![]() So does the low-income housing tax credit. Tax breaks that offset corporate research costs, widely popular among Democrats and Republicans, look suspiciously like government spending. What is the mortgage interest deduction, if not a direct government subsidy to a select group of home buyers? Or the exclusion for employer-sponsored health insurance, which by itself will reduce federal revenue by nearly $3.4 trillion over the next decade.Īnd businesses are on the gravy train too. It also is true for a long list of other individual income tax deductions and credits. Indeed, the federal budget already counts the refundable portion of these tax credits as spending. ![]() This has been true for refundable tax credits such as the earned income tax credit (EITC) and the child tax credit (CTC). ![]() But they weren’t, either for administrative convenience or because in recent decades Congress has been happier appearing to cut taxes rather than boost spending. Many easily could have been structured as government spending. The US Treasury helpfully lists the hundreds of tax expenditures now on the books. By the standard definition, scores of tax expenditures function like spending subsidies, even though they are not transferable. Smith is absolutely right that many of the IRA’s green energy credits are do indeed “function like direct spending.” But not because they can be transferred.
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