Monthly Archives: November 2017

More on Tax Reform

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The House passed yesterday, 227-205, its version of tax reform, and the next milestone is in the Senate.  The Wall Street Journal is referencing some special interests who are expressing misgivings about it.

Both the House and Senate bills would cut the corporate tax rate to 20% from 35%. If that overall tax rate decreases, tax credits and deductions become less valuable.

Well, of course.  Credits and deductions get their value from how much they reduce taxes for the government-favored groups of Americans for whom those credits and deductions are targeted.  With lower overall tax rates, those credits and deductions have less tax value—as any graduate of 3rd grade arithmetic can see.

That alone would mean that nearly 300,000 fewer low-income units will be produced over 10 years, according to an analysis by Novogradac & Co, an accounting firm specializing in real estate.

That’s the claim of a special interest group. It’s also not entirely true. With the elimination of real estate-related credits and deductions, housing—and rental—prices would no longer be elevated to absorb for the realtor’s benefit those bennies.

The same logic applies to other bennies on the chopping block: preferential tax treatment for bonds used by developers to build “affordable” housing and private activity bonds, which fund hospitals, roads, nursing homes, and charter schools—and sports stadiums and other froo-froo.  These things, too, would no longer have their prices elevated to absorb for the developer’s benefit the monetary value of the bennies.

On top of that, the reduced value of deductions and credits under the plan just passed in one house and on offer in the other is a non sequitur.  Our tax code should not be used for social engineering, least of all in accordance with the personal imperatives of 535+1 politicians in DC.  The—our—tax code should be limited to funding our government; social engineering should be left to We the People in our local communities.

Fake Apologies

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Senator Al Franken (D, MN) has been accused Thursday of sexually harassing a woman while the two were on a USO tour in Afghanistan 11 years ago.  He’s apologized for it.

He was also quoted in a 1995 New York Magazine article about his generating a “joke” for Saturday Night Live, where he worked at the time, that centered on drugging and raping then-journalist Leslie Stahl.  He apologized for that, too.

Then he said about that apology during his 2008 campaign for Senate that he

didn’t think he should have to apologize for the cracks, which his opponents were taking out of context. “To say I was sorry for writing a joke was to sell out my career, to sell out who I’d been my entire life,” he writes [in his book]. “And I wasn’t sorry that I had written Porn-o-Rama or pitched that stupid Lesley Stahl joke at 2 in the morning. I was just doing my job.”

But…”I learned that campaigns have their own rules, their own laws of physics, and that if I wasn’t willing to accept that, I would never get to be a senator.” And so Franken took a deep breath and told a little white lie: “I’m sorry.”

Little white lie.  Franken still wants to be a Senator.  With his clearly stated position that apologies are just lies to be mouthed in order to get what he wants, how is it possible for anyone—let alone the woman who accused him last Thursday—to believe his apology for that Afghanistan harassment?  Or any other apology he might pretend to offer for any other transgression?  Or anything at all he might say on any matter?

And lest there be any question about that USO incident, understand clearly: the existence of Franken’s pseudo-apology stands as his blithe confession that he did the thing of which he’s accused.

And he’s still a Senator.

Sexual Harassment

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The stampede to call out sexual harassment is growing, and actionable complaints are being made.  These need to be carefully investigated, and the hides of those convicted nailed to the outhouse wall.

However, there also is a growing number of accusations made against unnamed harassers—just claims of workplace harassment devoid of useful specifics.  The latest round (eliding Al Franken, who’s the subject of a nearby post) is claims of harassment in Congress.

Congresswoman Jackie Speier (D, CA) said she knows of two current members of Congress who “have engaged in sexual harassment,” while another congresswoman, Congresswoman Barbara Comstock (R, VA) recounted a member who exposed himself to a female staffer.

The members were not named.

And

Senator Claire McCaskill (D, MO) told reporters that she had been harassed when she interned on Capitol Hill, but she did not report it.

And

[Former Congressional Black Caucus Fellow] M Reese Everson said that a member of Congress asked if he could flirt with her “in order [for her] to excel in [her] career.”

The problem with this sort of accusation is that there’s no reason to believe them, certainly there’s no way to check them out, and most importantly, there’s no way to go after the harassers if they do exist—they get off scott free.

That’s unacceptable in both ways.  Name names.

Another Reason

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…to push for lowered State tax rates, empirically observed.

There are signs home buyers in metropolitan New York are pausing to consider the effects of proposed federal tax law changes, setting the stage for a possible chill in the market, brokers say.

The changes, in versions of bills in both the House and the Senate, likely would increase the cost of home ownership and reduce after-tax discretionary income for many mostly affluent home buyers in New York and other states with high state and local income and property taxes, brokers and analysts say.

This isn’t entirely true, though.  The reduced deductibility of mortgage interest will lead to lowered house prices (and through that, downward pressure on rents, even in rent-controlled New York City) through two pathways.  One is reduced demand for house ownership.  The other is through a lesser interest deduction being factored into a house’s price—this one will impact primarily, the high-end houses bought with jumbo mortgages, contra those brokers and analysts.

Or a high-tax State can do nothing and suffer the consequences.

One couple, who looked for homes in the area last year, is coming down to see a house on an island off Miami Beach listed for $22.5 million over the summer, Mr [Jeff, a Miami broker] Miller said.

“People I have been working with were on the fence,” he said. “Now they want to move [to Florida]. The new tax bill was the nudge they needed to push them over.”

These are exactly the high-income, high-asset folks whose pockets high-tax States like New York want to pick.

TPP Light

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President Donald Trump, on taking office, pulled the US out of the not-yet-finalized Trans-Pacific Partnership, which involved nations all around the Pacific rim including the US and Canada.  The TPP was far from perfect, but international trade is more about international relations and foreign policy than it is about economics, and it was a mistake to pull out.

The economic and political power of the coalition would have been a powerful brake against an acquisitively aggressive People’s Republic of China; the remaining 11 nations still represent some 17% of all world trade—and 30% of the world’s trade runs on sea routes the go through the TPP’s region—trade that is every bit as critical to the PRC’s economy as it is to Japan’s and the US’.

It might yet be.

[T]he eleven remaining TPP members have reached an agreement on the trade pact in principle, which means a new pact—without the United States—could be put into place which could shape trade in the Asia-Pacific area for the next decade.

Of course Canada is being nearly as foolish, demanding union rights over right to work parameters and expressing a willingness to blow up the remaining TPP if they can’t have them, but at least they’re still talking.

We should support the TPP’s conclusion for its PRC-containment potential, at the very least.