The Republicans' tax revolt

Senate Republican Leader Mitch McConnell (R-Kentucky) celebrates passage (swiped from nytimes.com)

There can be no more caviling about the accomplishments of the Republican-led federal government in 2017: the tax bill that cleared December 20, and was signed by President Donald J. Trump two days later, represents major policy change. Unfortunately, in addition to achieving some legitimate objectives the bill pushes policy in some very dubious directions.

First, the good news. The bill includes a long-overdue overhaul of corporate taxation. The U.S. relies to an unusual degree on business taxes, and the complex provisions of the tax code had pushed the top rate (which nobody really pays) far above that of other advanced democracies. The current bill closes some loopholes and reduces the top tax rate from 36 to 21 percent, making American business taxation more transparent and possibly more internationally competitive. Some advocates expect this to result in more hiring with higher wages. (I'm dubious, given that corporate profits have already been doing well for most of this decade, far outpacing wages.) The provision is not revenue-neutral, but could have been offset with higher individual rates. (It wasn't.)

I'm also fine with what's happened to the home mortgage interest deduction: the amount of debt on which interest is deductible was reduced from $1,000,000 to $750,000 for homes purchased after 2017, and nearly doubling the standard deduction drastically reduces the amount of people who will take it. This provision of the code has inflated prices, encouraged communities to sprawl and individuals to over-build (see Zuegel 2017 and Williamson 2017); the presumption that homeowners make better citizens was dubious from the start.

Other positives: Using chained CPI to make year-to-year adjustments should more accurately reflect the impact of inflation on taxpayers, even though it will mean lower benefits from, say, the Earned Income Tax Credit.... The child allowance has been increased for the first time in awhile, to $2000, albeit offset by eliminating personal exemptions. For low income filers, $1400 of that credit can be refunded in a sort of "negative income tax"... And some ideas got removed from earlier versions: reducing or ending tax credits for historic preservation, as well as provisions affecting higher education like taxing tuition benefits for employees of colleges and graduate student fellowships. (Maybe those last are neutrals rather than positives, since nothing was changed.)

If the bill had gone only that far, it might have been more widely supported, in and out of Congress, although that's hard to say given Washington's toxically partisan divide. But the sponsors had to go and:

• skew the individual cuts to the wealthy. In part that's because the wealthy pay most of the income taxes in America, but that's not true of all taxes. (ITEP 2017 shows the distribution of tax payments by income level, and how that would have been affected by an early version of the 2017 tax bill.) This exacerbates an already-widening income and wealth gap in America. The skew does appear worse if you include the expiration of individual cuts after ten years, which was included to make the bill fit under budget caps, so a lot of opposition analysis focuses on 2027 numbers. In fact those cuts may or may not expire, but if they don't, they will clearly worsen the bill's impact on the deficit (discussed below.)
• double the estate tax exemption, which was absurdly high even before Republicans tried to end it in their 2001 tax cut. The ability of the very rich, some but not all of whom got that way by doing socially-productive things, to pass on huge fortunes to their heirs, all of whom got that way simply by coming out of the right vagina, is absolutely contrary to an opportunity society. We're making the world safe for aristocracy, pure and simple. And since whites got several centuries' head start on making money, this approach does racial harm as well.
• expand pass-through provisions, by which individual income can be taxed at the lower business rate. This option is not available to typical working people, of course, only to those in a position to declare themselves independent contractors. A special provision related to real estate partnerships will provide substantial benefits to the Trump family as well as Senator Bob Corker (R-Tennessee), a late convert to the yes column, all of which is giving cynics a field day.
• retain the obscene carried interest loophole, whereby the income of financial wizards is taxed as capital gains rather than income, and therefore at a much lower rate. This has cost the government $18 billion over the last ten years, besides which it irrationally favors financial wizardry over any other work. Hello-o-o, 1 percenters!
• run as much of a deficit as they legally could claim. The official estimate of revenue loss, $1.4+ trillion over 10 years, assumes a substantial economic stimulus effect, which as I said may or may not result, and steady and considerable economic expansion throughout the period. Otherwise the impact on the deficit is substantially worse. Fiscally stimulating the economy at all in the eighth year of a bull market with the country at or near full employment is hard to justify. The capacity of the federal government to deal with future events (natural disasters, security threats, economic downturns, funding for retirement and health care programs, maintaining infrastructure), not to mention regular disruption in our high-tech economy, has been damaged, which is inexplicable. In the near term, higher deficits would trigger funding cuts for Medicare and Medicaid.
• add legislative matters to the bill. Republicans have repeatedly attempted over the years to repeal the individual mandate provision of the Affordable Care Act and open the Alaska National Wildlife Refuge to oil drilling, without success. Both are included in this bill. The ACA change cuts health care policy off at the knees--"We have essentially repealed Obamacare," President Trump proclaimed Wednesday--roiling individual insurance markets, without any recourse for the most vulnerable.
• do all this in an all-fired hurry, without so much as a committee hearing. Senator John S. McCain (R-Arizona) complained last summer about his leadership's abandonment of "regular order" in considering legislation. This bill was a most egregious example, but he supported it anyway.

