Tax Reform: “Unintended Consequences”

by Andrew Stuttaford

There’s a lot that’s wrong with the GOP’s tax overhaul, and much of it can be put down to the speed at which it has been flung together, speed that, given the breadth of the proposed changes and the complexity of the tax system, is quite astonishingly reckless. There is absolutely no need to declare ‘victory’ (it’ll be anything but) by Christmas.

And, yes, while the complexity of the tax system is part of the problem that the GOP has set out to tackle (without, I suspect, much success), that does not mean that it can avoid the uncomfortable reality that simplifying the complex can itself be complex. The Gordian option is not always available.

A week or so back, I quoted something written by the Wall Street Journal’s Greg Ip:

In their rush to pass a sweeping tax overhaul, Republicans and the Trump administration may be headed for a reckoning with the law of unintended consequences. The U.S. tax system is a complex, jury-rigged contraption. At the best of times, tampering with any part invariably triggers collateral consequences. Those risks are magnified now by Republicans’ determination to pass the plan with minimal hearings on party lines by Christmas.

Now there’s this from Politico (my emphasis  added):

Republicans’ tax-rewrite plans are riddled with bugs, loopholes and other potential problems that could plague lawmakers long after their legislation is signed into law…

Republicans may try to pass subsequent legislation to address problems, but that may not have the ”reconciliation” protections — a set of complex rules in the Senate that allow them to shut off Democratic filibusters — on which they’re now relying to move their plan through the chamber. That would enable Democrats to block any fixes.

In many cases, Republicans are giving taxpayers little time to adjust to sometimes major changes in policy. An entirely new international tax regime, one experts are still trying to parse, would go into effect Jan. 1, only days after lawmakers hope to push the plan through Congress.

“The more you read, the more you go, ‘Holy crap, what’s this?’” said Greg Jenner, a former top tax official in George W. Bush’s Treasury Department. “We will be dealing with unintended consequences for months to come because the bill is moving too fast.”

Republicans may try to pass subsequent legislation to address problems, but that may not have the ”reconciliation” protections — a set of complex rules in the Senate that allow them to shut off Democratic filibusters — on which they’re now relying to move their plan through the chamber. That would enable Democrats to block any fixes.

Lawmakers could also punt some of the issues to Treasury to figure out with government regulations. But that’s typically a slow process, and most of the Republican plan would take effect Jan. 1.

Quite how that is taxpayer-friendly escapes me.

And then there’s this (via Richard Rubin in The Wall Street Journal, again, my emphasis added)

Some high-income business owners could face marginal tax rates exceeding 100% under the Senate’s tax bill, far beyond the listed rates in the Republican plan. The possible marginal tax rate of more than 100% results from the combination of tax policies designed to provide benefits to businesses and families but then deny them to the richest people. As income climbs and those breaks phase out, each dollar of income faces regular tax rates and a hidden marginal rate on top of that, in the form of vanishing tax breaks

Virtue-signaling (for the benefit of an audience that will not be won over) comes at a price.

Meanwhile, while we should be pleased that the GOP withdrew its earlier plan to attack 401k plans, it appears that the Republican war on savers is not over.

The Wall Street Journal:

A little-discussed provision in the Senate tax bill could lead to a higher tax bill for millions of small investors and cause many to unload stocks before year-end to avoid those costs.

Under the Senate’s $1.4 trillion tax overhaul, investors would lose the ability to choose which shares they can sell to reduce a position. Instead, investors selling partial stakes in a company would have to unload their oldest shares first, a process known as selling on a “first-in, first-out” basis.

After complaints, mutual funds and ETFs have been exempted from this particular twist of the Republican knife, but the GOP Senate majority’s message to individual investors is to drop dead or, rather, to pay up. It’s a move that punishes both the buy-and-hold and dollar cost averaging approaches preferred by many smaller investors and is made all the more iniquitous by legislators’ long-standing refusal to inflation-adjust capital gains that, in the real world, may be far less than they seem.

At least House Republicans appear to see that there’s a problem:

The House’s tax proposal doesn’t include the first-in, first-out provision, and some lawmakers are trying to kill it. In a letter to Senate leaders on Thursday, 41 House Republicans urged their colleagues to drop the provision, saying it would amount to “massive, fundamental change that inhibits investor autonomy.”

And

Some money managers and analysts say there has been so little discussion of the Senate provision that investors may be surprised to learn that the new rule could reduce—or even wipe out—what they would save from an income-tax reduction.

