As people all over the United States send their forms into the IRS, they’re probably seething over President Joe Biden’s repeated assertions that Americans are willing to pay more in taxes. In a recent interview with ABC News this week, he predicted that he would get Democrats in Congress to vote for what would be the first major federal tax increase since 1993.
Biden’s view is no doubt shaped by cognitive dissonance. He wants to raise taxes, so he believes the American people are behind him. His opinion on the subject is likely reinforced by the oft-repeated observation coming from thought leaders and other political influencers that the pandemic has created conditions favorable for passing a tax hike.
Part of this is a question of who’d pay for it. Everyone is always for a tax increase if it means lower debt or higher spending so long as they’re not the ones whose taxes go up. Few people think of themselves as “rich,” so calls for higher taxes on the wealthy don’t bother them. Everyone is generally happy when someone else pays the bill.
Pollster David Winston looked at the issue in early April and found, by a margin of 2 to 1, “voters do not believe the statement that because of what happened with Covid, I am willing to pay more in taxes.” Consider that carefully. Federal spending to fight Covid and blunt the impact of the lockdowns imposed by the states has added well over $4 trillion to the national debt – some say it’s more like $6 trillion – yet most voters are unwilling to fork over their dough to close the gap between what went out and what’s coming in. (By the way, that “gap” isn’t nearly as big as people have been made to think. A lot of states are ending the year in the black even without the money from Washington and, in D.C., federal revenues are just about what they were projected to be before Covid hit).
In the Winston survey, the biggest supporters of a tax hike are, no surprise, liberal Democrats – but they are willing to see their tax bill go up by what he calls “a very weak margin” of 43 to 36 percent. Only a third of moderate Democrats go along with the idea while 47 percent say they don’t. Interestingly suburban women, a targeted group for both Democrats and Republicans in the next election, say they disagree with the statement 20 percent to 55 percent as do most Republicans (70 percent) and most independents (53 percent).
A newly released Rasmussen Reports national telephone and online survey generally backed up the Winston Group findings. Its poll had 64 percent of likely U.S. voters saying they oppose increasing taxes while just 22 percent supported the idea and 14 percent said they were not sure.
The Rasmussen reports data also showed 45 percent of voters saying the current level of federal taxes “is already too high” while just 13 percent said they were “too low.” Another third – 33 percent – aligned themselves with the mythical Goldilocks saying, after the Trump tax cuts of 2017 that the current level of taxation is just “about right.”
Now, here’s where it gets interesting. President Biden has taken to saying Republican voters support his plans for the country even if GOP members of Congress reject it. Maybe – but what he doesn’t say is that – at least as far as taxes are concerned – members of his own party aren’t getting in line behind him.
“Whether or not congressional Democrats go along with Biden’s plan,” Rasmussen Reports said, “Democratic voters appear to feel differently. Only 19 percent of Democratic voters say the current level of federal taxes is too low, while 34 percent of Democrats say taxes are too high and 38 percent say the level of federal taxes is about right.”
Unsurprisingly, Biden’s wrong about the GOP voters too, at least on taxes. “Among GOP voters 56 percent say the current level of federal taxes is too high,” the survey found with, “just 9 percent say they’re too low and 29 percent say the level of federal taxation is about right. Unaffiliated voters are nearly five times more likely to say current federal taxes are too high (48 percent) than too low (10 percent).”
Despite what the New York Times lets prominent leftwing Keynesian economists write on its op-ed pages, there isn’t a lot of sentiment for raising taxes in America on anyone. The people are opposed to higher taxes on income, on gasoline, and just about everything else he’s proposed raising taxes on – tax hikes that would all break his campaign pledge that anyone making less than $400,000 per year wouldn’t see their taxes go up by “one thin dime.”
Infrastructure projects that are paid for by users, not by federal taxes, can be a big boost to the economy.
With President Joe Biden looking to pass a major infrastructure bill and other policy priorities, the growing question is how he will pay for them. While some Republican senators have signaled some interest in cutting bipartisan deals, both sides should be focusing on budget cuts and reprioritizing existing revenues. They must avoid tax increases that could undercut the economic recovery as the number of vaccinated Americans grows and we hopefully emerge from the COVID-19 pandemic.
President Biden has called for upping the corporate tax rate from 21 percent to 28 percent. While that’s still lower than the country’s corporate tax rate prior to the 2017 tax cut bill, which was then 35 percent, it’s a bad idea. At 28 percent, the federal corporate tax rate, combined with state corporate taxes, would be over 32 percent, putting the U.S. back to having the highest corporate tax among the highly-developed OECD, Organization for Economic Co-operation and Development, nations. For example, Canada’s corporate tax rate is 15 percent and Mexico’s is 30 percent. One outcome of Biden’s proposed tax hike would be more corporations looking to move out of the U.S. to lower-tax countries.
Decades of research also show higher corporate tax rates get passed on to workers, who end up paying the majority of the costs in the form of lower pay and benefits. The Tax Foundation estimates Biden’s corporate tax increase would eliminate 159,000 jobs, reduce long-run economic output by 0.8 percent and wages by 0.7 percent, with the bottom 20 percent of earners on average seeing a 1.45 percent drop in after-tax income in the long term.
Biden also wants to raise taxes on the wealthiest Americans. “Anybody making more than $400,000 will see a small to a significant tax increase,” Biden recently said to ABC.
Raising taxes on the wealthy consistently polls well with voters of both major political parties, but it’s a bad policy that doesn’t work as intended. An analysis in the Quarterly Journal of Economics of decades of data shows that tax increases on individual incomes reduce average incomes and economic activity, but the effect is the fastest and largest when taxing the top one percent. The so-called 1990 luxury tax, for example, killed so many jobs that the federal government actually lost revenue because of it. That is because the rich do not sit on mountains of gold in their vaults, as some might imagine. Most of their money is either invested or spent so raising taxes on the rich lowers consumption and all the jobs that creates, and lowers investment and all the jobs that creates. Hence, the top one percent pay considerably more in income taxes than the bottom 90 percent of taxpayers combined.
The country is expecting significant economic growth this year as more Americans are vaccinated and able to travel to visit loved ones, go on vacations, eat in restaurants and attend things like sporting events. Tax increases would undercut this growth by taking money that would be invested in expanding existing businesses or opening new ones.
