American Opinion: Congress's spending bill is feeding the already comfortable upper-middle class
American Opinion: Based on tax provisions Congress attached to the must-pass spending bill that President Donald Trump signed last week, we'd say lawmakers have revealed a preference for the care and feeding of the already comfortable upper-middle class.
"Revealed preference" is a name economists give to the way markets help societies and individuals learn about themselves. Claims and hopes come and go, but actual expenditures show true priorities. Former vice president Joe Biden, of all people, gets the idea: "Don't tell me what you value," he likes to say. "Show me your budget, and I'll tell you what you value."
Based on tax provisions Congress attached to the must-pass spending bill that President Donald Trump signed last week, we'd say lawmakers have revealed a preference for the care and feeding of the already comfortable upper-middle class.
Not even the imperative of getting $1.4 trillion worth of funds approved by a Dec. 20 deadline could move Congress to meet an urgent need of the working poor: an expansion of the earned-income tax credit (EITC) for single, childless adults. The EITC is essentially a wage supplement, delivered as a tax refund, that boosts the take-home earnings of low-wage workers. It favors those with children, which is an understandable policy goal but no reason to omit single adults who are willing to work their way out of poverty. Democrats pushed measures to nearly triple the maximum EITC for such workers from $529 to $1,464 per year and to make workers under age 25 eligible, but such proposals got left on the cutting-room floor.
Meanwhile, Congress found room for puzzling new benefits for the relatively well-off minority of Americans who put money into tax-free 529 college tuition savings accounts. Henceforth, savers will be able to withdraw 529 funds tax free not only for tuition and other expenses but to pay off up to $10,000 in student loans- even though the whole point of 529s is to promote saving over borrowing, not to lower the cost of borrowing. However, it probably does meet one of Congress's needs — for a talking point on what lawmakers are doing about student debt.
More substantive and, as a matter of governance, encouraging was inclusion in the bill of the Secure Act. The measure modernizes tax-advantaged individual and employer-based retirement savings plans, the most popular employer-based version of which, the 401(k), had 100.2 million participants with $5.7 trillion in assets in 2016, according to the American Benefits Council. Again, this is mainly a middle class and above perquisite; just 5% of those making $25,000 or less take advantage of existing retirement savings incentives, according to the Tax Policy Center.
Still, the Secure Act helps modestly by encouraging small businesses to offer employees 401(k)s and enroll them automatically once a plan is in place. It enables part-time workers to join 401(k)s and raises from 70 1/2 to 72 the age at which individual retirement accounts (IRAs) must be tapped, to account for longer life spans. The Secure Act is largely paid for over a decade —via the phasing out of a tax-planning incentive used mainly by the wealthy. Given the huge additions the spending measure makes to the deficit otherwise, that nod to fiscal responsibility is welcome.
This editorial is the opinion of The Washington Post's editorial board.