During the final two decades of the 20th century, readers of the financial press were treated to one positive news story after another. Tax reform, immigration reform, deregulation, free trade agreements, investment liberalization, the end of communism, welfare reform, etc., etc. The list goes on and on. I didn’t know it at the time, but I was being spoiled by good news.
In the 21st century, progress seems to have come to an almost complete stop, and in areas like housing regulation (NIMBYism), things have gotten far worse. However there have been two bright spots. The Obama administration enacted the so-called “Cadillac tax”, which would have gradually phased out the massive federal subsidy on health insurance plans. That subsidy dramatically boosts health care costs, lowering the standard of living of average Americans.
Then the Trump administration enacted a $10,000 cap on the deductibility of state and local taxes. This helped to make our tax system more efficient, and less annoying. (I no longer had to itemize!) It also made the economy more efficient by reducing the federal subsidy for state and local spending.
Alas, I should have known that this was all too good to be true. The Trump administration repealed the Cadillac tax (with support from many Democrats), one of the most disastrous policy decisions in my entire life. And the Biden administration now seems likely to water down the SALT cap.
Check out this dreary Bloomberg headline (and subheads):
The Democrats say they want to raise taxes on the rich to fund social welfare programs. But do they? The SALT changes would be a massive tax cut for the rich. And the Democrats also seem unwilling to eliminate the outrageous “carried interest” tax loophole that benefits billionaire hedge fund managers, who end up paying a lower tax rate than your plumber. Even some Republicans oppose that loophole. Many of the tax increases on the “rich” that actually do occur will likely be tax increases on the middle class disguised as “business taxes”. (As if businesses pay taxes.)
Sorry if I sound so cynical. But after the 1980s and 1990s, I’m finding this new century to be quite depressing. Even the movies suck.
READER COMMENTS
Jose Pablo
Sep 13 2021 at 8:03pm
“Even the movies suck”
Even The Economist is now a much less liberal (in the European meaning of the word) publication!!.
Scott Sumner
Sep 13 2021 at 8:12pm
Yes, very disappointing.
byron
Sep 16 2021 at 8:13pm
is there a new home for disaffected readers of the Economist?
mbka
Sep 15 2021 at 10:01pm
Dang! I noticed that too, and though maybe I’m just getting old and grumpy. Well, that too.
Phil H
Sep 13 2021 at 9:52pm
Should do the movies at your other blog, really, but I just watched Zola, and highly recommend it. I thought it was a women’s movie in quite an interesting new way.
I don’t remember you writing about horror much. But there’s been a very good run of horror movies lately: Babadook, Relic, Hereditary, Get Out…niche but great!
ssumner
Sep 14 2021 at 1:15pm
Get Out was good. I used to see more horror films when I was young.
Jerry Brown
Sep 13 2021 at 10:15pm
The ‘Lord of the Rings’ movies were pretty good. Don’t give up all hope yet.
ssumner
Sep 14 2021 at 1:16pm
I agree.
Evan Sherman
Sep 14 2021 at 4:11pm
“There is always hope.”
Cooper Albertson-Webb
Sep 14 2021 at 11:01pm
Just a fool’s hope.
Andrew_FL
Sep 13 2021 at 11:08pm
Nothing says “Libertarian” like being very depressed taxes aren’t higher
Brandon Berg
Sep 14 2021 at 8:01am
Tax deductions are offset by higher marginal tax rates. In the end, we still pay the same amount in taxes overall, but the deductions and credits often give us inefficient incentives to spend our money the way the government wants us to instead of the way we want to.
The SALT deduction is especially bad because not only are higher federal marginal rates needed to offset the lost revenue, but it also subsidizes excessive state spending by giving taxpayers a 30-40% rebate on state taxes.
Libertarians should hate the SALT credit for the same reason Democrats love it: It encourages excessive state spending and taxes.
Andrew_FL
Sep 14 2021 at 8:08am
Now do the Cadillac Tax
robc
Sep 14 2021 at 9:16am
[citation needed]
If we had a balanced budget law or something, you would be correct. But I see no direct connection between tax deductions and CURRENT marginal tax rates.
ssumner
Sep 14 2021 at 1:18pm
Even if one is so cynical as to believe that tax rates and tax deductions are uncorrelated, it’s still a sad comment on the 21st century. Where are the win-win reforms?
robc
Sep 16 2021 at 11:31am
Trump tax plan?
The much higher standard deduction takes lots of regular deductions off the table (I still itemize but keeping thinking each year that this will be the last year).
Reduced power of deductions and lower corporate income tax rates sound like a win-win.
Henri Hein
Sep 13 2021 at 11:21pm
I won’t have that! It’s true there are plenty of awful movies from the 21st century, but there are also plenty of good ones. Bear in mind that they are making more movies now (see also). It’s likely that as the total number of movies are going up, the number of bad movies are also going up, and the average quality may be going down, and yet it could still be the case that there are more good movies that are just harder to find.
Below are some movies from the 21st century I personally consider great, and some I consider good. The ones in the Good list I consider well worth watching, but without having some profound effect on me I would ask of a movie before calling it great. These are just some samples I dug up at a moments notice. (I know 2000 is not technically the 21st century, but you can omit those movies and still have a decent list).
