Paying for Hillary's Tax-Credit-Palooza
In past presidential elections, candidates hoped to convince voters of their fiscal rectitude. This time, though, fiscal responsibility is out. Tax giveaways are in.
This puts Hillary Clinton in a straitjacket. She has proposed about $1 trillion in new government spending -- much of it through the tax code. But unlike the Republican candidates, she doesn't claim that tax breaks lead to higher growth and thus pay for themselves. So she's under pressure to show how she'd pay for all the tax credits she is proposing.
Not only are the Republican candidates offering more generous tax breaks on everything from estates to investment returns. They aren’t even pretending to honor the concept of budget neutrality -- that is, they haven’t identified spending reductions or tax increases elsewhere to offset all the tax cuts they are proposing.
The Committee for a Responsible Federal Budget, a nonpartisan think tank, has an infographic showing that the seven GOP candidates with tax-cut plans, using conventional scoring, would add a total of $42 trillion to federal deficits over 10 years.
This election’s sole fiscal hawk, Ohio Governor John Kasich, is finding out the hard way that fiscal probity is out. He's making little headway with his old-fashioned call for a balanced budget and warnings about his rivals' "fantasy tax plans."
The new outlook is also haunting Clinton, who has targeted one interest group after another with tax-relief gifts. The most recent example: up to $1,200 in credits to reimburse family members for the cost of caring for aging parents. (Say thanks, baby boomers.) That followed an offer of up to $2,500 in tax credits for out-of-pocket health-care costs. (This one's for you, millennials.)
And those followed her proposals for making college more affordable, including making permanent a generous tax credit for college tuition and other expenses that began under the 2009 stimulus law. The package's price tag: $350 billion over 10 years.
Clinton also would provide tax credits to help working parents pay for child care. Low-income homeowners who install solar panels would be eligible for a break, as would investors in low-income urban areas.
For companies, she would provide $1,500 tax credits for each apprentice hired, and an expansion of an existing job credit if businesses hire ex-felons and other marginalized people. She would reward companies with profit-sharing plans with a 15 percent tax credit on the value of bonuses paid out.
The list goes on. It's so lengthy that Clinton opens herself to charges of mucking up an already over-complicated tax system. Besides, the government already offers a wide array of means-tested grants and loans for college; why is it necessary to use back-door spending to subsidize higher education even more?
Clinton was not going to forget Big Labor. She offers a tax credit that encourages infrastructure spending, which would provide jobs to union workers. She salami-slices the whole Democratic base -- boomers with aging parents; millennials with college loans; homeowners with costly mortgages; and minorities living in under-served urban areas. Each would get a generous credit.
She vows to pay for it all, but so far hasn't said exactly how.
Months ago, Clinton suggested limiting the value of tax deductions for well-off taxpayers, similar to a plan President Barack Obama has offered for several years but that Congress has never seen fit to take up. Obama's plan would cap at 28 percent the value of deductions -- for charitable contributions, payment of state taxes and the like -- that itemizers use to lower their tax bills. If Clinton offered the same idea, she could claim to have "saved" $525 billion over 10 years, which is the score given by Congress's Joint Committee on Taxation.
Even then, she needs to find about $500 billion in savings to pay for the rest of her free stuff. That's the price of claiming to be fiscally responsible. It's also the price of playing interest-group politics.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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