“Trump fans applauded when he said he’ll eliminate taxes on tips. Then Harris proposed that, too. Her audience applauded. Trump then proposed not taxing overtime. More applause.
But narrow tax exemptions are bad policy.
In my new video, economist Allison Schrager explains how they create nasty, unintended consequences.
“No one likes tipping,” says Schrager, “but all of a sudden, you’ll have to pay tips for everything.…More people will be paid in tips.””
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“Trump’s proposal to eliminate tax on overtime would reduce hiring.
“Employers may hire fewer people so they can give more overtime to employees they have already,” says Schrager.”
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“rent control is destructive. “Sounds really good,” says Schrager. “But all it means is that people are less inclined to rent to you.”
“Why would you enter a market where it seems like the government is actively trying to hurt you?” Adds Mercatus Center economist Salim Furth. “You’re providing an essential service, something human beings need to live, and the government views you as a hostile outsider. I wouldn’t want to bring any service into a market like that.”
Argentina’s new libertarian president just scrapped rent controls. The supply of rental apartments doubled, and prices declined by 40 percent! That’s good policy.
But Harris proposes the opposite!”
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“Trump’s (and Joe Biden’s) tariffs don’t just punish China, they reduce choice and raise prices in America.
“Free trade is good!” says Schrager. “It brings lower prices, making our own industries more dynamic, raising our income.”
“But trade does take away some Americans’ jobs,” I point out.
“But it creates a lot of other new jobs,” she replies.
It sure does. More and better jobs than those lost through trade.”
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“She proposes giving “first-time homebuyers” $25,000. Again, her fans applaud.
Schrager explains, “free” money from government doesn’t increase the supply of homes. When every buyer has $25,000 more, “they just bid up prices even higher!””
“In reality, Project 2025, an initiative put together last year by the right-wing Heritage Foundation to plan for the next GOP administration, was shaped by longtime close allies of Trump. Detailed planning for a second Trump term agenda along these lines is very real, and though the Project 2025 initiative itself has seemingly fizzled out, other groups have picked up the slack.
Furthermore, many of Project 2025’s key proposals — to centralize presidential power, crack down on unauthorized immigrants, deprioritize fighting climate change, and eliminate the Department of Education — are fully and openly supported by Trump.
Yet Trump’s intentions are less clear on a vitally important issue where Project 2025 made some particularly extreme proposals: abortion.
The project’s plan called for using presidential power to aggressively restrict abortions in several ways. Trump, wary of these proposals’ unpopularity, has said during the campaign that he won’t support some of them. He also evidently feels hesitant to outright disavow the social conservatives who have long been a key part of his base.”
“the four most prominent politicians in the country (sorry, Tim Walz) agree: U.S. Steel, a private company, should not be allowed to conduct a transaction with another private company unless the federal government agrees.
This is absurd—particularly because the deal is obviously in the best interest of U.S. Steel.
“We’ll admit that the competition for the dumbest economic policy is fierce these days—with prices controls on food, a 10% across-the-board tariff, and national rent control on the table,” opined The Wall Street Journal’s editorial board this week. “But opposition to the Nippon deal deserves careful consideration for this distinct dishonor given the deal’s manifest benefits and nonexistent harm.”
Indeed, Nippon’s plan to buy U.S. Steel gives the legacy steelmaker something that Trump’s tariffs and Biden’s blather about blue-collar jobs never could: A chance to actually become more competitive in the global marketplace. Among other things, Nippon has promised to invest $2.7 billion in revamping U.S. Steel’s plants.”
“It may be tempting to simply write this off as “Trump being Trump” and move on. But the Republican presidential nominee’s consistent inattention to the details of policymaking does matter—even if it has no bearing on the election—and the child care issue is a perfect example of why.
This sort of issue is a liability for Trump because he can’t just bluster or pander his way through it. Trump excels when he can turn complex policies into simple, partisan us-vs.-them arguments that allow him to avoid any attention on the specifics. On issues like taxes and immigration, this technique works because one party broadly wants the policy to shift in one direction, so Trump can simply promise to do the opposite—never mind the details.
But no one wants higher child care costs. Both sides want to reduce them. The argument, then, must turn on which side can offer the better plan for accomplishing that goal. As Thursday’s answer makes obvious, Trump has no such plan.”
“The Tax Foundation estimates that a 10 percent general tariff “would raise taxes on American consumers by more than $300 billion a year,” “reduce the size of the U.S. economy by 0.7 percent,” and “eliminate 505,000 full-time equivalent jobs.” Retaliation could “further reduce U.S. GDP by 0.4 percent and eliminate another 322,000 full-time equivalent jobs.”
Trump’s proposed tariffs, including a 60 percent levy on Chinese goods, “would reduce after-tax incomes by about 3.5 percent for those in the bottom half of the income distribution,” the Peterson Institute for International Economics estimates. They “would cost a typical household in the middle of the income distribution at least $1,700 in increased taxes each year.”
