There were, alas, exceptions. Probably most regrettable is the bill’s creation of a tax exclusion for employer payments of employee student loans up to $5,250 each through the end of 2020. Undoubtedly, student debt burdens many households, which is why it made sense for Congress to postpone payments on government-provided loans for six months in the bill. The tax break, however, provides a measure of actual principal relief Congress opted not to offer more generally, but only to relatively advantaged borrowers: those who have jobs, earn enough to itemize their tax returns and work for the 8 percent of employers who already provide such support as taxable income under current law. Lobbying to make this provision permanent has already begun — and should be resisted.
The same goes for certain other tax breaks in the bill, especially provisions temporarily and, given the crisis, arguably necessarily, expanding business deductions for interest costs and net operating losses. Restrictions on those were among the few offsets to the 2017 tax bill’s broader largesse for corporations; the tougher treatment of interest costs was expected to raise almost $478 billion by 2032, with the salutary effect of discouraging excessive corporate debt. This might be a time for emergency tax relief, but not for a permanent narrowing of an already diminished federal tax base.
Already, there are signs of a less balanced debate over what may be inevitable additional coronavirus economic relief in the coming weeks. House Speaker Nancy Pelosi (D-Calif.) is suggesting a restoration of the federal tax deduction for state and local tax payments, which the 2017 tax bill sharply curtailed — at a savings to the treasury of $668 billion, according to the Joint Committee on Taxation. She even wants to make it retroactive. The chief beneficiaries of the deduction would be suburban upper-income households in high-tax blue states such as Ms. Pelosi’s California; the top 17 percent of earners claimed 77 percent of the benefits prior to the 2017 change, according to the Tax Policy Center. Yes, states need federal help to get through this crisis; this huge upward transfer of income is an unfair and inefficient way to do that, especially if it’s retroactive — a pure windfall.
So far, both parties in Congress have mostly not used the crisis to pursue long-standing but tenuously related legislative goals. All who may be tempted to start behaving differently should take note that this was not only good policy but good politics, too.
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