President Biden and Republicans need to show some seriousness about dealing with the nation’s debt and deficits. In the debate leading up to the recent $1.9 trillion spending bill — which came after President Trump’s own $2.2 trillion stimulus bill and four years running up debt and deficits — the GOP could not credibly claim it cared about debt and deficits. Republicans and conservatives “ditched any semblance of fiscal restraint during the last four years of economic expansion (i.e., precisely when it’s easiest to cut spending),” Scott Lincicome recently noted in his newsletter for The Dispatch.
Spending cuts are needed and the country’s massive defense spending, over $700 billion a year, is ripe for cutting. A group of House Democrats is urging Biden to trim the Pentagon’s budget. Unfortunately, Republicans want more, not less, spending. “The problem with decreased or flat defense budgets is that our adversaries aren’t looking at cutting defense spending. It’s the opposite,” Rep. Mike Rogers, the leading Republican on the House Armed Services Committee, claimed.
As a military veteran I’d argue he is wrong because our current military is more than capable of defending our nation and, if we stopped our absurd and broken attempts at nation-building overseas, our defense budget is more than adequate already.
If Republicans aren’t going to support ending our forever wars and reducing defense spending, they should at least try to ensure that any big infrastructure and spending bills embrace the user-pays principle and utilize public-private partnerships. Raising the federal gas tax is counterproductive — as vehicles become more fuel-efficient — and politically unpopular, but private companies and private equity firms are ready to invest billions in major infrastructure projects. From water and sewer systems to roads and bridges, infrastructure can be built via public-private partnerships using private capital and charging user direct fees to pay for it.
Users don’t pay any more than they would’ve otherwise, the projects get built faster, private investors take most of the financial risks of losses if something goes wrong with the project, such as delays and cost overruns, and the companies can make a profit if they deliver the project efficiently.
Infrastructure projects that are paid for by users, not by federal taxes, can be a big boost to the economy. Combining this approach with some smart realignment of other federal spending would allow President Biden to achieve his policy goals without the harmful tax cuts he is considering and the consequent blow to the economy and to lower-income workers.
This past week, President Joe Biden unveiled his new $2 trillion infrastructure plan, scheduled for implementation over the next eight years. He delivered a pep talk about it before a union audience in Pittsburgh: “It’s a once-in-a-generation investment in America. It’s big, yes. It’s bold, yes, and we can get it done.” One central goal of his program is to tackle climate change by reaching a level of zero net carbon emissions by 2035. Many of Biden’s supporters gave two cheers for this expansion of government power, including the New York Times columnist Farhad Manjoo, who lamented that the program is too small to work, but too big to pass. Huge portions of this so-called infrastructure bill actually have nothing whatsoever to do with infrastructure.
In one classic formulation by the late economist Jacob Viner, infrastructure covers “public works regarded as essential and as impossible or highly improbable of establishment by private enterprise.” Classical liberal theorists like Viner believe it is critical to identify a limited scope of business activity appropriate for government. And even here, while government intervention may be necessary to initiate the establishment of an electric grid or a road system, oftentimes the work is completed by a regulated private firm, overcoming government inefficiency in the management of particular projects.
Biden’s use of the term “infrastructure” is merely a rhetorical flourish, the sole purpose of which is to create an illusion that his proposed menu of expenditures should appeal just as much to defenders of small government as it does to progressive Democrats. A quick look at the proposed expenditures shows that they include large transfer payments to preferred groups that have nothing to do with either infrastructure or climate change. Consider this chart prepared by NPR, which breaks down the major categories of expenditure:
“Home/community care” and “affordable housing” constitute over 30 percent of the budget at $613 billion. Much of this money is for child and elder care. Both are traditional forms of transfer payments, which are already available in abundance. Why more? Why now? After all, these cash transfers are not taxable compensation for work done. They increase the motivation to stay out of the workforce, in fact, and thereby reduce the size of the tax base as overall expenditures are mushrooming. Moreover, large doses of home/community care are difficult to target exclusively to the needy. A correct analysis seeks to determine whether such payments are directed toward the truly needy and whether they induce people to leave the workforce to become tax recipients rather than taxpayers.
A similar analysis applies to affordable-housing expenditures, both for renters and owners. In the Biden plan, those expenditures operate as a combined program of disguised subsidies and disguised price controls. An affordable-housing mandate typically requires a developer to build some fraction of total units held for sale or lease at below-market rates to individuals who fall within certain broad income categories. In some programs, the losses to the developer may be offset in part by government subsidies.
These programs are not only costly but also a massive disincentive to new construction, especially when the fraction of affordable units is set too high, at which point the developers cannot recoup their losses on the affordable units by their profits on their market-rate units. A far more sensible regime that reduces both rent controls and subsidies over time allows housing resources to be allocated cheaply and sensibly by market forces. Housing markets are like all others insofar as people are willing to spend other people’s money for their own benefit, which leads to overconsumption. Similarly, price controls reduce the incentive to produce housing that people want, thereby creating systematic shortages, and the long queues and political intrigues that accompany them.
The rest of the initiative’s priorities include investments in electric vehicles at $174 billion, roads and bridges at $115 billion, the power grid at $100 billion, public transportation at $85 billion, and railways at $80 billion. There is absolutely no reason to believe that these expenditures will be made in a responsible fashion, given the political forces that will descend on Washington if the proposed funds become available. Nor is there anything inherently desirable about electric vehicles, for example, that merits their subsidization. To be sure, there is a constant risk of pollution from vehicles powered by fossil fuels, but the correct response is to tax the externality in order to reduce its incidence, not to guess which alternative technology merits a subsidy. Indeed, it is especially wrongheaded to subsidize both electric cars and public transportation when they should be allowed to compete with each other. More generally, any massive subsidy for energy investment is a bad idea for the same reason that it’s a bad idea for housing: it leads to overconsumption, such that total social costs exceed total social benefits.
Shifting to wind or solar energy—both centerpieces of the Biden strategy—is also a bad idea. Those energy sources are too precarious to make more than a dent in the overall energy market. As the US Energy Information Administration reports, fossil fuels account for about 80 percent of total energy production in the United States, as well as raw materials for making “asphalt and road oil, and feedstocks for making the chemicals, plastics, and synthetic materials that are in nearly everything we use.” Keeping crude oil and natural gas in the ground is not a winning strategy. Indeed, relying on wind and solar carries risks, as these forms of energy can respond poorly in extreme situations, a reality that became clear with the breakdown of the Texas power grid recently during an extreme cold snap.
