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And Then There Were Five

May 17th, 2011 . by economistmom

coburn-ap-photo

This is not good news for bringing the Republicans around to the idea of reducing tax expenditures as part of a bipartisan agreement on deficit reduction.  As David Rogers reports on Politico:

The Gang of Six is now the Gang of Five, as Sen. Tom Coburn made a quick departure from Tuesday afternoon’s meeting of the bipartisan Senate budget group struggling for months to reach agreement on a long range deficit reduction plan.

“We’re still talking, still trying. This is not easy stuff,” Senate Budget Committee Chairman Kent Conrad (D-N.D.) told POLITICO after the meeting concluded about 45 minutes later. Asked about Coburn, Conrad had no comment, but the Republican later confirmed to reporters that he is dropping out of the effort.

The talks are at an “impasse” [said?] Coburn, but allowed that the remaining senators “may continue to meet without me.”

Why drop out today?  He seems to have suddenly taken a turn toward the “glass half empty” view.  More from the Politico story (emphasis added):

“We’re at an impasse – there’s no reason to talk about the same things over and over and not getting any movement,” Coburn told reporters later. “It’s just a recognition that we can’t get there.”

“My hope is that we can bridge that but right now I don’t think we can,” he said, indicating that he remains frustrated that the emerging plan still does not go far enough to slowing spending on major government benefit and entitlement programs. “It’s got to be balanced.”

“I’m not planning on participating at this time, if things change I will.”

I am wondering if he was referring to the “tax entitlement” programs and not just the entitlements on the direct spending side.  No doubt each side will interpret his complaint about lack of “balance” the way they each want to.  And they will stay in their trenches.  It’s really too bad.

94 Responses to “And Then There Were Five”

  1. comment number 1 by: AMTbuff

    This illustrates why I believe it may be better for a crisis to occur sooner rather than later. Politicians will simply not make a grand deal without political death staring both sides in the face. Only an actual imminent crisis can sufficiently concentrate their minds.

    Can we finally agree that a crisis is inevitable? If so, we should welcome the arrival of the crisis, not fear it. The sooner it happens the better off the generations of Americans will be.

  2. comment number 2 by: Brooks

    AMT,

    Diane writes, “I am wondering if he was referring to the “tax entitlement” programs and not just the entitlements on the direct spending side.”

    That reminds me that I don’t think I got an answer from you on something. Your argument on “tax expenditure subsidies boiled down to this: If some provision means that “tens of millions” of Americans (presumably taxpayers) will end up with less of a net outflow of cash to the Treasury, than it’s more like a tax rate cut than spending. Although your argument is very questionable for reasons I gave, if I accept your premise just arguendo, wouldn’t it imply at least that for Social Security recipients with some tax liability, at least the portion of their SS benefits that equals that tax liability should be viewed as more like a tax rate cut than spending?

    It does seem to meet your (implied) criteria (assuming there are “tens of millions” of SS recipients with some tax liability), and that’s even if we just consider current recipients; all the more so if we consider that a much larger portion of the population will get those benefits at some point in their lives while still having some tax liability.

  3. comment number 3 by: Gipper

    The Democrats have to lock arms with the Republicans and say, “Social Security and Medicare need big cuts.”

    None of this BS pretending that some panel of experts is going to bend the cost curve by bureaucratic fiat and other hand waiving, feel-good, hopey changey stuff coming from the PPACA. No more holding cards close to the vest and waiting (the Senate Democrats haven’t passed a budget in over a year, and still counting).

    Coburn is right. The Democrats are simply playing politics and refusing to recognize the reality: THEIR GREAT SOCIETY AND NEW DEAL PROGRAMS CREATED FISCAL RUIN FOR THIS NATION.

    Yes, it’s true. And raising taxes to Clinton-era levels won’t change the truth of this statement one iota. Diane, you refuse to look at the rapidly thinning population age cohorts in this nation. Demographics have killed the welfare state in the US and in Europe. Maybe not in the next 10 years, but definitely over the next 30 years.

    Under the Democrats have their “come to Jesus” moment, we’ll just sit around waiting for the car wreck. Republicans will bend once they see Democrats make this huge, political and philosophical concession. The independent voters will demand tax increases as a matter of fairness if Democrats agree to get out front on spending cuts.

    Until that happens, Grover Norquist and his ilk will rule the roost waiving the “No New Taxes” bloody shirt.

  4. comment number 4 by: AMTbuff

    Brooks, you have made me realize that there is another requirement for a tax break to be considered a rate cut rather than spending. The tax rate has to be reduced from a high level to a typical level. If I needed to pin it down, I’d say no more than half the median average tax rate. When you cut taxes below that, it could fairly be termed a handout.

    The EITC falls in this category and everyone agrees it’s spending. Conversely everyone agrees that the tax on 85% of SS benefits was a benefit cut, and it is accounted for as such in the budget.

    Wide-scope tax breaks that reduce tax liability moderately are properly classified as tax rate cuts rather than spending in my opinon.

  5. comment number 5 by: AMTbuff

    Gipper hit the nail on the head. A huge change in attitude is needed. That’s why I say that a crisis can save us.

    We are like the wife of a drunk. Before we give him more money, we insist that he has to join AA and get sober.

    He just got back from a real bender and he’s still holding onto a full bottle (PPACA). He won’t even relinquish that bottle because he hopes to drink it soon. He is a long, long way from getting sober.

    Drunks need to hit bottom before they will get sober. Let’s hope our government hits bottom sooner rather than later.

  6. comment number 6 by: Brooks

    AMT,

    Your revision re: limit at median tax rate reduces the validity of your premise even further. Surely, based on what you’ve said before, you wouldn’t make that statement re: the limit of the median tax rate if literally everyone with a tax liability received some tax break (not to exceed the total of his tax liability), right? According to your prior argument, would not someone below the median tax rate who received that tax break (along with everyone else) be receiving the equivalent of a tax rate cut?

    Re: my SS question, you have misconstrued it and thus not answered it. Previously when I asked it I made clear I was NOT talking about tax on SS income, but rather on other, non-SS income. Now please answer my question.

  7. comment number 7 by: AMTbuff

    I did answer if you apply the rule I gave. Allow me to simplify: If you receive $15k in SS and pay $3k in income tax on $30k of non-SS income and $2k tax on SS income, the $2k is a spending cut but the $3k is not. Why? Because $3k is a typical tax on $30k of income and not an overcharge (which the $2k is designed to be).

    As to your first paragraph, by median rate I do not mean a single number for everyone. I used it as a shorthand for typical, fair, reasonable, ordinary, etc. Please don’t nitpick words if you are interested in understanding my point of view as opposed to scoring debating points. I am completely uninterested in the latter.

  8. comment number 8 by: Brooks

    AMT,

    I’m not interested in “scoring debating points” or “nitpicking”. I’m trying to get you to answer my questions for the sake of a rational exploration of these issues.

    Your second paragraph is, therefore, ironic. ok, so you’re talking about something else re: median (and apparently something extremely vague, even conceptually, but never mind that). Still, is there some reason you can’t just adjust the question (per your “correction”) and answer it based on whatever that limit would be for a given individual — some tax rate that is “typical, fair, reasonable, ordinary, etc.” for him? What if someone’s tax liability before that tax break is right at what you would consider that tax rate, and then that person (along with everyone else) gets that universal tax break — it’s not like a tax rate cut for him, per your prior argument?

    Re: SS, you are STILL not answering my question. If it helps you understand the question, start by imagining everyone were receiving SS checks, and most people had taxable non-SS income (and pleeeeease forget the taxation on the SS income; it’s an irrelevant distraction, and obviously we can call taxation on that a spending cut). Now, if Joe has a tax liability of $10k on non-SS income (and to address the new condition you’ve added for some reason, assuming that that $10k reflects a “typical” tax on the amount of non-SS income he had), and then Joe and everyone else with a tax liability gets some tax break, you’d say that that tax break is equivalent to a tax rate cut. Well, that tax break simply means a lower net outflow of cash from Joe (and from every other individual) to the Treasury. But Joe’s SS check does the same thing: lowers Joe’s (and everyone else’s) net outflow of cash to the Treasury. So I’m asking: wouldn’t you say that $10k of Joe’s SS benefits are like a tax rate cut rather than spending, because those checks do the same thing as would, say, a tax credit of $10k that everyone, including Joe, received? Now please try to answer the question I’m actually asking, not some question you’d rather answer.

  9. comment number 9 by: Brooks

    AMT,

    If it helps, I’ll ask the same question as the SS question a different way:

    Suppose the federal government put everyone on food stamps, and the total amount each person got were no more than each person would have spent anyway on the applicable categories of groceries — say $500 per year per taxpayer or the amount of his income tax liability, whichever were greater (put aside timing issues and administrative questions for this illustration).

    You would say (and I’d agree in this case) that that $500, although officially categorized as explicit expenditures (”spending”) is actually more like a tax rate cut, right?

    Well, that’s essentially what I’m saying about SS benefits, IF we assume that the number of recipients with some tax liability on non-SS income is in the “tens of millions” (your standard for considering a tax break equivalent to a tax rate cut), or if we take the perspective that at some point in the lives of most income-tax-paying Americans we’ll be getting SS benefits.

  10. comment number 10 by: AMTbuff

    A uniform handout of food stamps to all people regardless of income tax liability is a type of broad-scope refundable tax credit. At the low end, namely sero income tax liability, this is equivalent to spending. At the high end, it could be seen as equivalent to an income tax rate cut but it could also be seen as spending. Personally, I see refundable credits as equivalent to spending.

    On SS, if the taxation on non-SS income is the same as everyone else pays on that income, there is no need to reclassify the tax paid as anything other than what it is. If the taxation is higher, that could be considered a spending cut. This is exactly what Clinton did in 1993 by making 85% of benefits taxable and not indexing the cutoff.

    Here’s a different approach: Suppose you want to play the tax expenditure game by declaring a 40% tax rate on all income with a nonrefundable credit for a percentage of income that increases to 40% at the lowest incomes. Would you then call the nonrefundable credit a tax expenditure and seek its repeal? No, its broad scope means that it is actually a rate cut.

    This example shows that my formulation eliminates some of the deception that could otherwise occur through biased choice of a baseline. In my formulation, the typical tax treatment establishes the actual baseline, no matter what fantasy baseline you attempt to impose.

  11. comment number 11 by: Brooks

    AMT,

    Yeesh, it’s like pulling teeth to get you to answer the actual question asked, and to answer it clearly (and I mean when you have no reason to change it to a different question).

    I explicitly ruled out any refundable tax credit component of my food stamps hypothetical. I said the amount would be limited by one’s tax liability. Re-read it if you must and you’ll see. So, rather than introducing that distraction and giving a vague response to my actual question by referring to “the high end”, here’s an idea: just answer my actual question.

    Although my description of that hypothetical benefit made it obvious, I’ll make this aspect more explicit in my question related to my “food stamps” comment above:
    You would say (and I’d agree in this case) that that $500 (or one’s tax liability amount, whichever were greater) that the government provided in food stamp value (essentially vouchers), although officially categorized as explicit expenditures (”spending”) is actually more like a tax rate cut, right?

    Or, if it were a $500 refundable tax credit, you would say the portion of the $500 equal to the tax liability would be more like a tax rate cut, right? (Please note that this is a separate question for a separate scenario, so hopefully you’ll answer both, although it’s hard enough to get you to clearly answer even one.)

    Re: SS, you’re not explaining the discrepancy between the reasoning behind your central argument on prior threads vs. your assertion here that the relevant portion of non-SS income shouldn’t be seen as equivalent to a tax rate cut. Perhaps you’re not getting my point conceptually so you see no discrepancy. Do you see that your central argument boils down to viewing as equivalent to a tax rate cut any provision that, for “tens of millions” of income tax payers, reduces the net cash outflow from them to the Treasury? Or are you not getting that, or see some reason why that’s not the case? You wouldn’t suggest that there’s a substantive difference per se between such a tax credit vs. the credit not existing, but those same people getting the same amount as a check or voucher from the Treasury, right? Because the effect is the same: less net outflow from that person to the Treasury. Any problem with any of that, or is it at all possible to get a clear “yes” from you on all of the above?

    Well, the relevant amounts of the food stamp value, or of the SS checks, are simply the substantive equivalent of that tax credit above. Instead of of Bob sending $20,000 to the Treasury rather than $25,000 due to a $5,000 tax credit, he’s sending $25,000 but the Treasury is sending him $5,000. Same net outflow from Bob to the Treasury ($20k). Get it?

    Re: your example, how ’bout you address mine first before confusing the issue even further? Try to focus on what I’m actually saying and asking and think about it before responding rather than allowing interference by views in your head that you really want express even though they are unrelated to the question I asked.

  12. comment number 12 by: AMTbuff

    Eliminating income tax liability is qualitatively different than a rate cut. You want to see everything in black and white, yes or no, but it’s not that way. Are you a lawyer or something? ;)

    If you want a cutoff, 50% reduction from typical tax liability is as good a place as any to say that it starts looking more like spending than a rate cut.

    Does this help?

  13. comment number 13 by: Brooks

    AMT,

    You have GOT to be kidding if you think you are being responsive in any substantive way to my questions. Maybe you don’t want to be, but I’ll continue assuming it’s at least possible you want to have a real discussion. (I have no idea what you are talking about re: my supposedly wanting to see everything in black or white, but never mind.)

    An example of your non-responsiveness to my actual question while responding to some question you imagine:
    On SS, if the taxation on non-SS income is the same as everyone else pays on that income, there is no need to reclassify the tax paid as anything other than what it is.

    Who is asking how we should classify the taxation on non-SS income?? Not me. I’m asking you about how we should think of the benefit checks. But no matter how many times I clarify, your mind is locked onto something else.

    And now you say, as if it represents a good-faith attempt to answer my questions, “Eliminating income tax liability is qualitatively different than a rate cut.” Your central argument is that a very broad tax credit or deduction is equivalent to — or at least similar to — a tax rate cut. Haven’t you been contending that all along? So why can’t you make a good faith effort to answer my questions instead of pointing out some qualifier that shouldn’t preclude a substantive answer?

