Going to the Dogs

Jacob Sullum | July 11, 2008

In a recent New York Times op-ed piece, Boston College law professor Ray Madoff explains how we're all footing the bill for Leona Helmsley's $8 billion bequest to the world's canines: Nearly half that money is rightfully the U.S. government's, since Helmsley's estate would be taxed at a rate of 45 percent had she not devoted it to charity. "The charitable deduction constitutes a subsidy from the federal government," Madoff writes. "In Mrs. Helmsley's case...her $8 billion donation for dogs is really a gift of $4.4 billion from her and $3.6 billion from you and me."

Really? By Madoff's logic, every charitable donation for which someone, living or dead, receives a deduction is partly "a gift...from you and me." So is every child, home mortgage, adoption, medical expense, and student loan that reduces anyone's tax bill. Unlike Madoff, who wants to change the rules for charitable bequests to make sure the money goes to "good causes," I don't think the tax code should be used for social engineering. But as long as it is, people who take advantage of deductions aimed at encouraging certain kinds of behavior are accepting a "subsidy" in Madoff's sense—i.e., keeping more of their own money than they otherwise would get to keep.

The deduction-equals-subsidy argument is actually weaker in the case of Helmsley's bequest than it is for the average itemizing taxpayer, since the money that's going to the dogs has already been taxed. Madoff is complaining that failing to tax it again is unfair to the rest of us, at least as long as the money is supporting a cause he doesn't like.

Comments

.|7.11.08 @ 11:32AM|#

Guys in my high school used to subsidize doggie style all the time. It was no big deal.

Guy Montag|7.11.08 @ 11:37AM|#

Great catch Jacob!

Nearly half that money is rightfully the U.S. government's, since Helmsley's estate would be taxed at a rate of 45 percent had she not devoted it to charity.

What a freaking wackjob! By his 'logic' ALL of the money would be the US governments if she had donated it to the federal treasury too.

Looking forward to our Leftie friends to appear here and defend this nonsense.

New World Dan|7.11.08 @ 11:42AM|#

So to recap... leaving an estate to your children is taxable, but leaving that same estate to dogs is tax deductable. Sounds pretty dumb to me. I'm for getting rid of non-profit status entirely, among countless other tax reforms. Or rather, making it completely irrelevant.

Guy Montag|7.11.08 @ 11:45AM|#

I'm for getting rid of non-profit status entirely, among countless other tax reforms. Or rather, making it completely irrelevant.

Me too! And put marriage on that list for me also.

J|7.11.08 @ 11:45AM|#

She should have left more of her money for the dogs.

|7.11.08 @ 11:46AM|#

When I was a teenager and my dad was showing me how to do my taxes, he would always look so angry when we got to questions like "are you blind" and "did you live within 80 miles of Wyoming between the years 1976 and 1978?"(I just made up that last one)

J|7.11.08 @ 11:46AM|#

I wonder if the money she left to her specific dog was taxed? I don't know how that works at all. I imagine it's like leaving it for a kid, though, right?

Guy Montag|7.11.08 @ 11:49AM|#

J,

If the dog has a SSAN it could be, but I am not sure on that one.

Better wait for one of our fiscal beast experts to address the particulars.

|7.11.08 @ 11:49AM|#

You guys don't understand your role.

You aren't citizens of the United States.

You are subjects. Subjects who grow taxes. Letting you keep your own money is like letting grapes rot on the vine.

DUH

Guy Montag|7.11.08 @ 11:51AM|#

I wonder if the dog has a rent stabalized apartment, like Rep. Rangel?

|7.11.08 @ 11:53AM|#

I wonder if the dog has a rent stabalized apartment, like Rep. Rangel?

Yes. But while he eats better than prisoners, he still whines when his train gets delayed.

|7.11.08 @ 11:57AM|#

On one hand we have a species of the dissolute yet intellectually degenerate described as law professors who maintain that the government has a right to your property upon your death. Soylent Green is to law professors what pretzels are to working people.

Ray Madoff|7.11.08 @ 11:57AM|#

What's mine is mine. What's yours is ours.

ed|7.11.08 @ 11:58AM|#

The same false premise is employed as an argument against school vouchers. Lefty teachers' unions call vouchers a subsidy for home-schoolers, a tax break at the expense of all the good little public-school parents. There's no debating that kind of philosophy.

|7.11.08 @ 11:59AM|#

I must be missing something. Why is social engineering of the tax code not an implicit subsidy? Does anyone here thing that mortgage interest deductions really aren't encouraging/subsidizing home ownership? Or is this a semantic argument, whereby "subsidy" can only be used to describe a direct government payment (an argument which I disagree with).

bernd|7.11.08 @ 11:59AM|#

Yeah, it's stupid, but I don't see how this is so extraordinary a thing for a scribe to say. It's just the exact same line of thought that leads to tax breaks being called "gifts", and I hear that all the time.

