Tax Code Follies #1: The "Tools of the Trade" Exemption

As a student taking tax law, I occasionally find myself reading passages that simultaneously amaze and depress me.  I'm sure many of these provisions were well-intentioned, but the incentives they create are unbelievable.  I'll try to post them as I find them.  Today's inaugural folly: the "tools of the trade" exemption.

Short description: The IRS normally doesn't let you deduct expenses incurred commuting to work.  However, it grants an exception for expenses incurred bringing "tools of the trade" into work.  Makes sense, right?  But there's more: the deduction only covers the costs incurred for the tools, not any additional costs covered for you to commute with the tools.

How it plays out: A doctor who routinely commutes to her office via subway realizes she's going to have to take several patient charts home for the evening.  If she takes a cab home, lugging the charts, she cannot deduct the expense.  If she pays the cab to take her charts home for her (and keep the meter running until she arrives) and she takes the subway home, she can deduct the entire cab fare (which would be assuredly higher with the waiting time). 

Perverse incentives created:  Double-commuting, potential issues of leaving sensitive documents unattended. 

Huntsman: Interesting Asia-Pacific Policy

Image via WikipediaJon Huntsman delivered his first major foreign policy address yesterday in New Hampshire.  Calling for America to turn west, the speech was thoughtful and articulate, and it drew heavily on Huntsman's experiences as a diplomat.

In particular, three things leaped out.  First, Huntsman leaned on his various experiences living abroad.  That represents quite a stark change from recent GOP primaries in which candidates had not traveled extensively (other than as members of CoDels) or were not fluent in other languages:

"I’ve lived overseas four times. I’ve seen the world as a diplomat, as a businessman, as a humanitarian. I’ve lived in and seen what our most significant competitor nations are doing to prepare for the rest of the 21st Century. And I have a very clear vision of what America must do as well."

Second, Huntsman announced support for India to receive a permanent seat on the UN Security Council.  Currently, only the five veto powers (US, UK, France, Russia, and China) have permanent seats.  Huntsman's position is an interesting one: India is the second-most populous nation in the world, has the ninth-largest economy, could serve as a counterweight to China in the coming decades.

Huntsman is probably correct that the Security Council needs reform, and he is perceptive that the US will get more "friendship points" naming India first.  But he seems to brush aside the tremendous cost of his proposal.  Huntsman's proposal will surely infuriate both China and Pakistan.  Additionally, Japan (#3 economy), Germany (#4 economy), and Brazil (#7 economy) all have strong claims for a permanent seat and will lose significant international face if only India is added to the Council. 

Third, Hunstman's theme could be described as either nuanced or inconsistent.  He uses uncharacteristically strong rhetoric against nation-building and in his claim that America's "future is not in the Hindu Kush Mountains of Afghanistan."  He also combines a slightly isolationist "come home" message ("Only Pakistan can save Pakistan.  Only Afghanistan can save Afghanistan. And right now we should focus on America saving America.") with a touch of the traditional Democratic message that the US should not presume to tell other nations what to do ("We cannot dictate fundamental changes upon an age-old civilization from afar.").  But then he bends back to hit a hawkish note on Iran.

All in all, a very interesting speech.  Win or lose, Huntsman will continue to be a voice in American foreign policy as he gets, more than almost any of his colleagues (with the potential exception of Romney), that the 21st century will be a Pacific one.

Quick plug: Huntsman for Secretary of State in a Romney administration?

Artists Raising Cain: The Lee Greenwood Primary

Image via WikipediaOne of my favorite stories this morning comes from the Alex Pappas at the Daily Caller.  Lee Greenwood, singer/songwriter of "God Bless the USA," and several other musicians endorsed Herman Cain for president yesterday in Nashville.   

Food for thought: as his anthem is such a mainstay of GOP campaigns and conventions, would Greenwood permit it to be a theme song of a Romney-led ticket?  Would he volunteer to perform it at the RNC as he has in years past?

I hope that he would.  The message transcends anyone's pick in the primary or the general.  It truly is an American classic.

Education: New Orleans Moves Towards "All Charter" System

Image via Wikipedia
Great profile in this weekend's WSJ of John White, the new superintendent of the New Orleans school system.  The most interesting part of the interview concerns the post-Katrina system that New Orleans has developed using charter schools.  In many other districts, White points out, charter schools rival the established school system and compete for students, teachers, attention, and funding.  They are often disfavored by teachers' unions and are sometimes seen as prejudicing those students whose parents are disengaged, as uninterested parents are unlikely to take extra steps to enroll their children in these opt-in schools.

