Taking a whack at the tax reform pinata -- Jan. 29, 2015 column

By MARSHA MERCER

Tax reform is like the old song about heaven. Everybody wants to go there, but nobody wants to die.

Nearly everybody -- President Barack Obama, politicians, most taxpayers -- says we need a simpler, fairer tax code, but nobody wants to give up anything to get there.

   

The uproar over Obama’s proposal to tax 529 plans is a case in point. You can imagine how the big brains in the White House figured that 529s were ripe for picking. Less than 3 percent of families use 529 and similar tax-free savings plans for college, and the plans disproportionately benefit the well off.

Households at all income levels may make after-tax contributions, earnings are tax-deferred and funds may be used tax free for qualified education expenses. About 70 percent of account balances are held by households with incomes over $200,000.

As part of his “middle class economics” plan, Obama suggested taxing 529s and using the revenues to expand an education tax credit for couples making up to $180,000 a year.

Cue the outrage. House Speaker John Boehner charged Obama’s proposal would hurt the very people the president claimed he wanted to help: the middle class. Congressional Democrats also took a whack at Obama’s 529 pinata.

The Obama family’s own hefty 529 accounts would have been unscathed as the proposal only would have taxed future contributions to plans. Back in 2007, the then-senator and Michelle Obama socked away $240,000 in 529 plans for their daughters’ education.

About half the households with 529 and similar college savings plans had incomes above $150,000, according to a Government Accountability Office study in 2012. But that means about half had income below that amount.

The GAO began its report with a disturbing fact: “While median family income decreased between 2005 and 2011, college tuition and fees increased at an average annual rate of 6 percent, more than double the rate of inflation.”

However promising taxing 529s looked on paper, it should not have come as a surprise to anyone in the White House that families that could afford to save used the plans and would hate to lose them.

In federal budget terms, taxing the capital gains of future contributions wasn’t a big ticket item. It would have resulted in revenues of $1 billion over 10 years -- but the proposal hit millions of families. There are about 12 million accounts nationwide.

Thus, Obama managed to accomplish something rare in Washington: His proposal united Democrats and Republicans – against him. The White House said the proposal had become “a distraction” and dropped it within a week.

A peevish editorial in The Wall Street Journal lamented that Obama had moved so quickly. “This is a cut-their-losses move, but we wish the idea had rotted in the sun for a few more months. It would have been instructive to the same middle-class taxpayers Mr. Obama claims to serve,” the paper opined. Pass the sour grapes – or raisins.  

Income inequality, long a Democratic issue, has become a new political cause for Republicans. As they weigh 2016 presidential bids, former governors Mitt Romney and Jeb Bush as well as Sen. Rand Paul of Kentucky and Wisconsin Gov. Scott Walker talk of ending poverty.   

Another problem is the shrinking middle class. About as many Americans identified themselves as lower or lower-middle class as middle class in a Pew Research Center/USA Today survey last year.  The share of Americans who said they were middle class dropped from 53 percent in 2008 to 44 percent last year.

The median household income was about $52,000 in 2013, the latest year for which the Census has figures. That’s 4.6 percent lower than it was in 2008 and 8.7 percent below 1999’s median household income of $56,895.

For the time being, savings in state-run 529 accounts appear safe from tax reform efforts.

Families will continue to use the plans tax-free for tuition, books, fees and other qualified expenses at any college or university in the country. 

One necessity that doesn’t qualify is computers. A bipartisan bill in the House would allow computer purchases with 529 funds, and Boehner has urged Obama to support it.

But that helps illustrate the problem with tax reform. It’s always easier to give -- or expand -- a tax break than to take one away.

©2015 Marsha Mercer. All rights reserved.

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All you need to know about Washington in 2014: It's an election year -- Dec. 24, 2013 column

By MARSHA MERCER

Trying to put unlucky 2013 behind him, President Barack Obama was upbeat about the New Year.

    

“I firmly believe that 2014 can be a breakthrough year for America,” he said Dec. 20 at a White House news conference before heading to Hawaii for vacation.

“It’s probably too early to declare an outbreak of bipartisanship,” the president conceded, “But it’s also fair to say we’re not condemned to endless gridlock.”

OK, it’s the holiday season, so let’s be charitable. It’s possible that 2014 will be more productive than 2013 in the nation’s capital. But don’t bet your new MacBook Air on Democrats and Republicans suddenly discovering they have a lot in common.

Everything you need to know about 2014 in Washington can be summarized in two words: midterm elections.

Obama and members of Congress are battling for their survival. Everything they say – and they will say far more than they will do -- will be focused on winning middle-class votes. The technical term is pandering, and both parties are masters of the craft.