You know, because rightfully, everything belongs to the collective and all you're allowed to keep is basically gracefully granted pocket money.

|7.11.08 @ 12:02PM|#

You are subjects. Subjects who grow taxes. Letting you keep your own money is like letting grapes rot on the vine.

As in most gardening, by harvesting frequently, you can increase your total yield. But don't take too much off the plant or it will die, which is undesirable except at the end of its growing season/life. Hence why the death tax is more lovable to Leftists than all the other ones: No one living suffers!

(And yes, I know that it punishes the offspring & others who would benefit from a bequest, but they frequently ignore that point so it looks good to them)

Guy Montag|7.11.08 @ 12:05PM|#

There's no debating that kind of philosophy.

Yep.

And people wonder why I ignore the trolls who appear here and employ that method scores of times per day.

gorgonzola\'s foil|7.11.08 @ 12:08PM|#

I have come to the conclusion that either of these situations would be perfectly fine by me: 0% estate tax or 100% estate tax. This middling area is too prone to tax gaming, through nonprofit gifting and step-up basis in stocks and real estate, and we end up with marginal tweaks by anecdote. Changing to 100% estate tax would require many changes to estate planning but there would still be ways to gift substanial bequests to your heirs: you just have to do it while you are alive, and relinquish control while you are alive. I don't see why courts have the responsibility to arbitrate competing interpretations of your wishes after you cease to be alive; the best way to see your legacy how you want it is to set it up while you are alive.

Also, in the event of 100% estate tax, I would suggest that Joint Tenancy with Rights of Survivorship or new similar forms of ownership should include dependent children as joint tenants of family property and wealth.

|7.11.08 @ 12:08PM|#

Why is social engineering of the tax code not an implicit subsidy? Does anyone here thing that mortgage interest deductions really aren't encouraging/subsidizing home ownership? Or is this a semantic argument, whereby "subsidy" can only be used to describe a direct government payment (an argument which I disagree with).

Because if you used subsidy, you would have the same term describing, people keeping more of the money they earned, in the form of tax breaks, and the exact same term describing bullshit subsidies that support corn prices and other bs. Those two are very very far apart on my outrage spectrum.

zoltan|7.11.08 @ 12:09PM|#

Soylent Green is to law professors what pretzels are to working people.

Uh, I failed analogies on the SAT. Can someone explain this?

Guy Montag|7.11.08 @ 12:10PM|#

gorgonzola's foil,

Can we do a 100% fee on lottery winnings too? It would eliminate the deficit immediatly!

Episiarch|7.11.08 @ 12:18PM|#

I want to tax scumbags who think other people's money should be theirs to social engineer with.

Guy Montag|7.11.08 @ 12:21PM|#

But Epi, that wouldn't be 'fair' to tax the needy.

|7.11.08 @ 12:24PM|#

val said:

Because if you used subsidy, you would have the same term describing, people keeping more of the money they earned, in the form of tax breaks, and the exact same term describing bullshit subsidies that support corn prices and other bs. Those two are very very far apart on my outrage spectrum.

I fail to see the difference between giving a tax break to corn farmers and making a direct payment to them. Sure, there are structural differences, but why is one a subsidy and the other is "keeping more of the money they earned"?

Abdul|7.11.08 @ 12:29PM|#

"In Mrs. Helmsley's case...her $8 billion donation for dogs is really a gift of $4.4 billion from her and $3.6 billion from you and me."

Hey, if that $3.6 billion is a gift from me, how come none of you sent a thank you note?

What a bunch of ingrates!

Guy Montag|7.11.08 @ 12:31PM|#

Abdul,

Yea, no kidding. I wonder what that professor was going to do with all of that money he gave away before he discovered the doggie needed it?

robc|7.11.08 @ 12:39PM|#

MP,

I fail to see the difference between giving a tax break to corn farmers and making a direct payment to them.

The tax break is cheaper to implement. :)

Guy Montag|7.11.08 @ 12:40PM|#

MP,

How about 'giving' the same tax 'break' to everybody who makes anything in the whole country?

