Does the money you earn from your labor belong to you? This question is important and draws a distinction between economic conservatives and progressives.
NC Policy Watch is a progressive North Carolina think tank co-founded by Chris Fitzsimon and the A.J. Fletcher Foundation. On March 22, Policy Watch will be hosting Prof. Christopher Faricy, of Syracuse University, to discuss his book “Welfare for the Wealthy: Parties, Social Spending, and Inequality in the United States.”
According to Rob Schofield, NC Policy Watch Policy Director, Dr. Faricy will discuss how “Republicans regularly enact tax breaks like 401k and 529 savings plans that use the government to redistribute wealth.”
I agree that tax credits, deductions, and exclusions are distortions in the tax code. However, I disagree with what Schofield thinks are creating these distortions. Schofield writes “The problem is, tax breaks are often inexact tools that don’t direct resources to where they are most needed.”
There are three mind-boggling implications made in the description of this event. Let’s unpack them.
1) Tax breaks are wealth redistribution.
This statement is incorrect. Tax breaks are distortions in the tax code that keep overall tax rates artificially inflated. However, allowing taxpayers to keep more of their own hard-earned money is not wealth redistribution.
Tax breaks, assuming they are applied uniformly, are not the same as redistributive subsidies. The only scenario in which tax breaks are wealth redistribution is a world in which all labor (and thereby wages) belong to the government. If that is the case, then anything less than a 100 percent tax rate is wealth redistribution. That is a bloodcurdling world in which we are all slaves to the government and government controls all means of production.
2) The government, and not citizens or taxpayers, knows best how to spend and distribute resources.
Government should exist to protect the rights and property of citizens, and offer a few core services.
In fact, the February 2018 Civitas Poll found that 63 percent of North Carolinians prefer a smaller government with fewer services and lower taxes.
Beyond those core services, the government should not be directing many (if any) resources. In fact, government at all levels has a very long and terrible track record of inappropriate spending and misappropriating resources.
Either Mr. Schofield has a blind faith in big government, or he is in favor of pork-barrel spending.
3) NC Policy Watch and Rob Schofield are opposed to all tax breaks.
If this statement were true, then at least Mr. Schofield would be speaking from an ideologically pure position. It would mean he wants a simpler tax code; likely with a higher rate, but still simpler.
However, NC Policy Watch has come out in favor of policies such as “circuit-breaker” tax credits for low-income homeowners, the Earned Income Tax Credit, healthcare tax credits, an increase in the number of income tax deductions, and the Renewable Energy Investment Tax Credit.
It should also be noted that NC Policy Watch has been completely silent on the $185 million in corporate tax breaks that Governor Roy Cooper gave away in 2017.
The truth is that the progressive left has no overall aim to simplify the tax code or get rid of tax breaks. They just disagree with who gets tax breaks.
Meanwhile, the Civitas position is that taxpayers deserve a tax code with as low of a rate as possible, and that is done by having fewer distortions. On that matter, Civitas has been clear and consistent.