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Different Descriptions, Different Purposes

June 2nd, 2008 · 5 Comments

David Boaz articulates a common libertarian pet peeve:

In an article about the wave of conservative reform under Louisiana governor Bobby Jindal, the New York Times writes:

Meanwhile the House is considering an income tax cut that would cost the state $300 million.

Another way to say that would be:

Meanwhile the House is considering an income tax cut that would save the taxpayers $300 million.

It all depends on whether you identify with the taxpayers or the tax consumers.

Here’s the thing: There are contexts in which I think it’s perfectly reasonable to use the language of “costs” or “tax expenditures” to describe tax cuts. For fiscal purposes, a narrowly tailored tax exemption or credit is functionally equivalent to a direct subsidy. If (if!) you suppose spending is an independent variable, giving a back a few million for companies that paint their walls puce or what have you just leaves a hole in the budget that has to be made up elsewhere—which is to say, it has to come out of the pockets of other taxpayers, either now or in the future. In these cases, it’s probably better to use the rhetoric of “cost,” because we don’t want narrow interest groups to be able to disguise a subsidy as a tax cut in order to win conservative support

The problem is, this is probably not the right way to think about broad-based income tax reductions. Whether we want to think of any given tax reduction as a saving for taxpayers or a cost to the government will generally depend on the details. The problem is, the fact that it’s reasonable and legitimate to use the “tax expenditure” framing in some circumstances tends to license the indiscriminate use of that frame.

Tags: Economics · Journalism & the Media



5 responses so far ↓

  • 1 Michael Yuri // Jun 2, 2008 at 12:22 pm

    I agree completely. Unfortunately, a number of Boaz’s Cato colleagues go even further and explicitly reject the concept of tax expenditures.

    See, for example, the education policy folks when they discuss vouchers vs. tax credits.

  • 2 southpaw // Jun 2, 2008 at 3:14 pm

    This might be an area where libertarians can make common cause with liberals because this framing is not particularly helpful to liberals, either.

    Liberals don’t want taxation framed as “giving the government a bunch of money to spend as it sees fit.” Instead, they’d presumably prefer something like “investing as a society in something worthwhile.”

    So for the gas tax, for instance, this frame would say:

    “A 10% cut in the gas tax would cost the state X billion dollars.”

    Libertarians would favor:

    “A 10% cut in the gas tax would save motorists X billion dollars.”

    And liberals would prefer:

    “A 10% cut in the gas tax would mean choosing not to invest X billion dollars to repair our crumbling roads and bridges.”

    The first frame is not optimal for any cause because (it seems to me) hardly anyone is concerned with the preserving the revenue of the state as an abstract proposition.

  • 3 Kevin B. O'Reilly // Jun 2, 2008 at 5:33 pm

    Right, it’s not journalists’ job to be advancing one group’s ideologically charged framing over another’s. “Costs the state” is technically accurate but somewhat incomplete inasmuch the tax cut (assuming it’s been dynamically scored here, of course!) will cost the *state government* $300 million.

    I’d write, “Meanwhile, the House is considering an income tax cut that would shrink the state’s coffers by $300 million.”

  • 4 Phoenician in a time of Romans // Jun 3, 2008 at 11:26 am

    It all depends on whether you identify with the taxpayers or the tax consumers.

    Given that everyone in society is a tax consumer, that seems like an easy choice. I guess he means “it all depends on whether you’re rich enough to get by if society starts crumbling”.

  • 5 Ike // Jun 3, 2008 at 11:08 pm

    Let’s concern ourselves with comments so abstract – as #4 seems to me to be – that they are incoherent. That way, we can avoid the fact that the money belongs to the taxpayer, not to the taxtaker.

    In case you wonder why I think comment 4 is incoherent, if society “crumbles” – not certain as to the extent of social deterioration implied there – the rich are going to be as bad off as the rest of the people, once “crumbling” gets down to anarchy and routine public violence. And what that has to do with the post is beyond my feeble wit to determine.

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