Just as Trump ignores those costs, Harris wants voters to believe that raising the corporate income tax rate from 21 percent to 28 percent is simply a matter of “ensur[ing] the wealthiest Americans and the largest corporations pay their fair share.” But that is true only if you overlook the broader economic impact of that change, which would hurt non-wealthy Americans as employees, consumers, and investors.
“Studies have shown that the corporate income tax is the most harmful tax for economic growth,” the Tax Foundation warns. On the flip side, recent research indicates that the Trump-backed 2017 reduction in this tax rate, which moved the U.S. from the high end among industrialized countries to the middle of the pack, “significantly boosted domestic investment.”
By raising the cost of doing business in the United States, a higher corporate tax rate inhibits investment, drives down wage and benefit growth, encourages offshoring of jobs, and reduces the return on retirement savings. “Under a 28 percent corporate rate,” the Tax Foundation estimates, “GDP would fall by $1.84” for “every $1 of higher revenue.””
“””Trump also recently proposed cutting taxes on Social Security payments. That might sound good because people will net more money when they receive their benefits. But the reality is more complicated. The poorest households wouldn’t see any change under that plan because Social Security benefits for those making below $32,000 are already untaxed, while the richest recipients would be more likely to see a tax cut.”
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“There’s no way around it: Lawmakers have to raise taxes on many families, including those who aren’t millionaires. Right now, any income that someone makes above $168,000 is not taxed for Social Security. That means that higher earners pay a smaller share of their income toward funding Social Security than lower- and middle-income earners.”
“On the merits, there is little question that liberals should prioritize making housing cheaper. There is nothing progressive about putting property owners’ return-on-investment above less privileged Americans’ access to shelter. Further, promoting homeownership as a wealth building strategy also fails many homeowners. Concentrating one’s savings in a single asset is a perilous investment strategy, especially for America’s least privileged groups.”
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“although tanking home prices isn’t politically tenable, slowing their growth in the name of affordability probably is. And for people looking to buy or rent a home, it makes a big difference whether home values rise faster or slower than wages. If paychecks grow more rapidly than home values, then housing becomes more affordable for workers, even if the nominal price of a house goes up. In that scenario, fewer renters would struggle to keep roofs over their heads, while homeowner backlash to increasing affordability would be limited, since, on paper, houses would appear more valuable than when they were purchased.
Pursuing that outcome, however, means making housing a worse investment for new buyers, especially relative to putting their savings into diversified index funds. Democrats therefore should not go out of their way to encourage middle-class Americans to invest in housing. And they certainly should not adopt policies that privilege homeowners over renters.”
“exempting tips from income taxes would increase the deficit, create some weird economic incentives, and unfairly cut taxes for a small subset of workers while not doing much to help the majority of Americans or grow the economy.”
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“Alex Muresianu, a senior policy analyst at The Tax Foundation, spells out in detail why that’s the case. He compares two hypothetical low-income service sector workers: a cashier and a waitress, both of whom earn $34,000 annually. Under the current tax code, both have the same baseline tax liability (roughly $2,000) even though about half of the waitress’s earnings are via tips.
If those tips are exempted from income taxes, the cashier still owes that $2,000. The waitress, meanwhile, owes just $600.
Harris should have to explain why she thinks it’s fair to ask some low-income workers to pay tax bills that will be two or three times higher than other workers who earn the same amount—because that’s what she is proposing here.”
“Those laws create a black market in which the composition and potency of drugs is uncertain and highly variable. They also push traffickers toward highly potent drugs such as fentanyl, which are easier to conceal and smuggle. As a result, drug users like Gentili typically don’t know exactly what they are consuming, which magnifies the risk of a fatal mistake. The “poisoning” that Peace and Caban decried therefore is a consequence of the policies they were proudly enforcing in this very case.”
“trade policy. Trump’s protectionist stance is well-known, with his administration imposing tariffs on a wide range of goods, particularly from China. He has since announced that he would like to impose an across-the-board 10 percent and then 20 percent tariff on imports to the U.S., on top of the those already in place.
But Harris’ stance is hardly better. She has embraced a “worker-centered” trade policy that looks suspiciously similar to Trump’s “America First” approach. Both emphasize protecting existing American jobs and industries, even at the cost of higher prices for beleaguered consumers, fewer resources to start new firms that will lead to more opportunity for the next generation of workers, and reduced economic efficiency. And let’s not forget that during the last four years, the Biden-Harris administration has imposed its fair share of tariffs while keeping many of Trump’s.”
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“Both sides want to subsidize homeownership. The Republican platform advocates for the government to “promote homeownership through Tax Incentives.” The Harris campaign has announced a $25,000 subsidy for first-time homebuyers. Both plans would subsidize housing demand, thus putting upward pressure on housing prices. Great for people who already own homes; not so great for the new homebuyers themselves.”
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“Both Harris and Trump represent variations on a theme of big, fiscally irresponsible, hyper-interventionist government.”