    And don’t give me just some bottom line answer without any sense of your reasoning when I’m pointing out that there is an apparent inconsistency in your reasoning and premises across your arguments.

    And if you don’t really want to answer and are giving me a deliberate run-around, please just say you don’t want to answer. Otherwise, my questions are clear, and you can just answer them.

  14. comment number 14 by: Jason Seligman

    Leaving the room is unlikely to move the debate forward.

  15. comment number 15 by: AMTbuff

    Sorry, Brooks, I don’t have the time to write a book here. I don’t even have time to read a book here. A real discussion does not require one party to shape his responses to fit the questions precisely. You won’t win Internet friends by steering a debate as if it were a cross-examination.

    You are not going to reach black and white here because the issue is not black and white except for refundable credits and some unrealistic hypotheticals. My whole point is it’s not black and white equivalence to either spending or tax rate reduction, and that there is no formula that can turn gray into black and white. A debate as to what is closer to black or closer to white will not get you anywhere.

  16. comment number 16 by: Brooks

    AMT,

    Geez Louise, give me a break. And again with this complete fabrication of yours that I’m insisting on things being black or white as an excuse for not answering questions, despite clear language on my part to the contrary, not to mention that you could simply make a qualification while answering, as in saying something is “closer to X rather than equivalent to X, and here’s why I’m saying it’s closer to X”. See how easy that is for someone who is really engaging in good faith, someone who is actually trying to answer the question and have a productive discussion?

    Bottom line: It seems more likely than not at this point that you don’t want to give clear answers (or in many cases, any actual answers) to clear questions, so you’re just pretending to answer (with non-answer responses) to save face in some way. Thanks for wasting my time. Next time have the courtesy at least to say you don’t want to discuss something rather than engage someone in an absurd run-around.

    And by the way, if my questions end up longer than a Tweet, it’s usually because I need to spell things out very clearly to avoid (or to try to stop) exactly the kind of run-around you’ve provided by answering completely different questions than the ones I’ve asked, as well as by nearly opaque vagaries and other unproductive responses. And usually my comment length grows when I’m getting non-answer responses, because (since I presume you’ve made an honest mistake and may be confused about what I’m asserting and asking) I try not only to explain my question with even greater clarity, but also to explain how your response didn’t answer my question so you will hopefully get it (see the distinction and understand my actual question). The more you show that you are not understanding, the more I usually have to write in hopes of your gaining an understanding, and this paragraph is an example: You don’t get why my comments get long sometimes, so I’ve written this long paragraph to explain it to you.

  17. comment number 17 by: AMTbuff

    I explicitly ruled out any refundable tax credit component of my food stamps hypothetical. I said the amount would be limited by one’s tax liability. Re-read it if you must and you’ll see.

    OK:

    say $500 per year per taxpayer or the amount of his income tax liability, whichever were greater

    That’s a refundable credit, Brooks. Did you mean to say “whichever is less?” If so, then I say this is more like spending for people with income tax liability less than $1000 and more like a tax rate reduction for people with income tax liability more than $1000.

    wouldn’t you say that $10k of Joe’s SS benefits are like a tax rate cut rather than spending, because those checks do the same thing as would, say, a tax credit of $10k that everyone, including Joe, received?

    No, because they are the functional equivalent of refundable tax credits like the EITC. Everyone classifies refundable credits as spending, with the caveat that the typical taxpayer sets the baseline against which these credits are measured. So it’s no fair saying everyone gets $X credit since after you remove the baseline trickery that’s the same as saying nobody gets a credit.

    Only if SS benefits were capped at something less than 50% of income tax liability would they be more similar to an income tax rate cut than to spending.

    HTH.

  18. comment number 18 by: Gipper

    Brooks, AMTBuff,

    Please exchange email or Facebook accounts and take this offline.

    Love your energy, but………

    PLEeeeeeeeeeeeeeeeeeeASE!

  19. comment number 19 by: Brooks

    AMT,

    Yes, I meant to say “whichever is less”, so I’m talking about non-refundable tax credits.

    Now then, I really don’t see the logic in your invoking some “typical” tax rate that would apply to some individual in each case as the determining factor re: what is equivalent/similar/closer to a tax rate cut than to spending. It’s almost as if you are deliberately invoking the concept of a baseline, and indeed some particular, yet vague, variable (across individuals) and arbitrary baseline, only to go back to your claim that this whole discussion centers around some concept of a baseline, about which people will disagree.

    Anyway, let’s back up a step and I’ll go through the logic again (and yes, this is a long comment, but believe me, brevity here has virtually no chance of working with you; taking the logic step-by-step may have a chance). And to keep it as simple as possible, I’ll start with an example on which we are closest to agreement: a universal non-refundable tax credit that everyone gets for doing nothing that they would not have done anyway (even if the tax credit had not existed), with the savings varying only by differences across individuals’ respective pre-tax-credit tax liability (since some won’t get the full value of the credit because it exceeds their tax liability, which is the limit since it’s a non-refundable tax credit).

    As I’ve said, and you’ve indicated as well, the above is more like a tax rate cut than spending. But why?

    Because it leaves the taxpayer (those with some tax liability prior to the tax credit) with more of his money to use as he sees fit, as opposed to the government either getting more of the individual’s money to spend as government chooses or causing the individual to spend money in a different way than he otherwise would, and also causing shifts in market prices and quantity supplied.

    So if there’s a $5k tax credit (or one’s tax liability amount, whichever is smaller) just for, say, breathing, then someone (say, Frank) with a pre-tax-credit tax liability of $25k now only pays $20k and ends up with $5k more to use as he wishes (and without market distortions or incentives due to any related subsidies, and without counting on the government to spend in a way that he would choose and do so as efficiently).

    Now then, the same thing happens if there were no such tax credit, and Frank pays $25k in taxes, but the Treasury sends Frank (and everyone else who has been breathing) a check for $5k (or tax liability, whichever is smaller). Frank ends up with $5k more due to that check, and he’s out only a net $20.
    (1) You see that equivalence, right? (leaving aside any possible differences in timing and administrative matters)

    (2) You see that that equivalence has absolutely nothing to do with whether or not Frank’s tax rate is “typical” in some way or has any other characteristics, right? It’s equivalent because it’s equivalent — the same thing happens in net terms, and happens on the same basis. There’s no substantive difference. You see that, right?

    Now, let’s consider SS payments, which I agree are equivalent to refundable tax credits. We can look at these payments as having two components: (A) the amount equal to an individual’s tax liability (or in the case of refundable tax credit, his pre-tax-credit tax liability), and (B) any amount that exceeds his tax liability (or pre-tax credit tax liability).

    So if Frank receives $18k or less in SS checks, and his tax liability is $20, then all $18k of his SS checks are equivalent to a tax credit of $18k. Frank sending the Treasury $20k and getting $18k back is no different than Frank just sending the Treasury $2k. (I’m leaving aside the matter of taxes on the SS income b/c that’s an unnecessary complication that seems to distract you.)
    (3) You see this equivalence, right? It’s just x + y - y = x.

    Now if Leo gets $18k in SS checks and has a tax liability of only $10k. In Leo’s case the SS checks as a whole are like a refundable tax credit. But there are two components, (A) the $10k component (the part equal to his tax liability, and thus equal to the amount of tax credit value Leo would get from an $18k max value non-refundable tax credit) and (B) the $8k component (the amount that exceeds Leo’s tax liability and thus is government spending).
    (4) Assuming very broad distribution of SS benefits to recipients with at least some tax liability on non-SS income, doesn’t it follow logically from your central argument that part A is similar to lower tax rates (or at least closer to lower tax rates than to spending)? Again, that is the part that has the same value as would a non-refundable tax credit (i.e., with maximum possible credit equal to the total of SS checks, but limited by one’s tax liability).
    (5) And in Frank’s case or Leo’s case or anyone else’s case, you need not ask if someone is paying some “typical” tax rate or “typical” for that person (whatever that means) in order to determine how to conceptually categorize per the above based on your central argument (re: broad tax expenditure subsidies), right? If you disagree, tell me why you can’t so categorize without first establishing some “typical” tax rate for each person

    Hopefully you’ll actually read the actual questions and explanations above and give reasonably clear answers, showing your reasoning, to the question I’ve asked.

  20. comment number 20 by: AMTbuff

    1. yes
    2. yes
    3. yes, you can look at it this way if you like
    4. Let’s imagine that SS benefits are delivered via Form 1040, like the EITC. That makes your argument simpler. SS is then, like the EITC, a refundable credit, which we agree is spending. You want to break the refundable credit into a non-refundable part and a refundable part. Then you want to look at the non-refundable part as a tax decrease.

    The problem lies in the decomposition step, where you take x and make it into (x-y)+y. Mathematically it works, but the result is two bizarrely structured pieces in place of one ordinarily structured piece. You can’t make any reasonable inference from an ill-chosen decomposition. If you want to posit a hypothetical Social Security program that only contains one component or the other, I might accept your argument.

    5. I don’t get to this question, having disagreed at item 4. My point remains that current practice defines the baseline. There might be a way to construct a mathematically precise way to say that, but I don’t feel any need to figure one out as long as people are proposing baselines that depart radically from today’s reality.

  21. comment number 21 by: Brooks

    AMT,

    So your response to #4 is simply that you have some rather unclear problem with thinking of the component of SS (or of a refundable tax credit) in terms of the two aforementioned components, even though you don’t disagree that the key component for our purposes (Part A) does indeed resemble a non-refundable tax credit. You present no argument or explanation of why you have a problem considering this component; you just label the concept “bizarre” and “ill-chosen”. It’s hard for me to respond to have any response to such labels devoid of any explanation or argument. I can only ask why you have a problem conceiving of that component as exactly what you apparently agree it is equivalent to (a non-refundable tax credit)?

    Surely if someone is making a monthly payment on some amortized loan you could see that part of the payment goes to principal and part to interest.

    Surely if I owed you $4 and gave you $10 for you to buy lunch today, you could envision $4 of the $10 as repayment of the debt.

    etc. I really don’t see what problem you have with this concept.

    And think about this:

    You said “yes” to #3, which was “if Frank receives $18k or less in SS checks, and his tax liability is $20, then all $18k of his SS checks are equivalent to a [non-refundable] tax credit of $18k.”

    That means you’d also say “yes” if Frank received $20k in SS benefits and his tax liability were $20k (as in the original example). In other words, you’d say that all $20k of his SS checks are equivalent to a non-refundable tax credit of $20k.

    Yet your rejection of #4 means that if Frank received $20,001 in SS benefits (just one dollar more), all of a sudden you could not think of any part of his SS benefits as equivalent to a non-refundable tax credit. I ask you: Does that really seem sensible to you, given your prior answers? Or does it seem much more sensible (given your prior answers) to consider $20,000 out of the $20,001 as equivalent to a non-refundable tax credit, and $1 as spending?

    (Just to repeat, I’m speaking of making sense given your other answers and your central argument re: broad tax breaks ; I’m not saying if I agree with your central argument, just taking it arguendo to address what seem to be internal inconsistencies on your part.)

  22. comment number 22 by: Brooks

    (I meant to end the bolding after “answers?”)

  23. comment number 23 by: SteveinCH

    Seriously guys, having participated in this many times before…

    1. Brooks will never change his mind that ALL tax expenditures are equivalent to spending.

    2. AMT (and me and Vivian) will never change our mind that some tax expenditures are equivalent to spending.

    What is the point of hundreds of comments given 1 and 2 above?

  24. comment number 24 by: Brooks

    Steve,

    That was extremely lame, not to mention absolutely false.

    It was lame b/c you are trying to discourage discussion simply b/c you decided to stop engaging (or stop engaging in good faith) at some point, perhaps after realizing or sensing a significant possibility that you were wrong and feeling a bit embarrassed.

    It was false because from the start I’ve always said that one could define “tax expenditures” so broadly that the term ceases to have much meaning and much (if any) distinction from lower tax rates.

    So please don’t continue making such completely invalid and pathetic comments.

  25. comment number 25 by: AMTbuff

    The decomposition is nonsensical because the resulting components bear no reasonable relationship to the whole.

    Take an irregular pentagon, house-shaped or otherwise. You can break the pentagon’s area into one triangle and one quadrilateral. Now we can both agree that the triangle has 3 sides and the quadrilateral has 4 sides. What does this tell us about the pentagon? Absolutely nothing! It’s completely irrelevant because the decomposition was ill-chosen. I can’t make it any clearer than that.

    Your decomposition was clever, and I needed some time to realize what you were doing because it was so strange, but the properties of the parts prove nothing about the properties of the whole.

  26. comment number 26 by: Brooks

    Steve,

    To add to my comment above, I noticed you never responded to my question at http://economistmom.com/2011/05/what-do-john-boehner-and-jon-stewart-have-in-common/#comment-38195 which I’ll paste again here:
    let me just ask this: Do you at least agree with AMT that “a narrowly targeted tax benefit is similar to spending” ?

    Or do you disagree w/ AMT based on your fixation on the non-substantive difference in cash flows, insisting that how we should think of these things conceptually is simply a matter of how much cash the taxpayer sends to the government, so anything that reduces that amount for anyone is equivalent to or similar to a tax rate cut, or at least much closer to a tax rate cut in nature than to spending?

    Maybe you’ll actually listen to and respond in good faith to AMT if he/she explains to you that a non-substantive difference in cash flows is…well, not a substantive difference, as in no substantive difference between your giving me $1 vs. your giving me $2 as I give you $1.

    Or you could just continue not getting any of this, not listening, not making a good faith effort to respond to questions and arguments presented to you, and tossing out snarky, invalid one-liners to try to discourage others from trying to sort it out (and I suppose for you to experience some sort of cathersis, given likely discomfort you feel when this topic is raised)

  27. comment number 27 by: SteveinCH

    LOL Brooks. One could define it as such and you have. If you don’t think that all tax expenditure are equivalent to spending, please to tell us how many are and how you arrive at that conclusion.