Also agree with Jerry about the Lord of the Ring movies.
Great movies:
Requiem for a Dream (Darren Aronofsky, 2000)
Let the Right One In (Tomas Alfredson, 2008)
The Pianist (Roman Polanski, 2002)
Under the Skin (Jonathan Glazer, 2013)
A History of Violence (David Cronenberg, 2005)
Memento (Christopher Nolan, 2000)
Lost in Translation (Sofia Coppola, 2003)
No Country for Old Men (Joel and Ethan Coen, 2007)
Eternal Sunshine of the Spotless Mind (Michel Gondry, 2004)
There Will Be Blood (Paul Thomas Anderson, 2007)
Mulholland Drive (David Lynch, 2001)
Waking Life (Richard Linklater, 2001)
Daybreakers (Michael and Peter Spierig, 2009)
Downfall (Oliver Hirschbiegel, 2004)
Good movies:
12 Years a Slave (Steve McQueen, 2013)
WALL-E (Andrew Stanton, 2008)
Crouching Tiger, Hidden Dragon (Ang Lee, 2000)
The Dark Knight (Christopher Nolan, 2008)
The Lives of Others (Florian Henckel von Donnersmarck, 2006)
The Grand Budapest Hotel (Wes Anderson, 2014)
Spirited Away (Hayao Miyazaki, 2001)
Grand Torino (Client Eastwood, 2008)
Gothika (Mathieu Kassovitz, 2003)
Scott Sumner
Sep 14 2021 at 1:36am
At least we agree that the 2000s were better than the 2010s.
MarkW
Sep 14 2021 at 7:10am
It’s true there are plenty of awful movies from the 21st century, but there are also plenty of good ones.
And keep in mind that the complete transformation in cost, availability, and technology. Pick your favorite era of movies and 1) Everything from that period is more available now than it was then, 2) The cost of viewing is very low, and 3) The equipment for home-viewing is spectacularly better. I don’t feel deprived.
And, of course, TV is vastly improved. My wife and I are just now into the last season of the delightful Deutschland ’83 / ’86 / ’86 trilogy. I mention it because it offers a chance for Scott to go back and re-live some of the positives of the late 20th century (and be reminded how those living through it didn’t always see it that way). I do agree that when it comes to economics and trade, things have been regressing. But there have been positive recent developments in other political areas — gay marriage, drug-legalization, ending police abuses, eminent domain, occupational licensing, zoning reform. And if remote-working survives the pandemic (as seems increasingly likely), there will be profound positive effects — commuting traffic will be greatly reduced (with greatly reduced QALYs wasted in the effort). Zoning will matter much less. Foot-voting will be much more powerful. People will be able to spend more time with friends and family. Home-schooling will be much more viable. It’s really not all depressing.
Alan Goldhammer
Sep 14 2021 at 7:25am
Yes, the Deutschland series was excellent. I’m finding that foreign television is quite interesting. I’m a big fan of Noir and MHz has some excellent shows. The German Tatort series are good, the French spy series ‘The Bureau’ ranks right up with ‘The Wire’ in my estimation. For light fare, ‘Call My Agent’ is just too funny and the cameos by famous French actors (and also Sigourney Weaver) are hilarious. The Sicily travel bureau was extremely disappointed with the conclusion of the very good Inspector Montelbano series.
robc
Sep 14 2021 at 9:18am
The last 4 have been TALKED about, but has there actually been any gains? Kelo is still the law of the land, last I checked (for one example).
MarkW
Sep 14 2021 at 10:38am
Kelo is still the law of the land nationally, but many states implemented reforms following the decision. And, yes, there have been real occupational licensing and zoning reforms. As for criminal justice reforms, clearly qualified immunity has been increasingly challenged as has policing for profit. So, I do think we are seeing some real progress in these areas.
Mark Z
Sep 14 2021 at 1:41am
The TV shows have been better though.
ssumner
Sep 14 2021 at 1:20pm
But how many are good enough to be worth watching?
Mark Z
Sep 14 2021 at 2:28pm
A decent number. The Sopranos, The Wire, seasons 1 and 3 of True Detective, the Deuce, the first two seasons of Narcos, and Mindhunter are a few I’ve enjoyed. There’s certainly plenty of garbage, but there are also many more ‘serious’ shows in recent years (largely thanks to HBO) that achieve the kind of quality that used to be reserved for films.
Alan Goldhammer
Sep 14 2021 at 3:58pm
As I noted in an earlier reply, most of the MHz network of shows which are largely Noir or procedurals are excellent. They have German, French, Italian, Danish, Swedish and a new one from Senegal (I haven’t seen that one). HBO generally has very good programing and all the David Simon shows, The Wire, Treme, and The Deuce are excellent. Sopranos was good but not like The Wire. Ray Donovan on Showtime was quite good as well.
Brett
Sep 14 2021 at 1:57am
You just got to watch more TV and streaming stuff. It’s basically flipped from the 1970s. Movies used to be creative with all kinds of niche appeal while TV shows were aimed at the broadest possible audiences and often bland, but now it’s the other way around.
ssumner
Sep 14 2021 at 1:21pm
I’ve tried watching some of the “quality TV” that people rave about, and have been mostly unimpressed. But yes, there are more decent TV shows than before.
