Ready for Rangel?
Mayor Bloomberg's abilities as a national leader are going to get a test this week, when Congressman Rangel opens on Thursday what he is billing as a major hearing on a host of tax issues. These range from what kind of levy to put on the kind of carried interest through which the operators of our home town industry, the hedge funds, make their fortunes to the earned income tax credit. The mayor, as our Russell Berman has been reporting, wants to expand and overhaul the EITC and has begun a lobbying effort to bring scholars and lawmakers on board. The Ways and Means chairman, though he has yet to address Mr. Bloomberg's proposals, is said by Mr. Berman to be interested in an expansion of the Earned Income Tax Credit.
The idea strikes us as a step in the wrong direction. The Internal Revenue Service describes the Earned Income Tax Credit as a "refundable federal income tax credit for low-income working individuals and families." It was passed in 1975 "to offset the burden of social security taxes and to provide an incentive to work." It has struck many that the right way to offset the burden of social security taxes is to lower them and the right way to provide an incentive to work is to lower taxes on the top margin, i.e., on the next dollar earned. The way the EITC works at the moment, it provides an incentive to file a tax return, but rapidly gets to the point where it provides a disincentive for additional work. It could be called welfare in disguise.
Our inclination is to praise Mr. Bloomberg for taking on the poverty issue and for dealing with the marriage penalty and the deadbeat dads, both of which issues figure in his reforms, but to warn of the disincentive effect of the Earned Income Tax Credit. The mayor seems to be way ahead in his thinking of Senator Edwards, who wants simply to expand the EITC. The mayor's proposal includes tightening eligibility but expanding the number of younger adults, particularly men, who would be eligible. It could cost as much as $8.5 billion a year, though the devil will be in the details. Targeting singles, the plan would lower the qualifying age for individuals without children living with them to 21 from 25, and it would raise the maximum qualifying income to just over $18,000, from $12,120. In all, an individual could see their annual government pay-out increase to more than $1,000 from less than $100. Recipients would be required to work 30 hours a week for at least half the year.
One thing that struck us in Mr. Berman's dispatch last week was a comment from Ronald Haskins, a director of the Brookings Center for Children and Families that organized Mr. Bloomberg's speech Tuesday in the capital. He had praise for Mr. Bloomberg's proposal on the EITC, but reckons that trying it first in New York would be a better way of testing its effectiveness and building political momentum nationally. Mr. Haskins figures the reason Mr. Bloomberg is going national right off the bat is that "Someone who's thinking about running for president has to make a certain number of national proposals." Our instinct is that Mr. Bloomberg can fight on both fronts.
The fact is that much of the mayor's charm as a national figure is the intensity with which New York is grappling with problems that affect the whole nation. It is true of taxes, both at the highest end of the income scale as well as at the lowest. It is true of education, where New York is a caldron of experimentation with just about everything short of vouchers. And of the war on terrorism, where New York has been at the center of the fight. Which is why, in our view, it's no coincidence that the three most newsworthy figures on the horizon for 2008 — Mayor Giuliani, Senator Clinton, and Mr. Bloomberg —are New Yorkers. As the new ways and means chairman, Mr. Rangel fits right in, and we find ourselves rather looking forward to the hearings about to begin.