    As you do so, feel free to explain how you arrive at the baseline necessary to do this quantification.

    As for lame, your obsession with this topic and your style of argumentation (you must answer my questions exactly as I ask them or you are arguing in bad faith) on it is lameness personified.

    Have a nice day.

  28. comment number 28 by: Brooks

    AMT,

    That’s really not much (or any) explanation. All you’re saying is that we can’t view any component of something as conceptually distinct if the component doesn’t resemble the whole, or something as vacuous as that.

    Listen, I’m going to repeat the last part of my prior comment (with bolding corrected) because I really want you to think about this, ok?

    You said “yes” to #3, which was “if Frank receives $18k or less in SS checks, and his tax liability is $20, then all $18k of his SS checks are equivalent to a [non-refundable] tax credit of $18k.”

    That means you’d also say “yes” if Frank received $20k in SS benefits and his tax liability were $20k (as in the original example). In other words, you’d say that all $20k of his SS checks are equivalent to a non-refundable tax credit of $20k.

    Yet your rejection of #4 means that if Frank received $20,001 in SS benefits (just one dollar more), all of a sudden you could not think of any part of his SS benefits as equivalent to a non-refundable tax credit. I ask you: Does that really seem sensible to you, given your prior answers? Or does it seem much more sensible (given your prior answers) to consider $20,000 out of the $20,001 as equivalent to a non-refundable tax credit, and $1 as spending?

    Again, are you REALLY saying that if Frank gets $20,000 in SS benefits, it’s equivalent to his getting a $20,000 non-refundable tax credit, but if Frank gets $20,001 in SS benefits, you can’t think of ANY of it as equivalent to a non-refundable tax credit??

  29. comment number 29 by: Brooks

    Steve,

    I’ve said from the start and repeatedly on multiple threads that, for example, one could define “tax expenditures” to include lower tax rates at lower incomes, claiming that letting them pay less is like sending them money. The underlying premise is simply that people should be treated equally for taxation of their respective incomes, so any favorable deviation to anyone from some flat tax rate (or, one could even argue, from a fixed tax amount per person) could be conceivably be defined as a “tax expenditure” if one wished to have such an expansive definition, but such a definition is unhelpful as I’ve explained.

    And as you know, I almost always refer to “tax expenditure subsidies for purchasing Product X”, which is deliberately more precise. (I include employer-provided insurance tax exemption as a type of “purchase”)

    But if you’re not going to pay attention or forget everything I say or just pretend you’ve never heard it and pretend you’ve heard me say essentially the opposite of what I’ve actually said, don’t ask me to repeat yet again something I’ve already told you a gazillion times.

  30. comment number 30 by: Brooks

    Steve,

    Also, I’ve even said a few times recently (in response to AMT’s argument) that in a pure case in which everyone (with a tax liability) gets a tax credit (in the simplest case, of the same amount, but probably even if it varies by tax liability) for doing nothing differently than they would have done anyway (without the tax credit opportunity), even if that’s purchasing the same amount of something (at the same price) that they would have purchased anyway, that’s equivalent to (or at least similar to) a tax rate cut.

  31. comment number 31 by: SteveinCH

    Brooks,

    I’m asking you to stop repeating yourself, not to start.

    You can frame and spin however you like but you can’t quantify tax expenditures in reality and therefore it’s a meaningless concept. But debate the concept all you like, I’ve long since given up on trying to get you to the practicalities.

    Have a good evening.

  32. comment number 32 by: Brooks

    Steve,

    You really should stop. My guess is that you either realize you’ve been wrong all along or you realize you are confused and sense you may be wrong, so you throw out silly comments like that.

    Sorry, but what we have here is not any unwillingness on my part to be practical, nor any “meaningless concept”. We simply have a concept (or set of concepts) that you either still don’t understand at all or are pretending not to understand (if you came to realize your error at some point). Period. For you to continue flailing about and throwing against the wall whatever irrelevant and/or nonsensical comment you can think of, along with obvious gross misrepresentations of what I’ve been saying (as we’ve just seen) is really pathetic, so just stop.

    I notice, by the way, that you won’t even respond to my question re: whether or not you agree with AMT on that point I mentioned. I’ll paste again and ask now for the third time:
    Do you at least agree with AMT that “a narrowly targeted tax benefit is similar to spending” ?

    Or do you disagree w/ AMT based on your fixation on the non-substantive difference in cash flows, insisting that how we should think of these things conceptually is simply a matter of how much cash the taxpayer sends to the government, so anything that reduces that amount for anyone is equivalent to or similar to a tax rate cut, or at least much closer to a tax rate cut in nature than to spending?

  33. comment number 33 by: Jim Glass

    Geeze, under a post about the Gang of Six Five we get another 25 comments about tax expenditures with no progress whatsoever toward agreeement.

    I’m with Gipper about that.

    Can the MMTers come back, please?

  34. comment number 34 by: Brooks

    Jim,

    If you care about the genesis and relevance of the topic to Diane’s post, it’s right there in my first comment. It’s no threadjack.

  35. comment number 35 by: Brooks

    Oh and Jim, AMT and I have indeed made “progress toward agreement” through previous threads, and he/she has (finally) taken steps toward agreement in a different aspect of the topic on this thread in his response at http://economistmom.com/2011/05/and-then-there-were-five/#comment-39410, particularly by his agreement re: #3.

    A lack of total agreement ain’t the same thing as “no progress toward agreement” on some/all aspects of an issue.

  36. comment number 36 by: SteveinCH

    Brooks,

    I posted a response but it didn’t stick for some reason. Here is your answer. From a distributional perspective, yes, from a systemic perspective no.

    It’s too bad you have a tendency to be so self-righteous. Insults are unbecoming but they are sadly all too common on blogs.

    If you want to prove me silly as you say, kindly define in dollars the current amount of tax expenditures and explain the logic behind the number.

    Or admit that you’re obsessed with a concept with little to no practical application. Either way is OK by me.

  37. comment number 37 by: Brooks

    Steve,

    Yeesh. You threw out that “distributional” vs. “systemic” line on another thread, and it was as irrelevant to my point then as it is now. I don’t think you ever actually explained what you mean or how it relates to anything I’ve said. Are you now saying that it is your answer to whether or not you agree with that statement by AMT? If so, here’s a crazy idea: how ’bout explaining what you mean when you say you disagree with him (and with me) “from a systemic perspective”? Does it amount to anything beyond the completely non-substantive difference in cash flows with which you are fixated (like the difference between your giving me $1 vs. your giving me $2 while I give you $1)?

    You consistently refuse to engage substantively — to actually respond directly to relevant, clear questions — yet, instead of just abstaining from discussion of this topic, I suppose due to discomfort/insecurity you feel when it’s discussed here, whenever you see it discussed, you feel compelled (1) to discourage others from discussing it, (2) to imply that I’m being unreasonable in some way, (3) to grossly misrepresent what I’ve been saying, and (4) to throw out one-liners implying you’re right about something I’m supposedly not getting, and then once again refuse to engage substantively. You really should stop. That obvious attempt simply to deal in some way with your own discomfort is what is extremely unbecoming, and all along I’ve been thinking about how that type of behavior is all too common on blogs (after someone has expressed a strong belief on some topic, then found himself unable to defend his reasoning, apparently is left with a lingering feeling of embarrassment and resentment that leads him to do some/all of those four things whenever the other party is discussing that topic with someone. Very common. But before your behavior on this topic, I would have considered you less likely than the average blog commenter to sink to such a low behavioral level. If you want to engage substantively, do so, and if you don’t, then just sit out the discussion others are having rather than engage in such behavior.

    RE: If you want to prove me silly as you say, kindly define in dollars the current amount of tax expenditures and explain the logic behind the number.

    What the heck are you talking about? How does this relate to anything I’ve said? I wouldn’t present some amount as the definitive amount for “tax expenditures” because conceptual definitions may vary, just as I’ve explained to you on this thread, or did you not get it?

    I assume one could come up with a figure totalling the value of all tax deductions and credits (in static terms at least — dynamic would be more complicated and subjective), and I think we’ve both seen such calculations, but someone could also point to deviations of tax rates from a flat tax, etc. per my earlier comment and call the “foregone” tax revenues due to lower rates (conceptually) “tax expenditures”, as I’ve explained.

    But I really don’t know what point you may think you’re making, and I’m not even at all sure you actually think you have a point at all.

    The topic we’ve been discussing, in case you missed it, relates to the nature of “tax expenditure subsidies” — tax credits or deductions for spending your money on Product X — and whether some/all such provisions are equivalent/similar/closer in nature to spending or to a tax rate cut. I have no idea why you apparently think this question is not worth discussing and has no practical application unless one presents to you a particular, objective, incontrovertible figure for total, universally-defined “tax expenditures”.

    For example, we can ask this hypothetical (and whether you think so or not, there’s obviously a practical application). Suppose there’s a tax credit for buying Product X that only 0.001% of taxpayers purchase. Well, that’s obviously very different from a tax rate cut (in terms of incentives, rewards, and interference with free markets and thus societal allocation of resources), but it’s the same as the government sending those people vouchers to buy Product X (if we assume no differences in timing, dollar amount, or administrative costs, all of which are extraneous to the main point here). Yet you’d call the subsidy in tax credit form “lower taxes” and “smaller government” and closer to a tax rate cut, and you’d call the voucher program (and absence of the the credit) “higher taxes, higher spending, bigger government” even though there is no substantive, economic, or ideological difference between the two form of the subsidy.

    If only you could get that, I have to think you could see how that insight could be applied as we consider fiscal policy choices, and you could see how misguided it is (and how it can conflict with your own preferences in economics and ideology, and how harmful it could be) to conceptually categorize such tax credits as you currently do.

    Do we need to come up with some universally-accepted figure for total “tax expenditures” to gain and practically apply that insight? Of course not. So what the heck is your point, if you have one?

  38. comment number 38 by: SteveinCH

    Brooks,

    I explained the difference between distributional and systemic on the previuos thread. To quote you, I will not repeat myself.

    As to defining the amount in an agreed upon fashion, help me understand how the President’s suggested trigger could be applied if we cannot define specifically which elements of the tax code are tax expenditures and which are not.

    So I renew my question, how much is it? From a policy perspective, it is the only question that matters and the question is ,in the end, political, not economic, however many hypothetical examples you want to create.

    My own view which I have stated many times before, is that the only quantification approach require a theoretical alternative tax code wherebdeviations from that alternative code are defined as tax expenditures. Unlike amt, I do not believe the nature of the expenditure can be defined a priori with sufficient precision to allow for clear categorization.

    Which is, of course the crux of our disagreement. Your argument requires an agreed upon typology to apply practically as in the proposed administration cap. No such typology exists, nor, despite hundreds of posts have you been able to convince others that one does

  39. comment number 39 by: SteveinCH

    Indeed, by my recollection, it was amt who introduced the notion of a typology into the discussion in the first place

  40. comment number 40 by: Brooks

    Steve,

    Your argument seems to be that unless there can be some objective, universally agreed upon definition and quantification of tax expenditures, which could then be used for application of some cap per some particular legislation, then it can’t be worthwhile to discuss the nature of some/all tax expenditure subsidies (relative to the nature of tax rate cuts or to spending).

    If that’s your point, or anything close to your point, I don’t know if it’s possible to think up a more ridiculous assertion. I don’t even know how to respond, other than referring you back to my prior comment and, well, so many others I’ve made throughout discussions of this topic re: how failing, as you do, to understand this issue will result in a highly irrational, self-contradictory, and harmful view of fiscal policy choices.

    I think I know why you’re taking this silly approach. In order to distract from the important point I’m making, which is not a semantic point (or one of “typology”) but rather a substantive, important, useful conceptual point (that you still don’t get or are pretending not to get, and which apparently causes you much discomfort), you want to make the point that there is some subjectivity and room for disagreement on the largely semantic (and potentially political/legislative) matter of how to define “tax expenditures” (a point on which I’ve agreed all along). So you keep insisting that I provide a tally for use with some particular legislation (e.g., to apply a cap), so you can then try to shift focus to the lack of an objective, universally-accepted definition of “tax expenditures” and claim (nonsensically) that the point/question I’ve been presenting on this topic is devoid of any practical application.

    Re: your supposedly not wanting to repeat yourself, if you don’t want to explain in any way the reason what you mean when you apparently say you disagree with AMT from a “systemic” perspective, and how this “systemic” perspective is anything other than a focus on completely non-substantive differences in cash flows, I can’t force you. I guess that’s your way of pretending to answer. I found your apparent definition on a different thread. You wrote:

    My focus is systemic. The systemic affect of a reduction in tax expenditures is an increase in government revenue, no more and no less.

    That’s why I ask if your use of the term “systemic” amounts to nothing more than a slightly fancy way of your focusing once again on completely non-substantive differences in cash flows. In other words, you are apparently yet again doing the equivalent of implying that there is a substantive difference (economic and even ideological) between your handing me $1 vs. your handing me $2 while I hand you $1. That’s apparently why you don’t want to explain — because it’s a focus on something devoid of substance, and you think/hope using a term like “systemic” enables you to create the false impression that you’re referring to something substantive. If that appearance is incorrect, feel free to explain (for the first time) what you are referring to that amounts to something substantive when you say you disagree with AMT’s statement from a “systemic” perspective.

  41. comment number 41 by: SteveinCH

    Brooks,

    Thanks for verifying my conclusion. You cannot quantify tax expenditures and therefore they are useless as a policy concept.

    I’m done.

    Have a nice day.

  42. comment number 42 by: Brooks

    Steve,

    Thanks for verifying everything I’ve said about your unwillingness to make a good-faith effort to engage substantively and your inability (or pretense thereof) to understand anything about this issue (and the related limitation of your comments to irrelevancies, opacity, and non sequiturs).