That is my idea of fair.

|7.11.08 @ 12:43PM|#

I fail to see the difference between giving a tax break to corn farmers and making a direct payment to them.

Tax breaks sound less scary?

|7.11.08 @ 12:44PM|#

God I hated Leona "rich bitch from the netherworld" Helmsley while she was wasting oxegen. Still, this fuckhead Ray Madoff likely wouldn't be offended if she'd left it to some equaslly useless charity like a womyn's studies chair at Boston College.

I'm willing to do away with all deductions but somehow this asshole with an overblown impression of his own morality doesn't recommend that.

Fuck him.

|7.11.08 @ 12:45PM|#

I fail to see the difference between giving a tax break to corn farmers and making a direct payment to them. Sure, there are structural differences, but why is one a subsidy and the other is "keeping more of the money they earned"?

With one you get YOUR money, with the other you get MY money. But sure you can call them both subsidies if you like as long as you add some nuance to the discussion. They are similar, in the sense you get money from the government, but not the same, at least to me

Dagny T.|7.11.08 @ 12:49PM|#

Grrr. I'm a tax accountant, and people who deliberately misunderstand the nature of taxation drive me nuts.

A tax break is NOT a subsidy if it's YOUR money to begin with.

However, don't get me started on bullshit like the Earned Income Tax Credit, whereby you can get a bigger refund than you had withheld (i.e., a nice present from the rest of us).

There's also another aspect of tax breaks for some (i.e., child tax credits, advantages for MFJ, etc): if gov't refuses to cut spending, it just means they'll be hijacking someone else. Lower taxes + less spending hasn't really been on the table for a while now, unfortunately.

Guy Montag|7.11.08 @ 12:50PM|#

They are similar, in the sense you get money from the government, but not the same, at least to me

To me, unless you are getting a check (or a deposit) from the government then it is NOT a government subsidy.

|7.11.08 @ 12:56PM|#

val said:

With one you get YOUR money, with the other you get MY money. But sure you can call them both subsidies if you like as long as you add some nuance to the discussion. They are similar, in the sense you get money from the government, but not the same, at least to me

You can point out (as others have already) the inefficiency of writing a check to the government only to have the government write you a check in return, vs. simply writing a smaller check. But if you remove the transaction costs, the choice are functionally identical. The illusion that they are different is the same illusion that the Social Security trust fund is a real asset.

|7.11.08 @ 1:03PM|#

To me, unless you are getting a check (or a deposit) from the government then it is NOT a government subsidy.

Ya but by that logic a tax refund where you overpaid taxes, lets say from estimated installments, would be a subsidy?


You can point out (as others have already) the inefficiency of writing a check to the government only to have the government write you a check in return, vs. simply writing a smaller check. But if you remove the transaction costs, the choice are functionally identical. The illusion that they are different is the same illusion that the Social Security trust fund is a real asset.

There are many more externalties to the subsidies, for example corn prices, then there are to tax breaks. Also subsidies are an increment to govn't spending, which have a huge propensity to grow, where as tax breaks are only a decriment in funding, and dont cary the same risk of 'growth'. I suppose you can qualify all that as 'transaction costs', but as they say the devil is in the details.
You are also assuming that the 'farmers' arent getting tax breaks as well as the 'traditional' subsidies

|7.11.08 @ 1:04PM|#

c'mon Guy...

OK, the government implements a flat tax. No deductions. Everyone pays the same rate. Then there's a government program to pay 25% of your home mortgage interest. All you need to do is fill out a form, send your statement, and they'll cut you a check.

So why is this a subsidy when before, with a tax deduction, it was just getting "YOUR" money back?

|7.11.08 @ 1:10PM|#

I'll try, zoltan

You asked:

"Soylent Green is to law professors what pretzels are to working people.

"Uh, I failed analogies on the SAT. Can someone explain this"

Soylent Green was made from dead people. The government is run by lawyers. Thomas Jackson is saying that this law professor believes the government is entitled to everything you own upon your death, including your remains (ie, Soylent Green). Therefore, the government-running lawyers want to eat you the way most of us working people like to eat pretzels........

How'd I do?

|7.11.08 @ 1:10PM|#

like a womyn's studies

Off Topic:

What's the deal with replace the 'a' with a 'y' in woman ? Is it a way to get "man" out of "woman" or something? Do feminist blogs actually write it this way? I've seen it a bit and don't understand the the point of origin of it.