The correct path to environmental soundness lies in the more efficient production and consumption of fossil fuels. This is why one of the best ways to deal with the externalities of fossil fuel consumption, such as air pollution and spills, would be to allow the development of the Keystone XL pipeline. Given how central fossil fuels are to the energy market, any small improvement in their production and distribution will result in enormous benefits. The effort to wean an entire economy off fossil fuels over the next two decades will provide short-term dislocations without any durable long-term relief.
The dubious nature of the Biden plan is made still more evident by looking at its rickety financing. As always, the two favorite targets for new taxation are increases in the corporate income tax and the income tax rates for wealthy individuals. The claim is that these targeted taxes will spare the rest of America from financial pain. Senator Elizabeth Warren made that case for her ultra-millionaire tax, saying her wealth tax would have no impact on 99.9 percent of the population. But that is one strong reason to reject her program or others like it: it encourages majorities to confiscate the wealth of the most productive. Those majorities, of course, would be far less eager if their own taxes were to rise at the same time.
Biden has rightly rejected that approach, but the price of his new, once-in-a-generation expenditure is an increase in the overall corporate tax rate from 21 to 28 percent. Yet this proposal has dangerous consequences too. The United States constantly competes with other nations for corporate investment. Biden’s policy will reduce the level of foreign investment in the United States while simultaneously increasing the level of American investment abroad. This in turn will reverse the beneficial effects of the Trump corporate tax cuts, which notably translated into higher wages. Additional taxes on the wealthy will barely make a dent in the anticipated financial shortfall.
Worse still, it is simply false advertising to say that even if these deferred revenues could be generated, they would cover the full costs of the Biden program. The public expenditures will take place over an eight-year period. As NPR reports, the government plans to keep the corporate tax in place for fifteen years to balance the books. That move will require the treasury to borrow money to cover the anticipated revenue shortfall. And there is no reason to think that the government will meet any of its revenue targets, let alone be able to find the revenues to cover the items on the Biden agenda.
At this point, Republican skepticism about the plan may perhaps peel away some Democratic support. To avert that result, Biden would be well-advised to unbundle the strange bedfellows in his omnibus bill, so that each component can be evaluated on its own merits. The likely result is a smaller program with better outcomes, both for Biden and everyone else.
Joe Biden made a lot of promises during his truncated run for the White House. One of them, that he wouldn’t be Donald Trump, he’s kept. The others, most of which were grounded philosophically in the idea he was a moderate Democrat – an image the mainstream media cheerfully did its best to confirm, have gone out the window.
On economics, on cultural issues, even on foreign policy he’s not just reverting to the positions taken during the Obama years. No, he’s breaking new ground in so many areas it’s clear he’s trying to be a transformational president rather than the caretaker who brought us all together he suggested time and again that he’d be.
His latest foray into the grand schemes of central planning is his lately-much-discussed infrastructure proposal that’s starting to look like “the green new deal” – which he said repeatedly he wasn’t for – plus a lot of other things.
What he wants to do is bad enough. How he plans to pay for it is even worse. Now, the whole business is carrying with it an estimated $2 trillion price tag, a figure that is ambitiously modest. It’s going to cost a lot more and, as if the Democrats ever need a reason to do it, he’s going to suggest a slew of new taxes and tax hikes to get the money.
According to an analysis of the proposal released Tuesday by Americans for Tax Reform, the starting point for Biden will be an increase in the top corporate tax rate from 21 percent to 28 percent alongside the introduction of a 21 percent global minimum tax, an idea beloved by European advocates for enlarging the welfare state to end tax competition between nations.
If that were not bad enough, he’s also calling for a doubling of the capital gains tax to almost 40 percent, imposing a second death tax by ending step up in basis, and raising the top individual income tax rate to 39.6 percent.
What he wants is tax reform in reverse. The right way to do it is to broaden the base and cap or eliminate deductions the way Reagan and Trump did it. In both cases that acted as rocket fuel to a moribund U.S. economy. What Biden is proposing to do will choke off growth and reduce incentives to save and invest – making America more like Japan in the process, a big economy with no appreciable growth.
“Biden’s tax hikes,” ATR said, “will hit Main Street small businesses hard. Small businesses that are organized as pass-through entities (sole proprietors, LLCs, S-corps etc.) pay taxes through the individual code and will be hit by Biden’s plan to raise the top income tax rate to 39.6 percent.”
Moreover, the group said, the increase in the corporate rate – if Biden gets what he is said to want – will cause utility bills to go up. “Utility customers bear the cost of taxes imposed on utility companies. Utility companies pay the corporate income tax. Corporate income tax cuts drive utility rates down, corporate income tax hikes drive utility rates up. When Republicans enacted a corporate tax rate cut, utilities across the country lowered their rates.”
What that means is higher taxes for just about everyone, shattering his promise that those making less than $400,000 a year (even if that’s by household and not individually, a distinction the then-former vice president never made on the campaign trail) “Inclusive of state taxes and the Obamacare 3.8 percent Obamacare tax, Californians would face a capital gains rate of 56.7 percent, New Yorkers would face a capital gains rate of 52.2 percent, New Jerseyans would face a capital gains tax rate of 54.14 percent.”
That makes it clear why Democrats from those and other high-tax states are adamant about repealing the cap the Trump tax reform put on the deductibility of state and local taxes also called “SALT.”
Without the SALT cap, taxpayers in well-run red states end up subsidizing the inefficiency, bloat, and wasteful spending in the poorly run blue states like New York and Illinois. That may be outrageous but it’s also Biden policy – and what the Democrats stand for. Taking money from the people (and states) that have it and oversee it responsibly to subsidize those who manage what they have poorly if at all.
As ATR points out, the proposed Biden’s corporate tax hike would make the U.S. top rate higher than Communist China’s 25 percent, a nation not thought likely to join in the effort to establish a global minimum corporate tax. What the president is proposing is an incentive for American companies to move to China rather than bring their operations home, something the coronavirus pandemic demonstrated “IRL” might be a good idea whose time has come.
The Democrats used to criticize the GOP for supporting tax cuts for any reason. Now the worm has turned. Mr. Biden and the Democratic Party are now for higher taxes for any reason, the health of the U.S. economy be damned. His tax plan is a bad policy – bad for everyone, except maybe China.
The Democrats don’t plan to run on their record in the 2022 midterm elections. They plan to go to the voters and argue that Republicans are too crazy and too outside the mainstream to be allowed to return to power in Congress.