    I won’t be at all surprised to see you continue to interject with more of the same on future occasions when you see me discussing this topic with others. But again, I encourage you to either try to engage substantively or to just abstain rather than repeatedly pretending to have some real point that I’m missing and persisting with your utterly nonsensical dismissal of the worthiness of the topic, while also pleading with others not to discuss the topic.

    You have a nice day too.

  43. comment number 43 by: SteveinCH

    Yes those hundred plus posts way back when showed my unwillingness.

    Tell you what Brooks, I’ll be happy to admit you are right about everything if you can explain how the Obama budget trigger mechanism (where half of the gap is supposed to be closed by eliminating tax expenditures) will work given that you seem to agree there is no precise definition of what a tax expenditure is.

    If that’s an irrelevant question in your mind, I can but conclude that you think theory is more important than practice.

  44. comment number 44 by: Brooks

    Steve,

    You’ve been around the blogosphere enough to know it’s not uncommon for someone to reply to questions and arguments numerous times without really addressing the actual questions and arguments, either out of deliberate avoidance or due to honest confusion, or some combination. It’s very common when someone senses that he’s just not getting something or realizes that he’s wrong, but immaturely chooses to try to create the appearance of responsiveness rather than either engage in good faith or decline to discuss further. Very, very common (sadly). Obviously my observation involves an assumption re: what’s going on in someone else’s head, but I’ve seen it enough (and probably you have too) to know it’s often quite obvious.

    I’m not familiar with the Obama budget trigger mechanism, but if it’s as you describe, I would want to know how “tax expenditures” would be defined. I would guess it refers to all tax deductions and credits, with a few possible exclusions (e.g., “standard deduction” and “personal exemption(s)”).

    You’re not saying someone can’t add such things up, right? I assume your purpose in asking this question is to then point out that there is subjectivity to the definition of “tax expenditures” (again, something with which I’ve agreed all along), but it’s a total non sequitur to go from that point to your assertion that this subjectivity means there’s no practical application for the conceptual point I’ve been making — I’ve explained many times why it is very important for rational choices among fiscal policy options, and why the conceptual confusion you and so many others have on this issue impedes such rationality and is therefore very harmful.

    How much longer will you continue with this immature behavior? I keep responding because I’m trying to maintain a bit of benefit of the doubt for you, but it seems highly likely that you are just struggling to save face in some way by continuing to try to create the impression you have some real point (not an impression on me, b/c you must know I see through it, but I guess you hope to give that impression to someone else).

    You won’t even respond substantively to AMT’s statement re: narrowly distributed tax breaks resembling spending more than lower tax rates. You won’t explain in what substantive way you disagree; you just imply there is some substantive way in which such tax breaks are equivalent to or at least more like lower tax rates than to spending.

    So again, if you are indeed just engaged in some silly struggle to save face, please stop wasting my time by taking advantage of the little benefit of the doubt I feel compelled to maintain for you.

  45. comment number 45 by: SteveinCH

    Brooks,

    If you can’t define a concept quantitatively when one is talking about budgets, of what use is it?

    You’ve been around the blogosphere long enough to know that personal attacks aren’t terribly effective I’d imagine. If you think to score points by impugning my intellect, imputing emotions or thoughts to me that I don’t have, I imagine you’ll be disappointed.

    Oddly, my point to you all along has been that there is no way to define the number without creating a “counterfactual budget”. You’ve told me many times how wrong I am. That argument means there must be an a priori way to distinguish a tax expenditure from something that is not a tax expenditure. No such a priori approach exists, at least that you or anyone else has been able to define.

    If you cannot define how much we currently “spend” on tax expenditures, help me understand how the concept is helpful.

    I was the person who suggested a graduated rate table amounts to a tax expenditure by the definition that you have tended to use in this discussion. You reject that because it reveals the infinite elasticity and therefore uselessness of the concept.

    I’m not struggling to do anything. Frankly, I find this whole discussion rather amusing. For someone to be so wedded to a concept that cannot be used in practice is truly interesting. You provide a definition above but freely admit its not the only definition. So perhaps you’d like to explain how the notion of tax expenditures advances a conversation when we cannot agree on what they are. Is a definitional debate over the meaning of the concept some form of advancement? Without an a priori way to delimiting tax expenditures, what use is the concept?

    You don’t like those questions and dismiss them. Perhaps because you don’t have an answer. Perhaps for some other reason. Unlike you, I’ll not presume to read your mind.

    All I can say is that as long as you persist in pushing every thread into a discussion of this topic, I’ll persist in pointing out the irrelevancy of the debate.

    Take care.

  46. comment number 46 by: AMTbuff

    Anyone who believes the concept of tax expenditures is not inherently ambiguous should read what the government’s own experts say on that question.

    See http://www.jct.gov/publications.html?func=startdown&id=1196

    - Read Section 6 on page 7.

    - Also read the top of page 19.

    - The discussion of “a more objective baseline” at the bottom of page 25 sounds like what I have been arguing:
    Under this approach, a “tax expenditure” is a provision that satisfies two conditions: First, the provision is “special” in that it applies to a sufficiently narrow class of transactions or taxpayers to permit the specification of a program objective that could be assigned to an existing agency other than the IRS and be administered with appropriated funds. Second, there must be a “general” rule to which the “special” provision is a clear exception.

    - Brooks would benefit from reading Section III.A. starting on page 29 and section III.E. starting on page 35. Don’t miss footnote 82 from our very own EconomistMom!

  47. comment number 47 by: Brooks

    Steve,

    My goodness. It’s as if you’ve missed everything I’ve said in our exchanges, plus substituted some stuff you image I said, and in effect you’re asking me to repeat it all.

    Do you recall (from at least one thread that involved Vivian as well) that I kept saying your fixation with a definition of “tax expenditures” (and more precisely your mental block re: the implications of the lack of an objective, universally-accepted definition) is a misguided detour away from the key point, which is not semantics but substantive conceptual distinctions and similarities (and simply algebra and logic).

    In other words, instead of considering the nature of things — “Is what I’m describing (a particular tax deduction or credit for purchasing Product X) more like A (a tax rate reduction) or B (spending)?” — you’re hung up on “Wait, what you’re describing is called “Z” (a tax expenditure) and people can disagree on what other things could be called “Z”, and until we can all agree on everything that should or shouldn’t be called Z, we can’t have any practical application for determining conceptually if what you’re describing is more like A or B, and since there’s no such objective definition, there’s no practical application.”

    And that’s just nonsensical, and my guess is that you know it’s nonsensical. Geez Louise, is it possible that you might honestly still not see how problematic it is (for public discourse on fiscal policy choices and, in turn, the policies that emerge) that so many people, such as you (if you’re still erring sincerely) consider Policy “M” to represent “smaller government” and “lower taxes” (bearing equivalence or similarity to lower tax rates), and consider Policy “O” to represent “bigger government, higher taxes and higher spending” if there is no substantive difference between M and O? And can’t you see how irrational and counter-productive (from conservatives’ perspective) such a view is for conservatives if M is actually more like “bigger government, higher taxes and higher spending” in nature (incentives, respective effects on all parties, distortion of markets, etc.)?

    For example, I repeatedly ask you why you disagree with AMT (and me) that a narrowly distributed tax credit for buying Product X is more like spending than like a tax cut, and you keep responding by (1) offering the apparently utterly non-substantive remark about a “systemic” difference, apparently meaning only a non-substantive difference in cash flows (”a reduction in tax expenditures is an increase in government revenue, no more and no less”, as if there’s a substantively difference if you just hand me $1 rather than handing me $2 as I hand you $1), and (2) insisting that there’s no practical application of an answer to that question simply because people can differ in how they define “tax expenditures”. If you don’t see how absurd all this is, especially after all I’ve already explained to you multiple times, I don’t know how it’s possible to get you to see it.

    I’ll ask you again: on what substantive basis do you disagree with what AMT (and I) have said re: narrowly distributed tax credits for buying Product X more closely resembling spending than a tax rate reduction?

    You may recall my urging you and Vivian (and perhaps also AMT) to break from your fixation on semantics and just consider what was being described (an example of some tax credit for buying Product X). If you’re still sincerely confused, you probably don’t realize that I could have made my point all along without ever saying “tax expenditure”, not even as part of “tax expenditure subsidy” or “tax expenditure subsidy for buying Product X”, which I’ve been discussing. I could have just always referred to tax credits and/or tax deductions for buying Product X. And then what would your response be? That you can’t answer my question about whether or not such a tax credit more closely resembled spending or a tax rate cut because there isn’t an objective, universally-accepted definition of some term I never uttered (”tax expenditure”)?

    I would like to think even you wouldn’t come up with something that overtly nonsensical, so maybe maybe maybe you’d feel compelled to actually address the question and (who knows?) maybe even come to understand why it’s important to answer as part of a rational approach to fiscal policy choices.

    So here’s a crazy idea: pretend I never used that term (”tax expenditures”), not even as part of “tax expenditure subsidies for buying Product X”. Forget about that term altogether. Do you really still not understand why it’s important to consider if the nature of some tax credit or deduction is closer to “big government” and “higher spending” than it is to lower tax rates and smaller government????? Really?

    As a note, you write:
    I was the person who suggested a graduated rate table amounts to a tax expenditure by the definition that you have tended to use in this discussion. You reject that because it reveals the infinite elasticity and therefore uselessness of the concept.

    Yeesh, yet more confusion (or pretense thereof). Again, I readily acknowledged from the start that the lower rates of a progressive tax structure could be viewed as “tax expenditures” if one took an extremely broad view (someone could say it’s equivalent to a flat tax and the government then “spending” via “tax expenditure” by sending checks to lower income taxpayers). It’s just that such a view is unhelpful because it creates a term that encompasses provisions with such diversity that it includes some provisions that are like (or actually are) lower tax rates (for some segments) and others that are more like spending, making the term extremely ambiguous. But again, your fixation with semantics has nothing to do with the point I’ve been trying to get you to understand — a point that can be made without any use of the term “tax expenditure”.

    Lastly, you’re implying I’m persistently threadjacking. I really don’t think so. In the vast majority of cases, the post either related in some very substantive way to my point or at least had some element that related directly to the topic, as is the case on this thread. See my first comment for the connection. (And far fewer comments would be required if good-faith efforts were made to answer the actual questions and arguments presented rather than throw out non-answer responses just for the sake of responding with something, let alone the silliness you are most likely engaged in.)

  48. comment number 48 by: Brooks

    AMT,

    Re: Anyone who believes the concept of tax expenditures is not inherently ambiguous…

    Who believes that?? I’ve said repeatedly and explicitly on this thread and just about every other discussion of the topic that I DO see that different conceptual views can be taken and thus related definition can vary, which means there’s a type of inherent ambiguity if someone uses the term unless there is some reason to be pretty sure how the user would be using the term.

    I’m saying this fixation with the definition of “tax expenditures” is REALLY getting in the way of some folks here (I think you to a much lesser extent at this point than initially and to a much lesser extent than Steve) considering and thinking through the substance — the nature of some tax credit, for example; closer to spending or to a tax rate cut in nature. You may recall I’ve been trying to get you guys to drop the fixation on semantics and definitions when I’m asking you to just consider what’s happening in some example I’ve presented (what incentive, what effects, etc. of some provision, and how it compares to spending or to a tax rate cut).

  49. comment number 49 by: SteveinCH

    Brooks,

    Although I answered your question once, I will answer it again. A reduction in tax expenditures is most similar to an increase in tax rates on people taking advantage of the particular tax provision. In some cases, it might also be said to be similar to a reduction in transfers to those people but in all cases it is similar to an increase in faxes on those people since they will experience the change as an increase in their tax liability.

    On can conuct an exercise in algebra that says that mathematically the net effect is the same but that does not mean it is conceptually the same. It is, in my view, most similar to the distinction between a contra credit and a debit.

    Both have the same net impact but they are in fact different concepts.

    Finally, as for answering questions, you have answered none of mine, preferring to attack than to answer or so it would appear.

  50. comment number 50 by: Brooks

    Steve,

    I think I’ve answered your questions to the best of my ability. If you think otherwise, feel free to explain. If you mean that I haven’t provided you some arbitrary or subjective definition and tally of “tax expenditures” so you could respond that it — and any other definition and related tally — is subjective (something I’ve acknowledged from the start), well I haven’t gone through that pointless exercise as I would think anyone would understand. You want me to waste time doing something just so you can make a point that I long ago (and all along) acknowledged.

    Re: A reduction in tax expenditures is most similar to an increase in tax rates on people taking advantage of the particular tax provision…It is similar to an increase in taxes on those people since they will experience the change as an increase in their tax liability.

    In effect, you’re simply repeating the same thing: the purchasers of Product X send more money to the treasury if the tax credit/deduction is reduced/eliminated. No kidding. That’s just a statement of fact.

    You also say:
    In some cases, it might also be said to be similar to a reduction in transfers to those people

    Well, if we assume (hypothetically) no difference in dollar amounts or timing or administrative cost (all of which are extraneous to the main point here), what substantive difference would there be in any case between (A) a tax credit or deduction for purchasing Product X, and (B) a voucher sent by the government to people to purchase Product X ?

    Once again, as I’ve explained a gazillion times in all sorts of ways, the incentives, results for all parties, and effects on the market are the same regardless of which form it takes. Anyone who buys Product X ends up with more money due to either A or B, and the Treasury with less money (and thus everyone left with a higher deficit and debt). What substantive difference is there between (A) a provision that means anyone who buys Product X gets to send $100 less to the Treasury than he otherwise would (or sends zero if his pre-tax-credit liability was less than $100) vs. (B) the absence of such a tax credit, but purchasers of Product X getting to use a voucher from the Treasury worth $100 (or the amount of their respective tax liability, whichever is less) toward that purchase.

    And no, I don’t just mean what’s the difference for purchasers of Product X, I mean what substantive difference do you see between the two policies?

