Should The Welfare Hypocrisy Critique Keep Me From My Tax Credit?

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In the CARE Act of 2020, Congress created a so-called recovery rebate for individuals. It creates a tax credit for the 2020 tax return worth $1,200 for single filers and $2,400 for joint returns plus $500 per qualifying child. The credit is reduced when adjusted gross income exceeds $112,500 single or $150,000 joint. They have created provisions for receiving the tax credit now in advance of filing your 2020 return, so it can help stimulate the economy. Regardless, this credit or its advance will then be calculated and filed as a part of your 2020 tax return.

In response to this tax credit, I recently saw a political cartoon by Mike Thompson which one Reddit thread called “The Welfare Hypocrite.” It depicts a pick-up truck at a bank teller drive through. The back of the truck is littered with political bumper stickers that say things like “More Freedom; Less Government,” “No Bailouts,” and “Get The Government Off My Back.” In the front seat of the truck is a stereotypical redneck couple with a large gun. The male driver is saying, “We’d like to cash our $1,000 government checks…” and eagerly handing a piece of paper to the reflective teller window. This image has gone viral on Social Media and is revealing a division of thought between friends.

Some, like the Reddit thread creator, see this as hypocrisy. However, I do not. Here are a few different ways of looking at this case.

It’s the rules.

I love playing and collecting board games. One game that I love is called “Betrayal at House on the Hill.” Although I don’t like horror movies or even thrillers, I enjoy this game because it is different every time you play. After randomly exploring and building the house, the players’ actions suddenly trigger the so-called haunt where one player turns into the traitor, the bad guy the other players are fighting against. You look up the triggering card and the room you are in on a table, and it tells you which haunt you are playing. Each haunt has its own set of rules, and each team has separate rule books to keep some rules a secret from their opposition.

Some haunts, like haunt number 35 “Small Change,” are a delight. Others are unbalanced in their fundamental design and can be a disappointment to play through.

My father and I are game designers at heart. We love to tinker with games to make them better. We have a printed version of the secret rules that we write notes on. The first time we play a haunt, we strive to follow the rules to the letter. However, if the haunt could be improved, we collaborate to write better rules to try playing next time. For example, on haunt number 49 “You Wear It Well,” we edited nearly every line of the rules to make it a better haunt.

When we play by ourselves, we follow our home-crafted rules with great joy. However, sometimes we play this game with friends who like to follow the original rules as written. In those cases, we fall back on what the game designers originally wrote.

In some of the haunts, the original rules break the balance or the fun of the game in my opinion. Often, I don’t think the rules should be written that way. However, when we are playing by the original rules, I follow the rules. They are the rules. That’s how you know how to play the game. We had the option of playing the game differently, and the collective decided that these were the rules they wanted to submit to. Once the collective adopts the rules of the game, it is perfectly acceptable for me to follow them. For me to not follow them would violate the integrity of the game.

I don’t agree with most of the rules that comprise the tax code. Why do homeowners with loans get a deduction when renters don’t? Why are business profits taxed twice, once as profit and once as the dividend or capital gain? Why does the tax code penalize those who create wealth? Why do some industries get special treatment?

If we need to tax anyone, I believe in a flat per-capita tax: Total Revenue Needed divided by Number of Individuals. In 2018, the federal government net collected $3,001,581,900 thousand. That is three trillion dollars. Meanwhile, the U.S. civilian population was estimated at 326,895,465 in December 2018 by the U.S. Census Bureau. That is three-hundred million people. $3,001,581,900,000 / 326,895,465 = $9,182.08 per person, a flat tax.

If the tax code were a haunt in Betrayal, I’d have written some version of this new rule over top of the tax code years ago. However, the collective overruled me. They decided on this tax code, with its weird discrimination and special treatments. Now that we are playing by these rules, I will follow the rules. They are the rules. That’s how you know how much tax you owe.

I don’t owe more or less than what the rules say I do. I don’t deserve more or less money that what the rules say I deserve.

