Credit only where credit is due

I agree that tax credits for school choice are not a very good idea. The regressivity is not a particularly big problem; you can simply make the credits refundable. But economically, there is no difference between a tax credit and government spending, except that tax credits are more complex and less transparent. But it is different, you will insist; with a tax credit, you get to keep your own money, while with actual spending, the government takes your money. Yes, well, that is true for you, where you is someone who gets the tax credit. But unless we cut spending somewhere else, that is not true for me, where me is a childless single. Since the government is taking less of your money for other spending, it has to take more of my money to cover the shortfall. This is no different, either economically, or morally, from taking money from me to give to you in order to educate your children at the school of your choice. Indeed, tax credits are worse than spending, because they're not transparent. Since they don't show up as flows in the federal budget, it is harder to keep track of what we are spending on them. Of course, for people who want the programs thus funded, this is a feature, not a bug. But as a general rule, it's best to stick to Megan's Third Law: We should never unnecessarily multiply the complexity of the tax code. It almost always costs you more in the long run. And if libertarians and conservatives really want to attack the scope of the state, the first step is insisting on transparency no matter whose ox gets gored.

This article available online at:

http://www.theatlantic.com/business/archive/2008/05/credit-only-where-credit-is-due/3459/