What's the matter with this enormous pile of money? Maybe nothing. The tax expenditure tower includes programs like the Earned Income Tax Credit, which has done wonders to reduce poverty for low-income families. But some budget experts worry that this shadow budget has become an unwieldy excuse for politicians to sneak in new spending programs without using the word spending.
In fact, there's new evidence that Americans are much more likely to accept a new government program if it's described as a "tax break" rather than "spending", even when the programs are identical. Yale Law School students Conor Clarke, a former Atlantic staff editor, and Edward G. Fox, ran a series of online survey experiments that asked people what they thought of various spending proposals. The only variable they changed was whether the proposal was framed as a tax break or direct spending. Consider how you'd respond to the following questions:
- "Would you support the government offering annual $1000 cash payments to each family, to help cover rent?"
- "Would you support reducing each family's taxes by $1000 to help cover rent? If a family owes less than $1000, they get the rest in cash."
These days, it's en vogue to consider the American electorate to be clueless glob of near-random, hyper-emotional convictions. Academics have shared this opinion of the country for some time. In 1960, researchers from the University of Michigan published a famous study noting “the general impoverishment of political thought in a large proportion of the electorate,” adding that “many people know the existence of few if any of the major issues of policy.” Clarke and Fox's work is more subtle. The fact that people can have starkly different support for identical programs with slightly different descriptions suggests that even well-intentioned and well-informed voters have a hard time escaping the pull of positive framing effects.
The effects add up, too. The tax-expenditure budget unwinds some of the progressivity of the tax code. More than 50 percent of the benefits of tax expenditures go to the richest fifth of the population, thanks to tax breaks on investment income, savings, and mortgage interest. The richest fifth of the country sees almost all (93 percent) of the benefit of the tax break on capital gains, and the richest 1 percent enjoys two-thirds of that benefit. Something tells me that if the capital gains tax were framed like that, it wouldn't be considered quite so untouchable.