Friday, April 18, 2008

WFF - a benefit or a tax cut?

The Standard has a post about the average cost of benefits. The comments have a discussion about whether WFF is a benefit or not. I was reminded of this particularly by an interesting post by Greg Mankiw. In it, he talks about a thought experiment about taxes and family size - namely a tax credit for couples with children.

But -- hang on a sec -- a bonus for those who have a child amounts to a penalty
for those who don't have one. (Saying that those with children should be taxed
less than the childless is another way of saying that the childless should be
taxed more than those with children.) So when poor parents receive a smaller
credit than rich ones, that is, in effect, the same as the childless poor paying
a smaller surcharge than the childless rich. To many, the first deal sounds
unfair and the second sounds fair -- but they're the very same tax scheme.

While I believe technically The Standard is correct - WFF is not a benefit - a targetted tax cut is qualitatively the same thing.

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