Archive for June 29th, 2011

Ungrateful little monkeys!

Jun 29, 2011 in Deficit, Politics, Taxes

Suzanne Mettler wrote this timely and interesting article on how little people appreciate government assistance when it comes in the form of targeted tax breaks:

Growing up during the Depression, Sam Marchesi had to drop out of school after eighth grade—soon after his father died—to work and help support his mother and his seven younger siblings. When World War II began, he enlisted in the Army and served in the Pacific. Upon his return, he took advantage of the educational and training benefits of the G.I. Bill, joining the 52 percent of fifteen million returning veterans who did so. He acquired vocational training in architectural drawing and on-the-job training as an apprentice carpenter, skills that enabled him to become a successful custom builder. When I interviewed Marchesi in the late 1990s for a study of the G.I. Bill, he reflected, “I think it was a great thing that the government did, to give us this opportunity to pick up where we left off. We had to face the world. We had to make a living. Thank God the government had the doors open for us.”

The G.I. Bill’s transformative effects on the lives of men like Marchesi have become legendary, but just as striking in hindsight is the clearly visible role that government played as the source of those opportunities. In more recent decades the federal government has expanded its efforts to provide college aid to all Americans. But instead of delivering a straight benefit, like the original G.I. Bill, most of that aid has come through roundabout means, like payments to banks to provide students with loans, or loopholes in the tax code to subsidize families to save for or pay for college. Generations of Americans have now graduated with the help of these costly-though-indirect programs. Yet over the years, in conversations with my own students, I’ve noticed that, unlike Marchesi, few of them recognize that they’ve received benefits from government. It’s hard to imagine them reflecting on their HOPE Tax Credits, or their 529 and Coverdell college savings plans and saying, “Thank God the government had the door open for us.”

And it’s not just my students. In 2008, I conducted a survey to gauge the degree to which Americans who had received various government social benefits recognized them as such. Not surprisingly, most beneficiaries of the G.I. Bill who took part in the survey acknowledged that they had been given a leg up by the government. But of the respondents who made use of tax-advantaged Coverdell or 529 education savings accounts, 64 percent said they had “not used a government social program,” as did 59.6 percent of those who used HOPE and Lifelong Learning Tax Credits.

Now if the government wanted, it could simply tax and then hand checks out, and everybody would recognize that as assistance. But much like the income tax is for most folks relatively painless or even a bonus because the money is taken out before they ever see it, tax expenditures appear in people’s wallets without them realizing it was ever gone. And it leaves you with some whiny tax-obsessive bitching about how IT’S MY MONEY THE GOVERNMENT NEVER HAD A RIGHT TO IT IN THE FIRST PLACE SO IT MEANS NOTHING even though the financial effect is no different at all than cutting checks. All that ungratefulness accumulates and then you have these people acting like they did it all themselves, thus they should pay even fewer taxes…

So the government really should quit trying to be a Secret Santa and just stick its hand out, letting people know Uncle Sam is offering to help. Name the benefits. Make people see their taxes go out, then let them see the benefits roll back in. Put it all on the table. When people get a Social Security check, they have to be a very special kind of brainwashed Republican to forget who it came from.

In the meantime, Congress can close a lot of revenue gaps not by increasing taxes heavily (not that returning to Clinton-era levels is a heavy increase), but by eliminating a lot of tax expenditures that go to the upper middle class and the wealthy. It’s at least a bit more politically palatable for Republicans who know spending cuts alone won’t get the job done.