The tax bill does some good, but considering its effects on vulnerable individuals as well as American society as a whole, it does a lot more bad.

DATA STUDIES
Tax Policy Center: http://www.taxpolicycenter.org/publications/distributional-analysis-conference-agreement-tax-cuts-and-jobs-act/full
Institute on Taxation and Economic Policy: https://itep.org/finalgop-trumpbill/

Reuven S. Avi-Yonah et al.: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3089423

American Planning Association: https://www.planning.org/blog/blogpost/9140260/
US Treasury Dept: https://www.treasury.gov/press-center/press-releases/Documents/TreasuryGrowthMemo12-11-17.pdf 

SEE ALSO:
William G. Gale and Leonard Burman, "Congress Missed an Opportunity to Reform the Corporate Tax," Up Front, 26 December 2017
Alejandro Ortiz and Kathleen Powers, "So, What's in the Tax Bill?" Vote Smart, 13 December 2017

Bill Byrnes on law enforcement and the black middle class

Criminal justice policies that result in large-scale incarceration of young black men have spillover effects throughout the black population, middle class as well as poor, according to new research by Bill Byrnes of the Center for Research and Learning presented at one of the Center's Friday morning seminars last month. Byrnes's talk was entitled "Between a Rock and a Hard Place: The Black Middle Class and Mass Incarceration." My fellow middle-aged white men who can't understand what Colin Kapernick and the kneeling NFL players are on about would do well to draw near and give heed.

Byrnes's Ph.D. research is based on focus group interviews with blacks and whites in suburban Cook County, Illinois (the county that includes Chicago) concerning friends and family members who have been incarcerated as well as their own experiences with the police. It builds on existing research that traces dramatic increases in prison populations nationwide after 1978 not only to increases in violent crime from the late 1960s to the early 1990s but also the effects of de-industrialization, public calls for more policing, federal wars on crime and drugs, longer sentences and stricter parole rules. The United States already had imprisoned a greater percentage of its population than other advanced democracies, but now the discrepancy is huge. Moreover, it disproportionately affects people by social class, neighborhood and particularly race: in Cook County, blacks comprise 24.8 percent of the total population but 66.9 percent of the prison population.

Bill Byrnes (Source: Center for Urban Research and Learning)

Byrnes's focus groups revealed that both blacks and whites suffer emotionally when friends and family members are incarcerated, but whites "seem on the whole better cushioned." Blacks are more likely than whites to know someone who has been incarcerated; to bear financial burdens for family members in jail; and to themselves have had some negative encounters with police. Byrnes's middle class black respondents "have to negotiate their safety in public spaces in ways whites don't have to," relying on extremely proper demeanor and professional clothing to get them through situations (although that doesn't always help, as witness the 2016 killing of Philando Castile in suburban Minneapolis).

Byrnes concludes that "mass incarceration is about resource allocation," redolent of Harold Lasswell's definition of politics as who gets what, when and how. Blacks and whites start from different social places, and their interactions with the state "are not equivalent." This not only puts an "unjust" burden on the poor--greater police presence means more incarceration and afterwards higher unemployment, persistent poverty, and lack of access to education and housing--but extends those burdens to the nascent black middle class, whose economic position does not insulate them from incarceration of friends and family, or from their own awkward interactions with police.

Why should this matter to people who aren't black? Byrnes cites three reasons:

1. The economic costs of mass incarceration diverts state resources from other programs. "Million dollar block" is an expression for a neighborhood where the state is spending over a million dollars incarcerating its residents. "Do you want to know why it costs $40,000 to go to U[niversity] of I[llinois] now?" Byrnes asked rhetorically. He could have added: Or why we struggle to maintain transportation infrastructure or fund schools or treat the mentally ill? 
2. Mass incarceration may endanger public safety as much or more as it protects it. Where areas of concentrated poverty are also areas of concentrated ex-inmates, the lack of economic opportunity as well as ongoing encounters with law enforcement breed desperation, which actually increases the likelihood of crime.
3. Democracy itself is compromised by a policy approach layered on top of existing social and economic inequalities that creates "two-track citizenship" defined to a large extent by race. To this I would add that the era of economic mobility in America ended about 1973, just as black civil rights were beginning to be protected. The subsequent economic arrangements have frozen in place a wealth and opportunity gap that for historical reasons favored whites. The current House and Senate tax reform efforts, most egregiously the proposed end of the inheritance tax but going beyond that in many ways, can only add to the problem.

