Washington Matters


Bowing Down to Sacred Cows



President Obama is trying to raise and save money for priority programs like health care reform by nipping and tucking here and there. Good luck. Every nip and every tuck brings out the alarmists who say touching this program or raising that tax will end the world as we know it.

It is, indeed, part of the process for various interests and constituencies, and their defenders in Congress, to try to protect themselves. But somewhere along the line, aren't we all going to have to give in a little as we try to shore up the economy and make some of the changes the country voted for last November without adding dramatically to the already dramatic deficit? It's worth noting that in none of these cases is he proposing to actually eliminate entire tax breaks, subsidies or benefits. At worst, they are trimmed -- in some cases not even touched, but just changed.

But so far:

  • The loudest cries have been over cutting tax deductions taken by the wealthiest taxpayers -- families that make $250,000 or more -- for charitable contributions -- from the top rates of 35% and 33% to 28%. But deductions of 28%, or far less, is what the vast majority of taxpayers are allowed to take, lumping the top 2% of taxpayers in with the rest of us. Many charities and others are behaving as if contributions from their richest benefactors will fall off a cliff. Obama argues that the effect on giving would be minimal because the cuts are not terribly consequential. Two independent groups predict that giving would drop -- between 1.3% and 2.1%. Unpleasant, but hardly calamitous. And virtually nothing compared to the hit nonprofits are taking because of the recession. By the way, when was the last time deductions were at 28% for the highest income brackets? Under that well known pro-tax, wealth-distributionist president Ronald Reagan.
  • The second loudest raspberries were for reducing the interest on home mortgages in the same way. The only difference in this case is that instead of destroying charities we'd be wrecking the housing market, again. This could have some minimal effect on upscale homes, but frankly the biggest problem facing that real estate sector is not that the truly wealthy will suddenly stop buying houses, but that very few people who aren't in those brackets are unlikely to try to buy such high-priced homes any time soon. That era is over. And really, when you were pricing homes, did you figure out the money you'd be saving in tax deductions so specifically that learning you'd only get a 28% deduction would be a deal breaker? In an era where we will long be scrounging every corner of the Treasury to cut the deficit, we really need to stop fetishizing the mortgage tax break as if it were motherhood.
  • And boy, are the farmers mad, at least those with sales of $500,000 or more. They'd see subsidies shrink or even disappear as their annual sales rose. That would affect less than 8% of farmers. Again, come on.
  • Finally, we come to the veterans. Oh boy. This is a group you really don't want to get angry. There are way too many things in this town that are treated as sacrosanct that shouldn't be. Veterans aren't one of them, but what Obama proposed in terms of veteran health care wouldn't cut benefits a penny. Rather, Obama wanted to ask that care for service-related injuries be charged to vets' private insurance policies, not the VA. Veterans groups believe the government has a moral obligation to care for vets injured in the line of duty. That's not a trivial argument. But is the notion of having private insurance companies who are receiving premiums from veterans so absurd on its face that it should be dismissed out of hand? I'm not so sure.
Surely, in a crisis that is as deep and potentially long lasting as this one -- one where sacrifices will be made from all corners -- it's time to stop having knee-jerk reactions even to relatively modest proposals simply because particular programs or benefits have taken on a patina not terribly dissimilar from religious icons.




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