Do You Follow a Government Sponsored Lifestyle?

I caught the headline of a Kiplinger Article recently. The headline read “Tax Breaks for the Middle Class”. While some of the tips are great for those in the middle, some of it seem to be directed at the lower income levels, as the limits were quite low. At least for someone in Santa Cruz or anywhere near the San Francisco Bay Area.

It wasn't, however, the content of the article that triggered things in my head though. It was the headline. A reminder that the government takes many steps to “assist” you in defining your behavior and possibly your beliefs.

Many people, especially those who tout a fiscally conservative government, often comment that we should not be handing out money through welfare or other assistance programs to those who are unable or unwilling to work. I tend to agree with this principal in measured part, although there are definitely people who are unable to care for themselves or put into a positions, either temporary or permanent, where other viable provision is unobtainable. This is a small minority.

What identified with me in the headline of the article was that there is no practical difference between a welfare check and a tax break or credit. The difference lies completely in the delivery, not the result. That result is that someone is getting something from the government that somebody else isn't.

All government assistance, whether derived from direct assistance via a subsidy or from a tax break or credit, has at its core behavioral modification.

In the same way that people often demand that large corporations be taxed or subsidized for their business behavior government is also creating incentives for individuals to behave in a certain way.

With businesses it is often for them to produce more of something such as corn or wind energy. Also, to not produce as much of something such as low gas mileage vehicles or cane sugar. Most of that effort benefits some financially and for others it can mean a loss or a switch in business plans. Overall businesses adapt well, although some of those adaptions can result in a worse outcome than if government had left things alone. One example is the use of HFCS instead of sugar. Not only does it not taste as good, some studies are linking HFCS to certain health problems.

For individuals the affect of government favoritism is more pronounced. If your neighbor gets a tax credit for having a child, you are being penalized for not having one. If your neighbor gets a tax break for being married, you are being penalized for not, which in certain States still eliminates the possibility of a break for same-sex couples. You may get a tax break for driving a hybrid car, while your neighbor whose needs prevent that choice are penalized by your subsidy.

By deciding the winners and losers through taxation government removes your freedom of choice and creates its own class system. Conformity might not bother some, but I'm not a fan.