How Republicans are more shrewd than Democrats on tax policy

“For the people of this world are more shrewd in dealing with their own kind than are the people of the light. I tell you, use worldly wealth to gain friends for yourselves, so that when it is gone, you will be welcomed into eternal dwellings.” — Jesus, quoted in Luke 16:1-13 NIV

Everyone knows the punchline of this joke that Jesus tells in Luke’s gospel, but few people can recite the underlying story. I call it a joke, as do many theologians, because follows a bizarre parable about a dishonest accountant’s scam that is very disturbing if read literally. Jesus appears to be trying to get a rise out of his listeners. Conservative translations, like some King James Versions or the above New International Version, call the accountant a “wise steward” or a “shrewd manager” in the marginal notes, echoing Jesus’s description in the earliest English translations. Those more modern Bible translations that “get the joke” call him instead the “dishonest manager” or something similar.

The well-known punchline to the story is this: “No one can serve two masters…You cannot serve both God and money.” The scam in the story is that the head accountant for a rich master, fearing he is about to be sacked, writes down the value of all the accounts receivable owed in the form of olive oil and wheat, so that the master’s debtors pay back less money than what they really owe, in hopes one of the debtors will hire him in gratitude. In short, he cooks the books. Read as a joke, Jesus is saying that his own followers are a bit naive on the money front and are easily taken by the grift of “the people of the world.” So, “Wise up!”

The “shrewd manager” grift of tax expenditures

As with all good parables, both Republican and Democratic Christians can typically paint themselves as “the good guys” in the stories of Jesus. However, the voter and media reactions to President Biden’s recent forgiveness of student loans paint a clearer picture of the differences in how the two dominant American political parties provide taxpayer-funded “gifts” to their constituents. The Republican version is far more “shrewd” than are the Democratic “nakedly visible” programs, like the student loan forgiveness, because they hide the largesse, which is usually much bigger.

It all has to do with a term well known to tax accountants and congressional taxation committee members, but not to the general public — tax expenditures. Any special adjustment to taxes due or tax rates that takes you below the “nominal” (tax bracket) rates, whether by a special income exclusion rule or deduction which lowers your taxable income, or a credit, which lowers the actual tax paid, is called a tax expenditure.

These adjustments to taxes paid are called “tax expenditures” because they have exactly the same economic effect as if you paid your regular taxes and the government then wrote you a check, rebating part of your bill. Think of the “wise steward” in the parable above, who “wrote down” what people owed his master rather than passing them cash. Less money is coming into the collective American pot than the “official” tax rates would predict over the years.

Much less, in fact. These tax expenditures amount to well over $1 trillion of tax revenue shortfall every year, more than we spend in total on Medicare and Medicaid annually, just for the top dozen tax write-offs.

And you can bet that there is a distinct skew as to who gets the benefit of these tax expenditures:

What are these tax expenditures? Here are the top thirteen in 2021 by two different estimates, from the Joint Committee on Taxation and the Office of Management and Budget:

There is an estimated $500 billion more in “special interest” tax expenditures underneath this list, most of which are generated by rules, deductions and credits used by fewer than one in 10,000, or even one in one-million taxpayers. Truly, these are “special interest” favors, almost always winding up, as I recently noted, in the tax code via lobbyists for rich individuals and corporations, and often in language literally written by them to favor their clients.

I count two out of these thirteen tax expenditures that directly benefit the bottom tier of taxpayers — the credit for children/dependents and the earned income credit. Ninth on the list is the “Obamacare” (ACA) health insurance subsidy, although this mainly benefits more middle-class taxpayers unable to afford insurance or get it through their employers. Lower-tax-tier families in states like Florida who have not adopted expanded Medicaid under the ACA are still out of luck in this regard. These programs are usually seen as Democratic Party initiatives.

Hiding the ball

Number one on this list is the massive tax break corporations get for providing health insurance to employees that individuals do not get. The rest of the list, plus hundreds of smaller, special interest provisions, are historically sponsored mostly by Republicans, and the benefits go by far primarily to wealthier Americans and large businesses. In short, this is how many of the wealthiest Americans are reported to have very low tax rates, as Warren Buffett often notes, even below the rate paid by his secretary. Individually many of these items seem small, but mainly because they benefit just a few individuals or corporations, where several million dollars of tax breaks go a long way.

When the government hands out cash benefits to people, we can often feel taxpayer money being spent. But if we reduce a rich person’s effective tax rate through arcane tax rules, most of us have a hard time grasping that this “gift” has exactly the same economic effect as the cash transfer. Poor people typically get “welfare” via direct transfers of cash or services. Wealthy people and corporations mostly get their “welfare” via tax expenditures. That is why Republicans love tax expenditures. They can reward rich donors, but nobody sees the cash leaving the government coffers. The perfect grift.

“For the people of this world are more shrewd in dealing with their own kind than are the people of the light.”

2 thoughts on “How Republicans are more shrewd than Democrats on tax policy

  1. Bruce Lindgren

    Just for a little context, the term “worldly wealth” in the somewhat conservative NIV is rendered as “dishonest wealth” in the more mainline New Revised Standard Version. Translated literally, it could be read as something like “riches of injustice.” (μαμωνά της αδικίας)

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  2. @rklindgren Post author

    This is why I selected the NIV here, because it demonstrates that the editor who writes the liner notes (“wise steward” vs. “unjust steward”) wields a lot of power over loyal readers. Like some scribe long ago replaced “A certain Samaritan” with “The Good Samaritan” in the intro to the text, which can be read as backhanded ethnic slur (emphasize the “good” and insert your local minority name).

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