> The cost is fiction because it's a tax credit. The money is on both sides of the ledger. If you're making $60,000/year and your pre-credit taxes go up by $12,000 and then you get a $12,000 tax credit, you have paid an additional zero dollars in taxes.
Most people miss that the 'money' will get spent. This should lead to an income multiplier. Then hopefully to a reallocation of resources moving bureaucrats from administrative work to something else.
(Fiscal) income multipliers don't really exist (ie they are one) in an economy with a competent central bank that targets eg inflation or nominal GDP.
If whatever fiscal policy you have makes overall nominal spending go up (or down), that would have an impact on inflation, so the central bank will remove money from circulation (or add money to circulation) to counteract.
Thus neutralising any multiplier, you might naively expect.
(Also keep in mind that when you don't tax some money, it also gets spend or invested etc.)
Which is exactly the point. What's the "marginal tax rate" on low and middle income people of the existing benefits phase outs?
The >100% marginal rates that create actual cliffs are so patently absurd that no one can look at them and find any way to justify it, but even when the combined tax+phase out rates are in the neighborhood of 80-90% of marginal income, that's still not what we want, is it?
Yes, but marginal rates are important, too.