“If someone thinks their tax bill is going to get cut next year, some investors may wait until 2018 to sell stocks and then have this huge tax bill” since they will be forced to sell their oldest holdings first, said JJ Kinahan, chief market strategist at TD Ameritrade.

Another vote-winner! When are the midterms again? 

And

Another concern for small investors: The first-in, first-out provision will make it more expensive to perform regular portfolio rebalancing to keep their mix of stocks and bonds constant, since the provision will raise the amount of taxes they pay.

“This discourages investment rather than encourages it,” Mr. Kinahen said. “That’s dangerous.”

Meanwhile, via Politico (yet again, my emphasis  added):

The Treasury Department said Monday that the GOP tax plan currently before Congress would need an assist from other Trump administration priorities to pay for itself. 

Tax cuts alone aren’t enough, Treasury said in a one-page analysis, citing welfare reform and infrastructure spending as additional boosts to the economy.

Oh.

Treasury Assumes the Tax Cuts Will Work Fantastically Well

by Ramesh Ponnuru

The Treasury Department asserts that a combination of tax cuts and other Trump-administration policies will raise annual economic growth by an average of 0.7 percent over the next decade, so that it runs at 2.9 rather than 2.2 percent. Half of this alleged boost to growth, it says, will come from changes to corporate taxation. Treasury provides no explanation of how it reached its 0.7 percent figure, but does explain that if you assume all this growth occurs then the federal government will end up with more revenue than it would have had without the tax cuts. I assume that the point of this one-page press release was to allow Republicans to continue to pretend that there are economists who have looked seriously at this issue and believe that their tax-cut bill will result in higher revenues over the next decade–and thus there is no need to scale it back, cut spending, or admit that deficits will be higher.

‘Mr. Trump grew uncomfortable after two
or three days of peace’

by Rich Lowry

There is lots to chew on in the big New York Times piece from over the weekend on Trump in the White House. The contention in the article that Trump watches four to eight hours of TV a day has gotten a lot of attention, including from the president who denied it in a tweet today, not very convincingly:

If we’re counting having the TV on in the background, it’s not hard to believe Trump is at four hours or more a day. In the piece itself, the Times noted an earlier preemptive denial from Trump: 

…he is leery of being seen as tube-glued — a perception that reinforces the criticism that he is not taking the job seriously. On his recent trip to Asia, the president was told of a list of 51 fact-checking questions for this article, including one about his prodigious television watching habits. Instead of responding through an aide, he delivered a broadside on his viewing habits to befuddled reporters from other outlets on Air Force One heading to Vietnam.

“I do not watch much television,” he insisted. “I know they like to say — people that don’t know me — they like to say I watch television. People with fake sources — you know, fake reporters, fake sources. But I don’t get to watch much television, primarily because of documents. I’m reading documents a lot.”

What stuck out to me most in the piece was this passage:

To an extent that would stun outsiders, Mr. Trump, the most talked-about human on the planet, is still delighted when he sees his name in the headlines. And he is on a perpetual quest to see it there. One former top adviser said Mr. Trump grew uncomfortable after two or three days of peace and could not handle watching the news without seeing himself on it.

This really gets to the underlying motive of the tweets, which aren’t a brilliant ploy to distract from other news or a threat to the republic, as is often argued; they are largely a way for Trump to entertain himself by continually stirring the pot and keeping all the attention on him. This is where all the TV-viewing comes back in. The tweets are performance art, for the enjoyment of the artist (Trump) and the viewer (Trump).

It Shouldn’t Be this Uncertain in Alabama

by Theodore Kupfer

And yet it is. Roy Moore might hold a lead in the polling average, but honest observers are taking that with a grain of salt. The turnout for special elections is famously irregular, and the Moore scandal only makes the outcome harder to predict. The polls have accordingly shown a wide range of outcomes — everything from Moore up 53–44 to Doug Jones up 50–40. In fact, both of those margins are from polls released today.

The first is from Emerson College, which has had Moore consistently ahead of Jones since the allegations first surfaced. The nine-point lead represents a significant bump from the last Emerson poll conducted a week ago, which had Moore up four. Meanwhile, the poll showing Jones in front is from Fox News, which had Jones up eight on November 15. The difference between these two pollsters lies in the partisan composition of their samples: Emerson’s 600-person sample was 50 percent Republican and 33 percent Democratic; Fox News’ 1,127-person sample was 44 percent Republican and 42 percent Democratic. It seems a lot will hinge on which candidate can get out the vote.

