Tax Policy Winners And Losers

I’ve posted previously about the GOP’s tax “reform” plan, and some of the truly despicable provisions hidden in the fine print. As more details emerge, it appears that my list–like the one below–barely scratches the surface.

Whatever the arguments in favor of the $1 trillion in corporate tax breaks contemplated by the measure, the original idea–the justification for reducing the rate– was that the rate could be lowered if the loopholes that allow large profitable corporations to pay little or no tax despite the published rate were eliminated. Somehow, however, the current version of the “reform” bill leaves corporations with both lower rates and their loopholes.

Speaking of corporations, Dana Milbank reported a revealing exchange in a recent Washington Post column.

Individuals lose the ability to deduct state and local taxes, tax preparation, moving expenses and most medical expenses. But corporations — think of them as Very Important Persons with superhuman privileges — can still deduct these same expenses.

At Monday’s markup, Rep. Suzan DelBene (D-Wash.) quizzed a tax expert on this corporate exceptionalism:

“Will a teacher in my district who buys pens, pencils and paper for his students be able to deduct these costs from his tax returns under this plan?” He will not.

“Will a corporation that buys pens, pencils and papers for its workers be able to deduct those costs from its tax returns?” It will.

“Will a firefighter in my district be able to deduct the state and local sales taxes that she pays from her tax return?” She will not.

“Will a corporation be able to deduct sales taxes on business purchases?” It will.

“If a worker in my district had to move because his employer was forcing him to relocate . . . can he deduct his moving expenses under this plan?” He cannot.

“Can a corporation under this plan deduct outsourcing expenses incurred in relocating a U.S. business outside the United States?” It can.

We Americans just love our corporations….they’re people, you know.

And isn’t it nice that Republican Americans are so “pro-life”? (Well, they’re pro pre born life; once that little bugger emerges from the womb, they are considerably less solicitous.) Among the non-fiscal measures in the tax “reform” bill is one intended to “protect babies”–aka fetuses and fertilized eggs. You’d think these pro-life men (they’re all men) would do anything they could to support  adoption as an alternative to abortion. But you’d be wrong.

The House Republican tax reform bill would completely eliminate the adoption tax credit, which has been in the tax code since 1997. It was a bipartisan achievement pushed through by former Texas Republican Rep. Bill Archer, who was chair of the House Ways and Means Committee. Designed to help cover “reasonable and necessary adoption fees, court costs, attorney fees, and other expenses,” the credit is available for up to $13,460 per child.

Some employers also offer adoption assistance in the form of financial aid and paid leave time. As of now, this type of assistance is tax-exempt, but the proposed bill would make such benefits subject to taxation.

The bill would also make adoption assistance from employers — which usually takes the form of financial aid and paid leave time — taxable.

Words fail.

I’m less surprised by the measures that would effectively destroy graduate education; the current crop of Republicans considers educated people snotty elitists. GOP officeholders sneer at scientists, oppose research funding, and think college professors are unAmerican.

Most graduate students get through their degree programs depending on assistantships, tuition waivers and lots of ramen noodle dinners. As Forbes reports,

Currently, these tuition waivers are paid by the college directly to itself, on behalf of the graduate student, and are not counted as taxable income. Under the current “reform” proposal, tuition waivers would be taxed as regular income, making graduate school an unaffordable proposition except for those already independently wealthy.

And then there’s that pesky little detail that the Congressional Budget Office finds problematic: this monstrosity will add 1.7 trillion to the deficit. (And that’s evidently after robbing Medicare and Social Security…) If you are looking for some of those Republican “deficit hawks” of yore, you are probably out of luck.

On the other hand, if you’re wondering why Paul Ryan is reportedly optimistic about passing this Thanksgiving turkey, Representative Chris Collins explained it the other day.

Rep. Chris Collins (R-NY) got points for honesty Tuesday while advocating for Republicans’ tax bill to slash the corporate tax rate and eliminate the estate tax, among other things.

