There Are No Such Thing As Tax Earmarks

Promoted - Ryan Ellis is the Director of Policy at Americans for Tax Reform.

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

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

A tax cut is not the same thing as a spending increase.

Here’s a thought experiment for the dubious: suppose we eliminated the mortgage interest deduction and had HUD give every homeowner a $10,000 subsidy to pay his mortgage.  It’s all good, right?  Heck, we’re just replacing a “tax earmark” with a “spending earmark.”  Except that this “swap” would increase taxes and increase spending by hundreds of billions of dollars a year.


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I'm reminded of lessons from Accounting 101.  Would the correct T-Account entry be as a liability, or as a contra-asset?

When you cause tax revenues to decrease by changing tax rates or tax items, the money vanishes from the net at the end of the fiscal year and becomes a contributing factor to a net deficit just as surely as spending the same amount would have.  See the history of decreasing tax revenues and expanding deficits after the Bush tax cuts, when properly adjusted for inflation and GDP growth.

Popular Conservative theory has it that this money is "better in the hands of those who know best what to do with it, the taxpayers".  History shows us that when people who already have money get more, they tend to invest it, and the placement is unpredictable.

The tax cut money did not create jobs (GW Bush completed his first term having not created a single new job), it produced only tepid GDP growth, and studies I've seen showed it instead went to securities, commodity and Real Estate speculation, and much of it ended up off-shore in global investments that did nothing to help the US Economy directly.

Trickle-down, and tax-cuts have no direct impact on a National Economy, they DO have a nice impact on personal disposable income and the creation or growth of personal wealth.

So, I guess strictly speaking I guess you're professorially right, but the net efect is nil.  If you look at your thought experiment, you are taking in an estimated new $10,000 of revenue (the taxes you are now collecting) and returning the money via a check to the taxpayer.  The effect is nil to the taxpayer, and nil on the government side.

tax earmark

A tax provision that is intended to benefit a single entity or a single community is very similar to an earmark and should be treated similarly (i.e. with transparency and skepticism).  That said there are a lot fewer tax provisions that benefit single entities than there are spending provisions.

I don't think being skeptical of 'tax earmarks' or whatever you'd prefer to call them is tantamount to equating tax cuts and spending increases.  I'll take whatever tax cuts I can get, but a tax provision on 'wool research' isn't high on my list.



Earmarks can be seen together

Earmarks can be seen together in legislation and in the wording of Congressional board reports. 000-071 Stiff earmarks are compulsory and have the consequence of regulation, at the same time as soft earmarks do not have the upshot of regulation but by institution are acted on as if they were compulsory. HP0-Y20 Thanks for sharing the informative post.

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