At the risk of being pedantic, it isn’t limited partner interests that should be taxed as ordinary income. Limited partners are generally the investors in a pooled vehicle. It is carried interest (i.e., the investment managers’ equity share they don’t pay for) that people argue should be treated like any other form of compensation for services.
Conor Sen’s take on this every time it comes up is “you expect a Democratic Party increasingly reliant on $250k+ HHI voters to tax themselves? Good luck.” And he’s right. Upper middle class people have an infinite array of rationalizations to convince themselves that they’re actually poor. The tax code has probably reached a generational peak in progressivity.
I agree with much of this but eliminating the stepped up tax basis at death would (1) be a PITA for estate administration and (2) probably be unfair unless the estate tax exemption were to return to the levels that were set during the (second) Bush administration.
“The regressive nature of tariffs is clearly one reason Trump likes them. The whole name of the game for him is finding ways to be a ‘populist’ without backing away from the Republican Party’s fundamental commitment to plutocratic economic policy.”
This feels overly generous. I have never gotten the sense Trump knows what tariffs are, at the most basic level. He seems to think they are fees foreign countries pay for the privilege of doing business with the U.S.
I still don’t get whether he says that because that’s what he thinks or because he thinks that’s what voters would understand. Because Trump occasionally says things like companies will absorb the additional costs and inflation is a non-issue, which suggests that he does understand how they work. And then he turns around and says that countries (not companies) are paying the tariffs and you’re just wondering WTF and how much longer do we have to put up with this.
But re: oversimplification:
It’s similar to when my clients come to my office wanting to do Medicaid planning because “the nursing home will take their house”, and I explain that no, it won’t, but the government won’t pay for your care unless you are indigent. Even then, maybe half of them get the point and still think the nursing home will get the house.
"Trump’s gimmicks — like a tax deduction for car loan interest payments or for overtime pay — are eroding the core tax base."
If we were going to lose the election anyway then I kind of wish Harris had pointed out that eliminating taxes on tips is almost by definition increasing effective taxation on everybody who DOESN'T work for tips, instead of copying it because it was a fucking good soundbite in Nevada.
Hey, next time maybe argue that immigration isn't the worst thing for the country, instead of apologizing for it. Fucking loser party.
Middle-class and upper-middle class people are willing to pay more taxes if they, personally, get things they like, such as:
- safe, clean, frequent transit
- ending street homelessness
- public works and infrastructure they can see
- programs they will reasonably anticipate using
A lot of this is probably not a very good utilitarian use of tax dollars in the United States because it can't be done at reasonable cost, or else someone would have done it already.
But if you don't do it - say, you want to raise taxes to help starving foreigners, or opiate addicts, or at-risk inner city youth, or really anyone who's not them (all of which would have a much better rate of return than subway patrols or subsidized elder care or whatever other things middle class people like) - then you're just going to get a revolt in four years.
"But financing personal consumption with debt, as most car-buyers do, is a bit risky and unwise"
Overspending on consumption is risky and unwise. Taking out to avoid liquidating investments and incurring capital gains taxes is likely quite reasonable. Rates on auto loans are much better than rates on investment margin, and yet money is fungible.
The most popular way to change federal tax is to make it incredibly simple. Each person gets a large standard deduction (perhaps 25k each). All income is then taxed at a progressive rate, the higher the income the higher the rate. No other deductions. Investment income can have two rates, long term and short term capital gains. Business and corporate income should also be simplified with progressive rates. There should be no reason for the rich, a businesses or corporations to have to hire 100s of lawyers to prepare (avoid) their taxes. Another way to raise taxes without making everyone angry would be to hire enough personnel at the IRS so everyone is paying what they owe.
We're not getting any recouping of the tax base. There's no incentive for politicians in the short-term social media world to pivot to austerity until things end up like Argentina or Greece.