Whether that will be enough will depend in part on the health of the U.S. economy. If the Biden-Pelosi-Schumer spending binge and planned tax increases don’t hamper the post-COVID recovery, that might be enough. However, if the economy tanks and the Republicans pull together a realistic program for bringing growth and jobs back and getting spending under control, a GOP-led majority in both chambers is not only possible but likely.
Before you snicker, remember the Republicans came within a hair of winning back control of the House in November 2020 even as Donald Trump was losing. GOP congressional candidates ran ahead of Trump in about 180 of more than 210 winning races, and Republican House candidates won more contested races than Democrats did. A change in control isn’t out of the question by any means, which is why the progressive campaign machine has to do all it can to discredit its opposition in the minds of the electorate.
Enter QAnon, the internet-based wellspring of conspiracies ranging from the sublime to the outrageous—and all of them ridiculous. Unfortunately for the GOP, a few folks who’ve lately been their voters (not to mention a newly elected member of Congress or two) have been caught on social media spreading the conspiracists’ tales.
Up until it filled a narrative need, QAnon was a little more than a curiosity among the relatively few people who were aware of it. The intrigues it promulgated did produce a few notable and even tragic events but, in the main, it drew the attention of the fringe. That is, until its usefulness in painting a picture of the GOP as controlled by radical insurrectionists became clear. After that, the legacy media became the biggest outlet for its tall tales under the guise of reporting.
Up to a point, the strategy of elevating QAnon been a success in that it left GOP leaders in the difficult position of defending their own while repudiating the insanity. It’s a tight rope to walk. What the Democrats must do now is determine whether they can sustain these attacks over two years, and whether they’re insulated enough to avoid serious blowback.
You see, it’s not just the GOP that has a problem with conspiracy kooks. The Democratic Party is full of them too—and they’ve got the reins of power now. Consider that Rep. Maxine Waters, who now chairs an important congressional committee, was first heard of across America when she accused the CIA of being behind the crack epidemic in the nation’s inner cities.
She’s a problem, not that people bring that up much anymore. Maybe the GOP should. Republican leaders might also want to talk a bit about the Democrats who said George Herbert Walker Bush flew to Paris in 1980 to negotiate a secret agreement with the Iranians to keep the hostages until after the election. (Spoiler alert: He didn’t, but it took a congressional investigation to knock that rumor out).
Remember all the things the Democrats said about the Trump campaign colluding with the Russians and the allegations contained in the Steele dossier. They didn’t remain inside the confines of cyberspace; no, they became front-page news and were treated seriously for months until poof, nothing.
In the last few weeks, prompted by another tirade by Sen. Sheldon Whitehouse (D-R.I.), a guy who could have given the late Joe McCarthy some lessons on tactics, social media was abuzz about the supposed “real” circumstances leading to Associate Justice Anthony Kennedy’s decision to step down from the U.S. Supreme Court with a cast of characters including his son, officials of Deutsche Bank, and others appended to numerous tweets.
It’s undeniable, as historian Richard Hofstadter famously wrote back in 1964, that there is a “paranoid style in American politics.” What he and others miss is that it’s not confined to the Right. It’s at least as prevalent on the Left, if not stronger. The difference is that while the GOP’s crazy sometimes becomes unpleasant, the Left’s progressive crazy sometimes becomes law, which is much harder for all of us to deal with. If you doubt me, read the text of H.R. 1 closely.
Now that she’s a member of the tax-writing Senate Finance Committee, Massachusetts Sen. Elizabeth Warren plans to give the progressive agenda a boost by introducing a bill that would create the nation’s first-ever tax on total assets.
This so-called “wealth tax” would consider anything and everything owned by a taxpayer in computing the taxes owed. More than double taxation – which is taxing the same income twice as happened with the Death Tax – the taxes the former Democratic presidential candidate wants to put on the books would essentially tax savings, investments, and real property over and over and over again.
According to some early static estimates, Warren’s proposal could generate as much as $2.75 trillion per year – but that does not take into account any change in behavior that might occur on the part of the taxpayers on whom it would be assessed.
A study recently released by the non-partisan American Action Forum found a wealth tax would lead to a decrease in innovation and investment, drive down wages and cause unemployment and produce a $1.1 trillion shrinking in U.S. gross domestic product over the first ten years of its existence. In subsequent decades, GDP would be smaller by about $283 billion, a 1 percent annual decrease from current projections.
The Warren plan would impose this new tax, published reports indicate, on taxpayers with assets above $50 million at a top rate of 6 percent per year while giving the U.S. Internal Revenue Service far greater power than it currently enjoys. With a wealth tax on the books, the IRS would have to hire thousands of new agents and auditors to keep track of all the assets held by those of whom the tax falls, to account for them, and assign them proper valuation at tax time.
Also included in the draft of Warren’s plan circulating through the nation’s capital is a 40 percent “exit tax” to be imposed on anyone who seeks to leave the United States permanently and is reminiscent of the so-called “tax” forced upon Jewish individuals and families seeking to emigrate from Nazi Germany in the years prior to the onset of World War II.
There are some, even in Warren’s own party, who doubt the plan is legitimate.
“We are tax law professors who identify as liberal Democrats, donate to Democratic candidates, publicly opposed the Trump tax cuts, and strongly support higher taxes on the affluent,” Daniel Hemel and Rebecca Kysar recently wrote in the New York Times. “We are worried, though, that leading figures in our party are coalescing around an idea whose constitutionality is doubtful at best.”
Warren’s plan is one of several under consideration on Capitol Hill that, on paper, raise tremendous amounts of money for the U.S. government. Unlike tax changes that achieve such ends by stimulating economic growth, however, her plan would simply redistribute income already earned, long a progressive objective.
To date, there has been no comment from the Biden Administration on the Warren wealth tax or any of the similar proposals under consideration. For his part, President Joe Biden remains committed to his promised repeal of the Tax Cuts and Jobs Act in its entirety. If he’s successful, that would violate his repeated campaign pledge in which he vowed no American family making less than $400,000 per year would see their taxes go up “by one thin dime.”
The hidden agenda behind the new president’s busy week
No one can accuse President Biden of easing into office. His first days have been a blizzard of executive orders, presidential memorandums, and official proclamations. He says he wants to overturn the worst policies of the previous administration, and to restore a sense of national unity and institutional integrity. What gets lost in the details of all these initiatives is Biden’s partisan goal.
It’s not just that the new president wants to resume the trajectory America was on when Barack Obama left office in 2017. He also wants to claw back the gains red states made over blue states during the last four years. He wants to shift federal resources to Democratic constituencies, and to save the blue states from the true cost of their misguided policies. And if red America has to pay a price in lost jobs and tax revenue, well, that’s too bad.