Which is the case with most competitive elections. But this election should not be competitive. The last time a Democrat won a senatorial election in Alabama was 1992; the candidate was the solidly conservative Richard Shelby, who switched parties two years later and remains in office today. The last time a senatorial election was competitive in the state was 1996, when Jeff Sessions beat Roger Bedford by a mere seven points to capture the open seat. But Bedford was a pro-life Democrat who said things like “the old liberal days of tax and spend are over.” Jones’s beliefs are much farther afield from those of the Alabama electorate, and any reasonable candidate would be trouncing him.

Some commentators insist on casting Moore’s thin lead in the polling average as evidence of Steve Bannon’s strategic genius. At Bloomberg, Jonathan Green tells the story of how Bannon “rescued” Moore’s campaign “against all odds.” But a Republican victory in the Alabama special election would be a safer bet were Bannon not involved.

Study Shows Hormonal Contraception Increases Breast-Cancer Risk

by Michael J. New

Last week, the New England Journal of Medicine published a study finding that hormonal contraceptives increase the risk of breast cancer. It is among the first studies to specifically analyze the effect of newer, low-dosage methods of contraception. The study is both thorough and comprehensive, as it analyzes nearly 1.8 million women over a span of 17 years using Denmark’s comprehensive medical registry. The study has been covered by a number of mainstream media outlets including the New York Times, USA Today, Slate, NPR, and Time.

A significant body of public-health research finds that contraceptives with high doses of estrogen increase the risk of breast cancer. For instance, a 1996 meta-study in The Lancet analyzed data from 54 studies surveying 25 countries and found solid statistical evidence that both current and recent users of oral contraceptives were at an increased risk for breast cancer. Many public-health researchers believed that newer methods of contraception with lower doses of estrogen would eliminate these risks. In fact, a relatively small 2014 study of Seattle-area women arrived at this exact conclusion.

But this latest study — which analyzes a larger, more comprehensive dataset over a longer period of time — is among the first to provide statistical evidence showing that even low-dosage hormonal contraceptives increase the risk of breast cancer. The study also contains enough data to analyze the effects of various types of low-dosage contraceptives. It finds that long-term use of each of seven different types of low-dosage contraceptives significantly increases the risk of contracting breast cancer.

The media’s coverage of this study has been surprisingly accurate. Most outlets tend to downplay research finding that either abortion or contraception poses health risks. For instance, in 1997 the New England Journal of Medicine published study methodologically similar to this latest one, which also used data from Denmark’s health registry to analyze the abortion–breast cancer link. When covering that study, outlets claimed that induced abortion does not increase the likelihood of developing breast cancer, when in fact, the study found that abortions performed after 18 weeks gestation significantly increased the risk of breast cancer.

However, despite the fact that this new research reports that low-dosage contraceptives increase the risk of breast cancer, the increase in that risk is relatively slight, and the media have emphasized this finding in their coverage. Additionally, in the days after the study was released, many commentators were quick to tout the purported health benefits of oral contraceptives. That said, in an era of exceptionally politicized news coverage, it is heartening to see the mainstream media cover research on a potentially controversial public-health topic in a reasonable manner.

The Sports Tail Keeps Wagging the College Dog

by George Leef

College football and basketball can be great spectacles, filling American TV screens with action and color. But as Frederic Bastiat would have advised, we should also think about the unseen — what is not happening because of all those games?

One thing that isn’t happening is much studying by the student-athletes involved. The time demands of practice and travel leave little left for actual learning. That’s the reason why schools find ways of helping the players stay eligible with easy credits that call for little effort.

In today’s Martin Center article, Jenna Robinson examines this problem. She writes,

Time for sports . . . crowds out time for class. The average Division I men’s basketball player missed 2.2 classes per week during basketball season. Twenty-one percent of basketball players missed more than three classes per week during the season. It’s no wonder that the Federal Graduation Rate for Division I men’s basketball players was only 48 percent in 2017. The rate for all students was 66 percent. The increasing number of “one-and-done” players in college basketball is a vivid demonstration of athletics crowding out education. The NBA broke its record for the most freshmen selected in the first round of the draft this year, taking 14 one-and-done players in June.

And then there is the financial cost of the sports mania. It costs a lot of money to fly teams around the country, or sometimes out of the country. A big early-season basketball tournament was just held in the Bahamas.

