Blinking

The editors of the Wall Street Journal, predictably, oppose the bill that just emerged from the House Ways and Means Committee:

It’s been under wraps longer than some Egyptian mummies, but the bill for the Joe Biden – Nancy Pelosi -Bernie Sanders spending agenda is about to be exposed to the air. The Ways and Means Committee draft tax increase that leaked over the weekend is a $2.2 trillion Washington money grab for the ages.

The tax proposals aren’t final, but Ways and Means will start debating them as early as Tuesday. So much for deliberation. As Chairman Richard Neal has said, publicizing tax increases too soon gives the opposition time to build. Now that the details are out, we see what he means.

concluding:

Nice of the Speaker to volunteer her colleagues for retirement.

Maybe, maybe not. The brilliance of “tax the rich” schemes is that run-on effects are a pretty subtle concept for the average voter to appreciate. Like as not they’ll just notice how the bill affects their taxes, not realizing that it could cut their paychecks, slow down raises, and make it tough for their kids to find employment.

In another editorial the WSJ editors point out something amusing:

Carried interest is the share of profits that partners in hedge funds or private equity receive as compensation as a kind of performance fee. It is only paid if the fund’s return meets a certain threshold and under current law only if it’s held for three years. We’d prefer no such provision if tax rates were low enough, but it’s a useful incentive for risk-taking in a high-tax-rate world.

But Democrats and progressives have wailed against the provision for years as a loophole and called for its elimination. President Biden has proposed killing it. Hillary Clinton claimed it’s unfair that money managers “pay lower tax rates than nurses.”

Yet when Democrats have power, they never seem to kill the provision. And, lo, the draft Ways and Means bill merely extends the holding period to five years from three. Faced with offending some of their wealthiest financiers, the Democrats are blinking. That’s fine with us as a policy matter, but this ought to be the last we ever hear about this as a loophole.

Oh, we’ll hear about it again. And again and again and again. The reason that eliminating the deduction for carried interest never seems to make it into a bill is not merely that they’re afraid of pushback from their donors but because they like having the issue to run on.

Just to refresh your memory my views on spending and taxation are:

• I am neither a minarchist or an anarcho-capitalist.
• I think that we should be willing to pay for what we spend.
• I think we should want government to do less than we seem to.
• I think all transfer payments should be strictly means-tested (and stop a lot lower than median wage).
• I think that transfer payments should be focused on the poorest people in the U. S. which largely means rural blacks and people who live on Indian reservations.
• I think that we should abolish the personal income tax and replace it with a value-added tax, prebated to make it progressive. The reason we don’t do what every other developed country does is that the main purpose of the income tax is to increase Congressional power.
• I think that we should abolish the corporate income tax. It is an inefficient tax.
• I don’t have a problem with running deficits from time to time. I think that running large deficits should be reserved for compensating for shortfalls in aggregate demand. That isn’t our problem at present. Our problems at present are shortfalls in exports and business investment, too many imports, and, indeed, too much dependence on personal consumption expenditures.
• I agree with the Modern Monetary Theorists to the extent that I recognize we can run deficits indefinitely as long as our deficit is lower than the increase in aggregate product. That isn’t the case now.
• I think we should pay much more attention to increasing aggregate product than we have been for the last several decades.