Leave aside, for the purposes of this discussion, the relative merits of Biden’s executive actions. (I disagree with almost all of them.) Focus instead on their distributional effects, not on individuals but on sectors of the economy, on regions of the country, and on the donor bases of the two parties. The image that comes to mind is of swarms of dollars changing course midflight: a mass migration of subsidies, spending, and incentives from the GOP coalition to the Democratic one.
Start with energy. Biden killed the Keystone XL pipeline at a cost of 1,000 jobs and diplomatic goodwill with Canada. He banned fracking on federal lands and paused oil and gas lease sales in the Arctic National Wildlife Reserve. According to a White House fact sheet, he told federal agencies to “accelerate clean energy and transmission projects.” He is sure to bestow federal largesse on the sons of Solyndra.
The alternative energy sector overwhelmingly favors Democrats. Its political investments have paid off. The old-style extractive industries, mainly based in GOP strongholds, will suffer. In some cases they are targeted for extinction. The knock-on effects are serious. “Wyoming state superintendent Jillian Balow notes that her state depends on some $150 million a year in oil and gas federal royalties to fund K-12 schools,” says the Wall Street Journal editorial board.
Other Biden measures resumed the flow of government aid to the special interests behind his campaign. The second Catholic president has jumpstartedfederal funding of Planned Parenthood almost two years after President Trump cut off the nation’s largest abortion provider. Biden also reversed President Trump’s ban on money for “sanctuary cities” that choose not to enforce federal immigration law. That decision will help boost the budgets of progressive municipalities eager to pass off the costs of illegal immigration. Biden’s codification of the Supreme Court’s Bostock decision, which made gender identity protected under civil rights law, and his lifting of the ban on trans soldiers is sure to please a class of donors essential to Democratic Party finances.
Biden’s proposed American Rescue Plan best captures the new administration’s intermingling of public policy and greasy-pole gamesmanship. Take, for example, the $130 billion that Biden wants to spend on K-12 schools. That number is on top of the $67 billion Congress already has committed to reopening elementary and secondary schools.
The additional cash is a handout to the teachers’ unions, who have opposed a return to in-person instruction at every opportunity, and who are among Biden’s closest allies. Biden has adopted the unions’ rhetoric, saying that schools cannot open until they have been renovated. He’s wrong, of course—measures such as masks, hygiene, and social distancing are enough to stop the spread, especially among the elementary schoolers who need in-person classes the most and whose transmission rates are low. But science doesn’t matter. The unions must get paid.
One year after COVID-19 appeared in America, it is more than evident that arbitrary, statewide lockdowns are a disaster for small businesses, which happen to be a key part of the Republican coalition. The states that have done the most to reopen have best weathered the economic storm. And these same states tend to be low-tax, low-minimum-wage, and have a business-friendly regulatory environment, as well as a warmer climate. The Wall Street Journal reports that the South is leading America’s recovery. But, in the heavily Democratic northeast, “The recovery of jobs has lagged behind.”
What does Biden want? His solution is to make Florida and Texas more like New York and California. My colleague at the American Enterprise Institute, Paul H. Kupiec, calculates that the nationwide $15 minimum wage contained in the American Rescue Plan would “shift business formation, growth, and employment from red states to blue, as the higher minimum wage erodes red states’ labor cost advantage in many job categories.” What’s best for Cuomo, however, is not what’s best for the country.
A steep minimum wage hike in the middle of an economic crisis that disproportionately affects small business is the exact opposite of what you want to do to spur full employment. But it does make sense if you are using the crisis to gain leverage for unions and government over free labor and the private sector.
Blue America began to claw back red America’s earnings last week. And the next four years (at least) will see the Biden coalition press its advantage.
California businesses are leaving the state in droves. In just 2018 and 2019—economic boom years—765 commercial facilities left California. This exodus doesn’t count Charles Schwab’s announcement to leave San Francisco next year. Nor does it include the 13,000 estimated businesses to have left between 2009 and 2016.
The reason? Economics, plain and simple. California is too expensive, and its taxes and regulations are too high. The Tax Foundation ranks California 48th in terms of business climate. California is also ranked 48th in terms of regulatory burdens. And California’s cost of living is 50 percent higher than the national average.
These statistics show why California’s business and living climate have become so challenging. But the frustrations that California entrepreneurs face every day present a different way of understanding their relocation decisions.
Erica Douglas, a young tech entrepreneur, moved her company, Whoosh Traffic, from San Diego to Austin, Texas, a few years ago. Here is what she had to say:
“I’m leaving you. I’ve struggled with a government that is notoriously business-unfriendly—with everything from high taxes on earning to badgering businesses to work more to comply with bureaucracy. I paid enough in California income tax in one year alone to hire another worker for my business. And you charge me $800 annually as a corporation fee, when most states charge just a few dollars.”
Not surprisingly, California businesses tend to relocate from the counties with the highest taxes, highest regulatory burdens, and most expensive real estate, such as San Francisco, and they tend to relocate to states where it is easier to prosper. Texas imposes just a 0.75% franchise tax on business margins, compared to California’s 8.85% corporate tax. As if this large difference weren’t enough of an incentive to leave, the city of San Francisco imposes a 0.38% payroll tax, and a 0.6% gross-receipts tax on financial service companies. Yes, if your business is in San Francisco, not only are your profits taxed by the state, but your payroll and your output are taxed as well. Not to mention that Texas has no individual income tax, compared to California’s current top rate of 13.3%, which may rise to 16.3% soon, and which would apply retroactively.
Speaking of California entrepreneurs leaving the state, there is Paul Petrovich. If you live near Sacramento, chances are your life has been made easier by Paul. He is a major commercial real estate developer whose projects include facilities involving Costco, Target, Walmart, McDonalds, Wells Fargo, and Verizon, among other major firms. But Petrovich has announced he will soon be leaving. For . . . drumroll please . . . Texas.
You see, California is discussing a wealth tax that may hit Petrovich. Known as AB 2088, lawmakers are so proud of this 0.4% tax on wealth that they proudly market it as “establishing a first-in-nation net-worth tax” that “will generate $7.5 billion in revenue.” Complicated as all get-out, it involves not just financial assets but real estate, farmland, offshore holdings, pensions, art, antiques, and other collectibles. Europe tried taxing wealth, and it has failed, leading almost all countries to abandon it. And the idea that it will generate $7.5 billion in revenue is laughable, though it will create additional income for tax attorneys and CPAs. The state also intends to make this law follow you for up to a decade should you leave. Clever politicians? Maybe, but just how will they convince other states to cooperate once you relocate? Not to mention whether this future provision is constitutional.