Just like my silly board game, it is right and proper for me to follow the rules even when I disagree with them. When the government penalizes my bracket with costly requirements, taxes, surcharges, and compliance, I follow the rules. When the government offers a tax rebate, subsidy, credit, deduction, or other beneficial treatment, I follow the rules. The rules determine my tax bill.

If the rules say I qualify for a tax credit, then I owe less tax.

I can write out new rule ideas. I can argue for their adoption. However, if I lose, I will follow the rules. They are the rules.

Money is money.

One dollar is just the same as another dollar. Curiously though, our emotions do not perceive the world this way. We are often tempted to treat different sections of our money differently. There’s money earned, money found, and money gifted. There’s retirement money, emergency fund money, and fun money. There’s money for our future house, money from your inheritance, and money for lunch.

Some distinctions are helpful, because they help us curb our impulse to spend. Wealth is built on savings and setting aside money for our future helps us save. However, such partitions are unhelpful when discussing moral restrictions or when engaged in the rigor of financial planning.

This fallacy of the “two-pocket theory of money” is often used by those who talk about welfare hypocrisy. Those who fall prey to the fallacy will say that it matters what you do with the government money you receive. For example, “That money was intended to help people who need it, not buy you a steak dinner!”

Although some gifts, grants, or credits may come with a contractual obligation, for example a grant that can only be spent on scientific research, money that does not come with a contractual obligation is just money. Tracing which monetary source funded which purchase is slipping into the fallacious two-pocket theory of money.

All of our money should be held to a high calling and that has nothing to do with welfare laws, the government, your employment income, or your inheritance.

We like to challenge our clients to answer the question “What is the money for?” because money is a placeholder for the reward of labor. It is a simple way of asking, “For what or whom are you laboring?” or “What is your calling in life?” Individual callings before God are as unique as the people themselves. Almost regardless of which religious tradition we are talking about, spiritual values suggest that nothing is more important than determining your unique area of genius and calling.

Christians talk about their wealth in terms of stewardship to remind themselves that everyone’s assets are called to a higher purpose because God owns everything. We are like agents under God’s power of attorney, called to act wisely with all we are given control.

In this way, all money that comes into our possession — from your earned income to your loose change to your government rebate — is submitted to the highest moral responsibility. What is the money for? For what or whom are you laboring? What is your calling in life?

So, when the scoffer cries, “That money was intended to help people who need it, not buy you a steak dinner!,” they may have correctly cast judgement on unwise spending or they may not have. Regardless, their justification — because the money came from the government — is incorrect. Money is money. All money is called to the highest calling. The money that came from the government and the money that came from your job should both be spent wisely. Keep your tax credit and strive to spend all assets wisely.

It is return of property.

One political thinker who is frequently judged for welfare hypocrisy is Ayn Rand. She both opposed welfare and collected on her Social Security benefits. This issue is so frequently brought up by her critics that both the Ayn Rand Institute and took the time to address it. As the author summarizes, “The ‘Atlas Shrugged’ author called government handouts ‘immoral,’ but there is evidence that she accepted Social Security benefits in her later years — and that it was consistent with her worldview to do so.”

Before she posthumously received this critique, Ayn Rand wrote an entire thought paper on the topic entitled, “The Question of Scholarships.” In the essay, she was addressing a question she frequently received: Is it morally proper to receive scholarships or research grants or other free money? Does it matter if the gift is sourced from the public or private?

In the piece, Rand writes:

Since there is no such thing as the right of some men to vote away the rights of others, and no such thing as the right of the government to seize the property of some men for the unearned benefit of others — the advocates and supporters of the welfare state are morally guilty of robbing their opponents, and the fact that the robbery is legalized makes it morally worse, not better. The victims do not have to add self-inflicted martyrdom to the injury done to them by others; they do not have to let the looters profit doubly, by letting them distribute the money exclusively to the parasites who clamored for it. Whenever the welfare state offers them some small restitution, the victims should take it.

It does not matter, in this context, whether a given individual has or has not paid an amount of taxes equal to the amount of the scholarships he accepts. First, the sum of his individual losses cannot be computed; this is part of the welfare-state philosophy, which treats everyone’s income as public property.

