Recently, Ron Paul published an article titled “How Should Government Treat Energy Producers?”
In discussing the tax code he makes the following claim (emphasis mine), "with tax credits and deductions, industries, business, and individuals simply get to keep more of the money they have earned." He uses this to justify his support for tax credits and that, “Removing tax credits is nothing more than a tax increase.” It should be noted that is the same position Murray Rothbard held in his essay “The Case Against the Flat Tax”.
I emphasized “they have earned” above because that is the crucial question. If a credit or deduction allows an individual (to use the terms “industries” and “business” is redundant as they are in fact made up of individuals) to retain his own income then this is indeed a good thing (from a libertarian point of view). It takes the form of Sam steals from Paul to give back to Paul. If, however, the credit or deduction is the income of someone else then this is a subsidy and a distribution of wealth that takes the form Sam steals from Paul to give to Peter.
