Why Rick Santorum Wants Fewer Taxpayers
One of the interesting elements of Rick Santorum's rise has been the increasing attention paid to the fact that he's the only guy in the field who believes strongly that the tax code should be reworked to promote and support families. It's interesting because it stands at odds with the general Republican approach to tax reform in recent years, and it's worth highlighting because of the decision it represents about using the tax code to promote a certain vision of society.
You're by now probably well familiar with the statistic that approximately 47% of Americans pay no taxes. That's actually inaccurate - they do pay a number of taxes, as everyone does - just not federal income taxes. Why don't they pay federal income taxes? The answer might surprise you.
As it turns out, the largest statistical reason for the growth in the percentage of Americans who pay no taxes is the increase in the child tax credit under Republican leadership over the past decade.
Let's rewind to 1998, when Newt Gingrich was Speaker of the House. Republicans came up with the idea of a $400 tax credit, intended to lighten the tax load on working families and high-child-producing social conservatives. Signed into law by Bill Clinton, the child tax credit didn't stay at $400 - it expanded dramatically under George W. Bush, as he and the GOP Congress sought to please their base. They more than doubled the credit, which had the consequence of pushing more and more households into the category of paying no federal income taxes.
According to the Tax Foundation, in the period from 2000 to 2004 alone, this expanded child credit accounted for increasing total nonpayers by 10.5 million, a 32-percent jump. In 1997, before the child tax credit was introduced, under 20% of federal returns had no tax liability—today, as you know, it's 47%.
Now, few Republicans are willing to admit that the high number of nonpayers today is in large part due to their use of the tax code to further their view of society. Some, such as Michele Bachmann, have decried the fact that there are so many non-payers, calling them "freeloaders" and the like.
This puts conservatives in an unfortunate position. Either they have to walk back this talk about broadening the tax base, or they have to raise taxes on their middle and lower-middle class child-producing base at a time when birth rates are already dropping. (Hey, we need those kids to fund entitlements!).
For Santorum, the decision is easy: he triples down on the child tax credit approach. As the Tax Policy Center notes, Santorum's tax approach would triple the exemption for dependent children, which "would likely add significantly to the number of households that pay no income tax."
Now, fewer people paying income taxes isn't a bad thing, from my perspective or Milton Friedman's, as long as government is simultaneously cut back (my favorite president, Calvin Coolidge, cut the government to the point where only 2% of Americans paid federal income taxes). But where and what would Santorum cut? Without significant cuts, his tax plan would likely explode the deficit even further. And I have my doubts whether Santorum's approach would lead to the kind of economic recovery a flat tax would spawn to compensate for such steps.
For the rest of the candidates in the field, whose tax plans you can compare and contrast here, most have endorsed expanding the tax base and making more of these 47% of Americans pay. But what they ought to be emphasizing that the best way to expand the tax base is not through redistribution of tax receipts depending on who's in power in Washington (and whether they love families or not), but by getting more Americans working, and in higher wage jobs. Unfortunately, that takes time, and may have more to do with education reform than tax reform.
- Comment (34)
- · Quote
- · UnfollowFollow (3)
- Pages:
- 1
- 2
Comments:
Apr '11
Re: Why Rick Santorum Wants Fewer Taxpayers
Santorum has been one of Ryan's more enthusiastic backers, opposing the Ryan-Wyden compromise as too weak. Amongst other places, then, the money would come from Medicare. As a key author of welfare reform in the '90s, he's got a further reforms to that. Santorum is one of the more serious cutters in the field. While my recollection from your "pick your candidate" results is that you weren't a big traditional marriage fan, I'd have thought that you'd give credit to the degree to which most of the supporters for financially supporting those who invest much of their time, effort, and money in raising the next generation of Americans right do tend to be sound fiscal conservatives, too.
Dec '11
Re: Why Rick Santorum Wants Fewer Taxpayers
But it's for the children!
Oh, wait...isn't that a Democrat meme?
Dec '10
Re: Why Rick Santorum Wants Fewer Taxpayers
It is not just those who pay no federal income taxes who benefit from the child tax credit. Not taking the credit for my two children would triple my tax burden. It's nice to get it, but I think a more reasonable method would be to reduce my taxable income. The direct subsidy form just doesn't feel right even if I use it responsibly.
