Tax Cuts ARE NOT Earmarks

This post originally ran at ATR.

Rich Lowry and others are calling tax cuts in the Senate bailout package "earmarks" today.

Calling tax cuts "earmarks" is very unhelpful and completely wrong from a fiscal conservative perspective. There is no such thing as a “tax earmark.” Earmarks are spending. There are appropriations earmarks. There are authorization earmarks. There are no “tax earmarks.” To claim that there are puts tax deductions and credits (which is what we’re talking about here) on the same par as bridges to nowhere. Was the creation of HSAs a “tax earmark?” How about the home mortgage interest deduction? One might call for lowering the rates and broadening the base, but we should not fall into the trap of equating tax cuts and spending increases. That’s how some Senate Republicans got in such massive trouble over health care last year and energy this year vis-à-vis taxes.

This is precisely the same logic that Treasury’s Stanley S. Surrey used in the 1960s to create the “tax expenditure” concept. This faulty doctrine treats tax exclusions, adjustments, deductions, and credits as if they were the same as a federal appropriation. They are not. They might not be ideal tax policy, but they are federal revenue reductions—not budget increases.

I would exempt from my statement the outlay effects of refundable tax credits. Those are, indeed, spending and could rightly be sullied with the term “earmark.”

It’s this confusion between tax cuts and spending increases that I’ve found is the number one cause of well-meaning offices slipping into Taxpayer Protection Pledge violations. When I see things communicated that would contribute to this confusion, I try to jump all over it.