Most college sports programs are a net revenue drain on school budgets and those that appear to run in the black usually do so only because they get large infusions of student fee money.

What to do? Back in 2012, the NCAA put in place a freeze on the number of sporting events, but that does little to ameliorate the problem.

Robinson points to a recent survey showing that many college athletes think they are overburdened by the demands placed on them.

Many said they wanted more time off after travel and mandatory eight-hour rest periods overnight between required practice or competition activities. (In the existing NCAA rules, travel time can be counted as days off.) They also wanted more athletics-related activities to count towards the 20 hour NCAA maximum, including ‘voluntary’ workouts and practice preparation. In short, student-athletes would like more time to act like students, instead of professional sports stars. More time to visit family, socialize, relax, work, and maybe even hit the books.

Good, but it’s hard to see how their opinions will lead to any change.

‘Why Claims of Unconscious Racism Fall Flat’

by Roger Clegg

That’s the title of a panel discussion this Thursday, December 14, at noon at the Heritage Foundation. The subtitle is “Debunking the Implicit Association Test,” and the occasion is the publication by Heritage of a paper by Center for Equal Opportunity research fellow Althea Nagai on this topic.

Claims of “unconscious racism” and for the validity of the implicit-association test (IAT) have become commonplace on the Left in recent years, of course — but they should not be accepted. From the Heritage description of the panel: “Supposedly tapping into the subconscious, the [IAT] measures disparities in millisecond response times on a computer. While it has been hailed as ‘proof’ of deeply seeded racism in American society, policymakers should consider the growing body of research suggesting the test cannot predict real-world behavior before enacting policies to counterbalance so-called unconscious bias.” Accordingly, while “academia, police departments, and corporate America are seeking to root out unconscious racism,” and while “the IAT has started popping up in employment discrimination lawsuits,” “policymakers and employers should think twice before embracing these dubious claims of racism.”

On the panel will be Dr. Nagai, the Manhattan Institute’s Heather Mac Donald, and yours truly. To RSVP or livestream the event, click here.

A Suicide Bomber Attacks the New York City Subway... and Life Goes On

by Jim Geraghty

Let’s hear it for the quick work of the NYPD and the resiliency of New Yorkers. This morning, a would-be suicide bomber caused an explosion in an underground subway passage between Times Square and the Port Authority Bus Terminal, wounding four people. It’s a miracle more people weren’t hurt; police believe the explosive device detonated prematurely. Two Port Authority Police Department officers grabbed the injured bomber and successfully removed his remaining explosives without further harm to anyone.

New York Times correspondent Rukmini Callimachi, who covers ISIS, wrote earlier today, “After every attack where the casualties are few, I see misinformed people labeling it a ‘failed terror attack’ and theorizing ISIS won’t claim it because it was botched. Let’s be clear: This man walked into Times Square wearing a bomb. That is not a fail in ISIS’ eyes.”

Indeed, we were lucky this time. But the city is also resilient. About twenty minutes ago, I took the New York City subway from Penn Station to Columbus Circle. The 42nd Street Station is evacuated, and the empty platforms looked spooky, but beyond the immediate vicinity of the blast, busy New Yorkers are going about their Monday morning business. There’s a bit more of a visible police presence in Penn Station, on the subway platforms, and in the streets, but by and large, for many New Yorkers, this will be a typically blustery December Monday.

Dreading Holiday Political Arguments?

by Richard Brookhiser

Will there be wing-nuts roasting before an open fire? If you’re having political smack-downs with spouses, family, friends, or significant others, Jeanne Safer (my liberal wife, and long-time friend of NR) would like to talk to you, for research on her next book, I Love You, But I Hate Your Politics (All Points Books). You can email her at [email protected].

The Tax Cut Won’t Save (or Doom) Republicans

by Ramesh Ponnuru

My latest Bloomberg View column.

“There’s nothing wrong with supply-side economics that division by ten wouldn’t cure.” The quip came from Charles Schultze, the chairman of the Council of Economic Advisers in Democrat Jimmy Carter’s White House. It meant that improving incentives to work and invest would promote economic growth — but not nearly as much as tax-cutting enthusiasts believed.

The point applies to the politics of tax cuts, too. Both parties are exaggerating the impact the tax bill making its way through Congress is likely to have in the next elections. . . .

