The dreary 21st century
By Scott Sumner
During the final two decades of the 20th century, readers of the financial press were treated to one positive news story after another. Tax reform, immigration reform, deregulation, free trade agreements, investment liberalization, the end of communism, welfare reform, etc., etc. The list goes on and on. I didn’t know it at the time, but I was being spoiled by good news.
In the 21st century, progress seems to have come to an almost complete stop, and in areas like housing regulation (NIMBYism), things have gotten far worse. However there have been two bright spots. The Obama administration enacted the so-called “Cadillac tax”, which would have gradually phased out the massive federal subsidy on health insurance plans. That subsidy dramatically boosts health care costs, lowering the standard of living of average Americans.
Then the Trump administration enacted a $10,000 cap on the deductibility of state and local taxes. This helped to make our tax system more efficient, and less annoying. (I no longer had to itemize!) It also made the economy more efficient by reducing the federal subsidy for state and local spending.
Alas, I should have known that this was all too good to be true. The Trump administration repealed the Cadillac tax (with support from many Democrats), one of the most disastrous policy decisions in my entire life. And the Biden administration now seems likely to water down the SALT cap.
Check out this dreary Bloomberg headline (and subheads):
The Democrats say they want to raise taxes on the rich to fund social welfare programs. But do they? The SALT changes would be a massive tax cut for the rich. And the Democrats also seem unwilling to eliminate the outrageous “carried interest” tax loophole that benefits billionaire hedge fund managers, who end up paying a lower tax rate than your plumber. Even some Republicans oppose that loophole. Many of the tax increases on the “rich” that actually do occur will likely be tax increases on the middle class disguised as “business taxes”. (As if businesses pay taxes.)
Sorry if I sound so cynical. But after the 1980s and 1990s, I’m finding this new century to be quite depressing. Even the movies suck.