Sign Up For Our Mailing Lists


InsiderOnline Blog: October 2008

Are Targeted Tax Breaks Like Pork? Part II

Earlier this week, the weekly conservative bloggers briefing hosted by The Heritage Foundation featured a number of speakers on the topic of taxes. During the discussion, an interesting debate broke out between our friends at Americans for Tax Reform and our friends at the Tax Foundation. The question debated was how conservatives should view tax breaks that are targeted to benefit specific interests: Are they like pork—just a spending program administered through the tax code? Or are such tax cuts an incrementally positive—though perhaps not ideal—step toward reducing an already too high tax burden?

The discussion considered a hypothetical tax credit written to benefit just one person. From the perspective of that one beneficiary, a $1,000 reduction in tax liability provides more or less the same benefit as a $1,000 check from the Treasury. So why should one form of the benefit be esteemed as a move in the right direction while the other is regarded as a part of Congress’s culture of corruption? This is the view of the Tax Foundation. The counter argument, put forth by Americans for Tax Reform, is that cutting taxes is not a zero-sum game; but in order to spend money, government must first take that money away from someone else; thus, spending and tax cuts should never be equated. 

This debate is not a new one, as we noted in an earlier post (which provides a fuller description of the two positions). Without taking a position ourselves, we pose the following questions:

1. For conservatives trying to puzzle out this issue, is it at all relevant that tax cuts by themselves do not reduce the size of government? If the burden of government is what it spends, not what it taxes, then can we necessarily say that any tax cut must always yield some net decrease in the size of government? Government might respond to reduced tax revenue by decreasing spending, but it might also decide that the spending it wants to do is worth borrowing more money. And doesn’t more borrowing just mean tax increases in the future?

2. Is it at all relevant for conservatives that uniformity of taxes is a value embedded in the Constitution? The pertinent language from Article I, Section 8 is “all Duties, Imposts and Excises shall be uniform throughout the United States.” This clause is taken to mean that Congress cannot engage in explicit geographic discrimination when it comes to taxes. Interesting hypotheticals ensue. A tax credit that benefits only one person who happens to live in California would be constitutional. But a law that gave all Californians and only Californians the same tax break might bring a constitutional challenge based on Article I, Section 8. According to the logic of the “tax cuts are not a zero-sum game” position, however, the all-California tax break should be about 37 million times better than the one-person tax break.

3. Is it at all relevant that the recipients of targeted tax breaks aren’t just taxpayers, but are also tax consumers? For instance, earlier this week it was reported that the group ACORN has been skipping tax payments. ACORN affiliates owe $3 million in back taxes. Conservatives were widely outraged that a group whose entire agenda is to increase the size of government would be so hypocritical as to avoid paying its share of taxes. Another hypothetical: Now suppose that ACORN successfully lobbies Congress to receive a one-time tax credit in the amount of $3 million. By fiat, its tax liability has gone away. But has its hypocrisy disappeared, too? Would we conservatives give such an act of tax cutting our praise?

Again, not taking a position. Just asking some questions.

Posted on 10/30/08 12:24 PM by Alex Adrianson

Heritage FoundationInsiderOnline is a product of The Heritage Foundation.
214 Massachusetts Avenue NE | Washington DC 20002-4999
ph 202.546.4400 | fax 202.546.8328
© 1995 - 2014 The Heritage Foundation