Question: Is there any substantive difference between the government cutting you a check and cutting your taxes?

VerBruggen agrees with the Progressives on the Supreme Court I wrote about recently: Nope, all your money is the government’s!

But his odd insistence that government checks and tax cuts are the same began months ago, when he expounded more extensively if not coherently on this same subject.

I attempted to illustrate where he had gone wrong in his thinking by taking his positions to an extreme. To my surprise, VerBruggen agreed with my modest proposal to eliminate all charitable tax deductions and credits and capitulate comprehensively to the welfare state

More specifically: “The feds should eliminate the charitable tax deduction and send out the average (tax-forgiven) amount donated per adult to every citizen in the country to donate as they wish!”

VerBruggen supports a “charity entitlement” over charitable tax deductions. He favors a “social security” model for “kind of a ‘forced charity’” over tax deductions.

I’m not sure if he’s thought his rather radical and odd argument through to the end point.

Many of the citizens receiving their “charitable donation” check would be low-income. That means they didn’t earn the money they have been given, someone else did. Furthermore, they are qualified for government “charity,” which means they can use their “charitable donation” check on themselves; housing, food, healthcare, addiction treatment, maybe the opera or a class on origami.

What VerBruggen supports is not charity; it’s a massive new welfare program

And in addition to the new, wildly unrestricted welfare program, he supports forcing wealthier folks to hand money to less wealthy folks to “donate” to things those folks like. What is it that someone wrote recently on PhiBetaCon about how careful we are with other people’s money? Oh, right, George Leef referenced some guy named Friedman.

And just imagine how one might go about enforcing the use of the voucher in the first place. What happens if a person never donates it? Do we need special accounts from which to spend the money, or should we mandate one donation, with the check signed over to a single registered charity? What does this interesting new program look like?

The citizens who earned VerBruggen’s “charity” money can’t decide how it should be used. The government, in conjunction with citizens who did not earn the money, decides how it is to be used.

VerBruggen claims none of this matters. After all, tax deductions are a subsidy of private charity. “Charity” vouchers are a subsidy too. Ergo, there is no difference between vouchers and deductions. “The better solution,” writes Robert, “End charitable deductions (and most other deductions!) entirely.” I’m curious what deductions he thinks worthy of survival.

VerBruggen’s formulation is a cartoon version of the real world and the issues at stake. And his proposed “solution” would be an unmitigated disaster.

Government is heavily invested in the business of “charity.” The government supports health, housing, parenting, addiction, jobs and retirement programs. It supports scientific research, the humanities, the arts, recreation and of course education at all levels and in every field and stage of life. Federal, state and local governments are massive “charity” machines which collect some people’s money according to their success in earning it, allocate it to other people according to the preferences of still another set of people, as translated through the relevant political and bureaucratic system, who then spend said money on one final set of people. The support of all these people and things is required by the government.

In the libertarian Shangri-La, no subsidies of charity would exist. Let’s say the government collects taxes only for the common defense, policing, the courts, etc. In this state of nature thought game, he is correct that any charitable tax deduction would raise the effective tax burden on those who did not use the deduction. It’s a subsidy, and each non-deducting taxpayer is effectively compelled to support to some degree the donation of a deducting taxpayer.

Of course if every taxpayer takes a deduction, then there is no coercion; everyone benefits and the required increase in the tax rate would fall equally as well. In addition, each taxpayer would be free to direct his donation. In the case of a “charity” voucher, however, each taxpayer would be compelled to support the choice of non-taxpayers and lesser taxpayers. (There is also the minor difficulty of how one might enforce the use, and legal use, of a “charity” voucher sent to every citizen.)

In other words, vouchers require compulsion, and tax expenditures do not

Much more important, however, the government would not be in the business of providing “charity” itself. In our libertarian state of nature, which would be the least of evils; equal taxation in support of government-provided “charity,” or an equal amount forgone in charitable deductions available to all taxpayers? In the former case, everyone is compelled to support all government “charity.” In the latter, only those not claiming a deduction are compelled to subsidize the charitable deductions of others. Fewer people are compelled to support a particular kind of charity, but those who are compelled pay comparatively more.

But instead of proposing as his solution the elimination of the welfare state, VerBruggen promotes the elimination of the charitable deduction as his preferred state of affairs and the redistribution of charitable donations as an improvement on the status quo.

He insists that “charity spending does not offset government spending in the slightest,” yet also agrees that “voucherizing the tax subsidies for charity would remove the incentive to donate” to the range of charitable and social welfare activities the government supports.

Charity does not reduce pressure on the welfare state? The billions of dollars donated to health, education, welfare . . . these offset nothing in the public sector? In the absence of tax expenditures for employer-provided health care, how likely is it that the U.S. would have retained a relatively robust private medical market?

The charitable deduction allows the people who earned the money our governments spend on public “charity” to keep some portion of what the government would otherwise have spent on government “charity” or some other wasteful project.

