The Spending Code

Barack Obama yesterday introduced us to the notion that the failure to collect taxes is actually government spending.  Tax cuts (or deferred increases) are just an alternate way for the government to spend money, because without the cuts it would otherwise get the added revenue. Actually the idea is as old as Caesar, but it was jarring to hear it so seamlessly encoded into the Campaigner-in-Chief‘s talking points.

Any politician who without irony calls tax loopholes and other breaks “spending” should be sent home, because they’ve become part of the problem.

But if the former sensible tax relief is now spending, did Obama give “95% of Americans” a tax cut in the Porkulus, or did he just “spend” even more?


Barack Obama is a hard core statist.  Whether we call him a Marxist, socialist, fascist, or progressive really doesn’t matter.

As proof of his cratocratric mindset, we have the new meme of “tax spending”. From his campaign speech yesterday (emphasis added),

The fourth step in our approach is to reduce spending in the tax code. In December, I agreed to extend the tax cuts for the wealthiest Americans because it was the only way I could prevent a tax hike on middle-class Americans. But we cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire in our society. And I refuse to renew them again.

What he’s talking about there is raising taxes on the rich, so hated by his voting base.  Obama and his fellow statists want to increase taxes on the wealthy, because there aren’t enough wealthy people to vote back.

Beyond that, the tax code is also loaded up with spending on things like itemized deductions. And while I agree with the goals of many of these deductions, like homeownership (sic) or charitable giving, we cannot ignore the fact that they provide millionaires an average tax break of $75,000 while doing nothing for the typical middle-class family that doesn’t itemize.

Now, I’m not going to defend the economic wisdom of itemized deductions, because I would have to engage in the Broken Window Fallacy to do so.  I’d rather argue for a flat tax on income over the subsistence level, without deductions, to get government out of the business of influencing economic decisions.

But the reality is that the current tax code draws a delicate balance between the marginal rates and the vast array of deductions, credits, depreciation formulas and set-aside tables. To claim that all of these loopholes and targeted breaks are spending, or somehow favor the rich, is absurd, because people who don’t use them largely don’t use them because they already don’t pay much anyway.

This disgusting practice of stirring up the envy of Americans against one another must be stopped. It must be laid to rest, its proponents so thoroughly defeated that the idea falls into the ash heap of history.

To start, go here.