John Stossel
interviews economist Allison Schrager concerning the economic promises made by both presidential candidates. Ms. Schrager finds much not to like in the promises of both. Stossel writes:
Donald Trump and Kamala Harris keep making new promises. Trump fans applauded when he said he'll eliminate taxes on tips. Then Harris proposed that, too. Her audience applauded. Trump then proposed not taxing overtime. More applause.
But narrow tax exemptions are bad policy. Economist Allison Schrager explains how they create nasty, unintended consequences. "No one likes tipping," says Schrager, "but all of a sudden, you'll have to pay tips for everything. ... More people will be paid in tips."
I want lower taxes, but awarding specific exemptions to certain people doesn't just let some of us keep more of our money, it tells workers and employers to change their behavior.
"If you're a restaurant owner, you need chefs, hostesses, managers," says Schrager. "All of a sudden, one group of your employees isn't paying taxes, and the rest are. Suddenly, it would be very hard to hire anyone who's not a server."
Likewise, Trump's proposal to eliminate tax on overtime would reduce hiring. "Employers may hire fewer people so they can give more overtime to employees they have already," says Schrager.
Harris promises to put a cap on rents. It sounds attractive to renters but everywhere it's been tried it has resulted in a scarcity of available housing:
[Harris] says she will "take on landlords that unfairly raise rent on working families." Just "working families"? Will she allow landlords to raise rents on non-working families? I hate the poll-tested jargon. Her supporters praise her promise, but rent control is destructive. "Sounds really good," says Schrager. "But all it means is that people are less inclined to rent to you."
"Why would you enter a market where it seems like the government is actively trying to hurt you?" Adds Mercatus Center economist Salim Furth. "You're providing an essential service, something human beings need to live, and the government views you as a hostile outsider. I wouldn't want to bring any service into a market like that."
Argentina's new libertarian president just scrapped rent controls. The supply of rental apartments doubled, and prices declined by 40%! That's good policy. But Harris proposes the opposite!
What about Harris' idea to give first-time homebuyers $25,000?
Schrager explains, "free" money from government doesn't increase the supply of homes. When every buyer has $25,000 more, "they just bid up prices even higher!"
There's more at the link. It's a very unfortunate fact about our politics that it's much easier to get elected if you promise people freebies. It's economically irresponsible, but if your opponent is offering free stuff and you're campaigning on fiscal responsibility, relatively few voters will find your scrupulosity attractive.
