Sprinkles from the Left

An overwhelming majority of Democrats support the American Families Plan (95%; Monmouth University)

“Improving education in the U.S. requires a holistic approach to childhood starting in the very first years. It means ensuring that all families, and not just parents with means, can find housing, feed their children, afford child care and preschool classes, take time off to tend to ailing relatives or other needs, and avoid going deeply into debt to pay for college. Those same steps would lead to better physical and mental health for the nation, a stronger economy in which more women can participate, and reductions in a host of social ills.

The pandemic, however, laid bare the wearying struggles of the American family by worsening them. President Biden is correct in calling for wholesale change. Going back to pre-pandemic reality is unacceptable, and disparate, incremental steps would accomplish too little. This is a moment to grab onto, instead of allowing the continued weakening of family health, education and well-being in this country.

The $1.8-trillion American Families Plan that Biden unveiled Wednesday calls on Congress to continue the newly enlarged child tax credit that puts families in more comfortable financial shape from the start. To that, Biden would add significant per-family subsidies for child care for low- and moderate-income families, free universal preschool for two years before kindergarten, paid medical and family leave, and two years of free community college.

You can quibble with aspects of the plan — does free preschool for all make sense when more affluent families can afford to pay for their kids’ classes? Is paying child care workers a minimum of $15 an hour enough for high-quality care?

At this point, given the opposition of many Republicans to most federally funded social programs, we’d be lucky to get to the quibble stage. But the GOP should heed its base: There are plenty of working-class families in the South and the Midwest who are gasping for relief. This country makes it too hard to function as working parents; they shouldn’t need to worry every second about their children’s welfare or whether their finances can survive the inevitable bumps in the road.

Biden’s plans for funding these programs also will come under scrutiny — as they should, especially his call for a whopping increase in the top capital-gains tax rate. But for the most part, he is not looking at new types of taxes, even on the wealthy, and not raising them at all on people earning $400,000 a year or less. He wants to restore taxes on the wealthiest Americans that were inexcusably cut during the Trump administration, and ensure that all their income is properly reported to the Internal Revenue Service.

We do a lot of talking about family values in this country. But what do we mean by that? Surely not a willingness to continue a tradition of overworked, overstressed families who are a paycheck or two from homelessness.”

Editorial Board, LA Times

We are, after all, the only wealthy country that doesn’t ensure paid leave for new moms. Child care? It’s already heavily subsidized in places like Japan, France, Korea, Germany, Australia, and the Nordics, but here the cost often rivals college tuition. We trail most of our peers in pre-K enrollment, likely because—according to the Organisation for Economic Co-operation and Development—they often spend a lot more public money on it. While the idea of just giving money to poor families, in the form of a child allowance, may seem novel here, countries like Canada started doing it a while ago. In fact, if you add up our total expenditures on cash benefits, tax breaks, and services for families as a share of the economy, we’re third to last among countries tracked by OECD, just ahead of Mexico and Turkey.

And as for health care, do I even need to get started?

Our antiquarian family policies don’t just make life more difficult and expensive for parents and their children. They are also, in all likelihood, acting as a drag on the economy by keeping women out of the workplace. The United States used to have one of the highest rates of female employment among developed nations, but we began to fall behind in the late 1990s and early 2000s as other countries promoted policies like paid leave, child care, and flexible scheduling that made it easier for women to work, while our government stood mostly pat. In 2019, the employment rate for American women between the ages of 25 and 54 was 73.7 percent, below the average for Europe or the G7. Iceland, Switzerland, Sweden, Germany, Norway, the Netherlands, and others all topped 80 percent. On this score, we’ve fallen badly behind the times.

To be clear, there is some debate among economists about just how much pro-family policies like subsidized child care ultimately help women stay in the workforce—the mainstream view is that they have a significant impact, though some studies suggest they have little to none at all. But there’s no reason Americans shouldn’t be able to enjoy a semblance of the support that other governments provide their parents and kids, even if the end result is partly just better quality of life.”

Jordan Weissmann, Slate

“I think Biden has two advantages upfront tonight [talking about the speech]. First, things are substantially and measurably much better in the country now when it comes to dealing with the pandemic. Even Republicans who insist on crediting Trump for the success — I won’t bother to argue with them here — have to admit the improvements.

So when Biden says he is delivering “real results,” most Americans will nod yes. Second, there is nothing that Biden will propose tonight that most Americans will think is a bad or exotic idea.

They might argue about the costs or ask how much of a role the Federal government should play, but two years of pre-school, two years of free community college, paid family leave, less expensive health insurance and tax increases confined to corporations and the very rich are all rather popular.

