No matter if you think the EITC is sound social policy or the slippery slope to complete despotism. The question in my mind is, “Is this something the IRS should be doing?” I think refundable tax credits distort the tax system and provide way too much incentive to game the system. Nina Olson made some very good points in her report to Congress this year. She first questions if a given tax expenditure is promoting the right behavior or social good. She then goes on to ask if the outcome can be measured with a suitable metric to see if the behavior has been modified or the social good desired achieved. She then questions if this is something the IRS is able, qualified and in fact should be doing.
This is my big problem with tax expenditures in general and refundable credits in particular. The function of the tax code should be to raise the necessary funds for the functions of a small, efficient and constitutionally restrained federal government. It is without question that the Federal government spends vast amounts of money foolishly and wastes it on programs designed to do little more than assure their re-election. For some the EITC and the various other social safety net programs provide a leg up and enable the recipient to get an education and go on to a life of self reliance and productivity. For far too many it becomes an inter-generational trap which keeps them in poverty and dependency.
This is my big problem with tax expenditures in general and refundable credits in particular. The function of the tax code should be to raise the necessary funds for the functions of a small, efficient and constitutionally restrained federal government. It is without question that the Federal government spends vast amounts of money foolishly and wastes it on programs designed to do little more than assure their re-election. For some the EITC and the various other social safety net programs provide a leg up and enable the recipient to get an education and go on to a life of self reliance and productivity. For far too many it becomes an inter-generational trap which keeps them in poverty and dependency.
Comment