David Friedman On Sen. Obama's Tax Plan

David Friedman makes some good points about Sen. Obama's tax plan in a post on Wed. called "More On Obama's Tax Plan". Here's a portion:

"If we count all of the refundable tax credits as expenditures, I suspect that Obama's claimed reductions in total taxes and expenditure turn into an increase, although I do not have the data to be sure. I don't know what happens if we count only refunds that are actually paid out, rather than used to reduce the amount the taxpayer pays in.

The general problem, the ambiguity between cutting taxes as a way of subsidizing activies one wants to subsidize and paying out the money directly, is not a new one, so one can hardly blame Obama and his campaign for it. But it is an important one. Transfer payments make up a very large share of the federal budget. With sufficient ingenuity, one could eliminate essentially all of them from the expenditure side by relabelling them refundable tax credits, thus producing, on the books, an enormous reduction in both expenditures and taxes, while actually changing nothing at all. Obama seems to be moving things at least a little farther in that direction."

This seems a very good point to raise. Of course, it applies to all tax plans. I think that the main point is to hold Sen. Obama to his promise of reducing total taxes and expenditures, and hold him to a meaningful standard.