Letters to the Editor

By Democracy Readers

Too Much Credit

Jason Furman gives a very good account of the beneficial effect of tax policies such as the earned-income tax credit (EITC) and the child tax credit on poverty. [“Poverty and the Tax Code,” Issue #32] They reduce misery and they have bipartisan support. However, there are significant trade-offs absent from his account. Tax expenditures like these legitimize and sustain low wages. They also act as a hidden subsidy for large corporations, undermine small businesses, and play a part in the hollowing out of the middle class. Tax expenditures contribute to a broader political failure and economic injustice. They are a compromise at best. The EITC, child tax credit, and other tax expenditures are part of a larger system of tax breaks favoring higher-income taxpayers that reduce the progressive nature of the tax code. Tax breaks provide support for retirement accounts, health care, and home ownership that the middle class appreciates but, taken together, this system contributes to the budget deficit and the federal debt, which in turn reduces support for social welfare programs such as Medicare, Medicaid, and the nutrition assistance Mr. Furman advocates. Tax expenditures are a mechanism for what Jacob Hacker calls the “privatization of risk.”

Tax expenditures are at the core of what Suzanne Mettler calls the “submerged state.” Their invisibility means the public does not know about the effective help the government is providing. The EITC hides the exploitation of low-wage workers and prevents an informed debate about the role of government, thereby strengthening arguments about “market-based” solutions. The vast majority of low-wage workers in the United States work for major corporations such as Walmart, McDonalds, and various retail chains. These corporations succeed in part because of the wage subsidies provided to their workers. Meanwhile, these same corporations claim that their success is a product of good business acumen and risk taking, and that the wealth generated rightfully belongs to stockholders and executives. These corporations stridently resist unionization and working-wage campaigns while undermining small, locally owned businesses, which are a key source of support for family and community life. The EITC penalizes employers who pay workers better. In addition, since the tax on capital is lower than the rate on some wages, the financial burden of the EITC falls on the middle class. That burden reinforces the notion that taxes are too high. Warren Buffett’s secretary, not Warren Buffett, pays for the EITC.

The return on the EITC is impressive and seductive, but advocates for the poor and working class should not lose sight of the broader context, and the arguably more important policy changes that would empower workers, promote education and employment, and protect Social Security. Good governance involves compromise and trade-offs. However, instead of rushing enthusiastically into the arms of Marco Rubio and others who are generally hostile to the poor and working class, the left should recognize that increasing the EITC is a compromise required by political contingencies. The EITC and child tax credit make things better, but modest improvements in the poverty rate come at a cost.

Pat Oles
Department of Social Work
Skidmore College
Saratoga Springs, N.Y.

Preaching to the Converted

While an interesting bit of history, Mike Konczal’s “The Voluntarism Fantasy” [Issue #32] is also a bit of a straw man:

1) Nobody today is arguing for ZERO government involvement, as Konczal’s piece suggests. Nobody. It’s debatable whether anyone actually ever did. The question isn’t whether or not to have social insurance, but how to make it actually work and be sustainable.

2) Critics of national social welfare programs argue for subsidiarity, which doesn’t say government has no role, just that local governments (from the family, to social institutions, to—finally—local and regional legislative governments) have a role to play in charity, and that those local roles should be respected. People don’t follow the philosophy they advocate perfectly, not even socialists like Mr. Konczal. No libertarian calls for utter and total liberty for his newborn infant.

In short, Konczal is just firing up the already convinced.

Far better to show why increased localized control of social insurance is a bad idea, since there are actually people out there talking about that.

Kevin Tierney
Brighton, Mich.

Still a Work in Progress

Fascinating article [“The Voluntarism Fantasy,” Issue #32]. Two quick points, though. First, has the Affordable Care Act (ACA) and the public-private model it enshrines changed (or will it change) our nation’s perceptions about social insurance? The ACA is the first social insurance scheme in the United States that employs a public-private approach at the individual level, and I wonder whether there will be a demand for other programs to follow this model.

Second, I think it is important to note that the social insurance system planned during the New Deal remains incomplete. We all know about the trials and travails of the health insurance fight. But there were also plans to provide income support for persons who were injured or became sick off the job (temporary disability). Only five states have those programs now—not coincidentally, that group of five states includes the only three states to have family leave insurance as well.

E. Pierce Blue
Alexandria, Va.

Democracy Readers who would like to submit a letter to the editor can do so by emailing dajoi@democracyjournal.org.

Also by this author

Letters to the Editor

Click to

View Comments

blog comments powered by Disqus