We have had several threads recently and a lot in the past where different posters have declared things like " if the Government lowers taxes, shouldn't we know what the money is spent on" or "lower taxes are stealing from the Government".
First, I have read the entire string before posting an answer (I promise!) and wanted to make a irect reply to your original post since the discussion doesnt seem to have advanced very far. I started out as an economist and taught Money & Banking. I ended up representing taxpayers before the IRS fo a living.
I agree with you that, "The Government has the right to tax, and taxes are needed to run essential services." I believe that the powers of government are not limited to "essential services" (who gets to decide what is essential?) but has general powers to promote the general welfare. I believe that government must be accountable for its spending (including "tax expenditures") and the public has both a right and duty to hold government accountable at the ballot box for its stewardship of our collective resources.
The beancounters in the Congressional Budget Office keep track among a lot of other things that effect the budget "tax expenditures" which are defined as any exclusion, deduction, credit, deferral, orother device in the tax code which has the effect of providing a tax advantage to one group of taxpayers but not all or nearly all taxpayers. So for example, the standard deduction and personal exemption (while not universal, there are exceptions) applies to most people and therefore is not a tax expenditure, while the deductions for mortgage intrest, charitable contributions,and casualty losses are.
The gross amount of tax expenditures is staggering. Each time a tax or expenditure bill comes up for a vote, the CBO must score it for its effect on the budget, so we get a pretty detailed idea of the cost of each measure, both spending bills and tax bills, when they are passed and as they continue in effect
Which brings me to your question. If government were to reduce all tax rates that would reduce revenues, but not be considered a tax ependiture. If however, he government decided to double the child tax credit, it would be a tax expenditure. Some tax credits are "refundable" in the sense that they can be refunded even if you have paid nothing in; the child tax credit happens to be partially refundable. The idea for such credits comes from the flaming liberal who was Barry Goldwater's chief economic advisor in 1964, Milton Friedman. He called it the "Negative Income Tax" and today we call it the Earned Income Tax Credit. Since Barry lost in 1964, the idea didn't become law until another Republican by the name of Richard Nixon got elected president four years later and made it a signature part of his domestic policy.
But most of the tax expenditures go to very large corporations and very wealthy individuals. Those parts of the tax code are arcane and most people are only vaguely aware that they exist. Things like intangible drilling costs, percentage depletion, bonus depreciation, refund o FICA taxes on tips, and so forth. I make a pretty good living keeping up with the breaks that help small (as in less than 500 workers) businesses.
So some people and entities get checks from the government in excess of any amounts they have had withheld or paid in. These tend to be the very poor and the very rich.
I'm not sure what you are referring to when you state "Where did the concept that if the Government takes less of your money they should be able to make you tell them what you spend your money on come from?" I'm guessing you are talking about the idea that in order to get most of these tax breaks you must provide the government on the tax return with the information necessary to calculate it and show that you are eligible for it. For example, to claim the now expired New Homeowner's Credit, you would have to prove when you bought the house and how much it cost. If you had something else in mind, I am curious to hear it.
All the best, Jamie
