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Taxation Terra Incognita

As I write, the first full business week of 2018 is about to begin. It’s also the season for tax preparation, as banks, employers and investment firms prepare W-2s and other official tax documents to distribute by month’s end. One of my rituals during winter break from school is to lay the groundwork for sending off my return form as early as possible, to get ahead of the pack for that sweet refund. The IRS dutifully posts current 1040s in all their varieties on its web site by the time the lull between Christmas and New Year’s Day arrives, for the benefit of early birds like myself—at least until now. Though a wide selection of secondary documents, such as the Form 8863 used to deduct college expenses, have been updated for the past tax year, the primary Forms 1040, 1040A, and 1040EZ available for download from irs.gov still say 2016 at the top.

I blame the lobbyist-written, sloppily assembled, and hastily, surreptitiously passed “Tax Cuts and Jobs Act of 2017”. The news cycle during the bill’s deliberations were dominated by stories of entire provisions scribbled by hand into the print version’s marginalia, questionable quid pro quos benefitting wavering legislators, and amendments voted upon in the wee hours. One result of this behavior was the public’s distaste for the bill, with only 32 per cent of voters expressing approval, according to fivethirtyeight.com. Though most of the final act’s changes have no effect on the 2017 tax year, there is obviously enough confusion about it to keep current tax forms from being issued in as timely a manner as years previous.

No doubt exists among even the act’s proponents that it will lead to ballooning federal deficits. This has been the case for every tax cut going back to Ronald Reagan’s first term. So talk of spending cuts has already begun, from House Speaker Paul Ryan on down, to offset them. President Trump's 2018 budget includes some $2 trillion in spending cuts over ten years to Medicaid, Affordable Care Act health insurance subsidies, SNAP (food stamps), Social Security disability insurance, Supplemental security income, and TANF (cash welfare), and even these will not erase the coming tide of red ink. The children’s health insurance program (CHIP) has not had its funding renewed since it ran out in November. Though mandatory spending cuts authorized at the beginning of the decade to mitigate future deficits were waived for this legislation, other targets will certainly include Medicare, education, and transportation programs. Because these programs benefit lower and middle income groups the most, the act’s net benefit for the majority of taxpayers will be negative over time.

For better or worse, government budgets are statements of a society’s priorities. Whether or not you believe our society’s least fortunate have only themselves to blame for their plight, these people are still thinking, feeling human beings with basic needs— food, shelter, good health, equal opportunities in employment and education that do not always result from strenuous effort. Many government programs enacted in the 20th century were meant to level obstacles for the disadvantaged to fulfill these needs. These programs have been relentlessly assailed by conservatives as “tax-and-spend Big Government” whenever debate about their effectiveness occurs. Yet many of these same conservatives have gone on the record as praising government programs that they eventually target. These include:

  • Rural electrification
  • National Institutes of Health
  • Student loan guarantees
  • National Park systems
  • Youth summer jobs programs
  • Federal Deposit Insurance Corporation, which prevented millions from losing their life savings during the Savings and Loan crash of the 1980s, and the financial meltdown of 2008
  • Head Start
  • Public libraries
  • G.I. Bill funding veterans’ college educations since World War II
  • Federal Aviation Administration

This is not to mention effusive compliments for Social Security, Medicare, food stamps, and, best of all (if you were a kid like me growing up in the 1960s), NASA, which sent 27 men to the Moon in a span of four years and returned them all safely.

One persistent criticism is that federal programs are ultimately inefficient and wasteful, and can be better administered by private entities and local communities. This argument ignores the history of massive projects, from the initial development of the Internet to the interstate highway system, that for-profit enterprises would never have undertaken for their enormous costs or limited prospect of immediate return on investment. The burdens of social safety net programs as the only backstop against personally devastating events would overwhelm local communities for the same reason massive corporations often use to advocate for mergers—that economies of scale work best in these circumstances. Long stretches of interstate, for example, in the vast, underpopulated areas of the western U.S. would probably not exist if those projects were dependent on the resources of smaller governments.

Or, they might look very different. I’ve made frequent drives up I-25 to Albuquerque for family get-togethers for decades. The journey from around Hatch to Socorro, more than 100 miles, features a number of steep hill climbs and descents. Engineers and construction workers went to enormous expense of time and labor to smooth out many of these sudden changes in elevation by creating cuts through hilltops, filling in or bridging deep ravines, nearly all paid for by federal funding, to make these trips accessible to all, no matter what vehicle you own. Imagine if these roadways were built to the specifications of the most fervent budget cutters that championed the recent tax cuts—no more subtlety of elevation and access, usage limited to only the most powerful and expensive vehicles capable of overcoming the challenges of gravity. This is the kind of society I fear we have become, and the prospects for those we especially depend on to sustain our future, the young, bright children who will surprise us with their talents no matter where they come from, look dim from here.

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Thomas Collette