“My donors are basically saying, ‘Get it done or don’t ever call me again,’” Collins said.

I’m sure those donors are selfless patriots who simply want to see middle-class Americans get some tax relief. (And if you believe that, I have a swamp in Florida to sell you…)

Comments

Down is Up

The vast majority of Americans believe that the deficit has soared in the Obama era. Late last year, a Bloomberg Politics Poll found that 73% of the public believes the deficit has gotten bigger over the last six years. (This belief appears to be founded in equal parts upon a campaign of intentional disinformation and a conviction among rightwing conservatives that Obama is the AntiChrist determined to destroy America.)

The latest Congressional Budget Office projections tell a rather different story:

The budget deficit for 2015 is expected to drop to roughly $425 billion, according to a report released Friday by the nonpartisan Congressional Budget Office (CBO).

That’s down from the $486 billion the CBO projected in March. If it drops to $425 billion by the end of the fiscal year on Sept. 30, it would be a seven-year low for the government’s annual budget shortfalls.

Another Bloomberg poll found that only 6% of Americans are aware that the deficit is shrinking. So 94% of Americans are totally unaware that we have seen a $1 trillion dollar– that’s trillion with a “t” – deficit reduction since Obama took office.

As Steve Benen has written, this seems like the sort of development Tea Partiers and the Beltway’s Very Serious People should consider an extraordinary accomplishment. And I’m sure they would–If anyone other than Obama had accomplished it.

Comments

Correcting My Goof

A few days ago, I reported that the deficit and debt had steadily declined during Obama’s tenure. A reader pointed out that although we have seen the deficit dramatically reduced, so long as there is any deficit at all, the debt continues to grow.

He was absolutely right, of course–my mind was evidently elsewhere when I wrote that particular sentence. (It is a bit worrisome that, as I grow older, my mind increasingly takes these small trips to…somewhere.) The question that naturally arises, then, is: as the Obama Administration increasingly tames the deficithow worried should we be about the debt?

Paul Krugman has the answer to that question.

About those projections: The budget office predicts that this year’s federal deficit will be just 2.8 percent of G.D.P., down from 9.8 percent in 2009. It’s true that the fact that we’re still running a deficit means federal debt in dollar terms continues to grow — but the economy is growing too, so the budget office expects the crucial ratio of debt to G.D.P. to remain more or less flat for the next decade.

Things are expected to deteriorate after that, mainly because of the impact of an aging population on Medicare and Social Security. But there has been a dramatic slowdown in the growth of health care costs, which used to play a big role in frightening budget scenarios. As a result, despite aging, debt in 2039 — a quarter-century from now! — is projected to be no higher, as a percentage of G.D.P., than the debt America had at the end of World War II, or that Britain had for much of the 20th century.

So perhaps we need not freak out about the debt, but still, it would be nice to eliminate it entirely. (Had W. left Clinton’s tax rates in place and not taken us into a costly and unnecessary war of choice, the debt was on track to disappear…but that was then and this is now…). So how much pain would we need to endure now in order to at least stabilize the debt–to keep it at its current ratio to GDP? Krugman has that information also:

Still, rising debt isn’t good. So what would it take to avoid any rise in the debt ratio? Surprisingly little. The budget office estimates that stabilizing the ratio of debt to G.D.P. at its current level would require spending cuts and/or tax hikes of 1.2 percent of G.D.P. if we started now, or 1.5 percent of G.D.P. if we waited until 2020. Politically, that would be hard given total Republican opposition to anything a Democratic president might propose, but in economic terms it would be no big deal, and wouldn’t require any fundamental change in our major social programs.

These facts would be comforting–if the people screaming bloody murder over the terrible, horrible, menacing debt were genuinely concerned about fiscal policy–and not motivated by partisan rancor or personal gain.

Comments

Deficits

I remain convinced that America has two deficits–one fiscal, and one informational. The economic deficit is important, but the deficit in basic understanding of the world we inhabit is arguably the bigger problem.