    You wouldn’t say that government purchasing some widget for people is only spending for the people who receive it, and you wouldn’t say government sending money to people who have no tax liability is only spending for those people. It is what it is: spending.

    Likewise, I’m asking not to state the fact of how it affects the beneficiaries in my example, but to answer the question about the two different forms of what I’m saying is substantively the same policy (a provision that will leave purchasers of Product X with more money than they’d have without that provision). You should note, though, that even if we took the kind of mistaken perspective you suggest by focusing only on the effect on purchasers, there is a significant difference between their paying less to the Treasury on the basis that that purchased Product X vs. their paying less because of a cut in their income tax rate. Different bases matter, obviously.

  51. comment number 51 by: Brooks

    AMT,

    I want to ask again for your response to http://economistmom.com/2011/05/and-then-there-were-five/#comment-39432

  52. comment number 52 by: AMTbuff

    Sorry, but I cannot improve on the analogy I already posted on that. You should take the time to read the JCT paper I linked. It will show you the scope of this issue and the pointlessness of focusing on mathematical identities.

  53. comment number 53 by: Brooks

    AMT,

    Oh come on. I’m asking you a simple question. You have, in effect, if Frank received $20k in SS benefits and his tax liability was $20k, you would consider all $20k of his SS checks equivalent to a non-refundable tax credit of $20k. Right? You answered “yes” to that #3 (re: $18k of SS benefits and $20k tax liability), so unless you’re now changing your answer, you can’t possibly saying “no” to this example here (with $20k SS benefits and $20k tax liability).

    Yet you have also, in effect, said that if Frank received just one dollar more in SS benefits — $20,001 instead of $20,000 — you would not consider ANY of his benefits equivalent to a non-refundable tax credit of $20k. All of a sudden, in your view ALL of the $20,001 is spending and NONE of it is equivalent to a non-refundable tax credit. How does that makes sense to you????

    I can’t force you to engage in good faith, but it really sucks if you insist on running away from a simple question like that.

    Earlier I read the sections you suggested even though I realized that the point you thought it would prove to me is a point I’ve acknowledged from the start of our discussion of this topic, and sure enough, that’s what it does. Re: “It will show you the scope of this issue and the pointlessness of focusing on mathematical identities”, what the heck are you talking about??

    Man, you and Steve are really bringing down the level of rationality, responsiveness, and efficiency of discussion. You guys are making it like pulling teeth to get an actual response to an actual question or argument, and you are responding with such garbage (of various sorts: irrelevancies, complete mischaracterizations of what I’ve said, non sequiturs, etc.). I hope it’s not deliberate.

  54. comment number 54 by: Brooks

    (I suppose now Steve will point out that there are two of you and one of me, therefore the problem must be me. Yeeesh.)

  55. comment number 55 by: Brooks

    In my first line, it should read “You have, in effect, said that if Frank received…”

  56. comment number 56 by: SteveinCH

    Nah Brooks, it’s a lot more than two if you think back to the history of this discussion. That said, numbers doesn’t make right but, when numerous people have a different point of view, it’s often a good time to reconsider one’s surety in one’s own rectitude.

    And of course, you don’t answer the question. If the concept cannot be quantified, what good does it do in a budgetary discussion?

    Also, do you understand the difference between a debit and a contracredit and do you understand the analogy to this situation?

  57. comment number 57 by: AMTbuff

    Obviously there can be no such thing as a tax expenditure since money only exists to pay taxes and we can print as much of it as we want…

    Getting serious again, Brooks, I’m saying that you can’t isolate one SS recipient, characterize that situation, and then draw any meaningful conclusion about the SS program as a whole. The mathematics is linear and allows those operations. The subjective characterization as like spending or like a tax rate reduction is nonlinear and does not allow decomposition, evaluation, then recomposition. That’s why I continue to say that focusing on the math will get you nowhere.

    If the gray area between spending equivalent and tax rate reduction equivalent were linear, or even if it were 1-dimensional as opposed to having many variables, you might have a prayer of getting somewhere with these decompositions. But as the JCT says, many of these tax expenditures are more properly addressed as tax reform issues rather than revenue loss. Expenditures in the tax reform category are ones that would not map to any sanely structured spending program. IMHO that includes the mortgage interest deduction.

  58. comment number 58 by: Brooks

    Steve,

    Re: Nah Brooks, it’s a lot more than two if you think back to the history of this discussion. That said, numbers doesn’t make right but, when numerous people have a different point of view, it’s often a good time to reconsider one’s surety in one’s own rectitude.

    LOL. Often that’s the case, but the emphasis here should be on “numbers doesn’t make right”. Logic isn’t a matter of democracy. And in the blogosphere it’s quite common for one person to be making sense and trying to get others to engage directly, substantively, and logically, while several others are really out to lunch or seemingly not even trying to engage in good faith. And since this topic happens to be one about which gross misunderstanding is so prevalent and harmful (particularly on the right), this topic is even more conducive to such a dynamic when one tries to help people understand their conceptual error.

    Re: And of course, you don’t answer the question. If the concept cannot be quantified, what good does it do in a budgetary discussion?

    I’ve answered that question repeatedly, not only on this thread but a gazillion times previously. How much more clearly can I explain to you that your conceptual error precludes a rational approach to important fiscal policy choices?? Can one quantify the forgone revenue resulting from a given tax deduction or credit for purchasing some particular product? Of course, if one has the data (plus, in the case of dynamic analysis, some adjustment for change in economic behavior due to the incentive provided, adjustment in pricing due to effects of the subsidy, etc.). But that’s not what you want to consider; you want a single, objective, incontrovertible figure for the total for all “tax expenditures”, and apparently the reason you keep asking for this is because (as I’ve explained repeatedly on this thread) you know that any such tally would reflect a particular definition of “tax expenditures”, which is inherently subjective in the broader conceptual sense, so you can then point out that subjectivity and repeat your nonsense about this somehow showing that there’s no practical application to considering whether some types of tax deductions or credits are, in effect, much more similar to spending than to a tax rate cut. Right? You’re still insisting on this run-around. It’s pathetic, but I guess you can’t get yourself to stop. It’s extremely hard for me to think that you actually think you are engaging rationally, because I know you are capable of reason to a much greater extent than you are demonstrating on this subject and particularly this thread. So I can’t avoid thinking that you are knowingly giving me the run-around due to some insecurity on your part and an apparent compulsion to struggle to save face in some way by trying to create the appearance that you are making some relevant, valid point(s).

    Re: do you understand the difference between a debit and a contracredit and do you understand the analogy to this situation?

    No, I’m unfamiliar with the term “contra credit” but it’s highly probable that whatever supposed point you are alluding to has absolutely nothing to do with your lack of substantive or rational engagement with me on this topic. You seem desperate to hide behind terminology and definitions to try to generate the pretense that you are saying something substantive, but you aren’t. I talk about a tax credit for purchasing Product X, and you want to divert discussion away from discussing the thing I’ve just described toward a discussion of semantics, definitions, and jargon in lieu of simply spelling out your reasoning, which isn’t surprising, because in general you have no reasoning to offer on this topic.

    But by all means, if you want to try to present some substantive response to what I’ve been asking and asserting, and you want to introduce some concept or term to me as a tool for showing your reasoning, go ahead. Most likely, you’ll just show once again that you are offering nothing resembling a substantive response to my point. After all, I’m speaking plain English and asking you to tell me what substantive difference you see between two things, and you refuse to simply answer and explain your answer. It really shouldn’t be hard if you actually have some point with some actual reasoning supporting it.

  59. comment number 59 by: Brooks

    AMT,

    Re: I’m saying that you can’t isolate one SS recipient

    But you DID. You said “yes” to #3.

    Upthread at http://economistmom.com/2011/05/and-then-there-were-five/#comment-39344 I wrote:
    So if Frank receives $18k or less in SS checks, and his tax liability is $20, then all $18k of his SS checks are equivalent to a tax credit of $18k. Frank sending the Treasury $20k and getting $18k back is no different than Frank just sending the Treasury $2k. (I’m leaving aside the matter of taxes on the SS income b/c that’s an unnecessary complication that seems to distract you.)
    (3) You see this equivalence, right? It’s just x + y - y = x.

    You replied:
    3. yes, you can look at it this way if you like

    So I guess now you’re backtracking and reversing your answer to #3, which was part of a flow of logic I presented in that comment. I have such a feeling of deja vu because you’ve done this before a few times. I get you to agree through a few steps in the logical chain, but when we get to the last part where another “yes” means agreeing with me on something overall (and contradicting an earlier assertion of yours), you say “no” without explaining. So I go back to the prior step to which you said “yes” to explain how a “yes” in the following step flows logically, and you (after avoiding the question for a while) eventually backtrack (explicitly or implicitly) on your prior “yes”, and so on, wasting a lot of our time.

    Are you indeed changing your answer to #3?

    And let me return to another question. (This is obviously a separate question so please don’t use answering this as a smokescreen for not answering my question re: changing your answer to #3.)

    I’ll paste again:
    Suppose the federal government put everyone on food stamps, and the total amount each person got were no more than each person would have spent anyway on the applicable categories of groceries — say $500 per year per taxpayer — or the amount of his income tax liability, whichever amount were [smaller] (put aside timing issues and administrative questions for this illustration).

    You answered:
    this is more like spending for people with income tax liability less than $1000 and more like a tax rate reduction for people with income tax liability more than $1000. You would say (and I’d agree in this case) that that $500, although officially categorized as explicit expenditures (”spending”) is actually more like a tax rate cut, right?

    In addition to ironically violating your own (new) supposed rule that we can’t think of the program at all in terms of some segment of recipients, you based your answer on this odd, extremely vague notion you have that some “typical” tax rate(s) act as some dividing point between the segment for whom some provision is more like spending vs. more like a tax rate cut. It’s just weird, or at the very least something you haven’t supported at all with any explanation.

    What is your answer to that question now? Still the same? Again, only taxpayers (of the income tax) are the food stamp beneficiaries in this example, and the benefit level cannot exceed a person’s tax liability.

    So let me break the question into parts so the logic is inescapable:

    1. That food stamp program is essentially equivalent to a universal, non-refundable tax credit for buying food, right?

    2. A universal, non-refundable tax credit for spending an amount each person would have spent anyway on some particular product is at least closer in nature to a tax rate reduction than to spending, right?

    3. Putting 1 and 2 together logically, that food stamp program is at least closer in nature to a tax rate reduction than to spending, right?

    4. The above (1-3) are true regardless of any consideration of what tax rates a given person or segment is paying on their income (such as your notion of above or below “typical” tax rate(s)), right?

    Now please just give me straight answers and don’t play games.

  60. comment number 60 by: Brooks

    AMT,

    Obviously I pasted part of the food stamps question in the wrong place.

    Here’s how it should have been:

    Suppose the federal government put everyone on food stamps, and the total amount each person got were no more than each person would have spent anyway on the applicable categories of groceries — say $500 per year per taxpayer — or the amount of his income tax liability, whichever amount were [smaller] (put aside timing issues and administrative questions for this illustration). You would say (and I’d agree in this case) that that $500, although officially categorized as explicit expenditures (”spending”) is actually more like a tax rate cut, right?

    You answered:
    this is more like spending for people with income tax liability less than $1000 and more like a tax rate reduction for people with income tax liability more than $1000.

  61. comment number 61 by: AMTbuff

    My answer to 3 is OK. What is not OK is the recomposition step: drawing a conclusion about the full SS program from that answer.

    As to your new 1-4: They are all yes. If you made such a program it would be like a rate reduction. But so what? There is no such program. Maybe the foreign tax credit, but I doubt that fits.

    Forget about trying to draw a conclusion about a different program such as the actual food stamp program. That would be the composition step that I’ve already said is not valid. Now do you see that your argument leads to a dead end?

    And can you please tone down the arrogant and argumentative style? I try to ignore it and respond as if your posts were written politely and by someone with considerable intelligence, but you aren’t making that easy for me to do. Maybe you could pretend that I’m someone you hope to ask out on a date…

  62. comment number 62 by: Brooks

    AMT,

    ok, so you’re now agreeing with my #4 and I assume you are implicitly withdrawing that business in your prior answer re: that notion of “typical” tax rates (whatever that was) having anything do with answering the question.

    All I was trying to establish, and I think I have now that I have a straight “yes” from you on #4, is that your view of whether or not some provision is more like (or even essentially equivalent to) spending or a tax rate cut has nothing to do with form, and has everything to do with whether or not some provision — be it a tax deduction or credit or even an explicit expenditure — results in a lower net outflow of cash from taxpayers to the Treasury for what you deem a large enough portion of taxpayers.

    If some spending program — such as my food stamps hypothetical — went to most or all taxpayers and only to taxpayers (and the amount didn’t exceed their tax liability), even that spending program would be more like a tax rate cut in nature per your view. (And if it were universal and if somehow spending on food and prices were not affected by this provision, I’d fully agree with that view.)

    And you now agree (per your “yes” to #4, and I’m just paraphrasing the original question #4), that if we assume very broad distribution of some transfer payment (spending) program to taxpayers (as in the SS example), the portion of those benefits received that equals (or is less than) each person’s tax liability is similar to lower tax rates (or at least closer to lower tax rates than to spending).

    I would think it also follows that the aggregate portion of total program spending that such individual portions represent (i.e., adding up all the individual portions that are more like a tax rate cut) would represent the portion of spending on that program that is more like a tax rate cut. For example, if all the total tax liability (on non-SS income, let’s say) of SS recipients equals, say, 10% of SS program spending, then (extending your prior reasoning) I would think you’d view 10% of SS program spending as more like (or equivalent to) a tax rate cut rather than spending. I don’t feel like going back and forth on that, but let me know if that’s how you’d view it, and if not, why not (since it’s just the aggregate of how you view it on an individual level).

    By the same token, as you’ve said previously (and of course I agree), even a tax credit or deduction would be more like spending in the case of narrow distribution (small portion of the population using it).

