Don’t Let the GOP Buy Your Vote, Stupid

Don’t Let the GOP Buy Your Vote, Stupid

by Nick Gillespie at the Daily Beast

http://www.thedailybeast.com/articles/2015/03/13/don-t-let-the-gop-buy-your-vote-stupid.html

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There’s no doubt that a spending hawk such as Lee, who has proposed a balanced-budget amendment in the past, knows that. Yet at the heart of his and Marco Rubio’s plan is a massive giveaway to parents in the form of a new $2,500 child tax credit (this would be added to an already existing $1,000 child credit) with no phase-out due to income. However, because it’s “limited to the sum of total income and payroll tax liabilities, including employer-side payroll tax liability,” it means that low-income parents won’t be able to claim the full amount.

The expanded child credit is a big reason why, as AEI’s Pethokoukis grants, the plan would “lose something like $4 trillion in federal tax revenue over a decade, maybe half that if you apply ‘dynamic scoring’ that factors in the effects of economic growth.” (Dynamic scoring attempts to model changes in people’s behavior to changes in the tax code. While the method is easily abused, its core insight—that we change our consumption patterns when costs and benefits vary—is sound.)

But unlike cutting taxes on business activity or trimming top marginal tax rates, expanding the child tax credit has nothing to do with spurring economic growth. This is something that conservatives grant in most contexts. As Curtis S. Dubay of the Heritage Foundation wrote just last year, “Increasing the credit would be a targeted tax cut that would put more money in the pockets of people who qualify for the expansion. However, it would not improve economic growth like rate reductions would because a [child tax credit] increase would not reduce those disincentives on productive activities.”

The free-market Tax Foundation agrees. In fact, in an analysis of the Rubio-Lee plan, it ran both static and dynamic scores of the plan. On its static score for the next 10 years, the Tax Foundation found the Rubio-Lee plan meant serious reductions in annual federal revenue. For instance, switching to just two tax brackets of 15 percent and 35 percent would mean $31 billion less each year compared to current law. The full expensing of business equipment would lead to another annual loss of $78 billion, while the changes to the business taxes would cut $210 billion. And the expanded child tax credit would mean the feds would forgo another $173 billion.



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