{"id":75,"date":"2015-01-31T15:28:00","date_gmt":"2015-01-31T21:28:00","guid":{"rendered":"http:\/\/admin.patheos.com\/blogs\/janetheactuary\/2015\/01\/is-there-hope-for-tax-reform.html"},"modified":"2015-02-24T21:33:58","modified_gmt":"2015-02-25T03:33:58","slug":"is-there-hope-for-tax-reform","status":"publish","type":"post","link":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/2015\/01\/is-there-hope-for-tax-reform.html","title":{"rendered":"Is there hope for tax reform?"},"content":{"rendered":"\n<\/head>

The operating narrative about the Obama administration\u2019s failure to gain public acceptance of its \u201clet\u2019s tax 529 plans\u201d proposal has become this: \u00a0this shows that tax reform is doomed, because no one will relinquish their tax breaks, even if it doesn\u2019t really help them all that much. \u00a0Reihan Salam says this, most recently, in a Slate column posted <\/a>Friday:<\/p>\n

Many smart people\u2014the libertarian Peter Suderman of Reason, the neoliberal Josh Barro of the New York Times, and conservative Patrick Brennan of National Review, among others\u2014have made the point that if Obama and his allies can\u2019t even tweak the tax treatment of this tiny little savings plan, they sure as hell can\u2019t succeed in raising other taxes enough to finance entitlement spending as the baby boomers retire in ever-larger numbers in the decades to come.<\/p><\/blockquote>\n

(Follow the link, and he links to these pieces, as well.)<\/p>\n

But this misses the point of what the Obama administration was trying to do here.<\/p>\n

Obama wasn\u2019t attempting \u201ctax reform\u201d as conventionally understood, to refer to the elimination of special-interest tax breaks in exchange for lower tax rates. \u00a0He was very specifically attempting to remove a \u201ctax break\u201d which encouraged saving for college (and, as I said before<\/a>, remove the tax break and you destroy 529 plans, the only special-purpose way to save for college), in favor of additional government spending: \u00a0initially the removal of the tax incentive was perceived of as funding the \u201cFree Community College\u201d proposal, and later the administration specifically identified the 1:1 swap as funding more, and permanent, cash benefits (\u201crefundable tax credits\u201d). \u00a0So this was not about whether the upper-middle-class can surrender specially-targeted benefits, but whether they\u2019ll accede to another tax-and-spend program.<\/p>\n

That being said, the bigger question is the mortgage interest deduction. \u00a0The 529 plan tax break is, like the Roth IRA, a question of whether all types of income are to be taxed in the same way \u2014 or, specifically, whether investment earnings and wages are to be treated the same. \u00a0The mortgage interest deduction is much more clearly a tax break for a favored type of spending<\/i>, a different category altogether. And the last time it was under discussion? \u00a0Well, that\u2019s when the realtors came out in full force with their TV ads about the importance of homeownership.<\/p>\n

Now, I\u2019d like to think that this deduction could be eliminated gradually, with a phase-out that caps the amount that can be deducted, and with that cap decreasing each year. \u00a0And people with less-expensive homes, whether by personal choice, or by living in areas of the country with lower housing values, or simply because their income is lower, already see a comparatively small benefit from this deduction, either because their total deductions are lower than the standard deduction, or because, in reality, they only benefit to the extent that their total itemized deductions exceed the standard deduction.<\/p>\n

Of course, then you reach the further question: \u00a0what about the deductibility of property taxes and state income taxes? \u00a0Or, for that matter, charitable donations? \u00a0For many people, these items work together to total above the standard deduction (for couples under 65, that\u2019s $12,400 for 2014). \u00a0For others, itemizing deductions offers no benefit at all. <\/p>\n

In any case, is tax reform achievable? \u00a0I suppose I\u2019d still like to believe so, and I think the obstacles are not the Upper Middle Class protesting the loss of tax breaks, but the special interests (like the Realtors) who want something to help their industry, and, of course, the politicians who want to keep receiving campaign donations. \u00a0(Remember Extortion<\/a>, and the milkers, and double-milkers?)<\/p>\n

But there were just as many special interest groups in 1986, weren\u2019t there?<\/p>\n

(Incidentally, Salam addresses other policy issues where he says that the upper-middle-class put up roadblocks in the way of sensible reform. \u00a0Chief among them is immigration reform: \u00a0the upper-middle-class, he says, are too keen on cheap labor, such as low-wage nannies, to sign on to any enforcement of requirements that these workers be legally eligible to work in the United States. \u00a0Here I think he should pay a visit to flyover country. \u00a0Heck, my husband and I would qualify as \u201cupper middle class\u201d by his income definition \u2014 though not the mindset part: <\/p>\n

We\u2019re talking about families that earn well into the six-figure range yet don\u2019t feel rich, either because of their student loan debt or the enormous cost of the amenities they consider nonnegotiable: living in well-above-average school districts for those with children or living in \u201ccool\u201d neighborhoods for those without.<\/p><\/blockquote>\n

since, for us, we don\u2019t \u201cfeel rich\u201d not because of debt or high-priced housing but because we were raised to have a comparatively frugal mindset and save fairly determinedly for college, retirement, and all-purpose \u201crainy day\u201d contingencies.<\/p>\n

But in any case, I don\u2019t know anyone who has hired a nanny, except for my former boss, whose nanny was hired through a service, with all the proper taxes. \u00a0Some of our neighbors have a lawn service, others don\u2019t, and this is as much a matter of mindset as income \u2014 but I just can\u2019t imagine any one of them saying, \u201cI support nonenforcement because otherwise my lawn service rates would go up.\u201d<\/p>\n

So far as I can tell, nonenforcement is not due to the collective will of the upper middle class, so much as the influence of the wealthy and the employers themselves.<\/p>\n

That being said, of course, I have no idea about the statistics \u2014 what percent of Midwesterners use nannies, let alone nannies who are paid off-the-books or are ineligible to work in the U.S. in the first place, compared to New Yorkers or Californians. \u00a0But this description that this is commonplace seems unlikely, in my world.)<\/p>\n<\/body><\/html>\n","protected":false},"excerpt":{"rendered":"

The operating narrative about the Obama administration\u2019s failure to gain public acceptance of its \u201clet\u2019s tax 529 plans\u201d proposal has become this: \u00a0this shows that tax reform is doomed, because no one will relinquish their tax breaks, even if it doesn\u2019t really help them all that much. \u00a0Reihan Salam says this, most recently, in a […]<\/p>\n","protected":false},"author":2209,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[38],"class_list":["post-75","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-tax-reform"],"yoast_head":"\nIs there hope for tax reform?<\/title>\n<meta name=\"description\" content=\"The operating narrative about the Obama administration's failure to gain public acceptance of its "let's tax 529 plans" proposal has become this:\" \/>\n<meta name=\"robots\" content=\"index, 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