Tax “expenditures,” “broadening” the base, and other lies to widen the gap

Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

Mitchell’s laws:
●The more federal budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor,
which ultimately leads to civil disorder.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The penalty for ignorance is slavery.
●Everything in economics devolves to motive.


We’ve discussed in the past, how semantics has ruled the erroneous beliefs about our economy and led to recessions.

For instance, using pejoratives like “federal deficit” to replace “economic surplus” and “federal debt” instead of “deposits” (in the Federal Reserve Bank), fools the public. Nearly everyone viscerally wants “debts” and “deficits” reduced, despite the fact that economically, these are positives.

For quite some time now, one of my favorite misinformation sources, The Committee For a Responsible Federal Budget (CRFB), which is associated with Pete Peterson’s foundation, has been using another, rather subtle, misnomer:

Beyond Tax Expenditures
By Marc Goldwein, Jessica Stone, and Adam Rosenberg

The recent announcement by Senate Finance Committee Chair Max Baucus, D-Mont., and ranking minority member Orrin G. Hatch, R-Utah, to begin tax reform with a ‘‘blank slate’’ has helped breathe new life into the tax reform discussion and placed a renewed focus on tax expenditures.

Under their approach, all tax preferences would first be eliminated and could only be added back at the cost of higher tax rates or other sources of revenue.

Beginning with the last paragraph, the CRFB makes it clear they believe your taxes are too low, and any changes in tax law should raise your taxes. Nice?

But let’s get to semantics. Most people think of “reform” as being what one does to cure a bad situation. But CRFB latches on to the word tax “reform” and makes it their euphemism for tax “increases.”

No one likes tax increases, but who could argue against reform. In the CRFB world, if you agree on the need for tax reform, you actually are asking for your taxes to be increased. Subtle and clever, huh?

But here’s an even better one: “Tax expenditures.”

In the normal world, when you make an “expenditure,” you spend your money. But a tax “expenditure” saves you money. It’s actually a tax saving, reduction or deduction.

But (here’s the clever part), by calling it a tax “expenditure” the inference is that all your money really belongs to the federal government, so when you don’t pay taxes, the government actually seems to be spending its own money.

The fact is that in a Monetarily Sovereign government, there is no relationship between taxes and federal spending. Even were federal taxes $0, the government could continue spending forever. (Compare this to the situation with states and cities, which are monetarily non-sovereign, so do spend tax money.) Unlike the states, the federal government never spends tax money.

The really clever part is that the so-called tax expenditure has the same overall effect as federal spending — they both add net dollars to the economy, so both are economically beneficial.

But while a tax saving, tax deduction or tax reduction clearly benefit the public, “tax expenditure” conveys negative, extravagant and profligate implications. The public admires savers as being prudent, while spenders are seen as less fiscally responsible.

The tax-loving CRFB also opposes “non-tax expenditure base provisions (NTEBPs).

NTEBPs, as we define them, are provisions in the tax code that narrow the tax base and allow for a reduced tax burden but are not classified as tax expenditures.

If there is one thing the rich hate, it’s to “narrow the tax base,” which is another way of saying, tax the poor less and the rich more. No way would a Pete Peterson-related organization want that!

The theoretically broadest tax base would be to tax each poor person exactly amount as each rich person — the homeless guy pays as much tax as Warren Buffet.

So you can see why the rich would object to a narrow tax base.

But tax-lovers like CRFB never want to say, “tax the poor more and tax the rich less.” That would be too honest. So they discuss “narrowing” or “broadening” the tax base — more semantic misdirection.

Exclusions, credits, and other tax preferences are expensive, regressive, and distortionary. Collectively, they will cost the federal government approximately $1.3 trillion in forgone revenue in 2013.

Translation: Tax preferences add $1.3 trillion to the economy, helping to grow the economy. We prefer to pull $1.3 from the pockets of taxpayers.

The article lists the following seven personal NTEBPs that should be eliminated:
a. Moving expense deduction
b. Employee expense deductions
c. Gambling loss deduction (from winnings)
d. Business use of home
e. Deferral of capital gains income (vs. pay as you go)
f. Standard deduction
g. Personal and dependent exemptions (based on family size)

Of these, only two affect the super rich: c. (marginally) and e. The rest would have a dramatic and negative effect on the middle- and lower-income groups — i.e. they would “broaden” the base.

In this article, the authors identify “non-tax expenditure base provisions” (NTEBPs) as an understudied source of potential revenue which can be generated by broadening the existing income tax base.

Translation: The authors propose widening the gap between the rich and the rest, by sucking dollars out of the middle- and lower-income groups.