Church, State, and the IRS

by Ramesh Ponnuru

Alex Entz believes that the Johnson amendment, a legal provision restricting the permissible political activity of tax-exempt religious organizations, should be kept on the books rather than modified as it is in the House tax legislation. (In keeping with most reporting on this issue, Entz uses the term “repealed” rather than “modified.”) He makes two arguments: Loosening these restrictions could benefit progressives more than conservatives, and too much involvement in politics can prove injurious and even ruinous to churches.

The second point has real force. But it is a point better addressed to church leaders than to legislators. Pastors, priests, and rabbis should consider whether speaking out in an election will gratuitously alienate some of their flock, to mention one of Entz’s examples of the harms that can come from politicized religion. But it’s not the job of Congress, or the Internal Revenue Service, to protect them from making bad judgments.

Yachtsmen, Jackasses, and More

by Jay Nordlinger

In today’s Impromptus, I begin with Donald Trump and Robert Mueller. I proceed to Roy Moore and Vladimir Putin. I continue with the NFL. And so on.

In Friday’s Impromptus, I published a note from Richard Brookhiser, concerning auto-correct. He had been writing about Vyacheslav Molotov, the Old Bolshevik. Auto-correct wanted to change Molotov’s first name to “Yachtsman.” Rick commented, “A little bourgeois, comrade.”

Mike Brown, the editor of the Rockdale Reporter in Texas, tells me this:

We had a county commissioner here who served 24 years. Real good guy, Dale Jaecks. Naturally, I wrote his name a lot. And SpellCheck always wanted to change “Jaecks” to “Jackass.”

I told him that one time. He said, “I imagine there are some people in my precinct who would agree with that.”

I am told that SpellCheck wants to change “Nordlinger” to “Nondrinker” and “Mudslinger.” Heh.

’Casting About

by Jay Nordlinger

On Need to Know, Mona and I talk about Alabama, Israel, and other weighty matters. Then, toward the end, we discuss Hogan’s Heroes, where we really shine. We always have our finger on the pulse of popular culture.

Go here.

I also have an episode of Jaywalking, in which I ask the old question, Can music mean anything? Music without words, that is? Then I do politics, of the grimmer and lighter varieties. I have a note on Keith Olbermann (whose “Worst Person” I once had the honor to be). Then, finally, some more music — this time by a twelve-year-old girl.

Go here.

Jerry Brown’s Pot versus Donald Trump’s Kettle

by Wesley J. Smith

The radical governor of California–who signed bills legalizing assisted suicide, allowing non-doctors to be abortionists, and forcing pro-life pregnancy counseling centers to notify clients where to access free abortion (now before the Supreme Court)–has brought the Lord into his critique of Donald Trump. From The Hill story:

California Gov. Jerry Brown (D) says President Trump’s stance on climate change demonstrates that he does not appear to fear the “wrath of God” or have any regard for the “existential consequences” of his environmental policies.

“I don’t think President Trump has a fear of the Lord, the fear of the wrath of God, which leads one to more humility … this is such a reckless disregard for the truth and for the existential consequences that can be unleashed,” Brown said in an interview on CBS’s “60 Minutes,” which is set to air on Sunday.

Glass houses and stones. Pots and kettles. Pick your idiom. 

The Police Murder of Daniel Shaver

by David French

If you have the stomach for it, I want you to watch one of the most outrageous and infuriating videos I’ve ever seen. It shows the police shooting of Daniel Shaver in Mesa, Arizona. He was crawling on his hands and knees, crying, and begging police not to shoot him. An officer shot him anyway:

The background is simple. Shaver was a traveling pest control worker. He was in his hotel room (a La Quinta Inn) showing off to guests a pellet gun he used for work. Police responded to a 911 call claiming that a man was pointing a rifle out a window.

When police arrived, Shaver was alone with a woman. They had been drinking. The police ordered them out of the room, and they came out, raised their hands, and got on their knees. So far, things seem routine. Police responded to a call from a concerned bystander, they were concerned that the suspect may have a gun, so they demanded to clearly see Shaver’s hands. That’s entirely fair and appropriate. 

Then, however, things got strange — very strange — rather than asking Shaver and his friend to keep their hands visible while police (who, at this point, had guns pointing straight at both of them) approached and applied handcuffs, they ask them to crawl towards police in a highly-specific way. The Washington Post’s account is decent, but you have to watch the video truly grasp the strangeness of the requests:

Langley tells Shaver to keep his legs crossed and push himself up into a kneeling position. As Shaver pushes himself up, his legs come uncrossed, prompting the officer to scream at him.