    Now, you and I agree on that pure case of a universally utilized, non-refundable tax credit for making the same level of purchases that each person would have made anyway, if the amount of the tax credit doesn’t depend on how much each person spends on that product.

    We both view the above as similar to a tax rate cut.

    Where we differ is that you also think tax credits/deductions for purchasing particular products are closer to tax rate cuts even if they don’t meet (or even come close to meeting) all of those conditions, as long as the distribution is “broad” which you’ve expressed as utilized by “tens of millions” of people. I require higher standards per the above to consider it more like a tax rate cut, and I also find a bit odd your notion of an income tax structure that makes people pay a “penalty” — pay more in income tax — for NOT spending as much as some others on particular products chosen by the politicians.

    But at least we agree that form (tax deduction/credit vs. explicit expenditure) is NOT what decides (or has any real bearing on) whether some provision is more like a tax rate cut or to spending. (and yes, I’m leaving aside any differences in administrative costs, political treatment, timing of cash flows, etc.)

    That understanding is a very important insight that unfortunately escapes so many people (e.g., Steve), particularly conservatives, and the resulting confusion is a major impediment to a rational approach to fiscal policy choices. I wish you’d try to help Steve understand it. Although he said he believes that “some tax expenditures are equivalent to spending”, everything else he says seems to reject that notion, (maybe in that line he’s just referring to refundable tax credits). He apparently refuses to break from a fixation on non-substantive differences in cash flows, as if any non-refundable tax credit or deduction is similar to a tax rate deduction. Maybe he’ll engage with you more responsively, substantively and logically. Certainly at this point your style will be more inviting than mine, not to mention that he views you as pretty much on his “side” on this matter.

    I have to think you disagree with all the garbage he keeps throwing out on this thread re: the whole matter having no practical application and being unworthy of discussion. I assume you see how a rational approach to fiscal policy choices can be seriously impeded by a failure to see at least some tax credits/deductions as closer to spending than to a tax rate reduction or “smaller government”. He apparently does not get that at all — doesn’t get the usefulness and importance, as well as not getting the conceptual point itself. I hope you take it from here with Steve and make a substantial effort to get him to understand this topic at least to some significant extent.

  63. comment number 63 by: AMTbuff

    >I would think it also follows that the aggregate portion of total program spending that such individual portions represent

    Here you are falling into composition, which is faulty. Yes the area of the triangle is part of the area of the pentagon. But the properties of the triangle are not the properties of the pentagon. That’s where your leap of logic leaves me behind.

    You don’t appear to understand my objection to composition or you don’t agree with it. I can’t tell which it is, but I don’t see a way to progress from here. However, thanks for the pleasant tone of the last post!

  64. comment number 64 by: Brooks

    AMT,

    Re: You don’t appear to understand my objection to composition or you don’t agree with it.

    I don’t understand it. Your geometric analogy seems more a matter of fact than an explanation. Maybe it would help if I ask this:

    If 100% of SS recipients were like Frank — i.e., each and every recipient’s respective tax liability on non-SS income equaled or exceeded the SS benefits he received — you presumably would say that 100% of SS program spending was more like a tax rate cut than it is to spending (assuming broad enough distribution to meet your standard). Right?

    So what if only 99% of recipients are like Frank, and the other 1% get SS benefits that exceed their respective tax liabilities on non-SS income? You would consider SS program spending as purely spending (as if NONE of the recipients were like Frank) rather than at least some hybrid or combination of part spending and part more like a tax rate cut?

    That strikes me as counter-intuitive, but perhaps you have a reason for such an all-or-none conceptual view, or perhaps that’s not how you’d view the 99% scenario.

  65. comment number 65 by: SteveinCH

    Brooks,

    I’ll just say this. A contra credit is a reduction in assets. I debit is an increase in liabilities. Both have the same impact on net worth but they are separate entries.

    The implication is exactly what Keith Hennessey posted on his website months ago and you choose to ignore. Even though the deficit can be reduced by increasing receipts or decreasing spending, that fact does not mean that increasing receipts is the same as decreasing spending.

    In accounting A-L=NW and decreasing A (a contracredit) and increasing L (a debit) have the same impact on NW. Sadly, that doesn’t make them the same, it just makes them have the same mathematical impact.

    There are many cases in math of concepts that have the same effect but are different concepts. To take another simple example. Multiplying by zero has the same mathematical impact as subtracting a number from itself or n*0=n-n for all n. Does that mean that multiply by zero is the same as subtracting a number from itself. Not at all, it means it has the same impact.

    As to the rest of it, perhaps someday you’ll understand that not everyone who disagrees with you on this topic is ill informed, ill intentioned or incapable of rational thought. You appear not to understand that today given your style of engaging.

    I’m sure you consider all the points above irrelevant or to use your words “a distraction”. Nevertheless, the last 30 or so posts merely prove my original point to which you so heartily objected.

    Now I really will be done.

    Enjoy your weekend and the security that comes from certitude, even when it is misplaced.

  66. comment number 66 by: Brooks

    Steve,

    I must say once again, just ugh.

    RE: The implication is exactly what Keith Hennessey posted on his website months ago and you choose to ignore. Even though the deficit can be reduced by increasing receipts or decreasing spending, that fact does not mean that increasing receipts is the same as decreasing spending.

    Yet again you demonstrate that you either have no idea what I’m actually saying on this topic or you are so pretending (and deliberately completely mischaracterizing what I’ve said).

    In fact, I think you’re managing to include two types of confusion in one assertion.

    On this first point I’m not sure, but I think what you’re referring to is Hennessey’s point that deficits can be reduced either by increasing revenue or by reducing spending, in which case you’re implying I consider either way to be equivalent to the other in every substantive way simply because of the same impact on the deficit. Obviously such an implication is absurd. I would never assert such a thing, and no reasonable person could see any hint of such an assertion in what I’ve been saying.

    Second, you ignore all the points I’ve made a gazillion times in explaining all the substantive similiarities/equivalencies between some tax credit and a hypothetical spending program that did the same thing in terms of incentive provided, effects on all parties, distortion of markets, etc. — all provided in addition to the fact that you’re only response is to focus on non-substantive differences in cash flows, without ever (despite repeated requests on my part) providing any substantive difference, and thus your response amounting to an argument that x + y - y does NOT equal x simply by virtue of a non-substantive difference on the other side of the equation. But I’m not at all sure you’re getting even this explanation, and if you do, you most likely won’t admit the revelation.

    The only curious matter remaining is your statement way upthread that you believe that “some tax expenditures are equivalent to spending”. Which types of tax expenditures do you consider equivalent to spending and why? And how does that square with your apparent insistence everywhere else that a (non-refundable) tax credit or deduction is inherently equivalent or more like a tax rate cut than to spending simply by virtue of the fact that less money is sent by taxpayers to the Treasury?

    In any case, I hope AMT will help you on this issue. I’m not saying I consider all of his assertions on this topic valid, but he’s at least got much of it right at this point, and some of the rest relates to matters of degree on which we differ.

  67. comment number 67 by: SteveinCH

    As I said Brooks, I’m done.

  68. comment number 68 by: Brooks

    Steve,

    I’m not at all surprised you won’t answer that question. You’re not exactly eager to answer questions re: apparent faulty logic on your part.

    If you’re willing to engage with AMT, I suggest that question as a starting point. I wish I asked it earlier, although probably you would have been equally evasive at any point, whether you responded in some non-answer way or not at all.

    Again, I leave you (and AMT if he/she wishes) that question which I’ll paste again here:
    The only curious matter remaining is your statement way upthread that you believe that “some tax expenditures are equivalent to spending”. Which types of tax expenditures do you consider equivalent to spending and why? And how does that square with your apparent insistence everywhere else that a (non-refundable) tax credit or deduction is inherently equivalent or more like a tax rate cut than to spending simply by virtue of the fact that less money is sent by taxpayers to the Treasury?

    It’s a perfectly reasonable and natural question to ask you. Which probably makes it all the more the kind of question you don’t want to answer.

  69. comment number 69 by: SteveinCH

    Brooks,

    You’re acting the *** again but I’ll leave you with the following general statement. A thing can be equivalent to more than one thing at a time.

    In particular, the elimination of some tax expenditures could be seen as equivalent to spending. The elimination of any tax expenditure is equivalent to a rate increase for those it affects.

    So to use your type of assessment. Let’s say there were a provision in the tax code that was so tailored as to affect only you (and assume away the Constitutional issues with such a provision). That provision would be like spending for you and it’s elimination would be like a reduction of spending to you. At the same time, it would also be a reduction in your effective tax rate and its elimination would be an increase in your effective tax rate. Said increase could also be created by inserting a new provision into the tax code that raised your statutory tax rate (again leaving aside the Constitutionality of said provision).

    Thus, all tax expenditures are the equivalent of tax rate reductions. Some tax expenditures are the equivalent of spending increases. Our disagreement in the end is that you deny the first of those two statements.

    I’m willing to engage with anyone who isn’t an absolutist. On many issues, you are not. On this issue, you are.

    It’s not a question of more like or less like it’s a question of some versus all.

    I know you don’t like that answer but since you don’t respond to questions directed at you, I’m not sure why I or anyone else owes you anything.

  70. comment number 70 by: Brooks

    I ask you about your earlier statement that “some tax expenditures are equivalent to spending.” Your initial response in your comment now is “In particular, the elimination of some tax expenditures could be seen as equivalent to spending.” Obviously those refer to two completely different things.

    You write:
    The elimination of any tax expenditure is equivalent to a rate increase for those it affects.

    That’s a repetition of what you said earlier, which I explained at http://economistmom.com/2011/05/and-then-there-were-five/#comment-39633 is both a misguided perspective in this case (”perspective just of those it affects”) and nonsensical (saying that someone’s income is necessarily being taxed at a higher rate because of the elimination of a tax credit for buying some particular Product X, which is equivalent to saying that providing a tax credit for buying Product X [or for spending more on Product X] is necessarily equivalent to taxing income at a lower rate). Your next (third) paragraph seems to be built upon that nonsensical foundation and is thus also nonsense. And as a side note, among other errors, you are ironically doing what you falsely accuse me of doing: equating any difference in cash flow as equal in every substantive way, ignoring whether the basis is income or taxpayers’ respective spending on some particular Product X. You are conveniently blurring matters by speaking of “effective tax rate” when I’m asking you about income tax rate (I don’t know if that’s yet more confusion or a slightly clever attempt to muddy things up and make it seem like you may have a point). It’s really tedious trying to explain all your confusion to you as part of trying to get you to think through this topic logically.

    Re: I’m willing to engage with anyone who isn’t an absolutist. On many issues, you are not. On this issue, you are.

    That’s among a long list of completely baseless (and worse, contradicted by obvious reality) characterizations on your part re: my approach and views on this topic. Really ridiculous.

    Perhaps AMT can help you understand why — in a substantive sense — a narrowly distributed tax credit or deduction for buying Product X is more like spending than a tax rate reduction. And not just from the perspective of those who utilize it (part of your nonsensical argument), but period, as policy.

    AMT — if you’re willing to take on the challenge of getting Steve to engage and think rationally on this, good luck.

  71. comment number 71 by: Brooks

    Steve,

    Oh, and re: since you don’t respond to questions directed at you

    I said before at http://economistmom.com/2011/05/and-then-there-were-five/#comment-39633 and I’ll paste again here:
    I think I’ve answered your questions to the best of my ability. If you think otherwise, feel free to explain. If you mean that I haven’t provided you some arbitrary or subjective definition and tally of “tax expenditures” so you could respond that it — and any other definition and related tally — is subjective (something I’ve acknowledged from the start), well I haven’t gone through that pointless exercise as I would think anyone would understand. You want me to waste time doing something just so you can make a point that I long ago (and all along) acknowledged.

    So I ask again, what question of yours have I not answered as best I can, other than providing you some number when it is obvious (as I’ve explained) that there’s no purpose in doing so? You never responded substantively to me on this. You just want to keep pretending I’m not being responsive to your questions because you (probably) know you are not making a good-faith effort to answer mine (although it’s possible you really are this extremely and persistently confused on so many levels and at so many points in discussion of this topic).

  72. comment number 72 by: SteveinCH

    Brooks,

    I thought about another long post but to be honest, I couldn’t care less at this point.

    You think you’re right. I think we all get that at this point. But you’ve thought that from the beginning and not changed your tune one iota over hundreds of posts.

    If you want a final question how about this.

    “What is the point of engaging in a substantive discussion about a complex issue with someone who is rude, dismissive and stubborn?”

    See ya.

  73. comment number 73 by: Brooks

    Steve,

    First, it is not being “dismissive” for one to repeatedly refute a repeatedly made illogical assertion or series of illogical assertions, especially when the refutations include attempts to explain where the logic goes wrong and numerous and various explanation and illustrations of the correction(s). Nor is it “stubborn” to be unwilling to agree to some compromise view or to “agree to disagree” when the other person is being illogical and/or failing to provide any logical support for his illogical assertion(s) (which, admittedly, would be hard for that person to do, given that his assertion is illogical).

    Second, your reference to rudeness is sequentially-challenged. My rudeness emerged as it became increasingly likely that you were not engaging in good faith, but rather were (and still are) most likely continually responding in hopes of maintaining some pretense (in the eyes of some readers, I presume) that you actually are responding to my questions, arguments, and refutations and that you may actually be making some valid point. Such selfish, immature behavior is highly inconsiderate. It wastes others’ time (mine and any readers who happen to follow the discussion) and makes it less likely others will learn something. All just so perpetrator can feel like he may be avoiding or mitigating embarrassment. Very inconsiderate, and although responding to it by calling the perpetrator out on it may, in some/most cases, not be the most productive approach, such a response in that context is very different from “rudeness” absent that pre-condition.

    As for “stubborn”, I will admit to being stubborn in the sense of being persistent when someone continues to reply with non-answer responses masquerading as good-faith engagement. Guilty as charged.