Thanks in advance.

New World Dan|7.11.08 @ 1:11PM|#

I fail to see the difference between giving a tax break to corn farmers and making a direct payment to them.

Because tax breaks are regressive policy. A direct payment could exceed what they actually would otherwise pay in taxes. A tax break or tax credit tends to provide much more help to those that need them the least, aka, Republicans. For example, in terms of education policy, a tax credit would be more fiscally responsible than a universal voucher, but it only extends the benefit of private schools from the top down. Or, stated another way, it extends the benefits to those who otherwise generate enough tax revenue to fund the activity in question on their own. It is, of course, a debate for another day as to which is the better policy, but the "progressive" (sweet frosted side?) in me prefers the voucher.

hotsauce|7.11.08 @ 1:11PM|#

Let's say I'm rich and want my kids to get as much of my estate as possible when I die. Rather than get hit with the estate tax, could I set up a nonprofit staffed by my children and ensure they get paid a large salary?

|7.11.08 @ 1:11PM|#

There are many more externalties to the subsidies, for example corn prices, then there are to tax breaks.

You're letting the implementation method of the subsidy blind you to the reality that they're both still subsidies.

Look, I'll try again. Consider school vouchers vs. school tax credits. Both (in my view) are clearly subsidies for schooling. They are two separate implementation strategies for the same thing. Some argue that tax credits are a better strategy (for the reduction of transaction costs among other things) and some argue that vouchers are a better strategy.

But they are both subsidies.

Ska|7.11.08 @ 1:12PM|#

Pay taxes on the income you've earned your whole life, and hoard it so that when you die you can give 1/2 to the gov't (the states are going to take their cut too). God forbid you do something insane with your money like give it to whoever the fuck you want.

I wonder how many rich, old people are waiting until 2010 to die. Or have they repealed that provision yet?

New World Dan|7.11.08 @ 1:12PM|#

I've seen it a bit and don't understand the the point of origin of it.


Of course you don't understand it. You're part of the phallocracy.

|7.11.08 @ 1:16PM|#

New World Dan,

I'm not arguing the merits of tax credits vs. direct payments. I'm simply arguing that they are both subsidies.

And BTW, tax credits can be twisted into tax refunds, a la the EITC (mentioned above), so one can easily receive the same "excess" payment they would in a tax credit scheme as in a voucher scheme.

Guy Montag|7.11.08 @ 1:16PM|#

Ya but by that logic a tax refund where you overpaid taxes, lets say from estimated installments, would be a subsidy?

No, for obvious reasons. If you are truly, seriously asking if the return of an overpayment of taxes is a subsidy, or you truly thought that your example fit what I was saying then I hope this clears that up.

hotsauce|7.11.08 @ 1:17PM|#

To me, it's only a subsidy if the $ comes from the efforts and pockets of other taxpayers. So, ignoring the time value of money, if I pay $20,000 in taxes and get $20,000 back, whether through tax breaks or a check cut by the government, the $ coming back to me is not a subsidy. The first cent over $20,000, however distributed, constitutes a subsidy.

|7.11.08 @ 1:17PM|#

What's the deal with replace the 'a' with a 'y' in woman ? Is it a way to get "man" out of "woman" or something? Do feminist blogs actually write it this way? I've seen it a bit and don't understand the the point of origin of it.

You got it right on your first try.

Gilbert Martin|7.11.08 @ 1:19PM|#

"Really? By Madoff's logic, every charitable donation for which someone, living or dead, receives a deduction is partly "a gift...from you and me."

Actually his real underlying logic is that all the wealth anyone makes or has really belongs to the government and it is doing you a favor by letting you keep some of it.

As for who is or isn't getting a subsidy - it has nothing to do with tax deductions charitable or otherwise.

If the net total dollar amount of taxes you pay to the federal government is less than the dollar value of the specific federal government services you have personally received back in return calculated on a pro-rata user-fee basis, then you are being subdidized. If the net total dollar amount of taxes you pay to the federal government is more than that calculated amount, you are subsidizing somebody else.

|7.11.08 @ 1:58PM|#

OK, the government implements a flat tax. No deductions. Everyone pays the same rate. Then there's a government program to pay 25% of your home mortgage interest. All you need to do is fill out a form, send your statement, and they'll cut you a check.

If I buy a $40,000 car for $30,000, I don't have any earnings or income; I just got a good deal.

