A Subsidy By Any Other Name

I think a lot of the outrage over the retiree benefit "loophole" stems from a moral intuition that I just don't share.  I don't think the tax code has moral content.  I don't think tax subsidies are somehow different from, or worse than, other kinds of subsidies--and nay, conservatives, no matter how long you try to persuade me, I will remain indifferent to the distinction between "letting people keep more of their own money" and, um, giving them money from the tax coffers.  As long as "letting people keep more of their own money" means raising money from someone else to make up for the lost tax revenue, they are functionally--and to me, morally--equivalent.

The size of the subsidy we give companies, who we the money from to give them . . . these may have moral content.  But whether the subsidy is a transfer payment, or a tax credit?  Who cares?  So talk about "double dipping" leaves me absolutely cold.

Congress decided it wanted to give companies a subsidy to keep their retirees off of Medicaid Part D.  That subsidy seems to have been at most roughly equal to the average cost of a Part D beneficiary, and may have saved money.  About 80% of the subsidy seems to have been in the form of a direct payment, and about 20% in the form of a tax subsidy.

Now Congress wants to cut out the 20% of the subsidy that came through the tax code.  There's nothing wrong with that; maybe they should cut it, and they're certainly entitled to do so.  But not because companies were nefariously "double dipping", and not because we need to "end corporate welfare".  We were paying companies to do something we wanted done, and now we want to cut the payment by 20%.  Presumably, once we have reduced the payment, we will get less of the activity we wanted paid for.

Was the subsidy the right size before the cuts?  Is it the right size now?  If I had my 'druthers, we wouldn't have either Medicare Part D, or the corporate income tax, and the policy would pretty obviously be a bad use of public funds.  But I don't, and we do, and in that context, I have no idea where the subsidy should be set.  I doubt Congress does either, but I'm willing to defer to their authority nonetheless.

There is no wrongdoing in this scenario, neither by companies nor by Congress.  There is only a public policy argument about how much we want to subsidize private retiree benefits . . . and, of course, an angry Congress that wants to cut these subsidies without admitting that it has done so.