  74. comment number 74 by: AMTbuff

    Brooks, from the JCT paper I linked and that you really ought to take the time to read (I did):

    “Fiekowsky and others would go further than we propose to do, by classifying a tax provision as what we call a Tax Subsidy only if that provision could be replaced by a direct expenditure program in a reasonably administrable manner.”

    This is close to my point. If you mathematically transform a tax break into spending and the result is a nonsensical spending program, then the original provision is a tax break and not a spending equivalent. It is structurally different even though the dollars might match.

    You CANNOT conclude that because the spending version is nonsense that the tax version is nonsense. (The same is true if you transform a rational spending program into a nonsensical tax break.) This is the point that you have not yet accepted. Advocates of higher levels of revenue tend not to accept this point because it is dissonant with their agenda.

    Read the JCT paper and ask me for my opinion on any of the arguments prop or con therein. That would be MUCH more productive than your examples. Much better economists than you or I have already looked at this problem from all angles, and you will find all of their observations at least mentioned in that one paper.

  75. comment number 75 by: AMTbuff

    Brooks, allow me to attempt to clarify. Since you like math, I’ll give you math.

    Program 1 has revenue result x(m) for some input space m.
    Program 2 has revenue result x(m)-y(m).
    Program 3 has revenue result y(m).
    As you say, (x-y)+y=x. The revenue results are identical for every possible element of the input space m.
    Program 2 has a nonsensical structure.
    Program 3 also has a nonsensical structure.
    Do we have enough information to conclude that Program 1 is nonsensical? No! The more likely cause is that the segmentation into Program 2 and Program 3 was nonsensical.

    Now consider the case where there is no Program 3.

    Let Program 4 have revenue result z(n) for some input space n. Assume a 1:1 mapping N(m) exists from m to n. Assume that z(N(m))=x(m). Then Program 4 has the same revenue result as Program 1.

    If z(n) is ill-behaved in any way, can we draw any conclusion about the behavior of x(m)? No! It might be that the mapping N(m) is ill-behaved in a way that offsets the ill-behaved nature of z(n), making z(N(m)) well-behaved.

    Is this mathematical version easier to follow than the verbal version of the same argument?

  76. comment number 76 by: Brooks

    AMT,

    I plan to read your comments and respond, but at least through Tuesday night and pehaps a bit further I will be immersed in work.(Just FYI so you don’t think I’m ignoring your comments)

  77. comment number 77 by: Brooks

    AMT,

    Re: your 7:50: First, I’m not interested in labels, so I’m not interested in a discussion of what we should or shouldn’t call a “tax expenditure”. I AM interested in the incentives and effects of a given tax credit or deduction, and in particular whether those incentives and effects are closer to those of tax rate cuts or of spending — and in particular subsidies in explicit spending form.

    Second, I don’t see how the matter of administration is anything but extraneous to the question of the essential nature — incentives and effects — that are at the core of the policy. It may be, for example, that some tax non-refundable tax credit or deduction for purchasing Product X would be impractical to admister as a voucher program with the dollar value of each person’s voucher being the lesser of $Z or that person’s tax liability, but that doesn’t change the essential equivalence of the two hypothetical policies, and it is the understanding of that equivalence that can help people take a rational view of such tax credits or deductions rather than viewing them as necessarily in the same family as tax rate cuts, or at least closer in nature to tax rate cuts than to spending.

    Re: your 8:37, I don’t know what you are saying. I’m not following your notation, nor can I decipher much else.

  78. comment number 78 by: AMTbuff

    As the critics listed in the JCT paper say: If you cannot create a spending program that is essentially equivalent to the tax break, then the tax break cannot fairly be considered as equivalent to spending.

    If you restrict yourself to tax breaks which can successfully be re-created as direct spending programs, we can almost certainly agree that the two forms are equivalent. However the set of such tax breaks represents so tiny amount of revenue that it’s not really worth discussing.

    Forget my hyper-math post if it’s obtuse to you. I thought you might be a math expert and that it would help you.

  79. comment number 79 by: Brooks

    Re: If you cannot create a spending program that is essentially equivalent to the tax break, then the tax break cannot fairly be considered as equivalent to spending.

    I don’t know if that’s an accurate representation of what they said, but in any case, it’s a non sequitur. I mean, it really is nonsensical unless being unable to create it in spending form refers to more than matters such as difficulty in administration. Would you really say that a very narrowly utilized tax credit — which you’ve said is either equivalent/similar to spending or at least closer to spending in nature (incentives and all effects) than to a tax rate cut — is suddenly the opposite in nature if, for some reason, it would be very difficult or much more costly or even practically unfeasible to execute as intended if one tried to replicate it as an explicit spending subsidy? How does that administrative matter change the essence of the policy — the core of incentives it provides, the effects on beneficiaries, on markets, on the Treasury, etc.?

    Re: the mathematical notation, the last time I dealt with notation like that was probably B-school twenty years ago. Actually that’s not quite the case, but it’s rare, and when I’ve dealt with it since then I’ve seen all the variables defined and the discussion more or less in plain English.

  80. comment number 80 by: Brooks

    AMT,
    And I did read the few paragraphs following your quote that started with ““Fiekowsky and others…”

  81. comment number 81 by: AMTbuff

    Would you really say that a very narrowly utilized tax credit — which you’ve said is either equivalent/similar to spending or at least closer to spending in nature (incentives and all effects) than to a tax rate cut — is suddenly the opposite in nature if, for some reason, it would be very difficult or much more costly or even practically unfeasible to execute as intended if one tried to replicate it as an explicit spending subsidy?

    No. A tax break need not be equivalent to spending or equivalent to a tax rate cut. It might be a tax break that is not equivalent to any feasible spending program. Fiekowsky objected to calling this sort of break “spending” when it could not be replicated by an actual spending program. He apparently regarded such a characterization as abuse of the language.

    As Steve says, what you call it does not matter. Except that it does matter to people who want to use loaded terminology to advance a higher revenue agenda.

    Maybe I’m just old-fashioned, but I prefer to call a tax break a tax break unless it is virtually the same as a reasonably structured spending program. And I see no point at all to compare tax breaks to absurdly structured spending programs, or to compare spending programs to absurdly structured tax breaks.

    What does have value is to compare alternative taxing and spending plans to each other. In those cases I will tend to prefer the tax system with fewer of those tax breaks which do not improve horizontal equity. However I will not score removal of a $100B mass market tax break as equally good for the economy as removal of $100B of much more narrowly focused discretionary spending. If anyone can prove to me that those two have the same effect on GDP, I will listen.

    In other words, of all the types of broadly defined “spending” that the government does, I believe that mass market tax breaks are the least harmful to the economy. They leave money in the private sector rather than redirecting it narrowly and wastefully.

  82. comment number 82 by: SteveinCH

    Well said AMT.

  83. comment number 83 by: Brooks

    AMT,

    First, I must say it’s amazing to me that you so misconstrue what I’ve been saying that you think I (of all people!) need to be told that labels don’t matter. Perhaps you’ve forgotten that I’ve been the guy from the start trying to get other commenters here to stop fixating on the label of “tax expenditures” and to just address the substance of this issue.

    I assume you probably saw my explanation to Steve http://economistmom.com/2011/05/making-tax-expenditures-sound-more-like-other-spending/#comment-40179 that there’s a difference between focusing on labels vs. trying to determine if some tax credit/deduction (or for that matter some type of spending) is closer in nature (incentives and all effects) to spending or to a tax rate cut. If you didn’t read that comment, I suggest you read it, and if you did read it, I suggest you re-read it, and hopefully you won’t still confuse that basic question I’m raising as a matter of semantics (labels).

    And as a very basic matter of rationality, one should be aware of the error in attaching too much significance to (or even viewing as completely determinative) the form some subsidy/incentive provision takes (tax credit/deduction vs. explicit expenditure) in making that important determination of the essential nature of the provision. Someone who sees a substantive difference in essential nature of a subsidy/incentive simply by virtue of form — considering a tax credit as similar to or closer to a tax rate cut than to “spending” simply because it means less paid in taxes — is being irrational, and the prevalence of such a confused approach is at least potential (and I’d say is) very harmful due to it’s impact on choices among policy options.

    Now then, I asked you:
    Would you really say that a very narrowly utilized tax credit — which you’ve said is either equivalent/similar to spending or at least closer to spending in nature (incentives and all effects) than to a tax rate cut — is suddenly the opposite in nature if, for some reason, it would be very difficult or much more costly or even practically unfeasible to execute as intended if one tried to replicate it as an explicit spending subsidy?

    And you replied:
    No. A tax break need not be equivalent to spending or equivalent to a tax rate cut.

    You’ve managed to include in that reply a straw man and an evasion of the actual question I asked.

    The straw man:
    I included (with bolding added here since apparently it’s necessary for you to notice what I wrote) “equivalent/similar to spending or at least closer to spending in nature (incentives and all effects) than to a tax rate cut”. You reply as if I was asking about the extreme of equivalence rather than equivalence, similarity, or at least closer to spending than to a tax rate cut.

    The evasion:
    As I said, I was stating a view YOU have expressed repeatedly regarding the similarity of a narrowly utilized tax credit/deduction to spending. I just checked one other thread and grabbed this example of your saying “I believe that a narrowly targeted tax benefit is similar to spending” http://economistmom.com/2011/05/what-do-john-boehner-and-jon-stewart-have-in-common/#comment-38180

    Now, I know I’ve had a heck of a time on several occasions in which I’ve gone through the tooth-pulling process of eventually getting you to respond through several steps of a logical progression that I’ve laid out only to have you backtrack (at least temporarily, until I worked through it all over again with you), but I hope you’re not doing that yet again. Are you now rejecting that assertion of yours that “a narrowly targeted tax benefit is similar to spending”?

    I’ll assume, as I did when I asked you this question before, that you are not doing a 180 on this, and that you still view narrowly targeted tax benefits as similar to spending. Now then, I paste my question again, and I hope you’ll actually answer it this time:
    Would you really say that a very narrowly utilized tax credit — which you’ve said is either equivalent/similar to spending or at least closer to spending in nature (incentives and all effects) than to a tax rate cut — is suddenly the opposite in nature if, for some reason, it would be very difficult or much more costly or even practically unfeasible to execute as intended if one tried to replicate it as an explicit spending subsidy?

    And if your answer is “yes”, please explain to the extent you can. I really don’t see why a matter of administrative efficiency or some other problem with efficient execution in the other form would change the essential nature (incentives and all effects) of some provision in the form in which it exists. I’m open to whatever explanation you can provide.

  84. comment number 84 by: AMTbuff

    Yes, a narrow tax credit is closer to spending than to a rate reduction. However depending on the details, a narrow tax break might not be very close to fitting either one of these characterizations. I don’t think we disagree on this. You seem to be focusing on minor ambiguities in search of a disagreement on the basic math, a disagreement that does not exist. I prefer to move directly to the area of application, where we probably do disagree.

    Here’s another analogy: Suppose I ask you “Is Joplin, MO closer to Washington DC or Philadelphia?” Your very first reaction will be to think “Where in the world does he want to go with this?” Please forgive me if I occasionally respond by asking that second question rather than responding only to the first as if I were under cross-examination. I mean, you do want the whole truth and nothing but the truth!

    Sorry about my error on the labels issue. Thanks for the clarification.

  85. comment number 85 by: Brooks

    AMT,

    There’s a difference between a questioner where he “wants to go with this” vs. just replying as if answering the question while not actually doing so. But I don’t want to spend more time on meta discussion right now so I won’t get further into this point.

    I do note that before you said “similar”, and I asked you if you still would say “similar”, and your response was “Yes”, but you then shifted to “closer to” (and even then possibly “not very close to”, which is quite different from “similar” as you have said previously). That’s not a minor semantic difference, but I won’t dwell on that because I want to get to a clear answer to my question, and it’s getting much more tedious and time-consuming than it should be.

    Now then, before you said “similar to spending” without adding conditions, but now you are adding conditions. ok, so you are shifting in that regard too. Can you please now answer my question with at least some clarity? Do I need to paste it yet again? ok, I will, and I’ll adapt it to your new views:

    We have some narrowly utilized tax credit for purchasing Product X. You say that it is closer in nature to spending than to a tax rate reduction, but whether it is actually close or not depends on some condition(s). Tell me what the condition(s) is/are and why that/those condition(s) make such a big difference in the nature of that provision. And if that condition (or one of them) is that the tax credit could be efficiently and effectively provided (in effect) in direct spending form, why would an inability to do that change the essential nature of the tax credit, given that it is what it is in terms of incentives, effects on purchasers of Product X, effects on markets, prices, and allocation of resources, effect on the deficit, etc. If possible, explain your thinking to me. If you want to offer an example, perhaps from that JCT paper, perhaps that would help.

    As a note, I can’t continue putting in as much time as I have lately, only to make as much progress as we could have achieved in about 10% of the time had replies to my questions actually been responsive, and if I didn’t have to deal with backtracks and opacity, among other obstacles and detours. I’m not trying to be offensive, just stating the facts as I see them. It’s not just that I won’t have as much free time; I also just can’t justify devoting much more time to discussion of this topic with you guys given the inefficiency and the tediousness of all I have to deal with in trying to move the discussion along a logical path. And it also sucks that much of the inefficiency is due to deliberate non-responsiveness. Really would have been much better in every respect to at least humor me and just try to answer a question rather than resisting every step of the way, with occasional incidents of actual responsiveness. We should leave the repeated, deliberate non-response responses to the politicians on the Sunday morning talk shows.

  86. comment number 86 by: Brooks

    Oops, meant to have italics only in a couple of spots.

  87. comment number 87 by: AMTbuff

    On the choice of adjectives, please operate under the assumption that approximate matches in terminology indicate my agreement and haste, not disagreement and trickery. I am not a politician and I do not choose words with deceptive intent. Please take Yes for an answer!

    You say that it is closer in nature to spending than to a tax rate reduction, but whether it is actually close or not depends on some condition(s). Tell me what the condition(s) is/are and why that/those condition(s) make such a big difference in the nature of that provision.

