tax credits

About Those Loopholes

When it comes to individual taxes, key Republican legislators seem to think “reform” is mainly about limiting or eliminating certain itemized deductions, rather than about raising revenue in ways that do the least damage to the economy (by minimizing tax distortions and disincentives).

This emphasis on curbing itemized deductions is often compared with the Tax Reform Act of 1986 (TRA86), which supposedly “paid for” cutting the top tax rate from 50% to 28% by slashing several itemized deductions. In reality, however, most extra revenue from repealing itemized deductions after 1986 was devoted to raising the standard deduction, leaving total deductions unchanged. This is apparent in the graph below, which shows total deductions – both itemized and standard – as a percentage of Adjusted Gross Income. 

Deducations as a Percent of Adjusted Gross Income

A Long-Overdue Conversation about How to Replace ObamaCare

With the prospect of a Republican president who could conceivably repeal and replace ObamaCare, it is time for ObamaCare opponents to take a hard look at their “replace” plans. As I have argued elsewhere, expanding health savings accounts – a proposal I call Large HSAs – beats other alternatives like health-insurance tax credits. In short, if opponents succeed in repealing ObamaCare, Large HSAs would take another step in the direction of a market system. Health-insurance tax credits would constitute a step backward, because they would simply resurrect some of ObamaCare’s worst features–including an individual mandate and much of ObamaCare’s government spending and redistribution.

I set off a kerfuffle last week when I wrote that Sen. Marco Rubio’s (R-FL) ObamaCare replacement plan contains an individual mandate in the form of tax credits for health insurance. Rubio supporters and others were none too pleased. 

American Mathematical Society: Hurdles to U.S. Tech. Improvement

Allow me to liberally paraphrase a piece from the current issue of the AMS’s publication “Notices.” Thereafter, I’ll contrast my version with the original.

The US presents particular obstacles to achieving technological improvement at a national scale, deriving from its social and economic diversity and also from an entrenched tradition of entrepreneurship and private industry which precludes a federal role in any primary initiatives. Yet to achieve real improvement at scale requires some national coherence.

The laws of physics are the same in Florida and Montana; it makes little sense in a highly mobile population for more than one cell phone technology to exist within our borders. It would be like building a national railway system with different gauge tracks in each state.

Readers will no doubt realize that this argument is undermined by the substantial advances Americans have witnessed in Cell phone technology over the years, despite—perhaps even because of—the existence of alternative suppliers developing different hardware and operating systems. All the while, we are somehow still able to call/text one another without worrying whether our interlocutor is an Apple addict or an aficionado of Android. And scale hasn’t proven to be a problem. Apple and Google have managed to serve very, very large numbers of people indeed.

Supreme Court Must Resolve Obamacare Chaos

When the Affordable Care Act was being debated in Congress, former House Speaker Nancy Pelosi infamously insisted that “we have to pass the bill to find out what’s in it.”  It turns out, however, that the Obama administration—which has been making it up as it goes along with regard to ACA enforcement—doesn’t care “what’s in it.”

IRS Illegally Expands Obamacare

To encourage the purchase of health insurance, the Affordable Care Act added a number of deductions, exemptions, and penalties to the federal tax code. As might be expected from a 2,700-page law, these new tax laws have the potential to interact in unforeseen and counterintuitive ways.

The Perils of Publicly Funded “Private” Schools

We support getting publicly funded schools public accountability…. No exceptions, no excuses, no special treatment.

Thus spake John Johnson, spokesman for the Wisconsin Department of Public Instruction, on the subject of a new bill his agency co-wrote with Republican legislators. Among other things, the bill would allow the DPI to kick private schools out of the state’s voucher program if it rates them perennial failures.

Here’s the thing: Way back in … August of 2013, (a.k.a., “this month”), the head of a state department of instruction was forced to resign because, while in that same post in another state, he had personally revised his department’s ranking of a school run by a major political donor. State officials and agencies, contrary to the implicit assumption of “accountability” mavens, are not all wise, objective, beneficent philosopher-kings. They are people–and organizations made up of people–who have political and personal vested interests that do not always align with those of the families they nominally serve.

Fortunately, over the course of human history, a system evolved which tends to align the interests of producers and consumers more effectively than any other. It is the free enterprise system, in which producers must compete for the privilege of serving each and every customer, and consumers have the freedom to easily choose from among many competing providers. Let schools do their best to serve families and let families choose their schools: let the chips fall where they may. Some schools will succeed, others will fail. Those that succeed, grow. Those that fail are prevented from continuing to ill-serve families. It is a system that works not simply in theory, but in practice, as I found when I surveyed the worldwide within-country research comparing alternative school systems. The least regulated, most market-like education systems most consistently outperform state school systems, such as we have in the United States.

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