“I’m sorry,” Shaver says, placing his hands near his waist, prompting another round of screaming.

“You do that again, we’re shooting you, do you understand?” Langley yells.

“Please do not shoot me,” Shaver begs, his hands up straight in the air.

At the officer’s command, Shaver then crawls down the hallway, sobbing. At one point, he reaches back — possibly to pull up his shorts — and Brailsford opens fire, striking Shaver five times.

In fact, the Post actually sugarcoats the encounter. At one point an officer tells him “do not put your hands down for any reason,” even saying, “If you think you’re going to fall, you better fall on your face.” Then he says, “Crawl towards me.” How he can crawl without putting his hands down, I don’t know.

As the sobbing man crawls, he reaches back towards his pants (perhaps to pull them up) and is immediately shot dead. He had no weapon. He had done nothing wrong. And now he’s dead.

Essentially, what the police told an innocent, law-abiding, intoxicated American was this: Follow my highly-specific, very strange instructions or die. There was no need to make him crawl. The police were in command of the situation. At no point is there a visible weapon. I have seen soldiers deal with al Qaeda terrorists with more professionalism and poise. When a man is prone, his hands are visible, and your gun is trained upon him, he is in your power.

At trial, the officer testified that he though the suspect was reaching for his gun, and that if he had a chance to do things over, he’d make the same decision again. In other words, he presented the classic defense. He was afraid, so he fired.

I’ve written about this before. Juries time and again acquit frightened cops, regardless of whether the cop botched the situation or whether his fear was objectively reasonable. I wrote this after the Philando Castile verdict:

Legally, it’s not enough for an officer to show that he was actually afraid for his life. He has to show that “a reasonably prudent person” would also have the same fear. Clever defense lawyers twist this standard into a line of argument that goes something like this: The officer was afraid, and he can explain to you the reasons why he was afraid. Therefore, it was reasonable that he was afraid. But real fear isn’t always reasonable fear.

That’s especially true when the police — through their own incompetence — create their own fear. Philando Castile was shot even as he followed his killer’s instructions. Shaver died trying his best to comply with a highly unusual, complicated set of commands while under extreme duress. Scared cops still need to be competent cops, and members of the public shouldn’t face death because a police officer can’t keep his emotions in check.

Finally, I know that police have a dangerous job, but they’re not at war. As I noted above, it’s infuriating to see civilian police exercise less discipline than I’ve seen from soldiers in infinitely more dangerous situations. Not one of the men I deployed with would have handled a terrorist detention the way these officers treated American citizens. 

Arizona law defines second-degree murder as killing a person without premeditation “under circumstances manifesting extreme indifference to human life, the person recklessly engages in conduct that creates a grave risk of death and thereby causes the death of another person.” In this instance, the charge fit the crime. The jury’s verdict was a gross miscarriage of justice. My heart breaks for Daniel Shaver’s family. May God have mercy on his soul.

How Not to Write About the Tax Bill

by Ramesh Ponnuru

Here are the first two paragraphs of a Reuters report headlined, “Millions would lose mortgage, gift write-offs under U.S. tax bill: study”:

Millions of households would no longer benefit from federal tax deductions for charity donations, mortgage interest payments and property tax under Republican tax plans being debated in the U.S. Congress, a think tank said on Thursday.

The left-leaning Institute on Taxation and Economic Policy said that up to 29 million U.S. households now writing off donations, home loan interest and state and local property tax payments would no longer be able to do so under either of the two plans.

While all three deductions are maintained in some form in one or both of the rival Senate and House of Representatives bills, far fewer taxpayers could take advantage of them because of other proposed changes, said the Washington-based group.

You absolutely would be “able to” write off charitable donations, home-loan interest, and some state-and-local-property-tax payments under both the House and Senate Republican bills. You would be able to write off exactly as much in charitable donations and home-loan interest as you can today. Nobody would “lose” the write-offs that the headline claims millions would.

It’s just that millions of people would find it more advantageous to take the standard deduction. That’s because the bills raise the standard deduction and curtail the state-and-local tax deduction. The result is to make it less appealing to itemize. The article never clearly explains this point, and its language is alternately misleading and flat-out false. The reader comes away from the article knowing less than when he started it.