    Other than narrowness, the main condition to be close to spending is that the results of the tax break correspond to a reasonably structured program of direct payments. A refundable tax credit is spending-spending, not semi-spending or quasi-spending. A tax break that cannot be transformed into a reasonable spending program is just a tax break. Yes, it has a revenue cost but I cannot call that cost “spending” when it’s not structured to deliver benefits in amounts that are consistent with any conceivable and rational explicit spending program.

    You want to call it “spending” and we agree that you can call it a banana if you want and that makes no difference to what it is. We agree on the numerical value of the foregone revenue under the assumption that tax rates remain unchanged. That agreement should suffice.

    If you want to go further and assume that the tax rates SHOULD remain unchanged when the tax break is revoked, I claim that’s an assumption that should be questioned. For a better explanation of this specific point read the May 26 comment by Nonce at http://taxprof.typepad.com/taxprof_blog/2011/05/shaviro-.html#comments

    So, where are you going with this? :)

  88. comment number 88 by: Brooks

    AMT,

    Your paragraph starting “Other than…” states the condition, but doesn’t really answer my question of why the absence of that condition fundamentally changes the nature of the tax credit from being similar to spending (re: the characteristics I listed at http://economistmom.com/2011/05/making-tax-expenditures-sound-more-like-other-spending/#comment-40179 among other characteristics associated with spending) to being very different from spending (and, I presume, closer to the mid-point between spending at one end and lower tax rates at the other, if you accept that as a sensible continuum generally).

    Again, if the condition is something as simple as efficient administration, I don’t see how the very nature (incentives and main effects) of some tax credit for purchasing Product X fundamentally changes simply because it wouldn’t be possible to administer an equivalent program in direct spending form. So I ask again for you to explain. I realize, in fairness to you, that it may be an abstraction that is difficult to explain, but if you can give it a shot I’d like to see it (and I don’t mean just repeating again what the condition is). And again, if you have an example, perhaps from the JCT report, and if you explain your thinking on it, perhaps I can better see your thinking on this.

    Re: your last paragraph, I haven’t said anything in this discussion re: any preference for changing tax rates or not if a tax break is eliminated. My primary goal re: this topic is to stop the irrationality that the prevalent confusion continues to introduce to public discourse and politicians’ choices among fiscal policy options amid the great need to mitigate our long-term fiscal imbalance. And the confusion I refer to is the view that reducting/eliminating a tax credit/deduction for purchasing Product X* is a “tax increase” as if equivalent/similar to tax rate increases rather than closer to “spending” simply by virtue of the form the subsidy takes (tax credit). An example of this irrationality is the recent dust-up between Coburn and Norquist over Coburn’s desire to reduce/eliminate ethanol subsidies provided as tax credits and deductions, with Norquist objecting to their elimination on the grounds that it would be a tax increase, and Norquist and others pointing to the pledge not to raise taxes. Another example is Obama’s State of the Union in which he listed all his “tax cuts” (e.g., tuition tax credit) and then turned to the Republicans and said “I thought I’d get some applause on that one”, to which the Republicans responded with applause.

    So my primary goal is to do my tiny part to expose and correct this misunderstanding in order to promote a more rational approach to very important fiscal policy choices.

    Another goal involves my policy preferences, but that is distinct from the analytical matter above. I generally dislike tax credits and deductions for purchasing Product X, just as I generally dislike similar subsidies in direct spending form. And insofar as we reduce subsidies in both forms, along with other spending, we have lower deficits, or lower tax rates for given deficit levels, or some combination of lower deficits and lower tax rates.

    I’m going to reduce the time I spend on this, but if you have that explanation I’ve been requesting, I’d like to see it.

    * I include employer-provided health insurance in this category even if Steve doesn’t understand why.

  89. comment number 89 by: AMTbuff

    Your paragraph starting “Other than…” states the condition, but doesn’t really answer my question of why the absence of that condition fundamentally changes the nature of the tax credit from being similar to spending

    It’s not similar to spending if it can’t be executed as spending. I realize that your opinion on this differs from mine. It appears to be enough for you that a benefit similar in objective but very different in specific effect could be delivered as spending. Neither of us can claim that our opinion is a universal truth.

    Tax credits are more likely to be executable as spending programs than tax deductions. Deductions tend to couple the amount of benefit to income in a way that is impossible for a spending program to duplicate. Although I would tend not to call deductions a spending equivalent, that does not mean I don’t favor their reduction as part of a comprehensive tax overhaul.

  90. comment number 90 by: Brooks

    AMT,

    Re: It appears to be enough for you that a benefit similar in objective but very different in specific effect could be delivered as spending.

    I think I understand what you mean, and yes, it seems to me that if a tax credit for purchasing Product X provides particular incentives and has particular effects (of the types I’ve listed — effects on the beneficiaries, the deficit, markets, etc.) I just don’t see a reason why the nature of that tax credit (it’s incentives and effects) would fundamentally change simply because there would be administrative or other problems or inefficiencies if we were to try to do the same thing by different means (direct spending). I’ve asked you a few times to explain why you think differently but you just keep repeating that that’s what you think without providing any explanation that could help me understand your thinking on this. Maybe it’s something that’s hard to put into words, or maybe you don’t really have a reason — I don’t know; I just know I’ve asked you repeatedly to tell me why (and to use an example if that would help), and I haven’t gotten any such explanation at all.

    I’ll leave it at that. Unfortunately it leaves me unsure of what appeared (based on your statements until now about the similarity of narrow tax breaks for purchasing Product X to spending) to be our area of agreement.

  91. comment number 91 by: AMTbuff

    Brooks, it’s just that I resist using a heavily loaded word to describe something rather more lightly loaded. By analogy from our country’s recent political history, everyone agrees that there are degrees of torture, from techniques that kill the victim (e.g. drawing and quartering) all the way to those which create no physical damage at all (e.g., sleep deprivation and playing loud music). Those who favor elimination of any and all of these techniques prefer to apply the word torture to all of them. This is an intentional misuse of the language, in my opinion, diluting the meaning of the word torture so that another word will be required to convey its original meaning. (The conflation is double-edged: it makes sleep deprivation appear much more serious than before, but it also makes sawing off heads seem much less serious than before. Eventually people will insist that different words are needed, and the language will change again.)

    In summary, calling a tax break spending when it could not be executed as spending is a conflation that distorts the ordinary meaning of the word spending for political ends. It might be good politics, but I prefer not to damage the clarity of our language for mere political advantage. So if you ever see me type the words “death tax” without scare quotes you have my permission to administer an online spanking.

    A tax break that is not cost-effective should be opposed on the merits, calling it exactly what it is.

  92. comment number 92 by: Brooks

    AMT,

    Re: Those who favor elimination of any and all of these techniques prefer to apply the word torture to all of them. This is an intentional misuse of the language, in my opinion

    That seems like yet another case of you (along with one or two other commenters on this blog) responding to what I’ve said or asked by addressing other people who you think are saying something entirely different as part of advocating something (supposedly) in terms that I haven’t used. Our federal deficit would be eliminated If only the Treasury could get a nickel for every time a commenter here responded to a question/argument of mine with a non-answer comment addressed instead to those who supposedly use the term “tax expenditures” loosely and who supposedly advocate eliminating all of them. As I’ve explained many times, I could (and have, more recently) presented my questions and arguments without even using that term, not even a more precise usage of it as I had previously (”tax expenditure subsidies for buying Product X”).

    Re: calling a tax break spending when it could not be executed as spending is a conflation that distorts the ordinary meaning of the word spending for political ends.

    You are completely missing the actual question, and also yet again not providing a real explanation to my actual question. Perhaps I’m missing something (and if so, you still aren’t letting me know about it), but I’m talking about a narrowly utilized tax credit or deduction for purchasing Product X that YOU would consider similar to spending in nature (incentives and various effects) if essentially the same policy could be effectively and efficiently administered as a direct spending program, and I’m asking you WHY you would view the nature of that policy as very different and not similar to spending in nature (again, not as a matter of semantics or labels, but speaking of the nature of the policy, mainly incentives and effects) simply because it can’t effectively and efficiently administered as a direct spending program. You are now just stating that it “changes the meaning of the word”. Again, I’m asking you to explain why we should view the nature of such a policy so differently on the basis of whether or not it could be effectively and efficiently administered as a direct spending program, when (presumably) the inability to do so doesn’t change the incentives or effects of the tax credit/deduction. Simply telling me you think it would “distort the meaning of the word ['spending']” doesn’t seem to be any kind of conceptual explanation.

    Re: A tax break that is not cost-effective should be opposed on the merits, calling it exactly what it is.

    Well, sure, but here’s the problem that is important to address. Fiscal conservatives generally favor reducing spending as the primary means of deficit reduction because government spending causes market inefficiencies (suboptimal allocation of society’s resources, and higher/lower prices than would occur in a free market), and because it often redistributes wealth arbitrarily as a result of politics (politicians giving out goodies to particular segments to win votes or gain campaign contributions, etc.), and because government enabling those segments to end up with more money (or goods/services) means higher deficits and/or (generally) higher tax rates required to avoid higher deficits*. Even you would agree that even some non-refundable tax credits are similar to spending in terms of the incentives and effects that relate to all of the above.

    Yet many fiscal conservatives (and I’d say you too to a lesser extent) view the form of a financial incentive from the government to purchase product X as either the sole factor or at least an (excessively) great factor in how they think of the essential nature of that incentive and the effects of that incentive — if the incentive is provided as a tax credit, they generally think of it as similar to a tax rate cut and “smaller government”, or at least closer to that than to spending, and if it’s in the form of a direct spending subsidy, they generally dislike it on the grounds that it’s part of “big government” and “high spending”. I think (not sure) you and I agree in principle that form per se shouldn’t matter for determining which general family a given tax credit belongs to; you consider how narrow/broad it is (and even I’d say at the extreme of universality, and if it didn’t effect economic behavior, a tax credit would be equivalent or at least similar to a tax rate cut), and previously you’ve said that you consider a narrow tax credit as similar to spending in nature. (You have now added another condition re: adminstrability of an equivalent policy as a direct spending subsidy. I’m asking why that should make the difference.)

    Those who focus entirely or excessively on which form some incentive policy (for purchasing Product X) are taking an irrational approach. And their irrational approach will lead many to say that they will defend a given tax credit for purchasing Product X unless eliminating it would be offset by tax rate reduction, even though they would support eliminating that policy if it were in direct spending subsidy form even if it could be administered as such effectively and efficiently, because of those drawbacks to spending that I mentioned above in this comment. That’s one important reason to try to get a sense of the nature of the policy — closer to spending or a tax rate cut, and how close to whichever one.

    * When government actually provides products/services (or even contracts it out), there’s an additional objection on the grounds of bureaucratic inefficiency in execution. That doesn’t apply to as great an extent when the program is just financial (e.g., a voucher for Product X, or transfer payments).

  93. comment number 93 by: AMTbuff

    why we should view the nature of such a policy so differently on the basis of whether or not it could be effectively and efficiently administered as a direct spending program, when (presumably) the inability to do so doesn’t change the incentives or effects of the tax credit/deduction

    Is the nature of a narrowly targeted tax benefit for purchasers of product X similar to the nature of a narrowly targeted spending program to susidize product X? Yes, they are similar in nature because they have a similar objective and similar financial effect. As long as you don’t go all the way to calling the tax benefit spending I agree with you.

    I agree with you on the second half of your post. I can clarify that being able to structure a reasonable spending program to match the effects of the tax benefit is a much less important condition than that the tax benefit be narrow.

    Wide-scope tax benefits are my main area of disagreement with users of the term tax expenditure. Since that’s also where the big money is, that’s where the intellectual battle will take place.

  94. comment number 94 by: Brooks

    AMT,

    ok, so it sounds like you are saying that if a narrowly utilized tax break for purchasing Product X is similar to spending (as you said prviously), that similarity is NOT reduced (or at least not reduced by much) if that same essential policy could not be efficiently & effectively implemented as a direct spending subsidy.

    So at least for the most part, we are back to your assertion that “a narrowly targeted tax benefit [for purchasing Product X] is similar to spending”. I concur, and we also agree at the opposite end: we agree that a hypothetical (and possibly impossible) universal non-refundable tax credit for spending on designated products, if that spending were no greater due to this incentive than it would have been without the incentive, and if the amount of tax savings didn’t depend on the level of spending on those products, and if market prices and demand and supply for those products were no different than they’d be otherwise, then such a tax credit is similar to a tax rate cut. (Possibly this could also apply to tax breaks as a whole, which some people getting some tax breaks, and others getting other tax breaks, as long as, in sum, all those conditions are met for everyone.)

    Where we differ is in how we each view broadly utilized tax breaks. You say that if “tens of millions” of people utilize a given tax credit/deduction for purchasing Product X, then it’s more like a tax rate cut than like spending. I think that’s far too low a standard. If even half of all (income) taxpayers utilize a deduction, that still leaves half who, in your words, will be paying a “penalty” on taxation of heir income for not purchasing the product chosen by the politicians — and indeed, much more than half will, according to your view, have to pay various levels of penalties for not spending as much on those government-designated products as others. Essentially, your view implies that everyone gets his own, individualized tax rate based on how much he spends on those products. Seems to me that if every individual gets his own income tax rate based on how much he does things that have nothing to do with income, it’s not really an income tax rate structure.

    And it still means politicians are choosing products to subsidize, just as if they sent out vouchers, distorting markets and (in effect) redistributing wealth on the basis of individual consumer (and business buying) choices, with all taxpayers left with a larger debt burden so that pandering politicians can enable purchasers of particular products (a voting segment of sorts) to end up with more money than they’d have without the related tax provision. That sounds much more like “big government” “spending” and market distortion by a sort of central economic planning directing the population’s resources as the politicians decide (and arguably more for political reasons than even well-intentioned central economic planning, flawed as that generally is) than like “smaller government” and a freer economy.