misfitS pOLITICS

We talk. We write. We entertain. Or so we think.
  • Home
  • Home

Trump's (Probably Unintentional) Big Idea

9/16/2016

1 Comment

 
Alexandra F. Baldwin
Donald Trump released his child care proposal yesterday, complete with an expansion of government mandate, convoluted tax rebates and fantastically magic funding sources. But he let Ivanka unveil it, so we all wanted to look anyway. Pure Trump.

Buried in the garbage, however, is one little tidbit that begins to scratch at a hugely important, potentially earth-shaking idea that could fundamentally remake the Republic in dramatic ways. Think I am exaggerating? Well, maybe I am…but read on anyway.

What’s the big idea? I’ll let the Washington Post describe it:

“The GOP contender, who announced his plan this week, wants to let parents deduct from their income taxes child-care expenses for up to four kids. The total deduction would be capped at the average cost of care in their state, which ranges from roughly $5,500 annually for infants in Alabama to nearly $22,000 in Washington, D.C. Parents who make more than $250,000 individually or $500,000 together would not be eligible for the break.”

The big idea isn’t a tax deduction; the big idea is in tying the deductibility of child care costs to actual costs in the place you live. And the bigger idea, still, is normalizing the tax code to account for cost of living differences. And that, my friends, is a game changer.

The tax code currently treats a dollar as equivalent regardless of where it is earned. Everyone in America, though, knows that such a thing is not true. This lovely three bedroom unit is within a stone’s throw of the Arkansas State Capitol in Little Rock. It’s new, comes with a two car garage, roof deck and over 2,600 square feet of living space. It can be yours for about a quarter of a million dollars. This similar place, within spitting distance of the Massachusetts State Capitol in Boston, is a shade bigger at 2,800 square feet, and has a valet instead of just a garage, but you don’t get the roof deck and it will set you back at roughly $5.5 million.

Is the cost of living in Boston a full twenty times higher in Boston than Little Rock? No, of course not, but it’s certainly an awful lot higher (about 50 percent higher, per the Economic Policy Institute). People who live in big, expensive, coastal cities – New York, San Francisco, Washington, Boston – pay more for everything they do than people in cities of all sizes in other parts of the country. The cost of living in Houston, for example, is barely half of the cost of living in Washington, DC. People in those cities tend to earn more, as well, although the real premium of earnings is much smaller than the nominal premium.

But to the IRS, the family that earns $150,000 in Manhattan is just as rich as the family with the same earnings in Des Moines, despite the fact that the same income goes nearly twice as far in Iowa. Our income tax brackets, asset tests and income limits on all sorts of credits and deductions are uniform across the country, which benefits states with lower incomes and lower costs of living at the expense of the states with higher incomes and higher cost of living.

What Trump has proposed begins to chip away at that, and that is a huge…nay, a YUGE…idea. It acknowledges that stuff costs less in Alabama than it does in Connecticut and the higher earnings of someone in Connecticut doesn’t actually mean that person has a higher standard of living, or more disposable income or whatever measure you choose to use to measure wealth. It lets a normal taxpayer in Connecticut with two kids claim a deduction of up to $40,000 of child care expenses while only allowing the Alabaman $11,000, which is magnified because the woman in Connecticut is already in a higher marginal bracket than her equivalent in Alabama because she earns more.

Taken to its potential extreme, this fundamentally changes everything about the way we fund our government. Or, the portion we choose to fund instead of borrow, at least. If we started (and just to be clear – no one has proposed this) normalizing income tax brackets by state, or city or county or whatever, and readjusted the tax burden so that everyone paid a tax based on their cost-of-living-adjusted earnings and not their nominal earnings, the tax burden would shift in pretty remarkable fashion. A whole lot of people would have a whole lot more money, and a whole lot of other people would realize exactly how much they have been subsidized for 75 years.

And it is not very hard to figure out what that shift would look like.

Whose taxes go down? People in dense, wealthy coastal cities with high costs of living. Whose go up? People in lower-cost flyover country, especially the southern part of it. As a proud denizen of the state with the fourth highest cost of living in the lower 48, I am not really all that broken up about this. But I wonder how Trump’s staunch support in places like Mississippi, Tennessee, Idaho, Indiana or Oklahoma (the five cheapest) would react..?
1 Comment
Andrés Roemer link
12/5/2016 12:04:19 pm

I would like to say that this blog really convinced me to do it! Thanks, very good post.

Reply



Leave a Reply.

    Misfits

    Just a gaggle of people from all over who have similar interests and loud opinions mixed with a dose of humor. We met on Twitter.
    ​Enough said.

    (If that's not enough, you can learn more here)

    Tweets by misfitspolitics

    Archives

    January 2024
    November 2023
    December 2021
    October 2021
    September 2021
    January 2021
    September 2020
    June 2020
    May 2020
    April 2020
    February 2020
    January 2020
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    April 2019
    March 2019
    February 2019
    December 2018
    November 2018
    October 2018
    September 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016

    Categories

    All
    2016
    9/11
    Abortion
    AFB
    Afghanistan
    Air Force
    #alfieevans
    Alfie Evans
    ALS
    Armed Forces
    Army
    Baby
    Ben Carson
    Bernie
    Blog
    Bosnia
    CAOC
    #CelebrateWomen
    Christie
    City Council
    Comey
    Cooking
    Crete
    Cruz
    Deep Fry
    Desert Storm
    Donald Trump
    Drug Companies
    Election
    England
    Europe
    Exclusivity
    F-16
    Fanfic
    Fayetteville
    FBI
    FDA
    Fiction
    Fire
    Florida
    Free Market
    Fun
    Germany
    Gilmore
    Government
    Health Care
    Hillary Clinton
    Hobby
    Iraq
    Italy
    John Kasich
    Kevin Williamson
    Korea
    Kuwait
    LANTIRN
    Life
    Local Politics
    Marco Rubio
    Medical Care
    Memoir
    Military
    MIsfitMemo
    #MisfitMemo
    Misfits
    Misfits Politics
    Moms
    Mother's Day
    Narrative
    National Review
    NATO
    Navy
    #NeverTrump
    Patent
    Pharmaceutical
    Philippines
    Phillippines
    Politics
    Raymond
    Reform
    Rex
    Rubio
    Scarcity
    September 11th
    Service
    Ted Cruz
    Thread
    Tweetstorm
    Twitter
    UK
    Water
    Weekly Rewind
    World Cup
    World Trade Center

    RSS Feed

Home

About

Contact​

Copyright © 2016
  MisfitsPolitics
  • Home
  • Home