When the government makes applying for welfare hard, they mostly just waste a lot of people’s time and make it so people who qualify for benefits do not get them because the application is too burdensome. Such qualifications don’t boost employment, they just make poor people suffer more.
It’s easier to get subsidies that mostly go to those with higher incomes.
When you make qualifying for benefits difficult, you make it harder to track fraud. The biggest fraudsters are organized actors that know how to get around complex requirements. More fraud is doctors and wealthy people cheating on payments and tax subsidies, than poor people cheating to get food or healthcare.
The US loses 100 billion dollars a year due to corporate tax avoidance where corporations pretend like their profits came from low tax areas like the small island country of Malta. This is about equal to the budget of the food stamps program. It’s about equal to how much Medicaid spends on children’s healthcare. The Biden administration was trying to alleviate this, but Trump ended attempts to do so.
Trump’s tax cuts that mostly benefit the wealthy do not sunset. His financial benefits for the middle class and below do sunset. If he really thought these programs were good and were helping people, he and the Republican Congress that passed them would have made them permanent, instead, he made them temporary to use as an election issue.
Trump Accounts mostly benefit those wealthy enough to take advantage of them as tax deductions (ways to avoid paying taxes, making the deficit, debt, and inflation worse).
Anytime the government does something through tax deductions instead of checks, it’s a sign that it will mostly benefit the wealthy.
Jeff Bezos pays himself an 82k salary even though he is the head of a massive company, Amazon, but he is fabulously wealthy through his stock, which he can use to take out loans tax free. So, he lives a tremendously wealthy lifestyle while paying very little taxes. This is legal. The estate tax is supposed to make up for this, but it is riddled with loopholes.
“Economists have long known that tax expenditures make our taxes unnecessarily complicated, distort pragmatic economic decision making, and mostly benefit hand-selected political constituencies. My Mercatus Center colleague Jack Salmon and I have spent time demonstrating that most tax expenditures don’t offer broad-based relief but rather narrow carveouts that erode critical tax revenue while tilting the scales toward the special interests that sell whatever we’re nudged into buying.
Tax expenditures stand in sharp contrast to a neutral tax system—one that taxes income and consumption consistently and only once, trusts individuals to make buying decisions without manipulation, and leaves resource allocation to markets. Special-interest tax credits should ultimately be terminated.
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Deducting the interest on mortgage payments has virtually no effect on whether someone buys a house. It mostly leads to larger mortgages and bigger homes for wealthier households. That’s a subsidy for the upper middle class.
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The exclusion of employer-sponsored health insurance (ESHI) payments is the single largest individual tax break, costing in excess of $3 trillion over the next decade. Most employees would take the insurance their employers offer with or without this incentive. It ends up inflating the size and cost of plans, driving up health spending, making it more necessary to insure through one’s employer, and entrenching workers in their current jobs.
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The implications are clear: Tax credits and deductions are generally not harmless ways to help taxpayers. They are costly, distortionary privileges captured by industries and interest groups. They complicate the tax code, mask the true size of government, and fail to deliver the promised bang for the buck.”
Repeated Republican presidents and Congresses have told us that tax cuts will pay for themselves, and they repeatedly have not paid for themselves. Tax cuts like these are budget busters.
“The U.S. tax code is broken. That’s mainly because it collects revenue in an arbitrary, distortionary, and unfair manner. At the heart of the problem are “tax expenditures”: credits, deductions, and loopholes that benefit the government’s favorite groups and behaviors.
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It’s a patchwork of exceptions and preferences designed more by lobbyists than by public servants. Policymakers claim they are encouraging savings, promoting fairness, or aiding the poor. In reality, many tax expenditures—also known as tax breaks—serve no purpose beyond enriching powerful interest groups.
The solution is to return to first principles. We must begin by defining the tax base in a principled way. What should count as income? What should be taxed, and when? Only then can we properly distinguish between legitimate exemptions and unjustifiable giveaways.”
“The problem with tipped wages is not that they are taxed too heavily; it’s how little they tend to pay, and how much tipped workers have to rely on the kindness of strangers to make ends meet. In 2023, for example, the median annual wage for waiters was just below $32,000, according to the Bureau of Labor Statistics.
In fact, as the Tax Policy Center put it, eliminating income taxes on tips would do little, if anything, for many tipped workers whose earnings are so low that they are already exempt from paying federal income taxes.
“It’s very hard to dispute that the vast majority of moderate and low-wage workers are left out,” said Brendan Duke, senior director of economic policy at the Center for American Progress. “We know that 95 percent of low- and moderate-wage workers don’t get tips, and only about a third of those tipped workers pay income taxes and would benefit from this.” (Duke was specifically talking about Texas Senator Ted Cruz’s proposed legislation on this issue.)
Part of the reason that tipped workers are paid so poorly is that the federal government only guarantees them a subminimum wage of $2.13 per hour. If along with tips, a worker’s earnings are still below the federal minimum wage of $7.25 per hour, then employers have to make up the difference. (Many states and municipalities have wage requirements above the federal minimum, but those also often include carve-outs with lower hourly minimums for tipped workers.)
That’s why a handful of states have abolished the subminimum wage for tipped workers altogether. Because by allowing employers to pay tipped workers less, businesses essentially pass their payroll burden directly onto their customers. And while most Americans are used to paying tips, those who don’t — or those who at least threaten to not tip — create a hostile environment for workers and make it harder for employees to make a fair wage.”
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“One of the biggest concerns about doing away with federal taxes on tips is that it would discourage businesses from offering more competitive wages. That’s because if workers’ take-home pay increases because of a tax cut, employers wouldn’t need to provide tipped workers a higher base-line wage. In effect, it’s a tax cut that might mostly subsidize businesses’ payroll costs, not workers’ cost of living.
“It will reduce employers’ needs to raise wages,” Shierholz, of the Economic Policy Institute, said.
There’s also the fact that creating a tax carveout for tipped employees could create a major loophole for employers looking to pay people less. Some sectors, for example, can simply become part of the tipped economy, making more of their workers rely on tips rather than a minimum wage.
The policy would “incentivize employers to have more workers be in tipped occupations,” Shierholz said. “[Employers] could reduce the base wages they pay their workers under the guise of doing something for the workers. They could say, ‘We’re making you tipped because you won’t have to pay taxes’ and then in the fine print, it’s like, ‘Oh also, you’re going to be making $2.13 an hour in base wages.’”
That’s why pursuing other policies, like abolishing the subminimum wage, would do much more to increase workers’ pay than eliminating taxes on tips would. The poverty rate for tipped workers in states without a subminimum wage, for example, is lower than that in states with a subminimum wage.
“If you really want to help tipped workers, there are other ways that are far, far better,” Shierholz said, adding that federal dollars would be better directed toward programs like the Child Tax Credit or the Earned Income Tax Credit, which would be much better at targeting workers who need it.
So if politicians are looking to tout a pro-worker agenda, they should point to policies that can actually raise people’s wages, as Harris did by also endorsing raising the minimum wage. Otherwise, they might just be pushing for yet another tax cut for the rich. After all, that might be why major business lobbying groups have endorsed “no tax on tips” — to avoid actually raising workers’ wages.”