Case in point, as Steve Benen reports at Maddowblog: debates about the deficit.

As it happens, the budget deficit is getting smaller. In fiscal year 2010, which was President Obama’s first full fiscal year in office, the budget deficit was $1.3 trillion. In fiscal year 2013, the Congressional Budget Office projects the deficit will be $845 billion. That’s a 35 percent decrease in terms of dollars, and it’s even bigger—41 percent—if you are computing the deficit as a share of the GDP. The percentage drop is even bigger—roughly 50 percent—if you start from fiscal year 2009, which overlapped the final year of the Bush presidency and the first year of Obama’s.

The fact that the deficit is declining is not reason to ignore it, of course, but its size and trajectory are important factors–or should be–in any economic analysis, including proposals about appropriate measures to address it.

The problem is, when Bloomberg News commissioned a survey asking Americans whether they believed the budget deficit was growing or shrinking, just six percent answered the question correctly. Ninety-four percent had no clue. (Of the clueless, 62 percent actually thought the deficit was growing.)

So far as I know, Bloomberg didn’t ask a related question, of equal importance. It would be interesting to determine the percentage of Americans who could explain the difference between the deficit and the national debt.

For that matter, it would be interesting to know what percentage of our elected officials could correctly answer either of those questions.

Comments

Burning Down the Village to Roast a Pig

One of my favorite lines from a Supreme Court decision was delivered in the opinion striking down the mis-named “Internet Decency Act.” The Court compared the measure to burning down a village to roast a pig.

The “pig” this time is the budget deficit, which is unquestionably a very significant problem. Unfortunately, Congress is attacking America, not the problem.

Any credible economist will confirm that even if we zeroed out all discretionary spending–that is, if we spent only on the military and entitlements, and absolutely nothing else–we would not erase the deficit for twenty-plus years. (Actually, we would never erase it, because that would destroy the economy and lose billions in tax revenues.) If we are to get the budget balanced, we must couple responsible, judicious spending cuts (including military cuts) with measures to grow the economy and increase tax revenues. We might begin with rolling back the Bush tax cuts on the wealthiest 2% of Americans.

Instead, Congress is merrily proceeding to destroy civil society.

There has been a lot written about the effect of defunding Planned Parenthood on the health of poor women, and about the effort to kill public broadcasting. Those proposals are in the news. But another proposed cut that has been less discussed would defund the single most successful civic education program we have. The “savings” wouldn’t pay for a single fighter jet, but the cost would be incalculable.

The program is “We the People.” In a 2010 study conducted for the Center for Civic Education, students who completed We the People were far and away more knowledgeable about the country’s democratic principles and institutions compared to their peers.

We the People national finalists also were:

* More likely to register to vote, write to a public official, investigate compelling political issues, participate in lawful demonstrations, and boycott certain products or stores.

* More likely to agree that keeping up with political affairs, influencing the political structure, developing a meaningful philosophy of life, becoming a community leader, and helping others in need are of strong to absolute importance.

* More likely to agree that people should be able to express unpopular opinions and that newspapers should be able to publish freely, without government interaction.

As a graduate student who has worked with the program put it in an email to me:

“It’s mind boggling to me that right now, when we need it most, the best program in the country on educating citizens would be eliminated. This is very real, as the Center for Civic Education had to cancel the We the People – Frontiers partnership. Frontiers is a 70+ year old organization providing civic engagement opportunities to the African American community. Four years ago, we teamed up with them to provide We The People to their inner-city and urban club students on nights and weekends, since their schools are no longer teaching civics. These kids traveled to Birmingham, Alabama, competed in We the People competition and experienced the civil rights movement first-hand, learning from Foot Soldiers who marched when they were their age. That event was scheduled to take place in July and has been cut. 600+ inner-city and urban youth from around the country have already been hurt by this, not to mention the millions more in the future who may never know We the People.”

I wonder what those who are stoking the fire will do when our civic village is gone.

Comments