The stakes are large. If Obama’s approval rating doesn’t rebound from the miserable 42 percent he hit in the latest CBS News poll, he’ll be an albatross for Democratic candidates running for the House and Senate next November.  And if Republicans don’t stop playing fiscal brinksmanship games without offering alternatives, they risk writing their own political obituaries.

Some things won’t change when the ball drops at Times Square. Health care and the economy will dominate politics. Republicans will keep describing Obamacare as a train wreck and the economy as an abject failure. Democrats hope voters won’t listen once people start getting insurance coverage and the economy continues to grow.  Yes, those are big ifs.

Republicans in the Senate and House are convinced that public disapproval of the Affordable Care Act will translate into GOP votes. That means more hostile hearings presided over by House Republicans and more horror tales from Senate Republicans, although we may be spared another attempt to defund the law, given the political hits the GOP took from forcing a government shutdown last fall in a futile attempt to stop the law.

The bipartisan budget agreement this month showed that compromise is possible on Capitol Hill. An early test of whether bipartisanship will last will come over the debt ceiling. The Treasury Department says the amount the government can borrow must be increased by early March so we can continue paying our bills.

Conservative Republicans will demand budget concessions; Obama has reiterated his refusal to negotiate. Such a standoff also led to the shutdown.  

But 2014 has the added intrigue of Senate Minority Leader Mitch McConnell’s tough re-election fight in Kentucky. With only a 31 percent approval rating in his state, McConnell is the least popular senator in the land. In Kentucky, though, 31 percent was also Obama’s approval rating, which doesn’t help Democrats. 

If McConnell beats tea party challenger Matt Bevin in the Republican primary, he still has a formidable general election competitor in Democrat Alison Lundergan Grimes, Kentucky secretary of state.

For their part, Democrats on Capitol Hill will focus on working families and income inequality. A priority is raising the minimum wage. Sen. Tom Harkin, an Iowa Democrat who’s retiring, has proposed an increase from $7.25 to $10.10 an hour, which Obama supports.

Republicans counter that a higher minimum wage will mean that employers hire fewer workers. Both sides see the minimum wage as a potent campaign issue.

Senate Majority Leader Harry Reid says the first order of business in January will be extending long-term unemployment benefits, which Congress allowed to expire this month.  House Speaker John Boehner may go along with the extension, if spending cuts are part of the package.

Progressive Democrats, including Harkin and Elizabeth Warren of Massachusetts, are defying conventional wisdom that curbing entitlements must be part of any long-term fiscal plan.  They say Social Security benefits need to be raised, not cut.

Critics say it’s irresponsible to suggest raising benefits, which would require higher payroll taxes, and nobody, but nobody, expects anything to happen. But it does make a dandy campaign promise.

So much pandering ahead in 2014, and we haven’t even touched on 2016. Happy New Year!   

© 2013 Marsha Mercer. All rights reserved.

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This August, tell Congress what you think -- Aug. 1, 2013 column

By MARSHA MERCER

With Congress on a five-week vacation, it’s your chance to give your House member and senators a piece of your mind.

An old-fashioned town hall meeting is probably coming your way. Yes, tweeting is faster, but getting in a lawmaker’s face? Priceless.

When Rep. Robert Goodlatte, R-Va., sponsored a town hall meeting in Lynchburg last month, the last person to stand and speak was Dulce Elias, 16, whose parents brought her to the United States when she was 3.

“I love it here. This is my country. I want to keep on pursuing my education and I want to serve my country. But I can’t because I am undocumented,” Elias said, choking up, the News & Advance reported. 

Please, she implored Goodlatte, help the children whose parents brought them here and have done nothing wrong.

Goodlatte, the powerful chairman of the House Judiciary Committee, strongly opposes immigration reform until the borders are secure and enforcement is tightened. He’s no fan of citizenship for all 11 million undocumented individuals, but he said he would look into the issue.

“Maybe for someone like you, it could include a pathway for citizenship,” he said.

In 2009, tea party activists hijacked town hall meetings and turned them into shouting matches over health care reform and federal spending. In 2010, many Democratic members of Congress skipped town halls to avoid a scene with constituents. Nobody loves being yelled at. This year, though, Democrats say they won’t cede the field and intend to talk about immigration reform. Republicans want to focus on, what else, the evils of “Obamacare” and big government.   

The Senate passed a bipartisan immigration bill June 27 that includes a path for citizenship for 11 million undocumented immigrants. The Republican House leadership rejects that comprehensive approach and may vote on several separate bills this fall.   

Progressives will use the summer recess to pressure the GOP. Rep. Xavier Becerra, D-Calif., had a warning for House members: “If you have a town hall or if you don’t, we’re going to find you in the grocery store because this is it. We’ve never been this close,” he said Tuesday in an interview with Bloomberg News.

Polls show public support for a path for citizenship, but House Republicans fear GOP challengers from the party’s anti-immigration wing. So Republicans in the House plan to focus on topics the party faithful can agree on.