I am surprised that Petrovich stayed in California so long. As a developer specializing in developing infill projects, meaning developing unutilized or underutilized land, he has been involved in many lawsuits challenging his right to develop.
One has involved a mixed-use development project that includes a Safeway supermarket, senior living, shopping, and a gas station on a site of a former railway station, polluted and abandoned. What is not to like? For the city council, it is the gas station.
Petrovich has been involved in a legal battle over this project since 2003. All over a gas station. Twenty lawsuits and over $2 million in legal fees later, Petrovich appears to be winning, and winning against a city council that broke the law.
A state appeals court recently ruled that the Sacramento City Council denied Petrovich a fair hearing several years ago by acting in a biased manner. Sacramento Superior Court judge Michael Kenny wrote that one councilman demonstrated “an unacceptable probability of actual bias” and failed to have an open mind. The court found that the councilman was trying to round up votes against the gas station before it came before a hearing. Rather than accepting this ruling, the city council will appeal. They appear to be doubling down not only on bad behavior but on wasting resources as well .
Readers often ask me how California politicians have changed over time. An important and often overlooked factor is that politicians now have personal agendas that they aim to impose on other Californians, often without transparency or accountability. This is what is going on now with Petrovich, and is what is going on with AB 5, the new law that prevents many Californians from working as independent contractors that began on January 1. Voters must begin to hold politicians accountable for this if California is ever able to reform.
Mr. Petrovich, if you leave, I will be sorry to see you go. Your developments made life much easier and more prosperous for thousands. Thanks for your service. Your potential departure will be a loss for all of us.
Some people, even some very prominent economists like Nobel Prize winner Paul Krugman simply cannot get their heads around the idea that letting people keep more of what they earn is the best kind of economic stimulus there is. Instead, despite years of hard data proving otherwise, they still maintain more spending by the government is what greases the wheels and keeps the economy running.
This is nonsense. The tax cuts of the 1920s, the 1960s, and the 1980s were all followed by periods of remarkable growth in the U.S. economy. The spending binges pushed by FDR, by Richard Nixon, and among others, Barack Obama did little to fuel the engine of productivity or raise living standards.
The latest experiment, if it need be called that, was the Tax Cuts and Jobs Act proposed by a Republican-led Congress and signed into law three years ago by President Donald Trump. Progressives derided the legislation as “welfare for the rich” that would see the “poor get poorer.”
The progressives were wrong. After the TCJA became law, optimism among Main Street business leaders reached an all-time high in the third quarter of 2018 while the unemployment rate reached a generational low. Before the implementation of lockdowns as a mostly Blue Strategy for combating the novel coronavirus, the economy added 5 million jobs while unemployment among women, people of color, and workers without high school degrees reached record lows.
Thanks to the reworking of the tax code by the TCJA, American business started to put money into itself again. Core investments in equipment and other business necessities reversed its five-year downward Obama-era trend, shooting back up, adding to productivity, and raising workers’ wages. And, most distasteful of all to liberals whose economic policies are all about spending your money like it was theirs, federal revenues reached an all-time high because more Americans were working for bigger paychecks in businesses that were expanding.
This is what Joe Biden has promised America he’s going to undo. That’s the practical effect of his promise to “repeal the Trump tax cuts” which, in his mind only benefited the ultra-rich like him. He and his party win votes by exploiting the resentments that exist in America between those who are well off and who work hard and those who don’t. House Speaker Nancy Pelosi, D-Calif., may think the $600 per person being doled out in the latest COVID-19 relief bill will stimulate the economy – but that will be hard to do while other benefits provide a disincentive for people to go back to work in the places they can. Believe it or not, there was a hiring crisis in the Red States once their economies got moving again during the pandemic because some folks decided, rationally enough, they’d rather stay home and collect unemployment plus rather than go back to work.
They – and Biden and his incoming team of economic advisers – don’t know what they missed. Figures released by the Federal Reserve show low- and middle-class families saw large gains in wealth growth in 2018 and 2019. Low-income families saw their net worth increase 37 percent while middle-class families saw their net worth increase 40 percent.
Figures supplied by the House Ways and Means Committee show household income reached new highs as real median U.S. household income in 2019 rose nearly 50 percent more than during the eight years Barack Obama was president. Median household incomes increased 7.1 percent for Hispanics, 7.9 percent for Blacks, 10.6 percent for Asian Americans, and 8.5 percent for foreign-born workers while wages for minorities and women and young people grew at a faster pace than they did over Obama’s second term.
The Tax Cuts and Jobs Act worked, so well in fact it established the foundation for what should be – and looked like it was going to be a rapid recovery from the pandemic lockdowns. Instead, we have Joe Biden hinting that higher taxes, new taxes, carbon taxes, and other taxes are coming even if – as he unbelievably promises – families making less than $400,000 a year won’t pay a single dime more.
It’s sad really. With all the evidence showing Jack Kemp and Ronald Reagan were right, that a rising tide does lift all boats, Biden would rather pursue policies that play to the rhetoric of classically socialist class envy while ignoring the need to create an environment in which opportunities exist for those who most need them
Former Vice President Joe Biden has taken to social media to push back against claims his economic plan will lead to a tax hike on American taxpayers. “Let me be clear,” he tweeted on October 7, “A Biden-Harris Administration won’t increase taxes a dime on anyone making less than $400,000 per year.”
At first blush, that seems to be a lie. One of Biden’s core commitments to the voters has been his and Democratic Vice Presidential nominee Kamala Harris’ promise to repeal “on day one” the 2017 law that lowered marginal income tax rates on individuals and corporations. If that happens then the amount paid in income taxes will go up on everyone who pays them, not just the “wealthiest Americans” as Biden and Harris like to suggest.
The reforms to the U.S. tax code that made up the Tax Cuts and Jobs Act provided a financial boost to all Americans, even those that do not pay income taxes, because of the resulting increase in economic activity and job creation.
The numbers show the tax cuts worked as intended. The average American kept more than $1,250 of what they’d earned than previously possible while the average family of four saw household income increase by $2,000. According to data compiled by the U.S. Internal Revenue Service, taxpayers with incomes of between $50,000 and $100,000 saw a reduction in their annual levies twice as large as those with incomes of over $1 million.
