Cassandra posted a piece this week on one of my favorite topics, which is the grave danger of letting people vote for bigger government on other people's nickel. It's always seemed obvious to me that you'll get not only too much government that way, but runaway deficit spending.
So I was a bit taken aback to read her original source, which tries to establish a causal relationship between the percentage of non-taxpayers and the growth of government spending. Statistically, it seems the case is not easy to make.
It doesn't change my feeling of impending doom. I can't see how this can be a good direction to push in. If nothing else, it just chaps me to have to pay for intrusive government for the benefit of people who claim to support it, but not enough to pay for it themselves.
The argument they're floating is a little strange, actually. The conclusion is that people demand more transfer payments (which are normally associated with poverty relief efforts) because they don't pay enough taxes (due to credits and deductions, which usually require some degree of earned income to be effective).
ReplyDeleteThe argument to that conclusion is that people want more government because they aren't paying the full cost of it. But it's not at all clear that the people using the credits and deductions are the same people demanding more government; it might be the case that the credits and deductions put them in a position not to need, say, food stamps. Likewise, in terms of Social Security, there may no longer be earned income with retirees or the disabled to tax.
If you did eliminate some of the credits and deductions, you could push people from the nonpaying-but-nontaking category into the paying-but-needing-transfer-payments category. It's hard to imagine you could do this in a net effective way, unless you can cut the transfer payments (which, since more people will rely on them, will be democratically harder to do).
The article wants to argue the opposite: that if we raise the cost being paid by the nonpaying-but-nontaking category, they will demand cuts in transfer payments. Yet you could push them from being independent, so long as the government doesn't tax them, into actual dependency. Then you're stuck with an enlarged group that demands transfer payments in order to meet the costs of life.
If you were truly ruthless, the thing to do would be to cut the transfer payments first -- thus hurting the poorest, the retired and the disabled, who taken together aren't very numerous or powerful. Then you could raise taxes on the middle-poor without enlarging the class dependent on transfer payments, because there would be no payments for them to depend upon.
As we discussed at Cass' place some time ago, though, I think that no solution can work until we find a way to ban (or sternly limit) deficit spending. If we can't do that, raising taxes is just going to make people rendered poor by the tax demand government help them get by (where they could before). Since you'd be adding a level of bureaucracy, you'd be adding a level of inefficiency: and that means we'd end up spending more by trying to raise revenue in this way.
ReplyDeleteIn addition, as above, we'd be increasing the obvious constituency for such transfers.