To fight Obamacare, Heritage Action, an offshoot of the conservative Heritage Foundation, plans town hall meetings in nine cities between Aug. 19 and 29 -- Fayetteville, Ark.; Dallas, Tampa, Nashville, Birmingham, Ala., Indianapolis, Columbus, Ohio; Pittsburgh, and Wilmington, Del. – The idea is to kill the health care law by starvation.   

“We’ll make sure lawmakers understand the American people expect then to defund Obamacare in its entirety,” said Heritage’s Michael Needham.

Democrats have warned that trying to defund the health law will result in a government shutdown, and that could have disastrous consequences for the economy.

Responsible Republican members of Congress who want to keep the government open have a tough job going against the anti-government tide. Video snippets posted online of a town hall meeting Monday in Wetumpka, Ala., illustrate the problem.

Rep. Martha Roby, R-Ala., 37 and a second-term House member, met with skepticism from a tea party audience when she said shutting down the federal government was a bad idea.    

“If we shut the government down, I believe that’s exactly what Barack Obama wants us to do,” Roby said, explaining that Obama would win more seats in Congress in 2014, dooming Republican chances to repeal the health law.

“The last thing we need to do is to give this guy unfettered control for two years,” she said.

That wasn’t enough for a woman named Jody, who called Roby on the carpet for being too close to the “moderate elite establishment of the Republican Party, in particular John Boehner.” Roby tried to explain why being able to agree – and disagree -- with the House Speaker might be a good idea. No go.

Oh, the drama. I’m waiting for the reality TV folks to discover “Real Congress of Grassroots America.” Until then, check out a town hall meeting in a town or city near you this summer.

(Marsha Mercer writes from Washington. You may contact her at marsha.mercer@yahoo.com)

© 2013 Marsha Mercer. All rights reserved.

At it again: Congress plays politics and favorites with health law -- May 2, 2013 column

 By MARSHA MERCER

Two things people detest about Washington: when members of Congress play politics and when they play favorites, especially favoring themselves.

 

Well, pull up a chair and get your mad on. Both sides of the aisle are guilty in the flap over the Affordable Care Act’s health insurance exchanges.

Exchanges are the online marketplaces where people will compare and buy insurance starting in January. One of the selling points for the public is that members of Congress will participate. This is less because Congress wanted to do the right thing than because Sen. Chuck Grassley, R-Iowa, added a requirement that Congress and staff enter the exchanges.

Members of Congress are notorious for making rules for the rest of us while exempting themselves, and Grassley has the novel notion that Congress ought not do that. He was also gigging Democrats and didn’t expect his amendment to survive. But Democrats surprised him and agreed to it.

With the online exchanges scheduled to open for enrollment in October, House Speaker John Boehner, R-Ohio, and Senate Majority Leader Harry Reid, D-Nev., reportedly were secretly negotiating a way to exempt lawmakers and Capitol Hill staffers. When the news broke, the twitterverse lit up with outrage.

The congressional leaders denied they wanted to exempt themselves. They wanted only to fix it so the federal government could continue contributing its employer share to workers’ insurance premiums, they said. Maybe so, but the damage was done.

Now comes Rep. Dave Camp, R-Mich., chairman of the House Ways and Means Committee. He upped the ante by proposing that all federal employees – from the president to groundskeepers – buy their health insurance on exchanges. He would exempt active-duty military and postal workers.

“If the Obamacare exchanges are good enough for the hard-working Americans and small businesses the law claims to help, then they should be good enough for the president, vice president, Congress and federal employees,” a Camp spokeswoman said.

President Barack Obama has said he will buy insurance through an exchange, although he has medical staff at his elbow in the White House.

Camp’s bill brought speedy condemnation from Democratic leader Nancy Pelosi and the unions that represent federal workers.

“There is no need to kick over 2 million federal employees off their insurance plans in order to satisfy the cynical political urges of House Republicans, who have voted to repeal this law over 30 times,” a spokesman for Pelosi said.

Camp’s proposal is an over-correction, and federal workers are already political footballs under sequestration’s automatic spending cuts and furloughs. But his proposal does raise an interesting point. Should the government continue to subsidize federal employees’ health care the way private employers do?

If so, a mechanism for employer subsidies needs to be built into the exchanges. As currently envisioned, the exchanges are for people whose employers don’t offer insurance and for people who can’t afford the coverage that is offered.

The kerfuffle over congressional participation in exchanges came as most Americans seem to be hazy, at best, about the law. Four in 10 American adults don’t even know that the Affordable Care Act is still the law of the land, the Kaiser Health Tracking Poll reported.

