Seeing Daggers

No sooner had Senators Mack and Breaux unleashed their ideas on making the federal tax code more simple and fair than Senator Schumer unsheathed his rusty old dagger, describing the idea of eliminating the federal deduction for state and local taxes as “a dagger to the heart of the people of New York.” Voters might be inclined to listen – except for the fact that Mr. Schumer sees a dagger virtually everywhere he looks.A 2003 plan for flexible work schedules instead of overtime? “A dagger to the heart of the middle class,” Mr. Schumer said, according to the Associated Press. A 2002 plan by federal regulators to urge Wall Street firms to establish backup facilities outside New York City? A “dagger pointed at the heart of New York,” Mr. Schumer said, according to the Daily News. High gas prices? “A dagger at the heart of our economy,” Mr. Schumer said in 2000, according to the New York Times. A unilateral declaration of Palestinian statehood would be “a dagger through the heart of the peace process,” Mr. Schumer said in 2000, according to the Agence France Presse.Hate crimes “put a dagger in the heart of what America is all about,” Mr. Schumer said in 1999, according to USA Today. A proposal to change the federal transportation funding formula was “a dagger pointed at” New York and California, Mr. Schumer said in 1999, according to the Washington Post. School vouchers? “Daggers that plunge into the heart of what is the American way,” Mr. Schumer said in May 1999, according to the New York Post. Cuts in federal student aid? “A dagger to New York’s college students,” Mr. Schumer told Newsday in 1995.Not to put too fine a point on it, but Mr. Schumer sees daggers more often than a four-eyed knife thrower looking through a kaleidoscope. In the case of the Mack-Breaux proposals, we think he might be overreacting. Certainly an end to the federal deduction will cause New Yorkers to feel more acutely the burden of their state and local taxes, which are among the highest in the nation. But such pain – and the heightened competition between jurisdictions that will come with the elimination of the deduction – can only increase political pressure on state and local government in New York to reduce spending and taxes. As it is, the state and local tax deduction creates a perverse incentive that actually encourages states and cities to increase taxes on the theory that otherwise the money will just end up in Washington.The junior senator from New York, Hillary Clinton, commenting on the commission’s proposal, managed to hoist herself on her own petard, that is, dagger. “It is very troubling to hear that the President’s tax reform panel has recommended the elimination of a tax benefit for over 3.2 million New York families who are disproportionately burdened by high property and state income taxes,” she said. The reason those taxpayers are “disproportionately burdened by high property and state income taxes” is that they’ve been electing tax-raising Democrats from Mrs. Clinton’s party. Rather than fighting to preserve a federal tax policy that provides an incentive for those policy errors, Mrs. Clinton could encourage state Democrats to curb spending and reduce taxes, so that New York taxpayers would no longer be “disproportionately burdened.”President Bush is way ahead of Mrs. Clinton in his understanding of all this. In his 2004 speech to the Republican National Convention, the president said, “Another drag on our economy is the current tax code, which is a complicated mess – filled with special interest loopholes, saddling our people with more than 6 billion hours of paperwork and headache every year. The American people deserve – and our economic future demands – a simpler, fairer, pro-growth system.” He pledged that in a new term, he would “lead a bipartisan effort to reform and simplify the federal tax code.”The Mack-Breaux commission hasn’t yet made a formal written report, but the Associated Press reported that at a hearing yesterday it offered a series of proposals that included not only limiting the deductions for home mortgages and employer-paid health insurance but also eliminating the alternative minimum tax, reducing the number of income tax brackets, and expanding opportunities for workers to save tax-free for retirement or education. With the exception of some dangerous discussion of combining the income tax with a federal value-added tax, Messrs. Breaux and Mack and their colleagues are off to a good start, and Mr. Bush will get a chance to deliver the leadership he promised. One can hope that their actions will inspire reform of the tax codes constructed in Albany and City Hall. A dagger aimed at those codes is just what the city and state need.

Seeing Daggers

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