If VerBruggen is concerned that the tax burden will marginally increase on some citizen as the result of another’s charitable deduction then the answer is to balance that lost revenue with a reduction in government “charity,” not to eliminate the deduction.

Perhaps most concerning is VerBruggen’s breezy assumption that all income belongs to the government. He insists that “taxpayer money is already allocated” in the form of deductions for charity, and therefore that “voucherizing the total amount of the deductions wouldn’t change that . . .”

Really? Tax credits and deductions belong to the taxpayer who earned them. They are not government funds; that is a legal and logical statement. To insist otherwise is to argue that all income is the governments, and what it does not claim is ours. The money that a taxpayer spends is HIS money, not the government’s.

And, as is noted above, voucherizing charitable deductions will convert a huge portion into direct welfare payments and eliminate the core of the charitable act; giving away one’s own money.

In merciful conclusion, VerBruggen is confused and incorrect on a long list of issues.

Known as Section 199 relief, the deduction in question has been available to companies engaged in energy production, as well as manufacturing, for several years as an incentive to encourage operations and employment.

However, under an amendment introduced by Baucus, which could be voted on in the Senate next month, that deduction would be eliminated for certain players in the energy industry.

According to a memo obtained by Capitol Confidential and written by Senate Finance Committee staffers Scott Mulhauser and Erin Shields, the Baucus amendment is intended as a substitute to another introduced by Sen. Mike Johanns (R-Neb.).  The Johanns amendment is itself intended to modify the Small Business Jobs Act.

The memo states that “the Democratic alternative… would repeal Section 199 of the tax code, which currently allows these corporations to deduct six percent of their income from oil and gas production from their tax liability, effective December 31, 2010.”

While the amendment is aimed at the biggest energy producers, opponents say that the amendment is still dangerous.

LSU business professor Joseph R. Mason, who has been studying the effects of the Obama administration’s moratorium on drilling on the Gulf Coast community, recently wrote in an op-ed in the Wall Street Journal that according to some research, “this repeal would cause the U.S. to increase its reliance on imported oil from politically unstable nations, cost the economy 637,000 jobs, and reduce household earnings by nearly $35 billion over the next decade.”  Dr. Mason further noted that according to the Congressional Research Service, repeal would “adversely affect domestic production and increase imports.”

The Institute for Liberty, known to comment on misperceptions of energy industry profitability and subsidization similarly noted in earlier in July— when tax hikes including this one were first being mooted— that such changes would “increase taxes on energy companies and consumers.”

The Mulhauser-Shields Baucus Finance Committee memo does not address this point, focusing instead on the claimed benefit to small businesses of other provisions in the amendment.

However, opponents of the measure say they intend to raise the profile of the Baucus amendment, and all its content, ahead of any forthcoming vote.

“They can’t claim to be pro-job while being anti-business,” said one energy industry representative quoted above, “and November is just around the corner.”

While both Parties have their internal battles, Republicans who are wondering why their numbers are waning need look no farther than the current health care debate for clues.  When Democrats roll out a Federal takeover of private health insurance, the Republican response should not be less of a government takeover, it should be a total federal government withdrawl from regulating private health insurance.  The point is simple, although lost on many.

When we think about insurance in our lives, from life, home, auto, professional liability and health, which one is the biggest source on consternation?  Guess what?  Health insurance is the only one in which the federal government has significantly intruded.  Even that is currently regulated at the State level.  However, the many Federal government restrictions that complicate the health insurance marketplace are the primary reason competition cannot thrive.

The biggest perversion of the healthcare marketplace dates back to the forties when only businesses and not individuals were allowed a tax  deduction for health insurance premiums.  While we are now dependent upon our employers to provide for this need, we would never expect them to provide for our home insurance.  Most of the additional federal intrusions that perverted the market came in the federal acts including ERISA, COBRA and HIPPA including the provision barring insurance purchasing across state lines.

So now that we have Democrats and Republicans tossing out a variety of federal solutions, it is only fair to acnowledge that the Republican plan under the architecture of Congressman Roy Blunt, at least leans more toward market-based solutions.   It offers some creative strategies but nevertheless leaves in tact most of the previous federal intrusions.  The Democrat proposal on the other hand, is a vile package of power grabs and payoffs, primarily to big labor and Senator Louisiana Landrieu.  Still the leftist American oligarchy of Obama, Reid and Pelosi continues to push this menacing bill forward against plummeting poll numbers for both the bill and themselves.  It seems passing any bill at all is more important than what kind of bill they pass.

As the debate rages on, it is clear that the American public does not trust the Congress, period.  The army of lobbyists and special interests negotiating various carve outs, mandates and other special privileges into the 2000 page nightmare has Americans justifiably in nearly full rebellion.   While both Parties argue over which bill ought to be on the table they are trying the patience of an American public that wants no bill at all.