Two Reagan administration proposals provide an interesting look at the president's priorities. He wants to eliminate the Neighborhood Legal Services Program, not because poor people don't need legal assistance but because in these belt-tightening times it is expensive.
On the other hand, the administration's tax package includes a tax break for overseas workers that would cost the Treasury upward of $500 million -- nearly twice the cost of the NLSP.
There's another interesting comparison as well: the legal services program, despite its proven value, is fighting for survival, while the final tax measure is expected to sail through Congress with hardly any opposition.
The non-controversial measure, part of the administration's general tax package, would exclude from taxation as much as $75,000 in annual personal income of Americans working overseas.
The rationale for the proposal is that it is in the interest of the United States to encourage Americans to work abroad because their presence boosts U.S. exports and helps the country's balance of trade.
But reliable dollar figures on what the exclusion would produce in American goods sold aborad are hard to come by -- which means it is impossible to say whether the tax break would be worth its $500 million annual cost to the Treasury.
Until 1978, the exemption covered only the first $20,000 to $25,000 in overseals salaries, as a device to compensate for the extra costs of living abroad. The exeption was then replaced with a schedule of liberalized tax deductions for excess living expenses.
Now the Reagan administration wants to exclude entirely the first $50,000 in overseas income and half of the next $50,000. Supporters of the new tax break say that, without it, American workers would be replaced by foreign workers and American firms would lose billions of dollars in sales of goods and equipment.
Their evidence is mostly anecdotal. One American firms said its inability to compete with tax-advantaged foreigners resulted in its losing a contract to a French engineer who then hired French subcontractors who bought French equipment, costing Americans millions of dollars in lost sales.
The obvious question is: if landing the contract meant that much to the American firm, why didn't the company simply raise the salaries of its employees? Or, to put it another way, why should American taxpayers subsidize the salaries of private employees?
It is by no means clear that American overseas workers, because they prefer American goods, significantly boost the balance of trade. In many cases, they do just the opposite. It was Americans stationed in Europe who brought the first Volkswagens over here, marking the beginning of trouble for the domestic auto industry. Americans abroad buy suits from Hong Kong and Savile Row tailors, typewriters from Italy, fashions designed in France, electronics and cameras from Japan, and so on. There is one Amerian product they seem uniformly to prefer, but it will take a lot of U.S. toilet paper to offset the $500 millions drain on the Treasury.
Nor is the evidence overwhelming that the additional tax incentives are needed to keep the estimated 125,000 to 150,000 U.S. workers from deserting their overseas posts. In those cases where American workers do experience financial and other hardships, tax relief can be fashioned specifically to ease the burden.
For instance, construction workers in the Middle East often have it rough, living in tents and working in insufferble heat. Their employers make it attractive for them to stay there by offering various bonuses. Wouldn't it suffice to make these bonuses tax-exempt, as they already are for government workers and military personnel serving overseas?
Even where the working conditions are comparable to those at home, there are clearly disadvantages to working abroad.But why should U.S. taxpayers assume the additional burden? If it is in the interest of the employers to have pretroleum experts in Saudi Arabia or newspaper correspondents in Europe, why don't the employers themselves provide the incentives?
The administration proposal, coming as it does, during a time when social programs for those most in need are under attack, is more indicative of an us/them attitude than of real concern for fiscal restraint.