While I agree that Presidential candidates should not make very specific promises on taxation, there are some taxation ideas here that may be pragmatic but I hate on principle because of the same potential for corruption as tariffs. I still believe that a simpler, flatter tax system is better in the long run because special interest groups cannot carve out giveaways that are hard to roll back later. It does mean that some people will pay higher taxes and some people will pay lower taxes but no one can complain of unfairness. The mortgage interest deduction and SALT tax deduction are terrible ideas that incentivize bad actors like the real estate industry and shithole states like CA. My preference would be to get rid of special taxation rates for long term capital gains, mortgage interest deduction, SALT tax deduction, employer provided healthcare insurance premiums.
I'm with the broad sentiment of this piece (the goal should be a broader-based, AND more-progressive, tax system)...but I'm not sure I agree that we should avoid policy specifics...because the biggest loophole preventing the current income tax system from being progressive is the biggest tax loophole of all time: the carve-out from progressive income-taxation for capital gains (and dividends, and rents/royalties, AND, yes, the step-up in cost basis and the carried interest loophole...but mostly for capital gains).
I REALLY want someone from the Paul Tsongas school of Dems to run on a pledge to make that change, which (I'm persuaded) is the only way we have any kind of chance to bring the budget back into nominal balance.
I'm fine with raising taxes, as long as Republicans pay more.
On the flip side, a progressive code that advantages red states like Wyoming and Alabama by taking more from blue states like California and New York is not okay.
Hey don't judge me and my little used Chevy Bolt. A new entry level Nissan would have cost only $1,000 less, and my building has free charging so it seemed like a good deal!!
It seems to me that the deficit is sort of like climate change, politically speaking:
-a genuinely huge problem
-the worst effects will hit in the future, but something needs to be done *now*
-the average voter doesn't give a flying fuq about it and *will* get super mad at you for taking any painful/inconvenient actions to address it, such as raising taxes/implementing a carbon tax
-therefore, the problem is pretty much unsolvable beyond saying, "Godspeed, future generations! Thoughts and prayers!"
At times, I've imagined the idea of a special kind of carbon tax that is narrowly tailored to consumption activities that only the super-rich can afford. For example, from a moral standpoint, billionaires really should be paying tax on their carbon emissions when they travel around in their luxury yachts or private jets.
However, even this isn't the political slam dunk it appears to be. The amount of money it would actually raise would probably be negligible relative to the federal budget deficit, rendering it little more than a gimmick. And, of course, if the tax were to be high enough to actually reduce carbon emissions (e.g. get the super-wealthy to consume less of this stuff), then some middle-class people who get paid to help build or operate these yachts and jets might lose their jobs (granted, the number of such people would be very tiny, relative to the U.S. economy, but it would not be zero, and even one such person would generate sob stories that would be eaten up by Fox News).
The difference is that climate change could potentially be solved with scientific breakthroughs (geoengineering) but there's no way to make budgetary math work with innovation.
The technological solution to the debt is to find a way to increase productivity such that US GDP grows by ~6% annually. At that rate, the debt to GDP ratio starts falling on its own
I think the equivalent of "innovation" is "being wrong." Many (most?) economists thought Japan would be in much more serious trouble with 250% debt:GDP ratio than they are actually in.
Economists know a lot but there are also a lot of unknown.
The low-hanging fruit for tax reform has been there for years - run on a platform of generally keeping taxes the same, but making it much simpler. "By the end of my first term the IRS will send you a check or a bill for your taxes, and you'll have the option to make changes before it's final". Then you can strip out the exemptions and carve-outs, tweak the brackets, change medicare vs. SS vs. general income tax ratios, without having to stick to specific proposals during the campaign. And basically everyone is getting something - 90% of Americans take the standard deduction, and 2/3rds get a refund, so you're giving the benefit of reduced paperwork to 60%+ of Americans.
In general, I like the tradeoff of lower rates in exchange for fewer deductions. But, the devil is in the details, and to meaningfully lower rates, you'd have to sharply curtail popular deductions, including home mortgage interest and charitable contributions. In practice, the tax code is like software code. It only gets more complicated over time, as one more rule is written to cover one more case, never simpler.
