In my previous post, I discussed the politics of BIG/NIT proposals in the United States, the reasons for pessimism about the future, and the reasons why I’m more optimistic. In this final post, I’ll discuss one possible strategy for expanding BIG/NIT programs to the US.
But first some honest pessimism: One of Zwolinski’s arguments for a BIG/NIT programs is that it is superior to the current mishmash of social programs which characterizes the American welfare state today. Proposals like the one outlined by Charles Murray see a BIG as a replacement for the entire welfare state. Given the unique structure of the American state (multiple veto points, presidential system, weak parties, etc.), I have very little hope for an escape from our current Kludgeocracy. Any new program may slowly displace old ones but we will never see outright replacement in some “big bang” fashion. That said, I still see any new program that distributes more resources to the poor without the onerous moral regulation we find in TANF and SNAP as a net plus in my book.
According to my research, the best strategy for proponents of BIG/NIT is the expansion of the child tax credit (CTC) and the earned income tax credit (EITC) programs discussed in my first post. Of these two, the CTC is more important. When the CTC was first introduced in 1997, it was nonrefundable and worth only $500 per child. By 2003, it was worth $1,000 per child and partially refundable at 10% of income over $10,500. Currently, it is still worth $1,000 per child but refundable at 15% of income over a much lower threshold of $3,000. Given its current trajectory, one option would be to double the value of the CTC to $2,000 and make it fully refundable. This would extend the full benefit to families making less than $10,000 and provide a guaranteed minimum income of at least $2,000 to all families with children. Clearly, this is a very small amount but it necessary to enlarge the CTC’s constituency before increasing the absolutely value of the benefits. History is clear here. Part of the reason Nixon’s FAP proposal failed was because welfare rights groups overreached and demanded a much higher minimum than was politically feasible at the time.
How does this get around the obstacles I discussed in my previous post? First, the CTC provides the perfect “natural bridge” analogous to the bridge provided by family allowances in Canada. It is much easier to expand an already existing program than create one from scratch. Unlike other programs, the CTC isn’t tainted with the stigma of welfare. Moreover, this would enlarge the CTC constituency to include a broader coalition of poor, working, and middle class families who could then push for a larger credit in the future.
This still leaves the issue of deservingness. Won’t an expanded CTC include the same disproportionately nonwhite and unemployed population which helped derail previous BIG/NIT proposals? Yes, but this is where our third dimension of deservingness plays a crucial role. Previous accounts assume that race (identity) and work status (control) will automatically be the most salient features. Historically, the most salient feature of tax credits has been the deservingness of their beneficiaries based on reciprocity rather than identity or control.
David Schmidtz argues that we have two models of deservingness based on reciprocity – compensatory and promissory. Compensatory models are based on some past contribution. We have a right to certain resources because we paid into the system. Think Social Security or Medicare. From this perspective, “Keep your government hands off my Medicare” signs at Tea Party rallies make some sense because beneficiaries believe they have a right based on past FICA and Medicare taxes paid. Promissory models, on the other hand, are based on what we do after we receive the benefit. We have a right to certain resources because and to the extent that we make good use of the opportunities they represent. TANF and SNAP are governed by a promissory logic of deservingness. They are supposed to give you an opportunity to get back on your feet and become self-sufficient again. With the distinction between these two sorts of deservingness in hand, it shouldn’t be surprising that we see stringent moral regulation of beneficiaries because this is deemed necessary in order to ensure that resources are being utilized wisely (especially in light of stereotypes of the target population). Your Grandma, on the other hand, can spend her entire Social Security check on booze, porn, and lottery tickets because she earned it. The same goes for your tax refund check.
Tax credits adhere to the logic of the compensatory model of deservingness. Lawrence Zelenak argues this is because the “myth” of our right to our pre-tax income makes “everyday libertarianism” pervasive in tax politics. Unlike welfare beneficiaries, tax credit beneficiaries are perceived as getting some of their own money back rather than taking someone else’s money. This has important implications for the politics of tax credits.
Some will argue that it is not a true tax refund because beneficiaries can get back way more than they paid in taxes. This is irrelevant though. The average Social Security beneficiary also receives way more than they paid in contributions but try telling your Grandma she’s a welfare queen milking the system. It’s the perception that matters. Tax credits beneficiaries gain the identity of “taxpayer” which, much to the chagrin of some people, is a mighty powerful identity in the current political climate. The original rationale for the EITC was to offset growing payroll taxes on low income workers but it has already expanded far beyond its original intent. Despite its almost exponential growth, there has been little backlash against the EITC or fear that it is creating an underclass dependent on government welfare.
Policymakers and activists interested in BIG programs have historically focused on traditional social spending programs. When they have talked about tax policy, it is usually in reference to making the 1% pay their “fair share” in order to pay for such programs. If I’m right, perhaps it is time that we start thinking about tax policy with the poor in mind instead. Of course, this isn’t a new idea. The concept of a negative income tax was originally developed by Milton Friedman in the 1940s and put forth his 1962 classic Capitalism and Freedom. Through my discussion of the politics of BIG/NIT, perhaps we can move further toward Friedman’s ideal.