If I pay $40,000 for the car, and the car dealer turns around and writes me a check for $10,000 for some completely unrelated reason (maybe its my wages for working there), then, I have earnings.

In the first case, I kept my own money. In the second case, I got some of the dealer's money.

Is this really so hard to understand?

robc|7.11.08 @ 2:05PM|#

MP,

In baseball, a walk and a hit-by-pitch have the same result. However, on the scorecard they are two different categories.

By the same logic, a tax cut is not a subsidy, even though, in many cases, it has the exact same effect.

|7.11.08 @ 2:06PM|#

R C Dean,

That example is only relevant if you state a specific reason for getting a $10,000 discount for your car. Tax deductions have specific reasons. They are not simply a result of getting a good deal.

If you got a $10,000 discount because of a specific manufacturer promotion, or if the dealership cut you a check for the same specific manufacturer promotion, the reason you got the $10,000 is identical. The method in which it was transacted is irrelevant.

This whole "my own money", as the transaction relates to the concept of subsidies, is hogwash.

|7.11.08 @ 2:07PM|#

robc,

In baseball, a sacrifice fly and a base hit can both generate an RBI.

robc|7.11.08 @ 2:09PM|#

MP,

In baseball, a sacrifice fly and a base hit can both generate an RBI.

True. And either you are agreeing with me or I dont get your point. A sacrifice is not a base hit. Just like a tax credit is not a subsidy.

|7.11.08 @ 2:18PM|#

robc,

A tax credit is not a voucher. Both are subsidies.

robc|7.11.08 @ 2:23PM|#

MP,

Farmers dont receive corn vouchers. They receive corn subsidies. Subsidies are a payment from the government.
Tax credits, while very, very similar, are called something different.

Gilbert Martin|7.11.08 @ 2:25PM|#

"A tax credit is not a voucher. Both are subsidies."

Only if it reduces the total dollar amount of taxes you paid to a lower number than the total dollar amount of government services that you personally receive.

Otherwise, it isn't.

|7.11.08 @ 2:34PM|#

correct me if im wrong but the amount of corn subsidy one would receive is proportional to the amount of corn one has grown and not related to ones declared income or the amount of taxes already paid or unpaid.

|7.11.08 @ 2:37PM|#

robc said:

Farmers dont receive corn vouchers. They receive corn subsidies. Subsidies are a payment from the government.

The only difference between a school voucher an a direct payment is that a voucher has conditions on where it can be spent, while a payment does not. Both are obtained as a result of performing a direct action specified by the government. It is the performance of an action that defines the subsidy, not the method of payment.

Direct Payments and Vouchers and Tax Credits are all various forms of Subsidies.

Russ 2000|7.11.08 @ 2:42PM|#

Does anyone here thing that mortgage interest deductions really aren't encouraging/subsidizing home ownership?

Yes. Me.

People who think otherwise don't know history. Don't feel bad, you're in the overwhelming majority.

When the income tax was implemented, ALL interest was deductible. Over time, that has been whittled down to the point where now only a fraction of mortgage interest is deductible.

Your logic is equivalent to saying "Isn't the elimination of the income tax a subsidy?"

Russ 2000|7.11.08 @ 2:45PM|#

I fail to see the difference between giving a tax break to corn farmers and making a direct payment to them.

Then you are failing to see that farmers already get BOTH.

|7.11.08 @ 2:47PM|#

MP, what is your opinion on writing off business expenses to reduce tax liability? Subsidy? Because essentially it would fall into the same broad category you are describing as susbsidies.

We all understand the fungibility of money, you will not find the distinction between them in the end result, which money in your account which would otherwise have been in the government's account, the differences are in the implentation, in the transaction costs, the conditions attached, morality etc...

|7.11.08 @ 2:50PM|#

Russ 2000 said:

Your logic is equivalent to saying "Isn't the elimination of the income tax a subsidy?"

No, it's not. Every existing tax deduction has a specific purpose. That purpose comes with a provision of resources.

I'm really shocked that we're having this debate. Time and time again, people around these parts claim that the government subsidizes families. How? By providing tax deductions for dependents (among other things). That's how. Yet for some reason, now all of the sudden tax deductions aren't considered subsidies?

Huh?

|7.11.08 @ 2:57PM|#

val said:

MP, what is your opinion on writing off business expenses to reduce tax liability? Subsidy?