Dec '11
Re: Why Rick Santorum Wants Fewer Taxpayers
So our new front-runner wants to amp up the use of the tax code for social engineering.
Great.
Man, I miss Steve Forbes.
Re: Why Rick Santorum Wants Fewer Taxpayers
I certainly think it's possible Santorum has cuts in place to make it fiscally manageable (not sure you can get that from Medicare, at least not for a few years - maybe under Rand Paul's approach). I'd like to learn more about those - but these things don't need to be budget neutral (from my perspective) if they spark economic benefit which offsets the deficit hit.
Re: Why Rick Santorum Wants Fewer Taxpayers
Exactly. The thing I generally dislike about this approach is that it can just as easily be misused by future administrations. The advantage of a flat tax approach is that it's much more difficult to engage in social engineering (even a kind I agree with!) through the tax code. The power to do the right thing usually comes with the power to do the wrong thing, too.
May '10
Re: Why Rick Santorum Wants Fewer Taxpayers
Democrat: Vote for me and I will give you free stuff.
Republican: Vote for me and I will give you a special tax break.
Re: Why Rick Santorum Wants Fewer Taxpayers
Oh, and James of England: my real disagreement with Santorum is on trade and union policies, which I will endeavor to write about soon. I think his tax plan is still an improvement from the current path and is generally a good thing, though not the change I would like to see toward a more fundamentally different approach to taxation.
May '10
Re: Why Rick Santorum Wants Fewer Taxpayers
Hurray for Santorum.
This 47%-are-freeloaders silliness has been a conservative canard for some time. It ignores the fact that most people progress through the tax brackets as they age; that is, we start out relatively poor as we enter the workforce and start a family, and then we rise in income and wealth (and hence tax burdens) as we age.
Even the supposed "flat taxers" like Perry concede this point, without actually saying so (since they still enjoy getting mileage out of the "half the population pays for the other half" rhetoric): His flat tax exempts the first fifty grand in income for a family of four, a fact which, when combined with the option to participate, guarantees that the 47% will grow, not shrink.
If nothing else, Santorum will do the conservative movement a good deed by setting it straight on this issue.
May '10
Re: Why Rick Santorum Wants Fewer Taxpayers
Also, note that the Europeans, with their VATs, have significantly flatter taxes than us. And they don't have kids. No surprise.
May '10
Re: Why Rick Santorum Wants Fewer Taxpayers
outstripp: Democrat: Vote for me and I will give you free stuff.
Republican: Vote for me and I will give you a special tax break.
Ugh, how depressing. I think anyone who approaches this election with eagerness should be a candidate for psychoanalysis.
Nov '10
Re: Why Rick Santorum Wants Fewer Taxpayers
The tax code is an extremely blunt and crude tool for social engineering. Using it to coerce, reward or punish behavior according to its conformity with an ideal generally works out badly, and the more vigorously this approach is applied the greater the harm done by unintended consequences. Santorum comes of as a bit young and foolish here. Gingrich has made all those mistakes, but he strikes me as a bit older and wiser this time around. Course, I've been fooled before.
Jan '11
Re: Why Rick Santorum Wants Fewer Taxpayers
Odd. I read 5 posts which centered on Rick Santorum, including this one. None of them mentioned, let alone praised, his foreign policy stance. Yet Santorum was the harshest critic of Ron Paul's non-interventionist position, a criticism with which so many at Ricochet concurred. Where's all the pro-Santorum support for more military spending and a more aggressive foreign policy?
Apr '11
Re: Why Rick Santorum Wants Fewer Taxpayers
As Scott alludes to, I thought that you were in favor of this when Perry did it. How is the credit different?
Apr '11
Re: Why Rick Santorum Wants Fewer Taxpayers
Newt on Newt's plan, explaining why he adds further credits to Perry's $12.5k deduction (Newt only has a $12k deduction):
In other words, Newt would also dramatically enhance the Child Tax reductions for tax payers under his optional scheme. How does this match up with your claim that:
So far as I can tell, only Huntsman would dramatically expand the base, with Mitt and Paul mildly expanding it, Perry reducing it, and Santorum and Newt reducing it further.