And he’s building on ideas that have proven themselves either in the states or in other wealthy democracies.”

E.J. Dionne Jr; Washington Post

Sprinkles from the Right

Less than one-quarter of Republicans support the American Families Plan (22%; Monmouth University)

“[The proposed] taxes would be likely to hurt only small and medium-size businesses, as their larger competitors have the means to employ expensive tax lawyers and other techniques that secure their access to offshore loopholes — those jurisdictions that allow corporations to channel profits through them and avoid taxes. Biden needs to avoid the vicious cycle in which more tax means more tax avoidance, which in turn means lower tax revenues, which forces policymakers to raise taxes…

… There is potentially $36 trillion in offshore jurisdictions — much of it coming from companies and residents of the U.S. The IRS knows this, which is why it is trying to clamp down on institutions in those countries dealing with U.S. residents. However, though the White House is looking to give the IRS $80 billion to increase its enforcement efforts, that wouldn’t make a significant difference as long as the incentives favored offshore arrangements…

… It’s the middle class, not the truly rich, who are hit by tax rises like Biden’s. But it’s the rich with whom we need to work to create a functional tax system.”

Joshua Jahani, Managing Director of Jahani and Associates (published in NBC)

“Thanks to the [2017] tax cuts, more than 6 million American workers received wage increases, bonuses and increased benefits. The typical family earning $75,000 got a tax cut of more than $2,000. TCJA’s corporate tax policies enabled corporations to repatriate over $1 trillion, and businesses to invest more in American workers and operations…

…Nearly 7.3 million jobs were added to the economy from Trump’s election through the onset of the pandemic in February 2020. Prior to the pandemic, the unemployment rate fell to its lowest level in half a century. Americans of all backgrounds enjoyed a booming labor market; the unemployment rates for African Americans, Hispanic Americans, Asian Americans, women, veterans, individuals with disabilities and those without a high school diploma all reached historic lows.

Through February 2020, the strong economy put more money into Americans’ pockets. Wage growth rose at the fastest rate in a decade. Real median household income grew by a record 6.8 percent. Americans entered the workforce in droves, and small business optimism soared to record highs.

Significantly, the TCJA and other growth policies reduced inequality in both wages and wealth, enabling more people to achieve the American dream. Middle-class and lower-income workers experienced faster wage growth than higher-income earners in 2019, helping to narrow the gap.

As a result, millions of Americans were lifted out of poverty. Poverty rates for African Americans and Hispanic Americans reached record lows in 2019, and millions left the food stamp rolls…

…Biden’s move to reverse the successful Trump policies will hurt the “little guy” he always says he’s fighting for: middle-class families, low-income workers and minorities. Combined with the threat of rising interest rates and inflationary pressure, higher taxes will slow job creation, reduce our global competitiveness and bend the future economic trajectory down. A sputtering economy would mean dimmer job prospects, lower wages and higher costs everywhere, impacting the “little guy” the most.”

Monica Crowley, Assistant secretary of the Treasury for public affairs, 2019-2021. (Published in The Hill)

“Other advanced countries have programs that bear a resemblance to the American Jobs Plan and the American Family Plan, but they are largely financed by broad-based value-added taxes (VAT) rather than sky-high rates on capital gains or corporations. Consider, for example, that “socialist” Sweden has a capital-gains tax rate of 30% and a corporate tax rate of 22%. The standard VAT rate there is 25%, but the rate is reduced for many items…

…Consider that federal tax rates in our Anglo-Saxon neighbor, Canada, are roughly as follows: top marginal household income rate, 20%; top capital gains rate (half of capital gains are excluded), 10%; top estate tax rates, the same as individual income and capital-gains rates; top corporate rate, 15%. (Canada has a 5% national VAT.)

Of course, Canadian provinces add their own taxes to the federal rates, but tax competition between the provinces keeps these in check. The province of Alberta, like the state of Florida, has very low tax rates on income, capital gains, estates and corporations.

Tax competition between provinces, like tax competition between states, will endure that some sub-federal jurisdictions continue to have favorable rates in the future.

It is no stretch to imagine that creators of the American technology companies — the Facebook, Amazon, Apple, Netflix and Google parent Alphabet (FAANGs) of tomorrow — might decide to move a few miles north and launch their ventures in Canada rather than the United States. Or they might be even more adventurous and set up shop in Switzerland or Singapore, historically noted for very favorable tax regimes.”

Gary Clyde Hufbauer, nonresident senior fellow at the Peterson Institute for International Economics (published in MarketWatch)