The government is taxing business profits, not income. Depending on the rationale for qualifying (or disqualifying) expenses (such as the infamous SUV expense) sometimes, but rarely, deducting expenses may be considered to be an act of subsidization. Otherwise, deducting expenses is simply an equation to arrive at a profit figure.

|7.11.08 @ 2:59PM|#

No, it's not. Every existing tax deduction has a specific purpose. That purpose comes with a provision of resources.

Sure, in a tax reduction, that provision of resources are government services at a discount. This could truly be construed as a subsidy if we had a pay per use form of taxation, but for now this discount gets lost in the noise, where the person receiving the tax break, or other tax payers do not actually end up using all the services that they paid for. This is not to mention various economies of scale benefits that could be found with mass provision of services.

With a direct payment subsidy, you have a payment for service or a good that has nothing to do with the services goverment provides. In this case the resource provided is cash. There are no economies of scales when it comes to cash payments.

Guy Montag|7.11.08 @ 3:00PM|#

So, it is settled. We march on Washington tomorrow to have them eliminate income taxes!

Not sure if we should include folks from Ohio or have them lead . . .

|7.11.08 @ 3:05PM|#

Otherwise, deducting expenses is simply an equation to arrive at a profit figure.

Ok, so the morgage interest tax credit is simply an equation to arrive at a taxable income figure. I fail to see the difference.

Guy Montag|7.11.08 @ 3:08PM|#

When 100% of mortgage payments are a tax credit that will be the last straw!

Well, right after I pay it all off.

Russ 2000|7.11.08 @ 3:18PM|#

OK, the government implements a flat tax. No deductions. Everyone pays the same rate. Then there's a government program to pay 25% of your home mortgage interest. All you need to do is fill out a form, send your statement, and they'll cut you a check.

So why is this a subsidy when before, with a tax deduction, it was just getting "YOUR" money back?

In that hypothetical scenario it is like a subsidy. But it's the exact opposite of what actually happened.

Think about what actually happened. People had loans and paid interest. No such thing as an income tax. They barely got by, but they got by and put a couple bucks in the bank.

Now government inplements a 15% income tax. They can no longer afford the house. You might want to let them deduct the interest from their income so they don't lose their house if you still want them to vote for you and not go bankrupt.

Mind you, even allowing this deduction still amounts to reducing the tax from say 15% to 10%. The sudden 10% tax that didn't exist before lowers demand and lowers asset prices. Everybody panics. Quick! Create a central bank so we can inflate! (1907-1913)

Now the banks have more money, so now they can loan even more. E-Z credit. Yippee! (1920's.)

What? I have to PAY these loans back? And with interest? On top of my higher income tax because I'm now in a higher bracket because of the inflated money? On top of my new Social Security Tax? Everybody panics. (1930's)

|7.11.08 @ 3:28PM|#

val said:

Ok, so the morgage interest tax credit is simply an equation to arrive at a taxable income figure. I fail to see the difference.

Profit is defined by accountants and dictionaries. Taxable income is defined by politicians. The equation to calculate taxable income is not a result of a accounting definition, but of a series of political decisions were the result of politicians attempting to influence outcomes.

Russ 2000|7.11.08 @ 3:30PM|#

I'm really shocked that we're having this debate. Time and time again, people around these parts claim that the government subsidizes families. How? By providing tax deductions for dependents (among other things). That's how. Yet for some reason, now all of the sudden tax deductions aren't considered subsidies?

That's because you're stupid.

val's point about business expenses in spot on. Businesses aren't taxed on revenue, they're taxed on revenue minus expenses. Households should be taxed the same way if they're going to be taxed. And a 25% deduction is a fucking ripoff if businesses are deducting 100% of their expenses.

|7.11.08 @ 3:31PM|#

Russ 2000,

The key phrase in your post is "so they don't lose their house". It's not "so they don't lose their car" or "so they don't lose their tractor".

The political calculation was made to encourage the ownership of one type of asset over another.

|7.11.08 @ 3:31PM|#

That's because you're stupid.

Fuck you Russ.

Russ 2000|7.11.08 @ 3:35PM|#

The government is taxing business profits, not income.

And the government is taxing personal profits, not income.

It really WAS that simple. Now they're taxing mostly personal INCOME while still taxing business (including farm) PROFITS.

|7.11.08 @ 3:47PM|#

Profit is defined by accountants and dictionaries. Taxable income is defined by politicians. The equation to calculate taxable income is not a result of a accounting definition, but of a series of political decisions were the result of politicians attempting to influence outcomes.