Pentagon to Conduct Its First Agencywide Audit

by Jibran Khan
The Pentagon will carry out an audit for the first time, having been pledged to by the 2010 NDAA.

The Defense Department will conduct an agencywide financial audit for the first time in history, following requirements in the 2010 National Defense Authorization Act. In a conference yesterday, the Pentagon committed to annual audits, with reports to be issued in November.

The Department’s careless approach to finances is notorious. It has gone so far as to bury a study that demonstrated how it could save $125 billion dollars of bloat, to continue a multi-trillion dollar corporate welfare program for a jet with decades-old computing and worse flying ability than planes from the 1970s, and so on, deflecting any criticism by asserting that the skeptics do not care about American lives.

Now that the audit can be delayed no longer, it will be interesting to see how it affects the bipartisan blind eye given to DoD mismanagement. Of course, considering that much of it has been known widely for years, perhaps there will be no effect.

CNN Misreports Date of ‘Incriminating’ Email to Trump Campaign

by Philip H. DeVoe

This morning, CNN published an article alleging an effort was made to connect Donald Trump’s presidential campaign with documents hacked from the Democratic National Committee nine days prior to their publication. CNN reporters Manu Raju and Jeremy Herb used as evidence of this implicit collusion an email sent on September 4 containing a decryption key and web address for the documents, which were hosted by WikiLeaks.

As it turns out, however, that email was actually sent on September 14, the day following the documents’ publication, rendering the “exclusive scoop” by CNN a non-story. Furthermore, it seems that the email’s author, Michael J. Erickson, doesn’t work with WikiLeaks at all. According to a follow-up piece in the Washington Post, Erickson described himself to the campaign as the president of an aviation management company. Alan S. Futerfas, an attorney for Donald Trump Jr., told the Post that Erickson was unknown to the campaign and his email just one of “a ton of unsolicited emails like this on a variety of topics.”

Just last week, ABC News reporter Brian Ross committed a similar error when he incorrectly reported that Trump directed former national security adviser Michael Flynn to contact the Russians during Trump’s candidacy; actually, Trump’s direction came while he was president-elect. While Ross was suspended from ABC News for four weeks without pay and pulled from all Trump-related coverage, his — and the CNN reporters’ – mistake has lasting effects on public perception of the Trump collusion investigation (not to mention the economy; Ross’s report caused the Dow to fall by 350 points). By rushing articles to print without fact-checking, these reporters are exacerbating a lack of trust in journalists, undermining special counsel Robert Mueller’s very real investigation, and fueling unequivocal dismissals of Trump wrongdoing as “fake news.”

As of publication, CNN has not updated the story.

David Bentley Hart on Daniel Dennett

by Ramesh Ponnuru

Every ten years or so, Hart gives Dennett a good drubbing. This time it’s in The New Atlantis.

Here, as it happens, lurks the most incorrigibly problematic aspect of Dennett’s project. The very concept of memes — Richard Dawkins’s irredeemably vague notion of cultural units of meaning or practice that invade brains and then, rather like genetic materials, thrive or perish through natural selection — is at once so vapid and yet so fantastic that it is scarcely tolerable as a metaphor. But a depressingly substantial part of Dennett’s argument requires not only that memes be accorded the status of real objects, but that they also be regarded as concrete causal forces in the neurology of the brain, whose power of ceaseless combination creates most of the mind’s higher functions. And this is almost poignantly absurd. . . .

The entire notion of consciousness as an illusion is, of course, rather silly. Dennett has been making the argument for most of his career, and it is just abrasively counterintuitive enough to create the strong suspicion in many that it must be more philosophically cogent than it seems, because surely no one would say such a thing if there were not some subtle and penetrating truth hidden behind its apparent absurdity. But there is none. The simple truth of the matter is that Dennett is a fanatic: He believes so fiercely in the unique authority and absolutely comprehensive competency of the third-person scientific perspective that he is willing to deny not only the analytic authority, but also the actual existence, of the first-person vantage. At the very least, though, he is an intellectually consistent fanatic, inasmuch as he correctly grasps (as many other physical reductionists do not) that consciousness really is irreconcilable with a coherent metaphysical naturalism. Since, however, the position he champions is inherently ridiculous, the only way that he can argue on its behalf is by relentlessly, and in as many ways as possible, changing the subject whenever the obvious objections are raised.

