Donald Trump and Kamala Harris keep making new promises.
Trump fans applauded when he said he'll eliminate taxes on tips. Then Harris proposed that, too. Her audience applauded. Trump then proposed not taxing overtime. More applause.
But narrow tax exemptions are bad policy.
In my new video, Economist Allison Schrager explains how they create nasty, unintended consequences.
"No one likes tipping," says Schrager, "but all of a sudden, you'll have to pay tips for everything. ... More people will be paid in tips."
I want lower taxes, but awarding specific exemptions to certain people doesn't just let some of us keep more of our money, it tells workers and employers to change their behavior.
"If you're a restaurant owner, you need chefs, hostesses, managers," says Schrager. "All of a sudden, one group of your employees isn't paying taxes, and the rest are. Suddenly, it would be very hard to hire anyone who's not a server."
Likewise, Trump's proposal to eliminate tax on overtime would reduce hiring.
"Employers may hire fewer people so they can give more overtime to employees they have already," says Schrager.
"Do you know any economists who support these ideas?" I ask.
"No," she says. "It's actually nice that economists on both the left and right are coming together with a sort of mutual disgust."
Disgust is the proper response to many of Trump's and Harris' proposals.
Harris promises more rent control. She says she will "take on landlords that unfairly raise rent on working families." Just "working families"? Will she allow landlords to raise rents on non-working families? I hate the poll-tested jargon.
Her supporters praise her promise, but rent control is destructive. "Sounds really good," says Schrager. "But all it means is that people are less inclined to rent to you."
"Why would you enter a market where it seems like the government is actively trying to hurt you?" Adds Mercatus Center economist Salim Furth. "You're providing an essential service, something human beings need to live, and the government views you as a hostile outsider. I wouldn't want to bring any service into a market like that."
Argentina's new libertarian president just scrapped rent controls. The supply of rental apartments doubled, and prices declined by 40%! That's good policy.
But Harris proposes the opposite!
Likewise, Trump's (and Joe Biden's) tariffs don't just punish China, they reduce choice and raise prices in America.
"Free trade is good!" says Schrager. "It brings lower prices, making our own industries more dynamic, raising our income."
"But trade does take away some Americans' jobs," I point out.
"But it creates a lot of other new jobs," she replies.
It sure does. More and better jobs than those lost through trade.
Yet Trump brags about his tariffs, and Harris seems eager to outdo him with bad ideas.
She proposes giving "first-time homebuyers" $25,000. Again, her fans applaud.
Schrager explains, "free" money from government doesn't increase the supply of homes. When every buyer has $25,000 more, "they just bid up prices even higher!"
Why such economic ignorance?
"Look at Kamala's team," says Schrager. "Most of her core advisers are lawyers, not economists."
"What would be a good promise?" I ask.
"Addressing our growing debt," she responds.
That would be good. Thanks to Biden's reckless spending (and Trump's, and most every president's since Bill Clinton, and Congress adding pet projects), our debt now increases by $8 billion per day! That's money government cannot spend on protecting us or helping the truly needy.
Soon, Social Security and Medicare will run out of money.
But instead of addressing these problems, Trump and Harris pander.
"I won't raise retirement age by one day!" shouts Trump.
But if we don't reform these handouts, America will go broke.
Real reform frightens voters. So Trump and Harris make deceitful promises.
As Schrager concludes, "There's a lot to hate on both sides."
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