Oh comeon now, you know well enough that the politicians are the ones who defined profit. Well atleast they are the onese who define revenue and expenses and how they qualify in the determination of profit. The accountants and the lawyers simply calculate, interpret and find loop holes in the definition. That SUV expense is a good example, carrying expenses/loses to another year where they could be useful to reduce the tax burden etc...

Gilbert Martin|7.11.08 @ 3:52PM|#

You people keep going around in circles and semantic nitpicking.

It's real simple:

Any specific individual paying more dollars in taxes (regardless of what deductions or credits they get) than the dollar value of government services that that specific individual receives on a user fee basis in exchange for his money is subsidizing somebody else. Anyone paying less than that is getting subsidized.

The top 50% of income earners pay 97% of income taxes and the bottom 50% are paying the remaining 3%. There is no way that the bottom 50% are only getting 3% of government services. Virtually everyone in that top 50% is subsidizing somebody else (in that bottom 50%) regardless of what tax deductions, exemptions or credits they may get.

Guy Montag|7.11.08 @ 3:53PM|#

And the government is taxing personal profits, not income.

Don't you mean was there? Was a bit confusing when I got to the last sentence.

robc|7.11.08 @ 3:58PM|#

Direct Payments and Vouchers and Tax Credits are all various forms of Subsidies.

Nope.

Subsidies == Direct Payments

Subsidies/Vouchers/Tax Credits are all subsets of Social Engineering.

I might even argue that they all subsidize things. But thats just because we dont have enough verbs to go around. voucherize and taxcreditize dont really work.

But as nouns, Subsidies != Vouchers != Tax Credits. They are not synonyms. This is purely a semantic argument.

robc|7.11.08 @ 4:00PM|#

Gilbert,

semantic nitpicking

If people (MP) would just use their fucking nouns correctly, we wouldnt have to do this.

Gilbert Martin|7.11.08 @ 4:10PM|#

"If people (MP) would just use their fucking nouns correctly, we wouldnt have to do this."

The only purpose is to obscure the overall economic substance of who is REALLY subsidizing who.

In most cases, the economically accurate description of what is going on when leftists like Madoff claim somebody is being "subsidized" because of some tax deduction is that the person in question is not being required to subsidize somebody else to the extent that the person making that claim wants them to be required to.

|7.11.08 @ 4:16PM|#

robc said:

If people (MP) would just use their fucking nouns correctly, we wouldnt have to do this.

Well apparently I have both Barron's and Investopedia on my side. Make that of it as you will.

The point though, robc, was not to get into a semantic argument over the word subsidy. The point was that:

Direct Payments == Vouchers == Tax Credits

from the sense that they are all forms of subsidization. Others on this thread are apparently arguing that Tax Credits are morally superior because they are "my money". Well, I don't agree. It's all "my money". The specific financial mechanism implemented does not make much of a difference when discussing a government policy to influence a particular activity though economic means (which is the essence of a subsidy).

And Gilbert, we're taking about subsidization of specific activities. Your discussion about base level subsidization (i.e. if A is net positive in a government transaction, A has been subsidized) is true but not particularly insightful.

Gilbert Martin|7.11.08 @ 4:28PM|#

"And Gilbert, we're taking about subsidization of specific activities. Your discussion about base level subsidization (i.e. if A is net positive in a government transaction, A has been subsidized) is true but not particularly insightful."

On the contrary it is perfectly relevant - particularly in the context of responding to someone like Madoff. What is the intent of such people, after all, to rant about some specific tax mechanism as being a "subsidy" while ignoring the vast multitude of taxing and spending mechanisms that serve to subsidize either activities or people in ways they happen to personally like?

It is to force some people to subsidize others to an even greater overall extent than they are already doing.

|7.11.08 @ 4:31PM|#

Others on this thread are apparently arguing that Tax Credits are morally superior because they are "my money". Well, I don't agree. It's all "my money".


I assume you're refering to me. I think I presented a number of other ways they tax credits and subsidies are different. But again that farmer gets HIS money back for the morgage credit and then gets MY money when the governemt inflates the price for corn that would not have otherwise been suported by the market with MY money. And then when I want to go buy some Tequila or Tortillas or whatever, I find that I now have to spend more money to get these things, but do I get a subsidy or a tax credit for the extra expense I now encur?

Dagny T.|7.11.08 @ 4:32PM|#

Time and time again, people around these parts claim that the government subsidizes families. How? By providing tax deductions for dependents (among other things). That's how. Yet for some reason, now all of the sudden tax deductions aren't considered subsidies?