Taxes in America are like tipping in America - there's no good reason for them to be so terrible other than that Americans apparently can't be bothered to do better.
(And as in the tipping subthread, a surprising number of people will argue that no, taxes and tipping are fine, as long as there's a carve-out for their preferred people).
The tipping thing I don't spend much mental energy thinking about because there's no good way to get to a no-tipping society; what are we going to do, ban tipping?
Changing the tax experience you just have to get Congress and the president to agree that it should be simplified. There's a pretty clear path IMO. Yes, some people with carveouts today will be mad, but the benefits to the vast majority of people should give you plenty of air cover.
As an aside, as a liberal there's something to be said for simplifying the primary way that people interact with the federal government. I'm not surprised that trust in the government is low when people's experience with it is having to fill out a mind-numbing form (or paying an expert to do it for them). If a future president wants an Abundance-type government that delivers services, a great place to start is making yourself the person that turned filing taxes into an afterthought.
I struggle to imagine what would the actual law look like. Certainly you couldn't punish people for tipping. You could say businesses are prohibited from soliciting any money past the amount of the check? Businesses would hate that because they'd need to renegotiate salary with all their staff.
I almost think it would be easier regulating from a technology perspective; ban Stripe/Square/whoever from showing the tip screen or ban payment processors from changing the charged amount to include tips. But that would probably be at the federal level due to payments traveling cross states.
The worst ideas in the the "One Big Beautiful Bill" include:
-narrowing the tax base by cutting taxes on tips and cutting taxes on Social Security. One was a bribe to win hourly employees headed Trump's way anyway, and the other was a giveaway to a constituency already voting for Trump.
-SALT deduction expansion, a bad idea in general made worse by how Trump implemented it (which attempts, I think, to reduce the benefits for the rich)
-reducing the IRA investments (for different reasons)
And all of this is still less stupid than the tariff war
At the risk of being pedantic, it isn’t limited partner interests that should be taxed as ordinary income. Limited partners are generally the investors in a pooled vehicle. It is carried interest (i.e., the investment managers’ equity share they don’t pay for) that people argue should be treated like any other form of compensation for services.
Conor Sen’s take on this every time it comes up is “you expect a Democratic Party increasingly reliant on $250k+ HHI voters to tax themselves? Good luck.” And he’s right. Upper middle class people have an infinite array of rationalizations to convince themselves that they’re actually poor. The tax code has probably reached a generational peak in progressivity.
I agree with much of this but eliminating the stepped up tax basis at death would (1) be a PITA for estate administration and (2) probably be unfair unless the estate tax exemption were to return to the levels that were set during the (second) Bush administration.
“The regressive nature of tariffs is clearly one reason Trump likes them. The whole name of the game for him is finding ways to be a ‘populist’ without backing away from the Republican Party’s fundamental commitment to plutocratic economic policy.”
This feels overly generous. I have never gotten the sense Trump knows what tariffs are, at the most basic level. He seems to think they are fees foreign countries pay for the privilege of doing business with the U.S.
I still don’t get whether he says that because that’s what he thinks or because he thinks that’s what voters would understand. Because Trump occasionally says things like companies will absorb the additional costs and inflation is a non-issue, which suggests that he does understand how they work. And then he turns around and says that countries (not companies) are paying the tariffs and you’re just wondering WTF and how much longer do we have to put up with this.
But re: oversimplification:
It’s similar to when my clients come to my office wanting to do Medicaid planning because “the nursing home will take their house”, and I explain that no, it won’t, but the government won’t pay for your care unless you are indigent. Even then, maybe half of them get the point and still think the nursing home will get the house.
Sorry, I meant to write that half get the point and the other half don’t.
"Trump’s gimmicks — like a tax deduction for car loan interest payments or for overtime pay — are eroding the core tax base."
If we were going to lose the election anyway then I kind of wish Harris had pointed out that eliminating taxes on tips is almost by definition increasing effective taxation on everybody who DOESN'T work for tips, instead of copying it because it was a fucking good soundbite in Nevada.
