And other tax credits. Scott Hodge was one of the developers of the Child Tax Credit more than 25 years ago, and today he thinks the idea—well intended as it was—turns out to be bad tax and social policy (did I hear a sotto voce “unintended consequences?”).
His Monday Wall Street Journal op-ed went into detail on how the child tax credit, along with the subsequent proliferation of tax credits, turned out to be heavily counterproductive, reducing family prosperity through reducing the number of workers—who are family members—in the work force and thereby reducing overall GDP.
But the kicker of his piece was his closer.
No wonder the IRS is dysfunctional—it’s not equipped to be a social-service agency.
The “put money in people’s pockets” approach of the child tax credit might have been good politics, but 25 years’ experience shows it was bad policy. The country needs a tax agenda that promotes growth and opportunity, not handouts and redistribution.
Indeed.
The best tax agenda for growth and opportunity promotion begins with taking our tax code, and so the IRS, out of the social engineering milieu altogether. Tax collections should be limited (at the Federal level at least; although State tax codes would benefit from similar changes) to the Constitutionally mandated purposes of pay[ing] the Debts and provid[ing] for the common Defence and general Welfare of the United States. Keeping in mind, too, that the general Welfare of the United States is itself limited to the items enumerated in our Constitution’s Article I, Section 8.
That tax agenda concludes with enacting a tax code that eliminates business income taxes altogether (keeping in mind that it’s the business’ customers who pay the lion’s share of those taxes, anyway, in the form of higher prices, while the rest of us pay in the form of reduced innovation and fewer jobs). That adjustment needs to go along with setting a single flat tax rate on all personal income from any source, with no deductions, credits, subsidies, surcharges, or any of the other froo-froo currently extant in our existing byzantine and mendacious tax code.