About That Tuition-Waiver Deduction for Graduate Students

by Veronique de Rugy

I was on PBS the other night to talk about the House and Senate versions of the tax plan. At some point, we started talking about how the House reform plan treats graduate-student tuition waivers as taxable income. In response to the other guest on the show saying that it was malicious, I pointed out that a tuition waiver was indeed income. Based on the response I received from listeners, you would have believed that I had just endorsed torturing kittens.

Yet notwithstanding all the articles and commentaries about supposed cruelty to grad students, the House Republican plan is based on conventional tax analysis. Simply stated, tuition forgiveness in exchange for work is indeed a form of income even if no money technically changes hands. So the “exclusion” currently in the law is a loophole. Saying this doesn’t mean that grad students would feel no pain or wouldn’t have to pay higher taxes — even though with the doubling of the standard deduction and lower tax rates, it may not be as bad as what people fear. By the way, lost in the drama is the fact that outright scholarships would remain tax free. In other words, don’t be surprised if universities re-categorize tuition waivers as scholarships if that part of the House plan is in the final bill. Voila!

Now, let me say this upfront: In the search for a better tax base and genuine tax reform, getting rid of this tax preference is the right thing to do, especially if it is a way to pay for lower tax rates on corporations or individuals. I may not have started with that particular provision but that’s beside the point.

Yet this gives me an opportunity to highlight an issue that I and many others have complained about for a long time. The current tax code is based on a fundamental conceptual flaw (Warning: wonk alert!): As its base, our tax code uses the “Haig-Simons” definition of income: consumption plus the change in net worth.

In other words, it starts with a presumption that there should be double taxation of income that is saved and invested. As Dan Mitchell has explained, you see this approach from the Joint Committee on Taxation. You see it from the Government Accountability Office. You see it from the Congressional Budget Office. You even see Republicans mistakenly use this benchmark.

This is the wrong definition for the tax base. It introduces economic distortions to savings and investment by not accounting for the timing of economic profits. The Haig-Simons tax base prohibits an objective accounting of tax subsidies.

The best example is to look at so-called tax expenditures in Table 13-3 of the Office of Management and Budget’s Analytical Perspectives. The table lists all those tax breaks, exclusions, credits, and deductions as defined by a Haig-Simons tax base. But the result is that it fails to make a distinction between the preferences that are subsidies to special interests and those meant to mitigate some of the income tax’s bias against savings and investment and that attempt to move us towards a more neutral treatment of these activities.

Among the provisions meant to correct the frequent double-taxation imposed on investment and savings income, we find the deferral of taxes on income earned overseas through foreign subsidiaries and affiliates, the exclusions for IRAs and 401(k)s, and the supposedly preferential tax rate for capital gains and dividends.

Among the provisions meant to subsidize particular groups through the tax code, you find tuition-forgiveness deductions, the deduction for domestic production activities, the deduction for entertainment expenses, deduction for employer-provided transportation and parking, and the deduction for moving expenses. All of these and many others are repealed in the House version of the tax-reform plan.

Unfortunately, the House failed to repeal the biggest of them all: the deductions for employer contributions for medical-insurance premiums and medical care. As I have noted in a recent paper on tax preferences:

The exclusion for employer-provided fringe benefits, such as health insurance, is a prime example of a provision that should be repealed. It is distortionary, unfair, and — most importantly — a major contributing factor to the ever-growing cost of healthcare. Because it promotes overuse of insurance, it also dramatically decreases the amount of healthcare costs paid by consumers themselves as opposed to by a third party. Americans today pay only 12 percent of their healthcare expenses out of pocket, which weakens normal market forces. In addition, as Fichtner and Feldman have noted, it also results in profound horizontal inequity since “there is roughly a 30 percent price difference between employer-provided premiums and individual premiums.”

It’s a shame because it would have provided for a lot of revenue that could have been used to reduce the top marginal income tax rate and avoid the idiotic bubble tax.

Hopefully, the House’s effort to get rid of some genuine tax expenditures — and that includes the tuition-waiver exclusion — sets a precedent that could lead one day to the needed repeal of the health-care deductions.

One thing is sure: Fixing the tax code’s internal inconsistencies with tax preferences introduces a number of problems, if only because it complicates the tax code and people fail to differentiate between the good and the bad tax breaks. The U.S. economy would be better served by defining the tax base to eliminate the need for tax expenditures through a neutral “consumption tax.” It would certainly be more simple, efficient, equitable, predictable, and have a more neutral treatment of consumption and future consumption.