David S
Sep 14 2021 at 9:23pm
This is a dangerous suggestion, but try fast forwarding or skipping parts of TV shows that are boring. You can edit out 1/3 of Breaking Bad and get the story–just make it to the “Ozymandias” episode.
Try Trailer Park Boys
And Cowboy Bebop (okay it’s from the late 90’s but it’s genius)
Thomas Lee Hutcheson
Sep 14 2021 at 7:46am
I get the point of the Cadillac tax, but what distortion in the consumption/investment/leisure decision does the SALT deduction create? Is it just the political fact that (in your view) the revenue lost by eliminating the deduction will be recouped with revenue from on average lower income people?
MarkW
Sep 14 2021 at 8:54am
<i>but what distortion in the consumption/investment/leisure decision does the SALT deduction create?</i>
Overinvestment in housing and in (discounted) state and local services. And the SALT deduction works in conjunction with the mortgage interest deduction (since you typically need both to realize the tax benefits of itemization). Limiting the SALT deduction (and increasing the standard deduction) likewise made mortgage interest non-deductible for most Americans (especially with the $750K cap).
robc
Sep 14 2021 at 9:23am
Historical fact I like to point out whenever the mortgage interest deduction comes up…the original 1913 income tax form had a specific line for interest paid deduction (along with a line for losses due to shipwreck). Not mortgage interest…ALL interest.
The reasoning was that interest recipients had to claim it as income in the top section, so to avoid double taxation interest paid was deducted.
I just think it would be interesting to go back to that. Eliminate the mortgage interest deduction by allowing all interest to be deducted. Credit card companies would love it, except for the extra reporting they would have to do.
robc
Sep 14 2021 at 11:09am
First, here is a link: https://www.irs.gov/pub/irs-prior/f1040–1913.pdf
Line 2 of deductions was the interest I mentioned. Line 4 was shipwrecks. Line 3 was the SALT deduction, it has been around from the beginning also.
Line 6 of page 1 also has the marriage penalty.
Thomas Lee Hutcheson
Sep 14 2021 at 3:17pm
The conceptually proper treatment of housing mortgage interest is to tax the implicit rent income that the interest is a business expense in producing. Consumer loan interests is not a cost of earning income.
Thomas Lee Hutcheson
Sep 14 2021 at 3:24pm
Let’s keep mortgage interest separate. Perhaps it should not be a decoction at all or deductible only if the implicit rent of the housing being financed were treated as taxable income. If viewed as just a subsidy to owner-owned housing, the the solution would be to make it a partial tax credit at the lowest percent politically feasible.
Back to my question, what decision make by the taxpayer does making SALT deductible distort? Where is the dead-weight loss?
Todd Ramsey
Sep 14 2021 at 10:11am
A year or two ago, I sadly realized peak libertarianism was in the 80s and 90s, Reagan and Clinton, with a brief interruption from George HW. Followed by the worst president in my lifetime, George W.
Henri Hein
Sep 14 2021 at 1:11pm
Thanks for that! I consider George W the worst President since Hoover. That’s not considering Nixon, who was an abnormality, so I don’t know about rating him with others. Obama was also pretty bad, and only looks comparatively good because he was bracketed by such disasters.
Matthias
Sep 15 2021 at 8:42am
At least computer games have gotten massively better.
Philo
Sep 17 2021 at 2:08pm
I don’t play computer games—my game is Contract Bridge (!)—but I have the impression that you’re right, and that computer games are an important positive contribution to our culture. If I wanted to be a competent cultural critic, I would get busy playing computer games; I’d have a lot of ground to make up!
Michael Rulle
Sep 16 2021 at 3:54pm
I agree on Cadillac tax and the state tax deduction elimination. However, I disagree more with the context in which they exist. We have so many tax inefficiencies, that something that might otherwise be the correct decision can be wrong because it counteracts other bad decisions. I like to use the example of interest income and interest expense. Why should one pay tax on income from loans we make, but not get deductions on loans other’s make to us? (Or better, no tax effect on either).
So my position is always No on new taxes—ever. Get rid of the old ones—or at least make them fair—yes fair—relative to the Government’s take. It is a mess.
nobody.really
Sep 17 2021 at 2:54pm
One theory supporting SALT deductions: They’re akin to business expenses. States with higher local taxes also tend to be states that generate more federal revenues. Why? Maybe their higher public spending which makes them more productive–or, at least, more attractive to productive people. Thus, the feds are net beneficiaries of higher SALT, and should not object to incentivizing these investments.
True, you don’t need to demonstrate that your state’s SALT results in greater productivity to get the deduction. Likewise, businesses don’t have to demonstrate that their expenses resulted in greater productivity in order to deduct business expenses.
___
But more generally, yes, peak libertarianism (traditionally understood) has passed. Democrats are marching toward greater socialism. Republicans are marching toward greater authoritarianism/theocracy. Those who are skeptical of the state are increasingly stateless.
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