Hey, next time maybe argue that immigration isn't the worst thing for the country, instead of apologizing for it. Fucking loser party.
Middle-class and upper-middle class people are willing to pay more taxes if they, personally, get things they like, such as:
- safe, clean, frequent transit
- ending street homelessness
- public works and infrastructure they can see
- programs they will reasonably anticipate using
A lot of this is probably not a very good utilitarian use of tax dollars in the United States because it can't be done at reasonable cost, or else someone would have done it already.
But if you don't do it - say, you want to raise taxes to help starving foreigners, or opiate addicts, or at-risk inner city youth, or really anyone who's not them (all of which would have a much better rate of return than subway patrols or subsidized elder care or whatever other things middle class people like) - then you're just going to get a revolt in four years.
"But financing personal consumption with debt, as most car-buyers do, is a bit risky and unwise"
Overspending on consumption is risky and unwise. Taking out to avoid liquidating investments and incurring capital gains taxes is likely quite reasonable. Rates on auto loans are much better than rates on investment margin, and yet money is fungible.
The most popular way to change federal tax is to make it incredibly simple. Each person gets a large standard deduction (perhaps 25k each). All income is then taxed at a progressive rate, the higher the income the higher the rate. No other deductions. Investment income can have two rates, long term and short term capital gains. Business and corporate income should also be simplified with progressive rates. There should be no reason for the rich, a businesses or corporations to have to hire 100s of lawyers to prepare (avoid) their taxes. Another way to raise taxes without making everyone angry would be to hire enough personnel at the IRS so everyone is paying what they owe.
We're not getting any recouping of the tax base. There's no incentive for politicians in the short-term social media world to pivot to austerity until things end up like Argentina or Greece.
While I agree that Presidential candidates should not make very specific promises on taxation, there are some taxation ideas here that may be pragmatic but I hate on principle because of the same potential for corruption as tariffs. I still believe that a simpler, flatter tax system is better in the long run because special interest groups cannot carve out giveaways that are hard to roll back later. It does mean that some people will pay higher taxes and some people will pay lower taxes but no one can complain of unfairness. The mortgage interest deduction and SALT tax deduction are terrible ideas that incentivize bad actors like the real estate industry and shithole states like CA. My preference would be to get rid of special taxation rates for long term capital gains, mortgage interest deduction, SALT tax deduction, employer provided healthcare insurance premiums.
I'm with the broad sentiment of this piece (the goal should be a broader-based, AND more-progressive, tax system)...but I'm not sure I agree that we should avoid policy specifics...because the biggest loophole preventing the current income tax system from being progressive is the biggest tax loophole of all time: the carve-out from progressive income-taxation for capital gains (and dividends, and rents/royalties, AND, yes, the step-up in cost basis and the carried interest loophole...but mostly for capital gains).
I REALLY want someone from the Paul Tsongas school of Dems to run on a pledge to make that change, which (I'm persuaded) is the only way we have any kind of chance to bring the budget back into nominal balance.
I'm fine with raising taxes, as long as Republicans pay more.
On the flip side, a progressive code that advantages red states like Wyoming and Alabama by taking more from blue states like California and New York is not okay.
Hey don't judge me and my little used Chevy Bolt. A new entry level Nissan would have cost only $1,000 less, and my building has free charging so it seemed like a good deal!!
It seems to me that the deficit is sort of like climate change, politically speaking:
-a genuinely huge problem
-the worst effects will hit in the future, but something needs to be done *now*
-the average voter doesn't give a flying fuq about it and *will* get super mad at you for taking any painful/inconvenient actions to address it, such as raising taxes/implementing a carbon tax
-therefore, the problem is pretty much unsolvable beyond saying, "Godspeed, future generations! Thoughts and prayers!"
At times, I've imagined the idea of a special kind of carbon tax that is narrowly tailored to consumption activities that only the super-rich can afford. For example, from a moral standpoint, billionaires really should be paying tax on their carbon emissions when they travel around in their luxury yachts or private jets.
