Thursday, June 18, 2009

A modest proposal

Peter Hannaford, writing in The American Spectator:

[US Senator Lamar Alexander (R-TN)] is the lead sponsor for the Auto Stock for Every Taxpayer bill which would distribute the government's stock in GM (and Chrysler, too) to the 120 million Americans who paid income taxes on April 15.

Interesting idea, but I'd like to one-up it.

Stipulated: That the auto bailouts and the government assumption of stock positions in the car companies were both very bad things which never should have happened, of course; and that social engineering through tax policy is also a very bad idea. But the former's already been done, and if the latter is going to be done ...

... instead of giving that stock to "taxpayers," why not give it to non-taxpayers of a specific type?

I'm thinking of those taxpayers who collect the Earned Income Credit, and specifically of those taxpayers whose EIC results in a "refund" larger than the amount that was withheld from their paychecks in the first place.

In other words -- and I'm just making the numbers up as a ferinstance here -- someone who had $1,000 withheld from his paycheck for income taxes last year but, because of the EIC, will be getting $2,000 as a "refund" when he fills out his 1040.

Why not issue all "refund" amounts in excess of amounts actually withheld in GM/Chrysler stock instead of in cash?

In this scenario, the hypothetical filer above would get his $1,000 back, but that other $1,000 would be Chrysler/GM stock instead of pictures of dead presidents.

The two obvious and intended consequences:

- The cash cost to the Treasury of EIC-enhanced "refunds" would be reduced to the amount of actual refunds. No filer would be receiving more cash from Uncle Sugar than Uncle Sugar took from him in the first place.

- Those "poorest Americans" we're always hearing about, the ones the EIC is intended to help, would be picking up business ownership stakes -- a piece of "the American dream."

Sure, some of them would go sell the stock immediately (probably at a huge discount due to glut) and take whatever cash they could get for it -- but even that would get the stock back into the private sector where it belongs, and the cash would be coming from private investors, not the Treasury.

Others might hold on to their stock, reinvest dividends, start building their nest egg retirement or something else important to them.

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