More on Obama’s Tax Plan
10th September 2008
David Friedman takes a look.
he plan includes a bunch of “refundable tax credits.” It is not at all clear to what extent they ought to be counted as reductions in taxes, and to what extent as increases in expenditure.
The accurate term for “refundable tax credits” is “welfare”, since it’s a “refund” of a tax that was never paid.
Transfer payments make up a very large share of the federal budget. With sufficient ingenuity, one could eliminate essentially all of them from the expenditure side by relabelling them refundable tax credits, thus producing, on the books, an enormous reduction in both expenditures and taxes, while actually changing nothing at all. Obama seems to be moving things at least a little farther in that direction.
Oh, there’s a shock….