Tax smartness

Well, I guess with tax day, that explains all the interesting columns and posts on taxes lately.  I’m going to go with the flow.  I especially liked this one from Paul Waldman about what a positive, liberal agenda on taxes should look like.  Lots of good ideas here, and most aren’t even really that hard (except, of course, for the Republicans’ theological opposition to reasonable tax policy).

In particular, I want to look at what Democrats can and should do now when it comes to making their case about taxes to the public.

This is a topic most Democrats don’t spend a great deal of time thinking about. You can make an (imperfect) analogy with health care. For years, Democrats proposed changes to the health-care system, while Republicans said, “Oh no, we can’t do that. That would be terrible.” But most Republicans never worried much about what kind of health-care system they’d prefer, even after Democrats passed the Affordable Care Act. In a similar way, Republicans have taken most of the initiative on taxes, because it’s an issue they care deeply about, just as Democrats care deeply about health care…

So what would an affirmative liberal vision of tax reform look like? I know what Democrats don’t want, but what exactly do they want? I asked a bunch of liberal economists about how they’d change the system if they could. Some answers:

  • Impose a financial transactions tax on Wall Street. Eliminate the corporate income tax and instead require corporations to give the government 25 percent of their stock, which would eliminate the incentive to game the system. (Dean Baker, Center for Economic and Policy Research)
  • Get rid of “privileged types of income, which invite avoidance for no good reason. I’d add a simple, minimum tax on foreign earnings and an FTT of a few basis points.” And acknowledge that we’re going to need more revenue, not less, to meet our future needs. “Let’s just progressively raise the revenues we need and call it a day.” Instead, we should focus less on taxes and more on other policies to help lower-income people. (Jared Bernstein, Center on Budget and Policy Priorities)
  • “As much as I think on paper tax breaks for socially beneficial things is a good idea, I would design a tax system that primarily tried to raise revenue off of social bads like carbon and then followed the fair, broad-based, and progressive schedule for an income tax … when designing progressivity we need to think about places where regressivity is optimal (a gas tax) and then correct for that regressivity through other types of taxes. Our federal income tax system is not currently progressive enough to counter all of the regressive federal taxes that exist.” (Betsey Stevenson, University of Michigan, former member of Council of Economic Advisers under President Obama)
  • A financial transactions tax; a carbon tax, “but not to raise much revenue — I’d like to recycle the revenue back to people”; more tax brackets at the high end, because “it seems odd that someone making $400,000 a year pays the same as someone making $5 billion a year.” In addition, “I might get rid of the corporate tax and have more progressive individual taxes,” since the corporate tax is so susceptible to manipulation. (Josh Bivens, Economic Policy Institute)

All these economists had many more specific ideas. But what they had in common was that none of them favored a top-to-bottom overhaul of the system. While some of the ideas, such as Baker’s plan to eliminate corporate taxes in exchange for giving the government 25 percent of corporate shares, are creative or even radical, none of them would entail a visible change in most people’s lives.

I love Baker’s radical idea on replacing corporate taxes, but that one is probably more fantasy.  That said, Democrats should absolutely coalesce around some of the more consensus ideas here: a (mostly) revenue-neutral carbon tax, a financial transactions tax, and the idea of taxing all types of income the same (I’m looking at you capital gains).

Obviously, getting those passed into law is anything but easy.  But they all make sense as policy and can all probably garner majority support from the public (obviously, how you sell the carbon tax is very important).

But, you know what’s a real winner?  Taxing rich people more.  Yglesias summarizes the latest Pew research on the matter:

Safe to say, getting those wealthy people to “pay their fair share” is a political winner.  Alas, politically, the problem is that, for Republicans, cutting taxes for the wealthy is their sine qua non.  Still, Democrats really ought not be afraid to hammer this point harder– the public is with them.

Photo of the day

From a recent Atlantic photos of the week gallery.  Oddly enough, I love drag racing.  Would love to see it live sometime.

A jet-powered dragster takes part in The Fast Show performance car event held at the Santa Pod Raceway near Wellingborough, central England on April 2, 2017.

Oli Scarff / AFP / Getty


Quick hits (part I)

1) Here’s some cool political science from– air polluters like to position themselves just upwind from the border of a neighboring state.   Stick it to the other guy!

2) Just got Elizabeth Rosenthal’s new book on American health care.  I assign her fabulous NYT series on the matter to my Public Policy classes.  Can’t wait to read this.

3) On the resilience of failed fast food chains.  My wife and I still reminisce about Rax roast beef on our travels to and from Ohio State.

4) Both Derek Thompson and Father James Martin blame the law, as much as United for what happened.  I especially like Martin’s take:

Someone in authority—pilots, stewards, ground crew—might have realized that this was an assault on a person’s dignity. But no one stopped it. Why not? Not because they are bad people: They too probably looked on in horror. But because they have been conditioned to follow the rules.

Those rules said: First, we may sometimes overbook because we want to maximize our profits. Second, we can eject someone because we have overbooked, or if we decide that we want those seats back, no matter what a person can reasonably expect, and no matter how much of an inconvenience this is. And third, and most tragically, human dignity will not get in the way of the rules. A toxic cocktail of capitalism and corporate culture led to a man being dragged along the floor.

That is why bland “nothing to see here” defenses of the ills of corporate America and of the dictates of capitalism bother this capitalist and former corporate employee so much. They fail to see the victims of the system.

5) Tech products are specifically designed to be psychologically addictive.  I know I look at my phone too much, but I still think I’m pretty far from “addicted.”

6) When families use school vouchers for their children with disabilities, they often find they lose the legal protections for children with disabilities.  And they learn this the hard way.  Enough with vouchers, already.  Let’s just invest in high (or at least medium) quality schools for all.