Obama says the law is working fine, even if people don’t know it. He still believes that people will come to understand the benefits in time, although he also concedes there will be “glitches and bumps” along the way. Only 35 percent of Americans have a positive view of the law, Kaiser says.  

People are unlikely to embrace the law as long as Congress appears to disdain it. Sen. Max Baucus, D-Mont., made news last month when he worried aloud that the rollout of the exchanges could be “a huge train wreck.” He’s retiring but other Democrats are worried that the exchanges will hurt them in the 2014 elections.

It’s evidently too much to ask Congress to show leadership on an issue that affects every American.   

For now, Democrats and Republicans have returned to their corners. But we’re likely to see more mischief making on the health law and more reasons to detest Washington.

© 2013 Marsha Mercer. All rights reserved.

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Family values, fundraising, fairness -- and Obama's stance on same-sex marriage -- May 10, 2012 column

By MARSHA MERCER

To those who were shocked, shocked to hear that campaign politics might have figured into President Barack Obama’s endorsement of same-sex marriage, I have bad news. It was ever thus.

Obama fired off a fundraising email the day after he said he personally supports same-sex marriage. Unseemly, yes, but hardly surprising. Political strategizing has been at the heart of the war over marriage equality since the Defense of Marriage Act was a glimmer in Bob Dole’s eye 16 years ago.

As President Bill Clinton ran for re-election in 1996, Dole, the presumptive Republican presidential nominee, co-sponsored the Senate bill that defined marriage as between a man and a woman.

Dole wanted to stir the “family values” pot, but Clinton grabbed the spoon.

As Dole shepherded the bill banning same-sex marriage through Congress, with the help of House Speaker Newt Gingrich, the White House announced that yes, indeed, Clinton would sign it. And in September he did so, ignoring the outrage of gay supporters. The re-election campaign soon ran ads on Christian radio stations, lauding the president for fighting for “our values.”

Clinton sanded the edges off what Dole had hoped would be a wedge issue in that campaign. But the Defense of Marriage Act, or DOMA, lives as the law of the land. Obama disavowed DOMA and has refused to defend it in court – but the law still blocks thousands of lawfully wedded same-sex couples from receiving benefits available to heterosexual couples. We’ve yet to hear how Obama proposes to change that.

In 1996, no state had legalized same-sex marriage. Today, six states and the District of Columbia permit it, but under DOMA no state must recognize same-sex marriages that are performed in another state.

Section 3 of the law specifies that for federal purposes ``the word `marriage’ means only a legal union between one man and one woman as husband and wife, and the word ‘spouse’ refers only to a person of the opposite sex who is a husband or wife.”

The law effectively cuts out same-sex married couples from more than 1,100 federal benefits, according to the Human Rights Campaign, an advocacy group for lesbian, gay, bisexual and transgendered people.

Married same-sex couples cannot file joint tax returns, take unpaid family leave, receive surviving spouse benefits under Social Security or receive family health and pension benefits as federal civilian employees.

Obama told Robin Roberts of ABC News Wednesday that, “For me, personally, it is important…to go ahead and affirm that I think that same-sex couples should be able to get married.” But he dodged questions about what he will actually do, saying the issue should be left to the states.

A day earlier, North Carolina became the 30th state to ban same-sex marriage, reinforcing current law with a constitutional amendment.

It’s difficult to imagine how Obama can stick to the stance that his views are merely personal when he says fairness and justice are at stake. He stood for fairness when he backed repeal of “Don’t Ask, Don’t Tell,” the policy that prevented gay men and lesbians from serving openly in the military.

The main rationale for not defending DOMA in the courts was Obama’s determination that the law was unconstitutional, Attorney General Eric H. Holder Jr. wrote House Speaker John A. Boehner in February 2011. Nevertheless, law is law, and the president ordered his attorney general to continue enforcing it.

House Republicans hired a lawyer to defend the law in the courts.

The Supreme Court likely will decide the issues at some point. For now, Obama has a campaign to run and pay for. One in six of his top bundlers, who have brought in $500,000 or more, have publicly identified themselves as gay, The Washington Post reported.

Obama is trying to walk a line between voters with strong feelings. He stressed in the ABC interview that he deeply respects pastors and others who believe in traditional marriage, and he indicated that same-sex marriage isn’t a current priority.

“I’m not gonna be spending most of my time talking about this, because, frankly, my job as president right now, my biggest priority, is to make sure that we’re growing the economy, that we’re putting people back to work, that we’re managing the draw-down in Afghanistan effectively,” he said.

But he’s not shy about using the issue to bring in campaign cash. For now, Obama’s strategy is to describe himself as a practicing Christian who believes in the Golden Rule.

“Treat others the way you’d want to be treated,” he said before boarding Air Force One for a trip to the West Coast for fundraisers, where his support of same-sex marriage could boost his haul.

©2012 Marsha Mercer. All rights reserved.