Biden’s attack on the affluent, a tactic used by Democrats any time the economy turns sour as it has because of the coronavirus lockdowns, is calculated to win votes in November. His economic plan does not include income tax hikes for those making less than $400,000 per year – which conflicts with his promise to repeal what he calls the Trump tax cuts in their entirety – but does include several hikes in what the middle class will have to pay if his proposal becomes law.
“The most notable tax increase he has advanced is to restore in full the excise tax associated with the Obamacare individual mandate. Virtually all families who paid this tax (before it was zeroed out by the Trump tax cut) made far less than $400,000 per year,” says the Center for a Free Economy’s Ryan Ellis.
Ellis is one of several tax policy experts to conclude Biden’s plan includes tax hikes on middle America. Groups from the left, right, and center including the liberal Tax Policy Center, the Tax Foundation, the American Enterprise Institute, The Committee for a Responsible Federal Budget, and a model budget analysis produced by Penn Wharton all said taxes would go up across all income levels if the Democrat’s proposal became law.
Coming or going, it seems the former vice president is not being totally candid with the voters about what his plan would do. The Trump tax cuts will not be completely repealed, something left-wing followers of Bernie Sanders and AOC might find disappointing. The middle-class GOP voters Biden and Harris are trying to woo into their column will not like hearing they’ll be paying more to the government while potentially getting less from it.
Biden is right on one thing though. It won’t be “one, thin dime” taxpayers will be shelling out if his plan passes; it will be a lot more.
The California Legislature is back from its summer recess and has frantically resumed its quest for new revenue sources.
One of the latest ideas is Assembly Bill 1253. This proposed legislation would add new income tax brackets for high earners on top of the existing ones.
Income between $1 million and $2 million would receive a one percentage point surcharge, bringing the marginal rate to 14.3 percent. Those earning between $2 million and $5 million would pay an additional three percentage points, and those earning over $5 million would pay an additional 3.5 percentage points, bringing their marginal rates to 16.3 percent and 16.8 percent respectively.
This plan constitutes a continuation of California’s soak-the-rich approach to raising revenues.
While some seem to believe that high earners can provide unlimited resources, the evidence from prior tax hikes suggests that the introduction of these tax rates is not even likely to raise revenue for the state. At the same time, it will hammer job creation.
The problem is that high earners do not simply sit there and take it when the state goes after their income.
In a detailed study of the 2012 California ballot measure that raised the top state rate to 13.3 percent, Ryan Shyu and I found that just two years later, the state was only collecting 40 cents of every dollar that it had hoped to raise from the tax increase.
High income taxpayers affected by the 2012 tax increase suddenly began to flee the state at higher rates, especially to zero tax states like Nevada, Texas, and Florida.
Even more importantly for the state budget, those that stayed began declaring considerably less taxable income than they would have otherwise, apparently either scaling back their productive activities or engaging in tax avoidance.
The economist Arthur Laffer has famously argued that there is a tax rate beyond which a government’s revenue will decline if it raises taxes further, due to the disincentive effects of high taxes.
While the federal government may be helped by limits on what American citizens can do to escape federal taxation, state governments tread on much thinner ice when faced with the ability of taxpayers to move their residences and their earnings generation to other states.
In 2012, California was at least still at the point where raising top income tax rates led to some increase in near-term revenue, albeit with grave long-term consequences.
Today, however, the state is starting from a 13.3 percent tax rate that is the highest in the nation.
Furthermore, Congress has since moved to protect federal taxpayers against bloated state spending by placing a $10,000 cap on state and local tax deductions as part of the 2017 Tax Cut and Jobs Act.
So while the blow of a 3 percentage point tax increase in 2012 was strongly cushioned by deductibility against top-bracket federal rates, California taxpayers today would feel the full force of this proposed round of increases.
Once taxpayers have responded by voting with their feet, reducing their business activities, and re-upping with their tax attorneys, the state will likely lose revenue if it attempts to increase rates.
To make matters worse, Sacramento’s narrow focus on tax revenues ignores that fact that this tax avoidance behavior will lead to job losses. These rates also apply to business income to non-corporate entities (such as partnerships and LLCs) which account for over half of all employment in the US.
In another study, Xavier Giroud and I found that each percentage point increase in individual tax rates that the average state implements leads to losses of up to 0.4 percent of all non-corporate jobs in the state.
Starting from California’s already astronomical top rate, the impact would be expected to be even larger.
These job losses will negatively impact the well-being of Californians and further reduce state tax revenues.
California’s approach to relying on the taxation of top earners has sown the seeds of its own destruction. The top 0.5 percent of taxpayers pay over 40 percent of individual income taxes in the state.
Officials are blaming COVID-19 for the budgetary havoc, but this structure means that in any downturn, California revenues will tank due to the excessive reliance on both the ordinary income and capital gains of top earners.
If the Legislature is interested in promoting economic growth and prosperity in the California, and securing the state’s own fiscal future, it should reject further top income tax rate increases.
Instead, it should work towards putting the state back on a path towards being a competitive place for high-income individuals and businesses to locate their economic activity.
President Donald Trump has so much on his plate right now, it’s difficult to see how he prioritizes the actions he must take for the country’s good. There’s so much going on in so many different areas it’s hard to recall any president in recent memory having to face so much at any one time at any one time.
All presidents must deal with crises. How they lead is part of the way we judge their fitness for office. And there are a lot of folks who say his leadership lately has been lacking as the nation deals with the novel coronavirus.
That’s remarkably ungenerous. The president mobilized the federal government and private industry to respond in ways not seen in decades. It’s impossible to be certain but is nonetheless highly likely the interventions he led produced faster testing on a broader scale, more ventilators than needed, and helped keep the spread of COVID-19 under control.
We may never know. All the models produced by the so-called public health experts working in the smart institutions were way off, even when early-stage interventions are accounted for. Meanwhile, as the result of actions taken by many of the nation’s governors, mostly in blue states, the U.S. economy tanked, a record number of jobs were lost in a single month, and Congress spent so much money on relief that might not even have been necessary it will take at least a decade of above-average economic growth to recover.
For the immediate future, President Trump would be both politically smart and doing the best thing for the country if he focused on measures to get the economy open and off its back. Businesses need to reopen. Lockdowns, if they are needed again (if a still-at-this-point hypothetical second wave hits), need to be localized, targeted, and well thought out. People need to get back to work, pay down their debt, and start saving again.
