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Is there such a thing as a bad tax cut?

October 06, 2008

If you are the beneficiary, no. If you are the only beneficiary, it's a different story.

The Tax Policy Blog explains why targeted tax breaks, directed to a select (or politically well-connected) group, are just like spending. They criticize Grover Norquist and Americans for Tax Reform for their embrace of targeted tax breaks that help a few while screwing the rest of us. Iowans for Tax Relief has the same shortsighted approach as ATR. As the Tax Policy Blog puts it:

Suppose Congress was about to pass an earmark that sent a government check to some person or company for $1 million as a reward for doing something that had no public good value (beyond private gains). But then at the last second, the earmark was withdrawn and replaced with a $1 million tax credit for the same person or business. Should angry opponents of the corrupt spending earmark be appeased? No. They were right that wasteful government spending forces higher taxes onto taxpayers, but so do wasteful government tax credits. The only real difference is that the IRS is implicitly writing the check instead of the Department of XYZ.

UPDATE: Forgot to link at first; go here.

Tags: tax policy.