Senator Warren’s star has faded from a sure thing nominee (that is why I don’t do predictions) to being back in the pack. Whether she gets the nomination or not some of her legion of plans will be adopted by her fellow Democrats. As you may know, Senator Warren as it has been said has a plan for everything. Her website lists more than 50 plans for various public policy issues. Let’s take a look at a couple of plans to get an idea where she is trying to lead us.
One plan you would not necessarily think I would look at with great interest is for universal childcare. It popped up on my computer so I took a look. It was eye opening and probably indicative of what she wants to do with the rest of her plans.
Her writing is in a very folksy manner to make people feel like she is one of them. In this case it tells of the struggles she had while raising two children and teaching law at the University of Houston. It is nice to know she has faced some of the same challenges as the rest of us.
She then outlines the problem. Childcare costs are high. They can be particularly challenging for single parents. Not only are costs high, but finding quality, safe providers can be difficult. All of us who raised children – even in two-earner families — know the challenges. It is part of what drives the flood of illegal immigrants from south of the border as they know there are jobs waiting for them to help with childcare.
The problem comes with Warren’s solution. She starts by stating “My plan provides the kind of big, structural change we need to transform childcare from a privilege for the wealthy to a right for every child in America.” In short, she will nationalize childcare.
Warren writes of partnering with local providers – states, cities, school districts, etc. But the reality is the federal government does not really partner with anyone. It takes over. As she says, “The federal government will pick up a huge part of the cost.” That means it will determine the rules. She writes about how “providers would be held to high national standards.” The feds will set the standards and pay for the lion’s share; thus, it is clear she is planning on nationalizing childcare. This would all be paid for from the Ultra-Millionaire Tax, but she does not quantify the cost of this nationalization of childcare.
The cost would be huge. First, the feds do too much already; do they really need to be in charge of our kids? Second, this will further break down local communities and encourage more fatherless households as a mother can just take her child to the local office of federal childcare and let them raise her child (or children).
You read the plan and it all sounds so beautiful: I can have childcare and someone else will pay most or all the costs. Sounds fabulous until you start to execute the plan. If you have a problem trying reaching someone and getting results.
Warren’s next plan I took a look at was her “big new idea”: the Real Corporate Profits Tax. Warren begins by chastising the big corporations for not paying their fair share. Her plan will fix that.
There are lots of reasons a corporation might not pay a lot of taxes. They may have had a loss in a prior year that is now being applied against their current income. It would be unfair and bad policy for a company to have a loss in 2017 and not be able to apply it against 2018 profits. Or the corporation may have used significant tax credits (derived from programs Warren and other elected officials put in the tax law to encourage certain behavior or investment). Everything the corporations do is legal and put in place to solve some social need the Congress deems important.
If Ms. Warren wants to get rid of some credits, I am all for that. I wrote a column a few years back ago calling for that. I have yet to see her movement to eliminate the Alternative Motor Vehicle credit or the Low-Income Housing credit? She could propose ending the Indian employment credit. You cannot blame employers for using the legal tax code to minimize their taxes when you participated in supporting the causes that benefit from these credits. Warren places blame for what she characterizes as boondoggles on lobbyists, but it falls firmly on her shoulders and her fellow members of Congress.
What Warren wants to do is apply a 7% tax on all profits above $100 million of a company. That is in addition to any tax derived from the current system. Warren states she wants a separate tax so that these large corporations cannot avoid her levy. She doesn’t want them taking deductions or using credits that Warren does not like because these adjustments to taxable income are deemed loopholes. Loopholes are in the eye of the beholder.
This is in effect an Alternative Minimum Tax (AMT) which we just got rid of. We got rid of it because it was far too complicated and other tax benefits were eliminated to help offset the AMT departure from the tax code. Warren wants to go back to gunking up the code. We lowered rates and got $133 billion of increased tax revenues, or a 4% increase.
And we lowered rates particularly for these larger corporations who were moving to other countries. We had the second highest corporate tax rate in the world (Japan). We are now in the middle of tax rates for corporations worldwide. We were having the corporations and their profits moving elsewhere for lower rates. Corporations are moving back. Warren just wants to punish corporations and sees them as not being a sympathetic target. Warren is confused about the economics. Does she want higher rates or more revenue? She may raise the rates, but she will get less revenue.
In addition, we know the statement indicating the tax will only be applied to corporations with $100+ million of profits will change. When Warren does not get the revenue she hoped for, she will lower it to $50 million and then to $5 million and then to every single corporation. It always works that way. She thinks this will bring in $1 trillion in revenue. That is a pipedream.
These two plans give you a well-defined look at what Senator Warren wants to accomplish. Convince people she is taxing the other guy to provide them free services controlled by the federal government.
That may be for you. But not for me.