I will add a fourth reason. It has been a core assumption since the beginning of this blog project that we will not in the coming century be able to live as separately as we have been doing for the last 75 years. Whites are going to figure out how to live with blacks, and vice versa, and policy approaches that reinforce and extend racial inequalities are making that very very difficult.

SEE ALSO:
'The Latest Bad News and Our Common Life," 17 December 2014. For more from Holy Mountain, please choose "race" from the list of labels in the right-hand column.


Ta-Nahesi Coates's essay, "The Black Family in the Age of Mass Incarceration," which appeared in The Atlantic Monthly in 2015, is reprinted along with his own commentary/update as chapter 7 of his We Were Eight Years in Power: An American Tragedy (New World, 2017). It is particularly useful for his copious citation of sources. Coates was interviewed by Krista Tippett at the Chicago Humanities Festival, and that is here.

Michelle Alexander, The New Jim Crow: Mass Incarceration in the Age of Colorblindness (New Press, 2012)
Charles Marohn, "It's Time to End the Routine Traffic Stop," Strong Towns, 31 October 2017

Re-Zoning Cedar Rapids

Community residents at ReZone Open House,
New Bo City Market, October 2017

Cedar Rapids's adoption of form-based zoning will be targeted in scale and proceed incrementally, according to city planners Seth Gunnerson and Anne Russett. The two spoke last week to the Corridor Urbanism group, following an input-seeking open house in mid-October. (I am a member of the ReZone Steering Committee, which has met occasionally since March 2016 to discuss formulation with planners and the consultants from SAFEbuilt Studio.)

ReZone Cedar Rapids grew out of the city's comprehensive plan adopted in 2015. Form-based zoning is being applied first in the downtown area, as well as four nearby areas that had previously been designated as zoning overlay districts allowing for relaxation of existing zoning rules: Czech Village/New Bohemia, Ellis Boulevard on the Northwest Side, MedQuarter and Kingston Village. The intent is to follow through where there has been ongoing focused planning efforts; these areas can then serve as models for other areas where occupants may seek focused planning in the future (such as the College District).

Citizen suggestions at the open house for future form-based zones included
Mound View/College District (center right cluster)
and along the Highway 100 extension (far left)

The area created by the extension of Highway 100 is currently a blank slate, and currently under the jurisdiction of Linn County, but is likely to be annexed by the City of Cedar Rapids before development, so form-based zoning and even walkable urbanism are open possibilities there. This poster...

...presented by H.R. Green Engineering at a city open house in March 2014 suggested walkable urbanism was at least being considered for future development along Highway 100, albeit there were two other posters there too.

Gunnerson and Russett explained that form-based zoning centers on the form and size of buildings rather than separating uses (residential, commercial and industrial being the three main traditional categories). The code also describes street networks and multiple access, neighborhood character and the relationship of buildings to streets.

Dot stickers indicated citizen support

Typically form-based regulations have buildings fronting the streets rather than existing behind parking areas...

...or green space, and describe pedestrian scale infrastructure like lighting...

and signs...

...although any form including large-lot suburban subdivisions can be part of the code.

The reasons to change the zoning code, besides encouraging more traditional walkable development, is to allow more options for neighborhoods beyond single use, update zoning that is often decades old and not descriptive of certain areas, and simplifying the process of approving or disapproving developments.

The first draft of the code is due this winter; the revised draft following public feedback will be presented to the City Council in summer 2018. The new codes may take effect immediately or be phased in over a number of months.

My guess is the average Cedar Rapids citizen will not notice much impact from this zoning change. In the targeted districts certain types of building will be restricted, but other types can be expedited. Over the long term we can hope for better economic development in those economically-important districts, and aroused public interest in attempting form-based zoning in other parts of the city. I'm more hopeful about the first than about the second.

CORRECTION: The discussion of property along the Highway 100 extension has been amended to clarify the probable sequence of annexation and development i.e. previous false information has been replaced by true information.

MORE! MORE! MORE!

City's promotional "trailer":

The city's Rezone website contains display boards as well as results of public input.

SEE ALSO:
"What is a 'Form-Based Code' and Other Mysteries of Zoning," 7 March 2016
"Envision CR Open House," 26 March 2014