Finally, this organization has the gall to ask for donations, the recommended size of which ranges from $50 to $10,000. (“Amounts smaller or larger than those indicated above are welcome but cannot be processed through our Web site.”)

Hey, if I were rich and wanted to screw the middle- and lower-income groups and didn’t care about what happened to the United States of America, I might be temped to support this organization.

But why would anyone else?

Rodger Malcolm Mitchell
Monetary Sovereignty


Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Medicare — parts A, B & D — for everyone
3. Send every American citizen an annual check for $5,000 or give every state $5,000 per capita (Click here)
4. Long-term nursing care for everyone
5. Free education (including post-grad) for everyone. Click here
6. Salary for attending school (Click here)
7. Eliminate corporate taxes
8. Increase the standard income tax deduction annually
9. Increase federal spending on the myriad initiatives that benefit America’s 99%

10 Steps to Economic Misery: (Click here:)
1. Maintain or increase the FICA tax..
2. Spread the myth Social Security, Medicare and the U.S. government are insolvent.
3. Cut federal employment in the military, post office, other federal agencies.
4. Broaden the income tax base so more lower income people will pay.
5. Cut financial assistance to the states.
6. Spread the myth federal taxes pay for federal spending.
7. Allow banks to trade for their own accounts; save them when their investments go sour.
8. Never prosecute any banker for criminal activity.
9. Nominate arch conservatives to the Supreme Court.
10. Reduce the federal deficit and debt

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia.
Two key equations in economics:
1. Federal Deficits – Net Imports = Net Private Savings
2. Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports


10 thoughts on “Tax “expenditures,” “broadening” the base, and other lies to widen the gap

  1. Mr Mitchell,

    Sorry to keep re-hashing the same thing over and over. I know we’ve had many disagreements in the past, but I think it’s important that people hear both sides.

    You are completely correct, that in today’s world governments no longer care about their tax revenues to budget their expenses. So yes, there appears to be no relationship between spending and taxes. However, that is not accurate at all. There is a relationship and I think we are both aware of it.

    As you say, the government can take the tax money and burn it (you may be right), although as you also say, money is mostly electronic now days. Let’s play a game sir, it’s call debit my account and credit your account.

    Sample 1 (Mr Mitchell): let’s debit my account for 10,000 dollars today, which I owe to the Federal Government in taxes. As you say, this money goes poof because the government “doesn’t spend” tax revenues. Tomorrow, the Federal Government magically receives a credit into their account for 10,000 dollars which it can now spend. In this example 10,000 of purchasing power went from my account to the Federal Government’s account.

    Sample 2 (DannyBoy): my account is debited for 10,000 and the Federal Government’s Treasury account is credited with 10,000. There is actually no other way this can happen as all USD payments clear through the Fed and it would be a proof break (although I’m sure there are) if 10,000 were credited without a debit somewhere else.

    Mr Mitchell, can you explain to me what is the difference between the 2 other than technicalities which really mean nothing. In both samples my 10,000 dollars of purchasing power went from me to the Federal Government. I can NO longer spend the 10,000 while the government now can.

    The reason you make the point may appear like you are trying to explain a technicality, but its not. It’s clearly an attempt to break government spending from tax revenues at all cost. When the government spends above tax revenues it borrows the funds from banks (mostly) which issue the credit into existence. This credit acts as money and devalues existing currency thereby stealing from the currency users, US. We are being stolen from sir, yet you not only promote spending, you want to disconnect it from tax revenues.

    Aside from the fact that deficit spending steals, it is the government’s duty to spend only tax revenues. Using taxes to spend means that the government would have to communicate with people to raise taxes for spending on projects. There is no irresponsible throwing of money down the hole, the people have to accept or reject it. And SIR, this is what you are trying to bypass, the people’s consent. You scream about how the government should give people that, give people this… yet you are against letting people keep their money.

    The fact is that when the government deficit spends, poor people, retirees, and others on the government dole get a small tiny fraction of what has been stolen from others. It’s like taking 100 dollars from the right pocket and putting 10 on the left. Oh and is the left happy with the 10 bucks, even though the fools just lost 20. Our education system is doling out some of the dumbest Americans in the history of the world. 99% of the people are stupified into believing that it’s good when the government steals their money. They would rather be watching American Idol than figuring out why there are no jobs and why they are getting paid minimum wage.


  2. Where have you gone, Jack Kemp? Republicans used to know that “tax expenditure” is the language of those who believe that everything you earn belongs to the government, and whatever it lets you keep is their gift to you.


  3. Sorry Danny,

    You said, ” . . . you are against letting people keep their money.. . . “

    On the contrary, I think federal taxes should be $0, and the people should keep ALL their money. You seem to be the one favoring taxes, which do nothing but steal money from the people.

