Tax credits not tax cuts
May 20, 2005
In the process of criticizing Rep. Doug Smith’s plan for a tax credit to encourage people to ride bicycles to work, I railed against tax credits in general, as I have done before. Tax credits are not tax cuts. They are given a clever name to make them appear to be tax cuts, but they are subsidies, government payments to individuals or businesses to support a particular activity.
That is a very liberal approach to government, and, in general, liberals should love tax credits, but conservatives should avoid them like the plague.
Ah-hah! One of my astute liberal listeners wanted to know, “How can Mr. School Choice be against tax credits, but make an exception when it comes to tax credits for wealthy parents to send their children to private schools?”
As the Al Gore character said in his Saturday Night Live debate, “That’s an excellent question Roger and I thank you for it.”
Put aside the fact that school choice tax credits are not just for wealthy parents. In fact, Governor Sanford’s bill would specifically exclude parents who are actually wealthy. That’s one of the few flaws in his bill.
That aside, school choice tax credits are in fact different from all other tax credits, including the proposed tax credit for bike riders, because the government approach to education is different than its approach to other universal needs: housing, transportation, food, clothing, etc.
The government agrees to provide everyone’s K-12 education. It doesn’t (thankfully) agree to provide everyone’s housing, transportation, food and clothing. We all pay taxes to fund the government provided education. So far, most state and local governments will only provide that education through a system of government owned and operated schools. School choice proposes to change that. It would leave in place the universal funding for education, but widen the choices available to parents. Tax credits are one way to accomplish that. School vouchers are another. I’m open to other ideas.
We don’t have universal funding of other things for which tax credits are proposed, such as commuting to work. If the government provided all workers a government owned and issued car, say a Yugo, then I would support those who want to widen commuters’ transportation choices. Under those circumstances, a tax credit for bicycles would make perfectly good sense, as would a tax credit for walking or for a car that might better suit the commuter’s needs than the government issued Yugo.
It may have been a bad idea for the government to provide universal funding for K-12 education to begin with, but it’s unlikely that will ever change, so the most practical way to improve the universally funded system is to broaden the choices available to parents.
That is why tax credits for school choice are the single exception to the rule that tax credits are, in general, a very liberal approach to government. In all other cases, tax credits establish a government responsibility to pay for something that has heretofore not been funded by government.
Whether it’s tax credits for child care or bicycle commuting, the underlying principle is that the government, in its infinite wisdom, chooses “preferred” individual activity and imposes a responsibility on all taxpayers to fund that choice. The government subsidizes some personal choices and not others as a way to entice more people to make the government-preferred choice.
That’s what the government does now with K-12 education. It fully funds government-owned schools, but not other education, in order to force most people to choose the government-owned schools. School choice tax credits would, therefore, do exactly the opposite of what other tax credits do, and it is why they are the single exception to true conservatives’ universal opposition to tax credits.