…The same moral principles and considerations apply to the issue of accepting social security, unemployment insurance, or other payments of that kind. It is obvious, in such cases, that a man receives his own money which was taken from him by force, directly and specifically, without his consent, against his own choice. Those who advocated such laws are morally guilty, since they assumed the “right” to force employers and unwilling coworkers. But the victims, who opposed such laws, have a clear right to any refund of their own money — and they would not advance the cause of freedom if they left their money, unclaimed, for the benefit of the welfare-state administration.

In other words, imagine that someone comes and steals all of your living room furniture and then, through welfare redistribution, is offering one living room set to each of the households in your neighborhood. From your set, your neighbor on one side is being offered your recliner, your neighbor on the other is receiving a couch pillow, and you are being offered your antique table lamp. You are a victim trapped in an involuntary trade. There is no decision that can be made that reflects what you want to have happened, which is keeping your own living room set.

The government is responsible.

Rand goes on in the same essay to provide an even stronger argument. Rand continues later:

The moral principle involved in all the above issues consists, in essence, of defining as clearly as possible the nature and limits of one’s own responsibility, i.e., the nature of what is or is not in one’s power.

The issue is primarily ideological, not financial. Minimizing the financial injury inflicted on you by the welfare-state laws does not constitute support of welfare statism (since the purpose of such laws is to injure you) and is not morally reprehensible. Initiating, advocating, or expanding such laws is.

In a free society, it is immoral to denounce or oppose that from which one derives benefits — since one’s associations are voluntary. In a controlled or mixed economy, opposition becomes obligatory — since one is acting under force, and the offer of benefits is intended as a bribe.

So long as financial considerations do not alter or affect your convictions, so long as you fight against welfare statism (and only so long as you fight it) and are prepared to give up any of its momentary benefits in exchange for repeal and freedom — so long as you do not sell your soul (or your vote) — you are morally in the clear. The essence of the issue lies in your own mind and attitude.

It is a hard problem, and there are many situations so ambiguous and so complex that no one can determine what is the right course of action. That is one of the evils of welfare statism: its fundamental irrationality and immorality force men into contradictions where no course of action is right.

The ultimate danger in all these issues is psychological: the danger of letting yourself be bribed, the danger of a gradual, imperceptible, subconscious deterioration leading to compromise, evasion, resignation, submission. In today’s circumstances, a man is morally in the clear only so long as he remains intellectually incorruptible. Ultimately, these problems are a test — a hard test — of your own integrity. You are its only guardian. Act accordingly.

I don’t agree with everything that Ayn Rand believed, but I appreciate her clarity of ideas in this piece. The people who should be judged are the ones who are responsible with the authority, control, and power over the situation.

Take the example of a preschooler and a mother. The preschooler is trying to solve a math problem for his homework. What is 2 + 2? The preschooler thinks it is 5. His mother is trying to coach him and help him to the correct answer, but the preschooler is adamant. At the end of the day, the preschooler has the responsibility and control over what answer is put on the paper because it is his homework. It is not his mother’s homework. The mother has a responsibility to educate her son as his parent and she has the power to attempt this goal, but she does not have the power to make him get the right answer.

In the case of welfare, the government has the control, the power, and the responsibility. For this reason, they are the ones with accountability for their decisions. They decided to adopt this tax system, to give these tax credits, to handout these welfare benefits. You have no control over those decisions.

The question for you is not “Should these benefits be given out?”; they are being given out and you have no control over that. The question is “Should you take the benefits which are being offered to you?” and “Will you fight against policies that you disagree with regardless?”

Although I concede that particular scenarios exist where I would decide not to take the benefits, I see no general-case reason why someone should deny themselves a benefit the rules say they deserve.

Pagans accept Christmas presents. Self-estranged children accept inheritance. Libertarians accept tax credits.

I see no hypocrisy.

Photo by Micheile Henderson on Unsplash

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Chief Operating Officer, CFP®, APMA®

Megan Russell has worked with Marotta Wealth Management most of her life. She loves to find ways to make the complexities of financial planning accessible to everyone. She is the author of over 800 financial articles and is known for her expertise on tax planning.