How To Fix Megan McArdle's Poverty

We have been busy but we would be remiss not to point out a plaintive missive from Megan McArdle (who else?). McArdle asks someone to figure out How Conservatives Can Fix Poverty and Win Elections for her, for on top of all its other crimes against humanity, Obamacare is destroying marriage. McArdle read and commented on Garance Franke-Ruta's Atlantic interview with a couple who might get a divorce because they can't afford health insurance of Obamacare.

Let us enjoy take a moment to note that, for all intents and purposes, Franke-Ruta replaced McArdle when the latter slowly faded off into the sunset.

Okay, we're done.

Then there's this little bit about something else, and after that bit we return to marriage. McArdle has read people who have read studies that say married people have more money than unmarried people, so conservatives should find a way to incentivize marriage, reducing the need for "entitlements" and consequently winning elections with their imaginary solutions.

Let's begin with McArdle's cri de coeur:

[...Conservatives need to think hard about their answers to the mess that is our current patchwork of benefits. I’ve seen suggestions here and there, but nothing, so far, that the movement has coalesced around. The liberal answer -- give subsidies to more people! -- creates plenty of problems. If conservatives can come up with a better one, they’ll have a cornerstone for the more populist conservative policy platform that Ross Douthat has been calling for. Maybe even for a more populist conservative policy platform that can win elections in 2016.

McArdle understands the need for alms for the poor; they keep the dirty and unwashed at arms' length. But let's not overdo it!

Generous welfare benefits discourage work, eroding the tax base that is supposed to support them. Even Social Security benefits seem to reduce the number of children people have -- children who are still very necessary to support the universal entitlement.

Since Social Security is given to retired and disabled workers and their survivors and dependents, yes, I suppose Social Security does "seem" to reduce the number of children people have. You know what else reduces the number of children? Not having children. McArdle is married yet has no children, for reasons we neither know nor want to know. It's not very fair of her to insist that the poor have more children so she can ensure she gets Social Security. McArdle plows on anyway.

I’m on the record as a marriage booster. Marriage is a happiness booster, it’s the best environment for raising kids, and it’s one of the most reliable personal finance programs around. It’s good for you, and good for society. Good policy should encourage marriage, not discourage it.

Conservatives support “family friendly” policies such as child tax credits, but they tend to give this issue shorter shrift. This dynamic plausibly plays a role in the disintegration of marriage among the less educated. You often hear that welfare helped to destroy fragile families by making men less necessary to their economic support. But welfare did more than that: It actually chased men away. A two-adult family was unlikely to be eligible for welfare, or ancillary benefits such as housing and Medicaid.

Unfortunately McArdle can't think of any actual policies so she merely wafts a request out into the ether, where no doubt it will land on some fallow conservative mind, who will be able to convince people to do what McArdle will not: give up something that is to their benefit. McArdle herself refused to give up her mortgage deduction or employer-provided and tax-payer subsidized health care. Yet she insists that people much, much poorer than herself give up their government benefits, benefits they use to survive.  The poor's government benefits pay for food and shelter for their children. McArdle's government benefits paid for a Thermomix.

And speaking of those deductions, we now come to the little bit of the post that is sandwiched in between the odes to marriage. Less charitable minds than ours might think that this little section was the real reason for McArdle's rare venture outside of Obamacare.

This is not the only program that has this effect. Many tax subsidies phase out at higher income levels, such as IRAs and student loan deductions, and thanks to the tax deal cut over the fiscal cliff, higher-income earners will face more such phaseouts this year.

The link leads to an article on the Pease Limitation.

One of the impacts from the fiscal cliff legislation to be felt by high-income earners is the reintroduction of the Pease limitation, reduces the amount of itemized deductions that certain taxpayers are allowed.  While the American Taxpayer Relief Act of 2012 reduced the impact of the Pease Limitation, it is still around, and it can greatly limit itemized deductions like mortgage interest and charitable gifts.

The infamous Pease limitation was first incorporated into the Omnibus Budget Reconciliation Act of 1990 and it is named after former Congressman Donald Pease.  The purpose of the Pease limitation was to raise revenue by limiting some popular and common itemized deductions among high-income earners.  Pease limitations aim to reduce the benefit of the following itemized deductions:

• Charitable Contributions
• Mortgage Interest
• State, Local, and Property Taxes
• Miscellaneous Itemized Deductions

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The limitation for 2013 will kick in on AGI levels that exceed $300,000 for joint filers and $250,000 for individuals, indexed for inflation.  Income over the applicable amount will trigger an itemized deduction limitation that is the lesser of (a) 3% of the adjusted gross income above the applicable amount, or (b) 80% of the amount of the itemized deductions otherwise allowable for the taxable year.

It seems that Mr. and Mrs. McArdle are about to take a bit of a tax hit. No wonder McArdle is trying to think of a way to save tax monies by squeezing the poor. Some people might complain at length about such an injustice, but McArdle is a libertarian and is no doubt overjoyed at the chance to stop taking advantage of those mooching and looting laws.