7) Corwin Smidt’s work on the disappearance of swing voters just came out in the latest issue of AJPS and I couldn’t remember if I had ever quick-hitted this Vox piece on it.  It’s good stuff, even if Alvin Chang does not seem to realize that leaners = partisans is not exactly new.  Also, I can think of a view damn relevant piece’s on Party ID from a fellow Ohio State PhD that Smidt fails to cite.

8) In the face of the latest ANES data, Drum argues, “We Still Don’t Know How Much Trump’s Victory Was About Race.”  He’s got some good points:

Klinkner thinks race played a big role in the election. There’s no question this is true, but did it play a bigger than expected role? The two major parties have been splitting further apart by race for years, with Republicans becoming the party of whites and Democrats the party of non-whites. This means that to survive with an ever growing white base, Republicans have to cater to white resentment more and more. Likewise, Democrats have to cater to black and Hispanic interests more and more. This is a cycle with positive feedback, so it’s only likely to get worse.

Racial attitudes certainly played a bigger role in this election than in the past. But did Trump himself accelerate this partisan trend, or was he merely the beneficiary of it? That still seems like an open question to me.

Great points, from Drum.  That said, I think his headline is wrong (and as a blogger, I presume he writes his own).  We know race played a helluva role, like it does with almost everything in modern American party politics.  What we don’t know if this was more for Trump than it would’ve been for Rubio, etc.  I suspect that answer is yes, but for now, I do think that remains somewhat TBD.

9) I find it absolutely appalling that the 4th amendment seems to not apply at all upon entry into the country and that CBP can legally search the entire contents of your smartphone (i.e., the entire contents of your life) without a warrant.  Congress can and sure as hell should change this.

10) What color was that dress anyway, two years later.  Great stuff from a cognitive psychologist who studies color perception.

11) Uncovering the secrets of proto-dinosaurs (this one is for you, DHG).

12) Literally surprised by all these headlines about the “mystery” of why shoelaces untie.  Seriously?  You’ll be shocked to learn that it’s the ongoing low-level stresses caused by your foot hitting the ground and moving through the air.

13) Jay Geils just died.  I found this NPR story about the evolution of the band and the transition of pop music in the early 1980’s utterly fascinating.

14) In case you missed the story of the NC legislator (Republican, of course) who likened Lincoln to Hitler while he was defending his anti gay marriage bill.

15) I know most NYC apartments on TV are pretty unrealistic, but I really enjoyed this piece looking at the apartments on several popular shows.  I was also interested to learn where a lot of the characters lived.

16) Why social mobility is so bad in the South.  Short version: concentrated poverty and lack of social capital:

Concentrated poverty is related to another factor Chetty and his colleagues mention: social capital, which is essentially the mechanism that allows people to interact with others and become a part of broad networks that can lead to opportunity. It can help people get hooked up to first jobs, internships, and scholarships. Without these types of connections, children are more likely to take a similar path to their parents. For those who live in areas of concentrated poverty, this means they don’t learn about opportunities that might get them out of poverty, or about people in different income brackets.

17) Atlantic article summarizing some nice new PS research on how Trump may be changing the meaning of “conservative.”

18) Apparently, job interviews are pretty worthless.  Should we really just hire people based on resumes and application files?  Maybe?

19) I’m sure you’ll be shocked to learn that Susan Rice did absolutely nothing wrong in the silly “unmasking” episode.  I’m sure the cable news networks will devote plenty of time to this point.

20) Chait on Trump’s budget director accidentally telling the truth:

For more than a generation, the Republican Party has single-mindedly pursued the goal of maximizing economic inequality. They have been almost as single-minded about not describing this as their priority. Republicans say their goal is reducing out-of-control deficits, or reducing out-of-control surpluses, or promoting economic growth, or saving Social Security and Medicare. But Donald Trump’s budget director Mick Mulvaney, in a new interview with CNBC’s John Harwood, basically admits that what he cares about is reducing transfers from the rich to the poor…

The place to begin understanding Mulvaney’s ideas here is where he says “letting people keep more of their money … is the most efficient way to actually allocate resources.” The premise of this statement is that the market distribution of income is sacrosanct, and progressive taxation is thus both morally wrong (because it takes money that rightly belongs to high-income people who earned it on their own) and inefficient. Mulvaney concedes that cutting taxes for high-income earners can “contribute to the deficit,” but this fact is “less important.”

21) Seth Masket says goodbye and good riddance to the judicial filibuster.

22) Krugman on Trump’s mean and stupid health care negotiating tactic:

The nastiness should be obvious, but let’s spell it out. Mr. Trump is trying to bully Democrats by threatening to hurt millions of innocent bystanders — ordinary American families who have gained coverage thanks to health reform. True, Democrats care about these families — but Republicans at least pretend to care about them, too.

Why does Mr. Trump even imagine that this threat might work? Implicitly, he’s saying that hurting innocent people doesn’t bother him as much as it bothers his opponents. Actually, this is probably true — remember, we’re talking about a man who once cut off health benefits to his nephew’s seriously ill 18-month-old son to gain the upper hand in a family dispute. But it’s not the kind of thing one expects to hear from the occupant of the White House.

What makes Mr. Trump’s tactic stupid as well as nasty is the reality that Democrats have no incentive whatsoever to give in.

For one thing, what is he offering by way of a deal? Obamacare increased coverage two ways, via Medicaid expansion and subsidized private insurance. Mr. Trump might be able to undermine the private markets, but Medicaid wouldn’t be affected. Why would Democrats ever agree to Republican plans, which would basically kill both?

Then there’s the political reality that by sabotaging Obamacare, the Trump administration would be handing Democrats a huge electoral gift.

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