Romney argued at a private fundraiser last spring that the 47 percent (actually, it’s 46 percent) of American households don’t pay federal income taxes amount to a group that is “dependent upon government, who believe they are victims, who believe the government has a responsibility to care for them.”
Arguments along these lines have percolated on the right for at least a decade, going back to when the Wall Street Journal editorial page described these Americans, who have enough deductions and credits to pay no income tax, as “lucky duckies.” This gives them every incentive, the Journal and conservatives have argued, to vote into office politicians who will expand the welfare state, content in the knowledge that they won’t have to pay for it.
Much rarer, even among those who embrace that argument, is advocacy of some of the specific policy changes that would make those duckies not so lucky. Here are three of them:
Some 44 percent of those who pay no federal income tax escape the burden because they are elderly. A major reason: Social Security benefits are generally untaxed for those recipients without substantial additional income. But if an enterprising politician wanted to change that, it probably wouldn’t be easy.
One approach would be to begin taxing all Social Security benefits like they were ordinary income. Presumably, the government would increase the amount of payments to make the after-tax payments the same, but this adds a lot of complexity: Right now, say, the government might pay a senior $15,000 a year, untaxed. In this scenario, suddenly the government is paying the person $20,000, but requiring them to fill out a 1040 form and send $5,000 of it back to Uncle Sam. In other words, it adds a lot of complexity to that elderly person’s life while, in effect, not changing anything substantively.
If you are an advocate of limited government, it could be true that forcing that senior to fill out an income tax form might make him a greater skeptic of government spending. But in the near term, it would be more of a boon for H&R Block than for the elderly or the U.S. Treasury.
There are other tax benefits for the elderly that could be eliminated without such Rube Goldberg processes, like an extra-high standard deduction for the elderly; eliminating it would mean more seniors facing an income tax obligation.
Stop subsidizing children
As it set about to cut taxes more than a decade ago, the George W. Bush administration put particular emphasis on what it saw as a pro-family tax code. In particular, it doubled the per-child tax credit to $1,000, made it refundable even to families who didn’t have enough income to benefit otherwise. It increased the standard deduction for married couples to eliminate the “marriage penalty” that had made it more costly, from a tax perspective, for many to marry rather than stay single.