I applaud Idema’s call for a clear acknowledgment by our political leaders of the need for sacrifice in the face of our huge national deficit. Assertions that the Bush era tax cuts should be extended indefinitely or that only the top 1 percent need pay more income taxes are unrealistic. We cannot expect to correct our existing problems without substantial and widespread sacrifice.
However, I object to Idema’s claim that all Americans should sacrifice more to reduce the deficit. Many Americans have already had great sacrifices imposed upon them by the recession: unemployment or underemployment, underwater mortgages, tiny interest rates on savings, and so on. Measures to reduce the deficit should take into account the burdens that citizens are already bearing.
I also object to Idema’s suggestion that having a large number of people with no income-tax liability is problematic. This ignores the other taxes these people pay. Moreover, it also overlooks the fact that the income-tax code is used to both collect revenue and provide subsidies (through credits, deductions, and exemptions). Economists label such subsidies as tax expenditures. Taxpayers without an income-tax liability simply receive a subsidy through the tax code that is greater than the tax otherwise imposed on them.
For example, the earned income tax credit (EITC) and child tax credit (CTC) lead to a zero income-tax liability for many low-wage working families. Still, Bread for the World reports that the EITC and CTC account for only about 10.3 percent of total tax expenditures. The remaining tax expenditures benefit mainly middle- and upper-income taxpayers. In fact, analysis presented in “The Submerged State” by Suzanne Mettler shows that the most expensive social programs are the retirement-benefits exemption, the health-insurance exemption, and the home-mortgage interest deduction — not the EITC, CTC or SNAP.
We need our leaders to be honest about the sacrifices required to clean up our debt and wise about distributing that burden.