Tax ‘Credits’ for People Who Don’t Pay Taxes?

President Barack Obama will propose an expansion of popular tax credits for middle class and working poor Americans on Tuesday in a fiscal 2015 budget designed to serve as a blueprint for Democrats in this year’s congressional elections.

The budget, which would also create automatic retirement accounts known as IRAs for some 13 million workers, has little chance of getting enacted.

The budget signals a shift away from last year’s emphasis on deficit cutting to a more pronounced focus on poverty reduction, a legacy-oriented goal the president is highlighting as he faces less than three years left in office. [Source: Thomson/Reuters 3/4/14]

He calls them “tax credits.” But traditionally — and objectively — tax credits refer to a refund or forgiveness for a tax already owed.

For example, parents might be given a tax credit if they paid tuition to a private school. Or a patient-citizen might be given a tax credit when purchasing a private health insurance policy rather than opting for the government program.

Yet Obama is proposing “tax credits” for people who, at least in some cases, and by the government’s own definition, are poor or lower middle class. Most taxes are not paid by people in this income group; and most people in these income groups do not pay income taxes. So how can they obtain “tax credits”?

If Obama came out and openly called this what it is — let’s say, a wealth transfer — might there be more consternation (even uproar) among the population than we currently see? One has to wonder.

It’s all in how you sell it. Especially when selling to a largely clueless population, when it comes to economics.

Obama plays a similar trick with IRAs. Everyone alive knows that an IRA refers to a retirement account paid for with one’s own money. It represents an attempt to partially privatize the Social Security system which (a) doesn’t pay enough money for most people to live on; and (b) restricts the liberty of people to decide how to invest their own money for retirement. It’s also a recognition of the fact that sooner or later Social Security (combined with Medicare) will go completely bankrupt (it’s already happening), and in the process will eventually bankrupt the entire American economy by requiring ultimately 100 percent tax rates, debt too high to calculate, or both.

Few people argue that Social Security should be fully privatized (albeit gradually). Almost nobody argues that there never was a moral basis for Social Security in the first place, since people should be in charge of, as well as responsible for, their own savings and other spending matters, and not forced to take part in any insurance program mandated by the government.

However, until Obama came along, most of our elected officials took it for granted that at least a partial form of privatization or moderation in the whole Social Security scheme was economically justified, if not morally.

Obama is different. He doesn’t like even this partial privatization. He knows that he cannot get away with simply outlawing it altogether. He cannot do what he probably would like to do, and what his stated ideology (“spread the wealth”) tells us he wants to do: Demand that everyone hand over all their retirement savings to the government to redistribute as it sees fit.

So instead, he proposes “providing” IRA plans for people who don’t have them. (Why they don’t have them is never revealed or discussed. All you need to know is they don’t have them, and therefore deserve them, according to our rulers.)

But how does the government “give” someone a retirement account? By definition, these 13 million people presumably cannot afford a retirement account. Or, perhaps they choose not to save, and instead spend their earnings on other things, things not required for survival but things they prefer to spend it on. (We’re not allowed to mention or discuss this, not publicly; not ever.)

Regardless, when government “provides” IRA accounts to people who don’t have them, government is doing it with other people’s money.

Morally or economically, how is this any different from government simply stealing from one person’s retirement account (or any account) and putting it into an account for another? Obama seeks to nationalize people’s retirement and savings by stealth.

Obama should be required to call what he’s proposing what it is. He doesn’t have to be required to call it socialism, or government-managed economic fascism — even though it is both of those things.

But he should at least be required to drop the terms “tax credits” for people who don’t pay income taxes, and drop the term “IRA” for people who will not be filling their accounts with their own money — but with other people’s money.

To be fair, Obama won election not once but twice while openly advocating a policy of “transforming” America’s semi-private capitalistic system into something different, and of openly “spreading the wealth.” If people were asleep when he said these things, they’re undoubtedly just as asleep now when he spouts this other evil nonsense.

  • Margaret Trombley

    Yes Yes Yes!!! Finally someone speaks the truth!

  • http://docthough1.blogspot.com Threnody

    On the other hand, when government raises taxes on businesses, who actually pays those taxes? Businesses, for the most part, just see this as another cost of doing business. (Of course, government also carves out tax breaks for their cronies, to give them a market advantage, but that’s another issue.) So, the consumer pays these taxes. If all people would understand this, perhaps they wouldn’t be so enthusiastic about socking it to the rich or businesses or their owners.
    As a percentage of household income, the increase in cost of living that these taxes on businesses result in for the lower income Americans is quite a bit higher than that for the upper income folks.
    So of *course* the lower income folks deserve some of that money back.
    While the consumer does end up paying those business taxes, the solution to give tax credits is absurd. It is all a smoke screen to allow government to situate itself in a position in which it can buy votes by handing out tax favors. Just lower taxes on everyone, especially business, cut all the unconstitutional programs, no special tax breaks, and leave us the flip alone. The lower income folks would still pay no income tax, their cost of living would go down, and they wouldn’t need to be turned into moochers. But this would leave the politicians without candy to trade for votes. Then they’d have to get back to the boring task of protecting the country and individual freedoms (yawn).