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In response to a debate on refundable tax credits

Posted by – 10/22/08

This blog is a response to a post on Facebook that simply grew too large to continue there. The original message, which was not made by me, touched on the hints of Socialism in Obama’s refundable tax credits. From there, a back-and-forth occurred with several different people, and the applicable portion of the latest comment is quoted below.

I definitely understand that Obama is not infallible and that some criticism of him is not baseless. In this case the criticism is misleading at best. All of the tax credits proposed are to go to people who work. For one, “welfare check” implies money from the government for those who don’t work. Those that do work still pay social security taxes and medicare taxes, as well as excise taxes on the gas you use or your telephone bill. These tax credits are designed to somewhat offset these taxes in particular. Currently, according to http://politifact.com/truth-o-meter/statements/813/, the government is giving nearly $53 billion in the same type of tax credits to some 57 million people who fall into the zero or negative income tax category. This has been supported strongly by republicans in the past because it helps to keep lower income people who work off of welfare and gives them more of an incentive to work.

It’s true that with Obama’s plan more people will be benefiting from these tax credits, but calling them welfare (especially when McCain’s healthcare plan results in the same sort of payments to individuals who pay no income tax) is misleading.

In addition to the politifact reference… http://www.factcheck.org/elections-2008/obamas_welfare.html

And Kevin, I would consider the opinion section of the WSJ to be a bully pulpit. The owner, Rupert Murdoch, doesn’t really strive to make any of his media holdings bastions for open-minded, fair discussion of issues.

I disagree. “Welfare check” implies money given to people who never paid into the pool of money from which the welfare check is cut. I understand the argument about FICA taxes. I hear it all the time from the Left because this is apparently the only reasoning available to justify Obama’s welfare tax plan, but it relies on a few major fallacies. Technically yes, the FICA payroll tax is an income tax because it is a tax on your income. But it is not an income tax in the vernacular sense and not what the McCain campaign is referring to when they discuss income tax. When we say “income tax” in the US, most people assume we are talking about the taxes that are not designated with a specific purpose (such as Social Security, Medicare, etc…) and are to be filed every April 15th. Using the term income tax to refer to FICA taxes is equivocation.

Second, the government constantly siphons funds from social security and medicare to pay for other projects — and in doing so, I should note, has squandered any chance our generation has of receiving Social Security checks… unless they raise our taxes… which they will. The government may treat FICA as if it’s the general fund income tax, but their mishandling of funds does not make it so. By trying to redefine income tax to include FICA, you are affirming the consequent.

And for good measure, I’ll throw in my own fallacy: the slippery slope. In addition to citing that working people pay FICA taxes, you mentioned the excise taxes they pay at the gas pump or through their phone bill. Illegal aliens pay for gas, groceries, phone service, cable tv, etc. Should we send them refundable tax credits as well?

Please don’t think that my criticism of Obama implies that either I will defend McCain where he is wrong or refrain from criticizing him for the same error. I agree with your point on McCain’s health care plan. That’s one of the points he’s been making with which I am less than thrilled. Have you noticed many conservatives championing this part of his plan? There’s a reason you haven’t. Another is his ludicrous plan to for the government to buy up all the bad mortgages (not just prop up the banks that did it, but go a step further and own them outright) and readjust the principle. Maybe there’s something I’m missing from the plan, but I don’t like it. Anyway, you’ll note that in the FactCheck piece you linked to, they didn’t say Obama wasn’t advocating welfare. They just mentioned that McCain’s plan advocates the refundable tax credits just like Obama does. That just backs up the argument that I’ve made for months. We’ve got two Socialists running for the presidency. One’s just a lot further down the continuum than the other.

I understand what they’re both trying to do, but it’s non-sense. McCain’s fiscal non-conservatism is not doing him any favors and will probably cost him the election. And do Democrats really think that an extra $500 individually or $1,000 per couple will hoist the poor out of the drudgery of their current position? Does Obama even know any poor people, or does he only know them theoretically? An extra $500 per person can be gained through only 2 hours more work per week. An extra 24 minutes per work day! If the poverty stricken were really this close to the flashpoint of financial freedom, you’d think we would see less poverty. This is such a clear case of simply throwing money at the problem. Call me a pessimist, but Democrats need to come to terms with the fact that a great many American workers are perfectly content to bitch and moan about their positions for the rest of their lives. People are poor because they’ve made bad decisions. People are poor because they don’t work enough. People are poor because they don’t manage their finances properly. People are poor because they buy toys they feel they deserve before taking care of the essentials. There is no curse for lottery winners; there is a definite reason so many are back in dire straights a few short years after hitting it big. They’ve proven they can’t be responsible with a little — remember? they buy lottery tickets for entertainment — so why should we expect them to be responsible with a lot? Send them $500 every April 15th, and I think we’ll see far more of what a buddy of mine saw at the unemployment office: a man in his brand-new Air Jordans playing on his iPhone… while he waited for his unemployment check.

Those people who dig down into their souls and fight to get out of poverty are supremely better people for having worked through their issues. At their convention this year in Denver, Democrats loved to rejoice with people who told stories of overcoming hardship for the betterment of themselves, yet they still don’t seem to learn the very clear lesson here: suffering isn’t fun, but real growth doesn’t occur without it. We see it in the natural world. We also see it in long-term business.

Government is consistently the only organizational force that thinks it can operate effectively without regard to the laws of give-and-take, supply-and-demand, and suffering-and-growth. Government is not intended to nor can it be expected to ensure the happiness of each individual citizen. Its task is to create an environment in which anyone can pursue it. The pursuit of… It’s a very key part of that famous line. Generally speaking, Democrats are detrimentally focused on the micro.

There seems to be something that causes liberally-minded people to assume anything good is a right deserved by all and to deprive anyone of these rights is morally wrong. Perhaps there’s a bit of guilt that they might not have worked hard to achieve their position in life, but I don’t think that applies to the majority of liberals. For most, I think it’s empathy. But pure empathy — unchecked by reason, logic, and the understanding of the inescapable natural order of things — sets up a social system that is destined to over-promise, disappoint, and ultimately fail.

We’re seeing right now the beginnings of the effects of Congress trying to buck the traditionally accepted risk-based assessment that lenders perform on all candidates for a mortgage all to achieve the seemingly noble effort to increase the number of homeowners in low-income areas. Throw those rules out the window and you’re suddenly giving huge amounts of money to people who cannot be reasonably expected to pay it back. This kind of plan isn’t sustainable. It was an artificial success. At the first sign of trouble, an avalanche of foreclosures began that couldn’t be stopped. Oh, Congress tried to legislate their way out of a massive problem of their own making — per the usual — but I seriously doubt we’re going to be pleased with the results.

Our government cannot operate effectively in this manner for long. In business, if the costs or risks outweigh the benefits, you don’t do it. A businessman knows that you cannot raise prices without there being a direct effect on sales, and therefore, revenue. In their cocky arrogance, our government officials think this natural law somehow does not apply to their tax policy.

We need far more businessmen in office and far fewer populist lawyers in elected office.

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1 Comment on In response to a debate on refundable tax credits

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  1. Kev says:

    And for my friends that are already looking up formal and informal fallacies in an attempt to nail me on my own harangue, look this one up first: argumentum ad logicam.

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