However, even this isn't the political slam dunk it appears to be. The amount of money it would actually raise would probably be negligible relative to the federal budget deficit, rendering it little more than a gimmick. And, of course, if the tax were to be high enough to actually reduce carbon emissions (e.g. get the super-wealthy to consume less of this stuff), then some middle-class people who get paid to help build or operate these yachts and jets might lose their jobs (granted, the number of such people would be very tiny, relative to the U.S. economy, but it would not be zero, and even one such person would generate sob stories that would be eaten up by Fox News).
The difference is that climate change could potentially be solved with scientific breakthroughs (geoengineering) but there's no way to make budgetary math work with innovation.
Oh, if you assumed arbitrarily large TFP increases. Taxes are progressive in real income.
The technological solution to the debt is to find a way to increase productivity such that US GDP grows by ~6% annually. At that rate, the debt to GDP ratio starts falling on its own
I think the equivalent of "innovation" is "being wrong." Many (most?) economists thought Japan would be in much more serious trouble with 250% debt:GDP ratio than they are actually in.
Economists know a lot but there are also a lot of unknown.
I'd rather not take the risk either way though.
The low-hanging fruit for tax reform has been there for years - run on a platform of generally keeping taxes the same, but making it much simpler. "By the end of my first term the IRS will send you a check or a bill for your taxes, and you'll have the option to make changes before it's final". Then you can strip out the exemptions and carve-outs, tweak the brackets, change medicare vs. SS vs. general income tax ratios, without having to stick to specific proposals during the campaign. And basically everyone is getting something - 90% of Americans take the standard deduction, and 2/3rds get a refund, so you're giving the benefit of reduced paperwork to 60%+ of Americans.
In general, I like the tradeoff of lower rates in exchange for fewer deductions. But, the devil is in the details, and to meaningfully lower rates, you'd have to sharply curtail popular deductions, including home mortgage interest and charitable contributions. In practice, the tax code is like software code. It only gets more complicated over time, as one more rule is written to cover one more case, never simpler.
Taxes in America are like tipping in America - there's no good reason for them to be so terrible other than that Americans apparently can't be bothered to do better.
(And as in the tipping subthread, a surprising number of people will argue that no, taxes and tipping are fine, as long as there's a carve-out for their preferred people).
The tipping thing I don't spend much mental energy thinking about because there's no good way to get to a no-tipping society; what are we going to do, ban tipping?
Changing the tax experience you just have to get Congress and the president to agree that it should be simplified. There's a pretty clear path IMO. Yes, some people with carveouts today will be mad, but the benefits to the vast majority of people should give you plenty of air cover.
As an aside, as a liberal there's something to be said for simplifying the primary way that people interact with the federal government. I'm not surprised that trust in the government is low when people's experience with it is having to fill out a mind-numbing form (or paying an expert to do it for them). If a future president wants an Abundance-type government that delivers services, a great place to start is making yourself the person that turned filing taxes into an afterthought.
It's well within the power of an individual state to ban tipping. Even a temporary ban of a couple of years would reset social conventions
I struggle to imagine what would the actual law look like. Certainly you couldn't punish people for tipping. You could say businesses are prohibited from soliciting any money past the amount of the check? Businesses would hate that because they'd need to renegotiate salary with all their staff.
I almost think it would be easier regulating from a technology perspective; ban Stripe/Square/whoever from showing the tip screen or ban payment processors from changing the charged amount to include tips. But that would probably be at the federal level due to payments traveling cross states.
The worst ideas in the the "One Big Beautiful Bill" include:
-narrowing the tax base by cutting taxes on tips and cutting taxes on Social Security. One was a bribe to win hourly employees headed Trump's way anyway, and the other was a giveaway to a constituency already voting for Trump.
-SALT deduction expansion, a bad idea in general made worse by how Trump implemented it (which attempts, I think, to reduce the benefits for the rich)
-reducing the IRA investments (for different reasons)
And all of this is still less stupid than the tariff war