The Democrats’ Tax Increase Euphemisms

As this whole debt ceiling debate has intensified, so has the use of euphemisms for tax increases by the Democrats and Media (but I repeat myself, blah, blah, blah).  Four stand out.

First, is the revenue-switcheroo.  What used to be called increasing taxes is now called “raising revenue.”  Yes, I’ll admit that tax revenues is not a new term, but the Democrats act as is they will be having bake-sales instead of raising taxes to increase revenues.  They won’t be.  The federal has one main source of revenue — taxes.  And that is what they are talking about. 

The government does not produce and sell anything in exchange for revenue.  It levies taxes and collects them.  If the Democrats had an ounce of courage to support their conviction that increasing taxes is the solution, they should say so.  And a media with a backbone and no agenda would make them do it.

Second, is a “balanced approach.”  For president Obama and his cohorts, a balanced approach means actually increasing taxes while promising to look really hard at trying to maybe cut some spending somewhere (they’re looking at you, defense), while making “investments” in various industries and government programs. 

Which of these three do you think will happen?  Of course.  We’ll get lots of new taxes, plenty of new programs, and no meaningful cuts in government spending.  Then, in five years or so, we’ll be right back having this debate, with an even higher debt and deficit baseline, a more precarious position overall, and less time to fix it.

Third, is the term “tax expenditure.”  This is an accounting term that the Democrats have seized upon to support tax increases.  The tax code has certain exemptions and deductions, such as, for example, the mortgage interest deduction.  Those who take advantage of the deduction are not taxed on the income that goes toward paying mortgage interest, decreasing their tax burden. 

Since the taxpayer’s resulting tax bill is then less than it would be without that deduction, the Democrats use the term “tax expenditure” to imply that the taxpayer is being cut a check from the treasury.  They are not.  To the contrary, the taxpayers are simply able to keep more of the money they earned and the government takes a bit less of it.  That is not an expenditure from the treasury in any rational sense.

There is a circumstance where the term “tax expenditure” makes sense in the normal sense of the words (as opposed to accounting terms of art) — refundable tax credits. 

Normal deductions and tax credits may only be claimed to the extent that they offset tax liability. But a refundable credit is a tax credit that can result in money being redistributed to a taxpayer above and beyond any tax liability that it offsets.  For example, a taxpayer who would otherwise owe $1,000 in income taxes but claims $1,500 in refundable tax credits, such as the Earned Income Tax Credit  and First-Time Home Buyer Credit, will pay no federal income taxes at all, and will receive a $500 check from Uncle Sam. 

That’s both a true tax expenditure and a welfare program.  Refundable tax credits should never — never- — be allowed to create negative tax liability, which means no income taxes are paid and a “refund” of other people’s money is redistributed.  Somehow, I don’t think this is the kind of expenditure the Democrats want eliminated.

Fourth, is a newly repurposed classic term, the “loophole.”  In the dark pre-Obama ages, a loophole was a technicality or ambiguity or simple mistake in the tax code that clever accountants and lawyers could creatively exploit to decrease their clients’ tax liability.  It was something that was put into the code for one purpose but had an unintended consequence that others could exploit.

Not so in the golden age of Obama.  Now, deductions, credits, or other goodies that Congress intentionally put into the tax laws — such as the private jet accelerated depreciation tax breaks included in Obama’s own stimulus plan — are derided as loopholes. 

I personally dislike such special deals and think they are generally harmful to the economy.  There is no reason to favor certain industries and taxpayers over others, and I would greatly prefer to level the playing field and get the government’s thumb off the scale.  But call these things what they are — tax breaks intentionally given to favored special interests.

It is bad enough that the Democrats are trying to hide their goals through slippery language.  But it is far worse that the media, instead of challenging these euphemisms has simply adopted them right off the DNC playlist.

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Published in: on July 21, 2011 at 10:33 am  Comments (1)  

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