Everyone knows that politicians love to rob Peter to pay Paul. But some are now suggesting that they should rob Peter to pay—Peter.
The underlying justification for this tax grab is that when government taxes certain activities—think of sin taxes on tobacco and alcohol—it discourages those activities.
But there are several caveats. Such taxes are regressive and disproportionately hurt the poor, who have less income to pay those taxes and may face more challenges trying to change their behavior.
And even as politicians are on their moral soapbox about trying to rid the country of certain activities, they are secretly, and hypocritically, drooling over the increased revenue they can use to boost government spending.
But here’s a new twist to an old practice: imposing taxes to discourage certain behavior while rebating the funds to the public so politicians can claim they aren’t really raising taxes.
Consider the carbon tax, which imposes a tax on products that release carbon dioxide into the air. The goal is to discourage the use of fossil fuels.
Democrats want to use carbon-tax revenue to fund their Green New Deal. Some Republicans, by contrast, support the tax but suggest handing out a check to everyone to offset the additional cost.
Or consider Senator Tom Cotton’s (R-Arkansas) proposed Tariff Rebate Act.
Cotton recognizes that Americans are paying most of the tariffs that President Trump has imposed on China and other countries, but apparently thinks tariffs are a good tool for punishing China.
According to the Wall Street Journal, he proposes taking the tariffs paid by Americans on specific items—$39 billion so far by Cotton’s calculations—and rebating the money back to Americans. Or at least most of them: taxpayers in the bottom three tax brackets.
Just what we need: more Americans receiving checks from the government. When did Republicans come to think that was a good idea?
Left unanswered is whether providing tax “rebates” would actually alter consumers’ behavior in response to a tax increase.
If the goal is to change behavior, such as using less fossil fuel, wouldn’t you want to ensure the tax is punitive? That’s what Democrats want.
But if the government takes money from one pocket even as it puts it in another pocket, does that encourage people to make different choices?
The biggest concern is that politicians will come to see this new tax-and-rebate approach, not just as a way to raise government revenue, but to micromanage consumers’ choices in ways politicians find politically expedient and beneficial—especially for them.
October 29, 2019