    And by the way, your intuition has led you astray. There is no historical relationship between federal deficit spending and inflation. Check it out..

    On August 15, 1971, the federal government unilaterally ruled that it was Monetarily Sovereign. The federal government makes the laws, so being Monetarily Sovereignty, it can do ANYTHING it wishes with the dollar. It can credit or debit any of its accounts at will, and does not need income to do it.

    Visualize the game of Monopoly, where you are a player and the rule maker. You pay for properties by taking scraps of paper and writing the number $10 on them. Or, you might write $1,000 on them. Or whatever you want.

    Why can you do that? You are sovereign. You make all the rules with regard to Monopoly money.

    No matter what classic accounting tells you, the federal government, being Monetarily SOVEREIGN, makes all the rules regarding the dollar and accounting for the dollar. That is why taxes and taxpayers and lenders pay for nothing.

    The government does NOT transfer dollars from taxpayers to creditors. It does not transfer dollars from lenders to creditors. It does not transfer dollars to anyone. It simply creates dollars ad hoc. It is sovereign over the dollars.

    Federal taxes are destroyed, and do not help the government spend. Even if federal taxes fell to $0, the government could spend $100 million tomorrow. Or $900 trillion. Whatever it wished. It is sovereign over the dollar.

    Your intuition is based on your experience being monetarily non-sovereign. Intuition is no substitute for the facts of Monetary Sovereignty.

    Before you brag about not being an economist, then spout off about economics, perhaps you first should try to learn Monetary Sovereignty


  4. Rodger,

    I am not sure why you keep harping on this. Like Danny, we have also gone back and forth on this and I though you might have been over it but apparently not.

    You are correct in most of what you say about how the government currently operates (although I would disagree with you on the implications of it all) however in this I am sorry to say you are completely wrong.

    Saying that the government makes the rules is a red herring. Saying that the government does not transfer money from taxpayer to creditor or vis versa is also a red herring. Saying that the budget is not related to spending is misleading but is also a red herring.

    Saying that taxes destroys dollars is misleading since there is no proof that the physical dollars are actual destroyed however dollars are destroyed in the sense that they are no longer accounted for as part of the money supply.

    However the government does use tax money to offset spending!!

    To say otherwise is just plain wrong!!

    I don’t know how many times it can be said and why you don’t get it (and no just telling us that is how it is, does not make it so!)

    If the government debits my account by $100 it’s account gets credited $100 (or are you telling me their never goes above $0 because other wise that is what you are saying). Yes that $100 is no longer part of the money supply but it is available for the government to credit to others accounts when it end up spending. If that was not the case then by law our deficits would be closer to 3 trillion than 1 trillion.

    In any case you and MMT have opened my eyes to some things and to how the government as it is currently set up actually operates. I think you are doing some good work especially in regards to the government spying etc(although isn’t it kinda ironic that you call for almost unlimited spending (yes that is a bit of an don’t actually call for unlimited spending) but yet you seem surprised when the government does spend stuff like this…that is when an entity is spending that kind of money you are going to get the good with the bad and is a main reason why the founders talked of limited government!) so it is a shame you have to hark on this and ruin the good that you are doing!!


    1. Apparently, you believe “red herring” to be a synonym for “fact.”

      You said, “there is no proof that the physical dollars are actually destroyed”

      There are no physical dollars. You cannot see, touch, smell, taste or hear a dollar.

      See: Why a dollar bill is not a dollar, and other economic craziness Monday, Jun 20 2011

      That dollar bill in your wallet is not a dollar; it is a title to a dollar. Just as your house title is not a house and your car title is not a car and a loan document is not a loan.

      Limited government as a general goal is nuts. Spending on benefits for people is good. Why would one wish a Monetarily Sovereign goverenment to reduce spending for people benefits?

      Spending on spying on people, maybe not so good.

      The politicians want to cut spending on benefits to the lower- and middle- income groups. That’s bad.

      As for the founders, I really don’t care much about the opinions of rich, white, Christian, male, slave-holding politicians of the 18th century. I leave founder-quoting to phonies, like Antonin Scalia.


      1. Please don’t tell me you don’t know what a red herring is!!

        “There are no physical dollars. You cannot see, touch, smell, taste or hear a dollar. ”

        Come on Rodger stop playing know exactly what I mean..another red herring!!

        Why would limited government be nuts?? Are you really saying the only ones who could take care of us are the government??…that is a pretty sad statement especially considering how well they are doing as of late??

