Remember that clause in the “US constitutional rulebook” stipulating that residents from one state should be forced to subsidize bailouts, pork, and welfare schemes in others? How about the one mandating that the tax code should be used as a tool of behavioral control? They’re right in the text, beside the “Military Can Be Used Anytime Anywhere”, “Congress Can Control Education”, and the “Feds Can ‘Regulate’ Everything in The Market” clauses.
So why would anyone be surprised to see a new federal bill to bail out California and other high cost area renters and the state politicians who've burdened residents with so much bad regulatory and tax mojo that new housing construction in the state is as rare as rain in LA?
Indeed, CA Democrat Senators Kamala Harris and Dianne Feinstein, Connecticut’s Richard Blumenthal (D), and New Hampshire’s bright new strobe light of lefty genius, Maggie Hassan (D), just proposed some federal tax manipulation (including possible subsidization) for residents looking to pay rent. As Christian Britschgi writes for Reason, it’s called The Rent Relief Act of 2018, and it offers refundable tax credits to renters who shell out more than 30 percent of their income on rent.
That translates to a tax credit Band Aid on systemic political problems in California, offering tax leniency for certain preferred behavior (which the feds do for all kinds of behaviors, including home ownership), and the potential of an overall redistribution of wealth to the lowest earners on the scale in the bill.
“This bill will ensure no family is priced out of the basic security of a place to live. Bolstering the economic security of working families would strengthen our country and increase opportunity,” Sen. Harris says in a press release.
Indeed, according to the proposal, people who earn under $25,000 annually will receive a 100% tax credit for their rent from the feds. But Americans at that earnings level don’t have to pay income taxes, and they can receive the Earned Income tax Credit (EITC), which is, itself, a redistribution scheme masked as a “repayment” of payroll taxes for Social Security and Medicaid. So this plan is, in effect, another way to redistribute wealth from those paying taxes to many who do not.
Why openly state you’re a politician interested in redistribution of wealth when you can hide it through so-called “tax credits” to residents on taxes they won’t pay?
And why bring up the political reasons rents are so high in CA and other regions of the US, when one can simply vote to mask the symptoms through a federal tax-subsidy scheme?
As I noted in May for MRCTV, California recently passed a mandate that by 2030, all new homes must be 50 percent solar powered, which will really do wonders for the incentives to build affordable housing all across the Golden State.
Indeed, as Britschgi notes:
‘With the billions in tax subsidies allotted to billionaires through last year's tax changes, this legislation provides a refreshing contrast for working families who struggle daily,’ says Mayor Sam Liccardo of San Jose, where it's illegal to build multi-family housing in some 75 percent of the city.
‘Senator Harris' legislation would help protect millions of families from losing their homes, by expanding benefits and opportunities for people who pay rent every month,’ declares Los Angeles Mayor Eric Garcetti, who wholeheartedly endorsed development fees in Los Angeles that add between $5,616 and $10,530 to the costs of building an average-sized one-bedroom apartment.
Finally, Britschgi offers succinct and valuable insights from Lynn Fisher, a housing and policy researcher for the American Enterprise Institute:
We would be asking the whole United States to subsidize the bad behavior of some locales that are artificially pushing up rents by not allowing more building to happen… If [Harris' bill] increases market demand and the supply doesn't expand with this, if supply can't expand, then simply what've you've done is to raise rents in many of these areas.
Economics? Supply and demand? Lessons about how government subsidy, prohibition, and regulation screw up the supply and demand curves that steer resources towards where consumers want them? Verboten! Seal your mouths, you evil economist wizards! We are politicians, and we don’t want that terrible word “economics” used ‘round these parts!
And the politicians certainly don’t want to pay attention to their Constitution. By using the tax code to hide their subsidy scheme, they’ve found a nifty way to circumvent the lack of any constitutional provision granting them the power to redistribute wealth. Of course, when put to the test, politicians like Harris, Feinstein, Blumenthal, and Hassan might claim they have the so-called “General Welfare” clause on their side. But such fatuousness negates the fact that the Founders put specific, enumerated powers in the Constitution and noted that anything not granted was reserved to the states and the people. It also pretends in a Utilitarian way that taking money from some people to give to others actually benefits the “general welfare”. The “general welfare” is not maximized by making anyone a potential victim of government theft, by setting up everyone to be under threat of government “regulation” and coercion.
The “general welfare” is maximized by leaving each individual member of the society alone to decide how best to live his or her life, to keep the fruits of his or her labor, and to offer products or services to others free from political threats.
Strangely, that’s how housing could be made more affordable in California. Not through redistribution of wealth, but through freeing up market resources to go where consumers want them.
Sadly, the political route to “addressing” these problems that the politicians created merely makes them worse.