New Orleans, by accident, has solved many of these problems.  Eighty percent of students currently attend charter schools, and the district seeks to get that number up to 100% by 2013.  In addition to the improved outcomes, White even argues that charters are easier to manage than centrally-controlled schools. As the system streamlines its enrollment procedures, it will go a long way towards creating a freer educational market driven by competition and dedicated to continuous improvement.

Was Scott Brown's Comment Sexist? No - and It's a Disservice to Everyone to Describe It That Way!

                            Image via Wikipedia

Scott Brown's "Thank God" rebuttal to Elizabeth Warren two days ago amused some and offended others.  But to me, the most striking element of the entire exchange was the immediate reaction by many that Brown's comment was sexist.  

The MA Democratic Party circulated an online petition demanding Brown apologize for his "sexist remark."  TheWashington Examiner's Phil Klein agreed the comment was sexist and argued that no Democratic senator could have same the same thing about a Republican woman.  The president of the National Organization for Women accused Brown of a "sexist misogynistic attack" and should withdraw from the 2012 race.   The blogosphere blew up with similar comments.

There was nothing sexist in Senator Brown's comment.  Juvenile?  Certainly.  Unnecessary?  Probably.  But not sexist - that's critically important.  Merriam-Webster defines sexism as "prejudice or discrimination based on sex."  What part of Senator Brown's statement differentiated between men and women?  If Rush Limbaugh, for example, had challenged Brown from the right and had made similar comments, do we really think Brown wouldn't have fired back the same way? 

We can have all the arguments we want about whether his comment was constructive for this race.  Many of us probably believe neither his comment nor Ms. Warren's provocation was fitting of a Senate campaign.  But we shouldn't go around calling such comments "sexist" when they aren't.  It cheapens the meaning of the term, and, worse, it disrespects those who've faced true sexism. 

The Blocking and Tackling Behind the Perry Campaign

I'll admit it: I'm not a huge Rick Perry fan.  We could go line-by-line, but the short answer is, I don't think he's got what it takes to get elected or, more importantly, to lead the most powerful country in the world.

All that said, Perry's recent campaigns have developed a pretty novel approach.

First, its technique has been unorthodox, drawing upon randomized tests devised by his campaign manager (NYT; Sasha Issenberg's new ebook "Rick Perry and His Eggheads"):

• He refused to debate opponents when running for governor
• He avoids "mainstream media" a la Palin, including editorial boards
• He relies more on public appearances than satellite beam-ins (aka, he hits a place more thoroughly, rather than just getting his name in a local paper) 

Second, it (so far) has been remarkably lean.  Politico reports that, while Perry's $17M of fundraising was impressive, the fact that he had $15M in the bank was even more so.  If this low burn rate continues, he'll be able to continue his run without the deeper-pocketed donors that Romney is tapping (like the commitment of Paul Singer and several big Pawlenty donors in the last two days).

Although the race looks to be closing in around Perry (and, admittedly, Perry may regain his stride), one must wonder if these strategies will form part of the major lessons from the 2012 race.  In 2000, it was W's fantastic fundraising efforts.  In 2004, Howard Dean (or maybe Joe Trippi) used the internet to catalyze supporters and  fundraise online.  In 2008, Obama (and David Plouffe) took Dean's playbook to the next level, utilizing technology, meetups, and social networking heavily to their advantage.

Will 2012 be the year we learn of the "lean" campaign?

What will the next 5% surtax pay for?

Atlantic's Megan McArdle has a great piece in her blog about the proposed 5% tax surcharge on those earning incomes of $1M or greater to fund the jobs bill.  Her gist (and I think she's right): let's grant the premise that you want to move towards this more progressive tax system.  If true, what's next after this?  If this 5% surtax pays for a program that we don't even have yet, it still fails to address the long-term structure issues facing the U.S. budget.  This additional charge represents a transfer of wealth from top earners to lower-income ones.  It would do nothing directly to shore up the entitlement programs (there could be smaller second- and third-order effects), and it would leave us no better off than we are today.

So, is there a 10% tax boost waiting in the wings to address the bigger issues we're facing?