Tax breaks and WTO

Max B. Sawicky sawicky at bellatlantic.net
Sat Jan 1 17:14:36 PST 2000


Max writes:
> In principle a progressive expenditure policy can erase
> the distributive effect of any tax.
Is this the same line of reasoning as "It doesn't matter how much we tax poor people so long as we give them a greater amount back in services" ...?

Doesn't this conflict the evidence that taxation is a poor way to redistribute at the bottom end anyway? Curious, /jordan
>>>>>>>>>>

Assuming poor people value what they get in services more than what they give up in taxes, distribution is irrelevant, or at the best a secondary matter. So yes, a regressive tax could be justified on that score. That doesn't mean a progressive tax wouldn't be better.

As to your second q., if taxes do not, by definition, entail refundable credits, then taxes alone can't do much for those who don't have much income to begin with. If they do include refunds, in principle a tax can duplicate the features of any benefit program you'd care to stipulate.

For instance, we could postulate a refundable child credit equal to X% (you fill in the X) of the previous national average level of AFDC benefits. One politically plausible way to pursue this is to call it "child support assurance."

Possibilities are more limited if refunds are only conditioned on labor income (the present situation), but still allow for much to be done.

mbs



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