Open Blog to the Tax Foundation Re: "Tax Earmarks"

This blog originally appeared on ATR's blog:

Yesterday, the Tax Foundation contributed to the healthy debate the movement has been having about taxes and spending.

There are several items that Gerald Prante mentioned that I wanted to respond to. As such, readers should probably have read his post before reading mine below:

   1. I fully acknowledge that some tax cuts are 100% revenue losers (child tax credit, three-legged spayed dogs credit, etc.). Some tax cuts have revenue feedback effects that make their cost something less than the static score (e.g., a cut in the top ordinary personal rate). Very few tax cuts probably pay for themselves (a cut in the top corporate rate comes to mind)

   2. I fully acknowledge that the tax code can cause economic distortions. One of the reasons housing prices are high is no doubt due to the mortgage interest deduction, for example. No argument there

   3. If, though, I were to put in place Prante's three-legged spayed dogs credit, how does that "cost the taxpayers money?" It costs the Treasury some tax revenue, but it doesn't have to come at the expense of any other taxpayer. It's only if you assume that the government has the right to a certain percent of GDP in taxes that it becomes a zero-sum game

   4. Alternatively, suppose I was to create a three-legged spayed dogs earmark subsidy. In order to finance this, I would first have to steal the money from an actual taxpayer (as opposed to the Treasury). Then, I would have to filter the subsidy through the federal bureaucracy. Finally, I'd create a welfare recipient who expects his check. While the economic distortion would be similar, the way it's done is far more innocuous when it's a tax break as opposed to a spending program

   5. I would hope that would all agree that the three legged spayed dog tax credit is, in fact, a tax cut. A tax cut is anything which causes taxpayers to pay less in taxes. If my tax bill before the credit is $10,000, and it's $9,000 afterwards, I just got a tax cut. If my tax bill is $10,000 and I get a $900 check from the government (don't forget to pay the unions their $100 vig), my taxes didn't go down at all

   6. As conservatives, we can distinguish between good tax policy and bad tax policy. I would much prefer cutting the capital gains rate to doubling the child tax credit. However, I would not oppose doubling the child tax credit merely because I can't cut the capital gains tax rate instead. As conservatives, we're for lower taxes

   7. Turning to the bailout plan itself (ATR is very much against a bailout, incidentally), there was a revenue title added onto the final version. This revenue title didn't "create new earmarks" since earmarks are spending. In fact, it didn't create all that many new tax cuts. All it mostly did was to prevent current tax relief from expiring--in other words, it prevented tax increases. The biggest chunks here were the extension of the research and development tax credit and the inflation adjustment to the AMT patch.

      Even if we can't agree that the vitriol for earmarks and pork should be reserved for the true enemy--spending--can't we at least agree that preventing a tax hike is certainly not a bad thing?