The conservative problem with tax credits 

Every year, it seems, Congress adds a handful of new tax credits. Most new tax credits are about modifying economic behavior: buy new doors, get a tax credit; take in hurricane victims, get a tax credit; build new windmills, get a tax credit. Some tax credits are more broad: the child tax credit, this year's "Making Work Pay" tax credit, the Earned-Income Tax Credit. Most of these credits are reduced for the upper-middle class and eliminated for the wealthy.

Obama proposed a handful of new tax credits in his State of the Union address last week. For conservatives, there are arguments against tax credits: they make the tax burden more progressive, they distort the economy by picking winners and losers, and they complicate the tax code. But there's one big argument in favor of tax credits: they lower people's tax burdens.

For months, Ryan Ellis, director of tax policy at the conservative Americans for Tax Reform, has been picking a public fight with the generally conservative Tax Foundation. Ellis (a friend of mine with whom I've worked) is pro-tax credit. The Tax Foundation (with which I have worked, as well) is anti-tax credit.

I won't referee this fight, but I do have to take issue with the way the Tax Foundation characterized my recent column on Obama's SOTU picking winners and losers. The title of Joseph Henchman's blog post is "Columnist: President Obama's 'Tax Cuts' Grow Government."

I don't think I wrote that. I know I didn't intend that. My column included tax credits in with more direct subsidies as policies that reflect Obama's "overall economic mind-set: Government should be the rudder that steers industry."

So, a fairer way to put it: Obama's tax-cut proposals, because they are so targeted, are an effort by government to exert more control over the economy.

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Timothy P. Carney

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