Several steps can be taken to help bring about the V-shaped recovery most everyone is hoping for. There are lots of positive indicators in the economy that its possible. Every policy decision from now until at least the end of summer ought to be taken specifically to enhance the possibility that will occur.
Just as the president was right to postpone tax filings and payments from April 15 to July at the height of the crisis, he would be right to have Secretary of the Treasury Steve Mnuchin tell the U.S. Internal Revenue Service to postpone the payment of those taxes until sometime in 2021.
The economy has just started showing signs of life. Taking $1 trillion out of it – which is what it would be if all the federal personal and corporate income taxes, estimated payments for the self-employed, federal excise taxes, the taxes paid by job-creating small businesses, and the outstanding balance due on returns from prior years – would almost assuredly plunge it back into a recession and push the recovery off by months.
The National Bureau of Economic Research says the recession caused by the lockdowns resulting from the coronavirus panic started in February. The NBER – and they’re the ones who get to make the decision – called it steep but short-lived. July 2020 should be a month of recovery because of strong, perhaps stronger than normal, economic activity. But that only happens if people are engaged in productive activity, buying and selling goods and services in the marketplace rather than sending Uncle Sam back a good chunk of the so-called stimulus.
Several prominent economists have endorsed this idea as being curative. Influential political groups including the National Taxpayers Union and Americans for Tax Reform have also signed on. The president and Secretary Mnuchin have it within their power to make this happen. They should order it be done with all dispatch. Certainty is important as businesses plan what to do next, whether to hire or fire, whether to stay open or close, and whether to expand. Knowing that the taxes due would not have to be paid until sometime early next year gives them that much more time to use their available cash to put people back to work. Making America Great and Keeping America Great can only be accomplished if America is working.
Democrats in the U.S. House of Representatives may have been stuck in their districts because of the coronavirus but Speaker Nancy Pelosi has been working hard on their behalf. On Tuesday she introduced the next in what’s getting to be a long line of COVID relief bills that, true to form, is loaded with tax and spending increases.
According to a quick but probably not definitive analysis of what she’s calling The Heroes Act by the good folks at Americans for Tax Reform, the Pelosi bill:
The new Pelosi bill also bails out her political allies, whether they be the cashed strapped, heavily indebted blue states like California, New York, and Illinois or cities like Baltimore, Los Angeles, and Philadelphia or her wealthy coterie of San Francisco sophisticates who probably also have freezers full of designer ice cream.
First off, she’s calling for $500 billion in funding to assist state governments with the fiscal impacts from the public health emergency caused by the coronavirus, followed by $375 billion in funding to assist local governments. Then she wants $20 billion to assist Tribal governments, $20 billion for the governments of the Territories, and an additional $755 million for the District of Columbia.
But the biggest kick of all is the two-year suspension — for 2020 and 2021 — of the elimination of the cap on the deductibility of state and local taxes on federal tax returns. That deduction, called SALT by the tax policy experts, helps ease the burden of living in high cost, high tax states like California while increasing the total burden of the federal budget sitting on the shoulders of low tax and no tax states like South Dakota, Texas, Tennessee, and Florida. To put it another way, it’s a way to get the red states to pay for the upgraded standard of living enjoyed by blue voters in blue states.
Congress and President Donald Trump capped the deductibility of SALT in the Tax Cut and Job Acts, making everything fairer to all. Pelosi wants to undo that permanently, which is probably why her proposed suspension lasts two years — which she figures is enough time for a Biden administration to get repeal through a Democratic Congress. What’s especially galling is how no one is going to call her out on how she and her husband will personally benefit if the cap is lifted. The Pelosis stand to save a lot of money if the SALT cap comes off while many of the rest of us end up paying more. Didn’t she recently call a scheme like that where an elected official stood to profit personally from political action they’d proposed or undertaken an impeachable offense?
'Over 86% of all households would lose' from free tuition policies
The “free” college plans touted by Sen. Elizabeth Warren (D., Mass.) and other Democratic presidential hopefuls will require radical tax hikes and leave 86 percent of American households worse off, a recent study found.
Warren and Sen. Bernie Sanders (I., Vt.) often promise tuition-free higher education and student debt cancellation on the campaign trail. However, a National Bureau of Economic Research study conducted by University of Wisconsin researchers found that free college translates to a hollowed-out higher education system that leaves many Americans worse off.
Researchers simulated two scenarios: one in which the federal government forces states to adopt tuition-free public colleges and another in which it provides subsidies to encourage states to do so. They calculated how each plan would affect the welfare of American households. The welfare function was derived from, among other things, the positive and negative impacts of higher tax rates and lower education costs.
“Over 86% of all households would lose while about 60% of the lowest income quintile would gain from such policies,” the study found.
In both scenarios, the free tuition policy benefited a group of the poorest Americans at the expense of everyone else. For the vast majority of U.S. households, any benefit derived from a free college plan was outweighed by its negative consequences.
Sens. Warren and Sanders, as well as former Obama official Julián Castro, want to make public college free for all Americans. Other presidential candidates, including South Bend mayor Pete Buttigieg and Rep. Tulsi Gabbard (D., Hawaii), backed a less ambitious plan that removed tuition costs only for middle- and low-income families.
Such proposals could end up hurting students before they get to college. For example, Warren said she would pay for her free-tuition plan by levying an up to 2 percent wealth tax on “ultra-millionaires.” She claims in her policy plan that states will split the cost of college tuition with the federal government but still “maintain their current levels of funding” for academic instruction even after her plan is implemented.
Warren’s plan would force state governments to withdraw resources from public K-12 education to fund the free college program, worsening the overall quality of education students receive before college. The lower education quality, along with higher tax rates, would contribute to a decline in welfare for U.S. households, according to researchers.
“The idea of ‘free’ public colleges is politically seductive. But of course a college education can’t actually be free—someone must pay for it,” the study said. “Allocating additional resources to the college stage may be self-defeating if this entails a reduction of public expenditure in the earlier stages.”
Some scholars, however, argue that lower per-pupil costs do not necessarily lead to lower education quality, but may reflect a more efficient school system. Analysts at the Heritage Foundation found that D.C. public school students drastically underperformed despite the district spending nearly double the national average per pupil.
Other academics have found flaws in existing free college programs. A Harvard University study found that a Massachusetts tuition-free college program for high-performing students actually lowered the students’ college completion rate, complicating claims from 2020 Democrats that their education plans would allow more students to graduate.