Dear Readers: We Have Understood You

Your feedback was overwhelming that you enjoy our curation of policy links, and so this will remain a part of the Morning Briefing, though we will still feature longer thoughts on occasion. Please, keep the feedback coming.

And, of course, on Fridays, you get your Friday Essays.

On Making Tips Tax Exempt

PolicySphere covers the tiny world of center and right-of-center policy professionals in Washington. It’s a tiny world, but an influential and important one and one whose nerdiness your correspondent finds infinitely fascinating.

This tiny world occasionally interacts with the broader world: the world of politics, of mass media, and of just the American people and the broader world generally. Whether the reverse is also true is more complicated.

Let us take one specific policy proposal as an example. What’s striking about this proposal, which was made by President Trump during his campaign, is that it is without a doubt the most talked-about of his new policy proposals in the real world, the world outside Washington; it has received very little attention in the circles we at PolicySphere monitor (and belong to).

You may have already guessed which policy we are referring to: making tips tax-exempt.

We have only seen one article in our world on this proposal (we have lost the link), and this article opposed the proposal on the familiar grounds of conservative economic orthodoxy, namely that tax deductions are economically distortive.

Meanwhile, we watched President Trump’s speech at the Republican Convention yesterday. The speech was widely seen as a poor, disappointing performance, but the highlight for us was the President speaking about this proposal (which received enormous cheers from the crowd) and how he got the idea, by speaking to a waitress in Las Vegas.

It’s impossible to know whether the story is true, but it does have the ring of truth, because there have been countless testimonies of Donald J. Trump interacting easily and enthusiastically with service workers in the decades before he entered politics, when he was already a wealthy celebrity.

The proposal seeks to address an obvious problem: several years ago, almost all tips were in cash; it’s impolitic to say so, but that meant that in practice, service workers did not report the tips, and therefore did not pay taxes on them; now, most payments are made electronically, via card or phone; so those tips must be reported.

Of course, you should always report all your income to Uncle Sam, but the reality has historically been different for this category of workers, who by definition are precarious and tend to be low-income.

Is it “bad” in some theoretical sense to add yet another niche deduction to our obese tax code? Yes, of course.

Will it make a significant positive difference to the lives of many people who are struggling? Yes, of course.

When thinking about this, we were reminded of the 2008 Republican Convention, where the chief policy aim was opposing then-candidate Barack Obama’s idea of returning taxes on income above $250,000 a year to their pre-George W. Bush levels; and the 2012 Republican Convention, whose theme and motto, “We Built That”, concerned celebrating business owners and managers.

In 2024, the most important policy proposal of the convention was not about some abstract economic theory, as important as those are, it was making a tangible positive difference in the lives of ordinary people. And this, too, should be a goal of policy.

Morning Policy Links

#Immigration – Center for Immigration Studies: SW Border Apprehensions Drop to Their Lowest Level Under Biden

#Housing – The cost of housing is one of the big issues in the campaign. The Center for Public Enterprise has a fascinating new report out suggesting the creation of a national housing construction fund to not only build more housing but to “create an economic environment where housing production achieves a degree of insulation from the business cycle” factors that are not indicative of housing demand” and its famously boom-and-bust dynamics.

#TaxPolicy – President Trump would like to lower the corporate tax rate even further, from 21% to 15%. In an article full of good ideas, the Tax Foundation points out that without reforms to broaden the tax base this is unrealistic.

#Economics – Speaking of corporate tax cuts, Tyler Cowen points out that the TCJA’s corporate tax cuts did help spur investment, though their impact on the deficit may make them unaffordable.

#K12 – Self-explanatory report from Bloomberg: “NY Students Banned From Using Phones First Hated, Then Loved It” Model for the nation?

#Law – A pending bill, backed by the trial lawyers lobby, would place restrictions on arbitration. Any lawyer with enough experience will tell you arbitration works really well. So this is a very bad idea.

#Fees – The Biden Administration likes to talk a tough populist game on “junk fees.” Their tongue firmly planted in their cheek, the fine people at Cato point out that the government also charges plenty of fees, and have even made a list of 101 late fees charged by the government.

#BottomsUp – Federal judge rules that 156-year-old ban on at-home distilling is unconstitutional

Friday Essays

We could almost make this section entirely about J.D. Vance. A writer and a former philosophy major and a policy mind, he wrote many essays and launched many more upon his nomination as vice presidential candidate.

First, the essay by the man himself on his conversion to Catholicism, for the very good magazine The Lamp.

An essay adapted from a 2019 speech, whose title is self-explanatory: “Towards a Pro-Worker, Pro-Family Conservatism“

Another essay adapted from a speech, this one on broader themes of civilizational crisis and pro-family policy.

Ben Domenech has a good, accurate and charitable, essay on Vance’s intellectual journey from moderate/neoconservative to populist.

Speaking of Vance’s intellectual journey, Politico has an essay charting the thinkers who they believe (not inaccurately) are most influential on Vance’s thought. They are Patrick Deneen, Peter Thiel, Curtis Yarvin, René Girard, Sohrab Ahmari, the Claremont Institute, and Rod Dreher.

Anti-monopoly scholar Matt Stoller has a very good essay this morning asking “Can JD Vance’s Populist Crusade Succeed?“

We don’t usually link to podcasts, but this interview of Oren Cass by Ezra Klein on J.D. Vance’s economic populism is very much worth listening to.

Chart of the Day

How could we not make this our chart of the day, the chart that saved the President’s life? (And which we already featured when it came out…)

Meme of the Day

Sadly, this chart is very true: