Tax reform for the next generation
Fresh off an embarrassing failure to tweak, yet alone repeal or replace Obamacare, the Trump administration is looking for a win. So naturally, it is attempting tax reform. Though nearly every presidential candidate runs on it, substantively changing the American tax code is politically perilous — which is why it hasn’t been done in a while.
But that doesn’t mean we shouldn’t try. Our tax code is arcane, burdensome and unwieldy. In the years since Ronald Reagan’s 1986 Tax Reform Act, the code has gone from fewer than 30,000 pages to more than 70,000.
When President Trump’s tax reform proposals emerge, Democrats and Republicans will inevitably focus their arguments on whether they will benefit the wealthy and corporations.
They should really be worrying about the effect on — and opinions of — millennials. At 80 million, millennials, born between 1980 and 2000, are the largest generation in history. Yet they are a demographic Congress has historically either taken for granted or ignored altogether.
On tax reform, Republicans have a real opportunity to win their appreciation and perhaps their votes.
Nearly half of millennials say the American Dream is dead, according to a recent Harvard study. It’s easy to see why. They “face record-high levels of student debt, along with higher unemployment and poverty levels and lower personal income than the two previous generations at the same points in their lives,” according to Generation Opportunity, a nonprofit advocating limited government.
If Trump and Republicans want to deliver meaningful reforms for the biggest voting bloc in history, they will consider three very simple but important areas of relief.
The first is fixing a tax code that punishes renters.
Millennials, struggling to pay back their college borrowing bills and scared off by the housing crisis, are increasingly living with Mom and Dad or renting. As a result, homeownership rates have plunged to 1965 levels — and millennials have the lowest ownership rate their age group ever has had.
The current tax code locks them out of dozens of federal income tax deductions that only homeowners can receive. According to MarketWatch, only 21 states and Washington, D.C., offer renters any kind of tax breaks, compared with the smorgasbord of federal tax cuts and credits homeowners can take advantage of, from a first-time homebuyers’ credit to mortgage interest deductions and home renovation deductions.
Instead of punishing millennials for their rejection of the irresponsible homeownership habits of their parents — taking out loans so big they often couldn’t be repaid — let’s give millennial renters a break.
Second is fixing a tax code that punishes singles.
Millennials are delaying marriage in record numbers. According to Gallup, in 2014 just 27% of them were married, far lower than the rates at which other generations were married when they were the age millennials are now.
The current tax code, in many cases, rewards marriage, as an antiquated incentive for women homemakers to marry working men. That means single millennials can’t enjoy their married counterparts’ writeoffs, deductions and protections. It’s time the government stopped using taxes to reward winners and losers in love.
The final reform is fixing a tax code that punishes entrepreneurs.
Millennials are exceptionally independent and innovative. Striking out on your own and failing a few times is de rigueur, while going to work for a company on the expectation that you’ll build a 30-year career there is unheard of.
But more than 80,000 government regulations and punitive taxes are scaring off millennial entrepreneurship. The current tax code punishes new businesses for running big losses in the early years and discourages investors from pursuing risky opportunities.
A tax code that’s neutral to a startup’s viability would encourage more millennials to take their chances on the next Uber, Airbnb or Spotify.
If Republicans and Trump want to give the biggest generation in history a much bigger stake in the economy they’ll help to shape, they’ll spend a little less time squabbling about corporate and personal income tax rates — and more making sure millennials have a special seat at the tax reform table.