Bit of a straw man here. Letting people with kids keep more of their money is great, but it arbitrarily favors them over single, childless folks.

But, even though that policy is creepy in a Big Brother, pronatalist way, it's in no way as morally deficient as giving money to people with kids that they haven't even earned. Mostly because it involves taking from others.

If they were increasing my taxes to give more deductions to families while still refusing to cut spending then you'd have a subsidy situation.

|7.11.08 @ 4:48PM|#

val said:

But again that farmer gets HIS money back for the morgage credit and then gets MY money when the governemt inflates the price for corn that would not have otherwise been suported by the market with MY money.

Why is it YOUR money. Why isn't it HIS money? He did pay some taxes, didn't he?

Look, if the claim is that a subsidy is only a subsidy when a user receives a net positive benefit from the government, then there's no use in talking about specific subsidies. Because if farmer A pays X in taxes and gets X in checks from the government, under the claim I presented above, farmer A is not getting subsidized. But if farmer B pays X in taxes and gets Y in checks from the government, and Y is greater than X, then farmer B is getting subsidized. Perfectly true, as Gilbert keeps repeating, but it then makes the distinction of farm subsidies irrelevant.

And if you believe that, in this example, farmer A and farmer B are both receiving farm subsidies, then its irrelevant whether they receive them via tax credits or direct payments.

Gilbert Martin|7.11.08 @ 5:02PM|#

"Look, if the claim is that a subsidy is only a subsidy when a user receives a net positive benefit from the government, then there's no use in talking about specific subsidies."

There really ISN'T any use in it.

People like Madoff who do so are merely using the term as a pejorative to attempt to get rid of something he doesn't personally like.

A subsidy for any reason is still a subsidy. And there is no way that Madoff or anyone else can prove that any particular subisidy is any more valid, worthwhile, usefull or justified than any other. Such things are merely a matter of personal opinion.

|7.11.08 @ 5:33PM|#

MP, I've already tried to explain this. First the corn subsidy is unrelated to the farmers income or the amount of taxes paid. Tax credits are. This is a major difference.

Second, the government does not provide a tax break in cash form, the resource provided is government services. A corn subsidy is a direct cash payment.

Because we dont not have a pay-per-use form of taxation you cannot put an actual cost on the tax break. You cant actually tell if a person if getting a net positive, that is you cannot tell me for sure now that Guy is getting his morgage interest credits that he is actually consuming a larger share of government services than he is paying for.

On the other hand you can most definetly put a direct cost to a corn subsidy and even pile on some secondary costs. This is especially obvious if you consider that given expenses a firm can suffer loses, not pay taxes, and still get a 'corn' payment, and if there are expenses left over carry them over to next year. Also the 'farmers' are already enjoying the same tax breaks everyone else is so they are getting the same government services everyone else is at the same average price, but are also getting an unrelated cash payment on top.

|7.11.08 @ 5:43PM|#

val said:

Also the 'farmers' are already enjoying the same tax breaks everyone else is so they are getting the same government services everyone else is at the same average price, but are also getting an unrelated cash payment on top.

Except that the "farmers" are not homogeneous. They are not all married homeowners with 3 kids and a Prius and an IRA and going to school at night and ...

Russ 2000|7.11.08 @ 6:19PM|#

Even if you accept the interest deduction as a subsidy, the end result is tyically people buying homes they can no longer afford since prices are dropping. They're up to their neck in debt. 5% are up to thier eyeballs.

I could have taken a 30-year mortgage instead of the 10-year I got. I would've recieved 20 YEARS of that fantastic subsidy! That would be a net loss of like $300,000 when you count all the additional interest I'd pay.

If receiving a subsidy means I wind up PAYING MORE, that's not exactly a benefit. But I'm sure my mortgage company would love me more. If you want to bitch about the subsidy, at least direct your anger towards the people receiveing the benefit.

Gilbert Martin|7.11.08 @ 10:32PM|#

"Because we dont not have a pay-per-use form of taxation you cannot put an actual cost on the tax break."

Yes there is a disconnect there because the taxes paid are based on income - not government services used - in the first place.

And no one's income is a "service" provided to them by the government.

If one want's to claim that getting a tax "break" of some sort is a subsidy, the retort could be that one's entire tax payment calculated on income - before the particular tax "break" is a subsidy TO the government to begin with.