Edited for a stupid math mistake. Lesson: don't drink and comment.
Edited on January 5, 2012 at 8:41amOct '10
Re: Why Rick Santorum Wants Fewer Taxpayers
Please do. I'm wondering how he reconciles more Free Trade Agreements with tax policies favouring manufacturing and a policy to "[s]trengthen our national security and national defense so that we are not dependent upon our foes or competitors for critical manufacturing, technology, energy and other security needs".
Apr '11
Re: Why Rick Santorum Wants Fewer Taxpayers
Ben Domenech
I certainly think it's possible Santorum has cuts in place to make it fiscally manageable (not sure you can get that from Medicare, at least not for a few years - maybe under Rand Paul's approach). I'd like to learn more about those - but these things don't need to be budget neutral (from my perspective) if they spark economic benefit which offsets the deficit hit. · Jan 4 at 7:
I agree that Santorum's plan would increase the deficit substantially in the medium term, and is worse in this respect than Huntsman's or Mitt's, about the same as Paul's. It'd increase it a lot less than Perry or Newt's plan, though; there are no 10 figure deficits added in Santorum's plan.
If you're complaining about his tax policy because you have a real complaint is about his other policies, that seems a little unfair.
Apr '11
Re: Why Rick Santorum Wants Fewer Taxpayers
genferei
I'm wondering how he reconciles more Free Trade Agreements with tax policies favouring manufacturing and a policy to "[s]trengthen our national security and national defense so that we are not dependent upon our foes or competitors for critical manufacturing, technology, energy and other security needs". ·
So long as they are not direct export subsidies, manufacturing tax cuts should be compliant with America's FTAs and with WTO guidelines. In other words, they'd have to be reasonably broad, applying to a substantial domestic market. America consumes a lot of American goods, though, so this shouldn't be a problem. Someone could always bring a new case, but there have been all kinds of similar subsidies in the past and in other countries, without any successful cases that I can recall.
There are also security clauses allowing for protectionism in defense industries. The question with his fake "security" stuff is how broadly he'd pursue the policies. Some minor cheating would be fine, normal, and consequence free. Historically, he has been good on trade.
Dec '10
Re: Why Rick Santorum Wants Fewer Taxpayers
James Of England
As Scott alludes to, I thought that you were in favor of this when Perry did it. How is the credit different? · Jan 4 at 10:05pm
The difference is that all of Perry's changes adjust AGI and retain none of the tax credits. Santorum's plan makes similar adjustments to deductions (seemingly only for children but not spouse, self, and other dependents?) and retains the Earned Income Credit and the Child Tax Credit, both of which are refundable. Under the Santorum plan it is still possible (and now more probable) that people will get back more than was withheld from their checks due to the refundable credits. With the Perry plan you can go to a zero tax burden but not to a negative one. One quibble I have with Perry's tax form [pdf], however, is there appears to be no mechanism for refund. Does this imply an end to automatic withholdings? If you owe nothing you send in the form and you're done; if you owe you send a check with your form rather than having the money kept from what has been deducted from every check?
Apr '11
Re: Why Rick Santorum Wants Fewer Taxpayers
The King Prawn
James Of England
The difference is that all of Perry's changes adjust AGI and retain none of the tax credits. Santorum's plan makes similar adjustments to deductions (seemingly only for children but not spouse, self, and other dependents?) and retains the Earned Income Credit and the Child Tax Credit, both of which are refundable. Under the Santorum plan it is still possible (and now more probable) that people will get back more than was withheld from their checks due to the refundable credits. With the Perry plan you can go to a zero tax burden but not to a negative one. One quibble I have with Perry's tax form [pdf], however,
I agree that Santorum's plan, like Newt's, is more generous to non-taxpaying parents.
You were saying, though, that you disliked the effect as applied to your finances, though, which would (by your descriptions of the impact, if I recall them right) be bigger under Perry than under Santorum, or under the current system. Again, worse still under Newt (who would give, if I have the math right, negative returns to households of four earning six figure sums).