        As for the founders and your and chasfac’s comments are pretty sad statements and shows why we are in the mess we are in!!


        1. The government makes the rules. (You don’t thing so?) That was the whole point of the post. By making all the rules, the government is not bound by your rules.

          The government does not transfer money from taxpayer to creditor or vis versa (Absolutely true for a Monetarily Sovereign government)

          Never said the budget is not related to spending (Typical misquote from the herring meister)

          Inflation has not been related to spending. (Also factually true) I even gave you the link to the facts.

          No red herrings there. Not even a gold fish.

          Here’s an opportunity for you. IF you answer this question correctly, I’ll continue to post your responses. Otherwise, bye bye.

          The question: What are the differences between a Monetarily Sovereign government and a monetarily non-sovereign government?


        2. If you want to ask me a question just ask, no challenge needed. If I don’t know the answer I will say so. If I am wrong and I am shown why I am wrong rather than simple told, I will admit I am wrong and educate myself more on the subject.

          To answer your question, I agree with your definition of Monetary Sovereignty…that is a Monetarily Sovereign government can create its won money at will, it does not need to as the saying goes…ask, beg or borrow anyone. A Monetarily Non-Sovereign government on the other hand needs to get it money from somewhere. Maybe not exactly how you would put it but I get the concept.

          However how does this relate to whether the government uses tax money to offset spending??

          So lets go through this…

          Your overall point may have been

          “The government makes the rules.” (a direct quote” and something I do not disagree with)

          But In your original post you said and quote (this is a direct quote which I copied!)

          “Unlike the states, the federal government never spends tax money

          Both Dannyboy and I questioned you on this, which I have also done in the past.

          When you replied to Dannyboy you said…the following…

          “Federal taxes are destroyed, and do not help the government spend”

          “The government does NOT transfer dollars from taxpayers to creditors”.

          As for my quote about the budget not being related to spending, that was not in your posts, Dannyboy mentioned it however I do recall you saying something to that effect in the past. If you did not and I mis

          Maybe I was not clear or as articulate as I could have been in saying my disagreement was over your characterization of saying that taxes do not pay for spending Although In my first post I did say “However the government does use tax money to offset spending!!”

          So I questioned you on this and what do you talk about inflation (how is this related to whether taxes are used to offset spending), you talked about the differences between monetary sovereign governments and Non-Monetary Sovereign governments, you talk about how the government makes the rules etc..all of these have little to nothing to do with whether the government uses taxes to offset spending….hence red herrings. The only response that came close was if the government transfers money from taxpayers to creditors but even that did not answer the question.

          So I have a question for you and a challenge.

          Obviously this is your blog and your the Sovereign here so you can choose to ignore this request or you can answer it or for that matter you can ban me from posting any more or just ban this post (but if you do ban me just because I challenged you in one area than I think that is saying a lot!!).

          So the question, very briefly… tell me how or show me how the government does not use tax money to offset spending??

          The challenge is to answer it directly in simple terms and to not use any “Red Herrings”.

          As an FYI…you might think I am playing a game of gotcha here or just trying to argue for arguments sake or just trying to be difficult but I am not really not. From what I understand you are wrong on this point and none of your replies have really shown me why I may be wrong.


        3. I think I may put a limit on comment length. Given the choice of one word or two, you’ve chosen 100.

          Anyway, the government doesn’t use tax dollars because it doesn’t need to. So your point is moot.

          The government controls dollar creation, dollar destruction and all accounting. It tracks what it has spent and what it has taken in taxes, but that does not mean it actually USES tax dollars.

          Tracking is not the same as using. If taxes were $0, this would have no effect on spending. So what difference does it make which accounts the government debits and credits?

          (Never mind. Don’t tell me. Not interested. You just wish to argue, not learn. I’ve tried to be a patient instructor, but you are a hopeless student.)

          This is the end of the discussion.


  5. Please cease with the “founders” crap, like they were all such great guys, only concerned with what was good for the commons. They were a bunch of rich, elitist, white guys who were all for government as it did not impede them in any way. Damn, sounds sort of like the guys in government today; minus a few tokens, who can be gerrymandered out of office whenever necessary. I’ll be for limited government too when the actual costs of doing business include all of the “free lunches” business receives from the public sector. The problem with too many of the proponents of limited government is they want to have their cake, what government does to facilitate their ability to make profit, and eat it too, not having to absorb the costs. What all of your ilk fail to comprehend is simply it’s not government that’s the problem, its who you chose to represent your interests, it’s what you allow it to do you. The people are true participants in governing; if they have the will to make it so. It’s not how much money the government spends, it’s what you allow it to spend the money on. Open your eyes. Open your mind.


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