HOW MANY TAX CUTS CAN DANCE ON THE HEAD OF A PIN?….As an alternative to expanding the SCHIP children’s healthcare program, President Bush has proposed replacing the current tax break for employer-provided health care with a flat tax deduction for individuals. Now, regardless of what you think about this in general, one problem is that a tax deduction is useless for low-income workers since they usually don’t pay much income tax in the first place. This is a solvable problem, but Ramesh Ponnuru explains the current roadblock:
The administration and its Senate allies are open to modifying the tax proposal to make it better for low-earning workers. The idea would be to offer people a refundable tax credit, not just a deduction, so that people who don’t make enough money to pay income taxes would get the benefit. Grover Norquist, the head of Americans for Tax Reform, is crying foul. He does not mind the elimination of the tax break for employer-provided health care as long as it is offset by a tax cut somewhere else — and he does not believe that refundable tax credits count as a tax cut. So Republicans who support the modified version of this health-care plan would be, in his view, raising taxes — and most of them have signed Norquist’s pledge not to do that.
Is a refundable tax credit “really” a tax cut? It’s a bit of a theological question, and apparently Grover Norquist is now the tax cut pope. If he says it’s not, then it’s not. And although I’m sure that Norquist can produce paragraphs of closely reasoned arguments for his position, it’s pretty obvious what the real issue is: this would be a tax cut for poor people. And that’s not a real tax cut, is it?
Norquist’s answer, according to Ponnuru, is to “throw in another tax cut to the mix.” That’s the ticket, all right. Anyone care to take a guess who that cut will benefit?