Tax Issues – Page 6 – The Wrongologist

Friday Links – September 30, 2016

It’s been a busy week at the Mansion of Wrong, with out-of-town family staying with us. There were parties, dinners, trips to NYC, and limited blogging. Wrongo and Ms. Right accompanied our guests to the 9/11 Memorial Museum. Since our first visit, the Museum decided to exhibit a composite of five floors worth of material from one of the Twin Towers that was heat-fused and compacted during their collapse. It is a truly horrible object, a charred and pitted lump of fused concrete, melted steel, carbonized furniture and less recognizable elements, a meteorite-like mass that no human force could have forged, and it is unforgettable. It is among Wrongo’s favorite pieces in the collection:

wtc-composite

This weighs between 12 and 15 tons. It is four feet high. If you ever thought that humans remaining in the WTC when it collapsed might have survived, consider this pancake comprising five floors of the North Tower. Please visit the Memorial and Museum if you haven’t been there yet.

Here are a few links for Friday wherein Congress acted with unusual bipartisan, but self-serving alacrity:

Congress overrode Mr. Obama’s veto of the bill permitting 9/11 victims to sue Saudi Arabia: Despite the efforts of the White House to kill “The Justice Against Sponsors of Terrorism Act “(JASTA), it will become law after yesterday’s veto override. The vote was 97-1 in the Senate, and 348-77 in the House. Very few in Congress wanted to be seen as against the 9/11 families in the weeks leading up to the election. The bill allows 9/11 victims and their families to sue Saudi Arabia for damages. JASTA is fairly narrowly tailored to Saudi Arabia, but it is unlikely to result in any accountability on the part of the Kingdom of Saudi Arabia.

In another show bipartisanship, Congress averted a government shutdown Wednesday as the Senate and the House approved a short-term spending bill, allowing lawmakers to avoid a crisis and return home to campaign. The Senate approved the bill by 72 to 26. The House then approved it by 342 to 85. This kicks the can down the road for 10 weeks, when the partisans will come out all over again with knives sharpened.

The House passed a bill Thursday that would give tax breaks to Olympic athletes who win medals. The measure does not apply to athletes with incomes over $1 million. The Senate approved it earlier this year. The House approved it 415 to 1. What Congress person wants to be viewed as anti-Olympian in an election year?

The lone dissenting vote came from Rep. Jim Himes (D-CT), who said:

We’ve got a Zika crisis, an opium epidemic and gun violence in the news every day…I think those are the issues that Congress should be spending time on.

He is not Wrongo’s Congress Critter, but he has Wrongo’s vote. Why should Olympians get tax breaks when other extraordinary Americans don’t? Nobel Peace Prize winners and Special Operations soldiers still have to pay their taxes. You pay your taxes, (well, maybe not you, Donald Trump). Another piece of bad policy by Congress.

That’s three cases of false bipartisanship in one week by the cynical people we keep electing.

This article suggests questions that should be asked of Trump about his taxes. Trump claims he can’t release his returns because he’s under audit. That could be a legitimate concern. It would hardly be fair if hundreds of tax professionals who oppose Trump politically helped the IRS by publishing their own analyses of the returns.

But, Trump pissed off Wrongo when he said how smart he was not to pay any taxes. On the one hand, none of us wants to pay more than we have to, but then along comes a billionaire who pays no taxes, and brags about it.

This is the guy who complains about the size of national debt, and says NATO members aren’t paying their “fair share”, when he isn’t paying his “fair share”.

Finally, a statue of Eagle Glenn Frey has been installed in the “Standing on the Corner” Park in Winslow, Arizona. Frey died in January. You remember the lyric:

Well, I’m standing on a corner in Winslow, Arizona, such a fine sight to see/It’s a girl, my Lord, in a flatbed Ford slowin’ down to take a look at me.

Frey’s statue joins that of song co-writer Jackson Browne that has been in the park since the late 1990s.

Trump’s Same ‘Ol GOP Tax Plan

Neil Irwin at the NYT compared the Clinton and Trump tax plans. Hillary’s raises taxes on the rich, and adds ~$1.1 Trillion to federal tax revenues over the next 10 years. The Pant Load’s plan is under revision (again), but, his old plan reduced revenues by ~$9.5 Trillion over the same period, and while his new plan will probably cost less, it will still create red ink.

Jared Bernstein had a few points which you might not have picked up on:

…the plan is pure, old-fashioned, supply-side, trickle-down orthodoxy. How that squares with Trump’s play for disaffected working class voters hurt by globalization is left as an exercise for the reader.

Bernstein’s best point is about the “pass-through” income loophole Trump creates. His new plan sets the top income tax rate at 33% but creates “a much lower rate than 33% for a substantial number of very-high-income households by allowing people to pay a new low rate of 15 percent on “pass-through” income (business income claimed on individual tax returns). According to the Tax Foundation, pass-through businesses now earn more net income than traditional “C” corporations (like GE or Ford). So of course, Republicans want to lower their tax rates. More from Bernstein:

More than two-thirds of all pass-through business income flows to the top 1 percent of tax filers.

And it will probably get worse: When you can pay a lower rate on a particular type of income, you will visit with a tax lawyer and set up a Limited Liability Corporation (LLC). Then off you go to the boss and say, as Bernstein points out:

“I’m no longer Joe Paycheck, I’m Joe Paycheck, LLC. Pay me the same salary but call it a consultant’s fee for services provided by my limited liability corporation”. Joe then passes that income through from the business to the personal side of the tax code and pays 15% on it.

Where Joe might have formerly paid as much as 39.5%. This will allow the hedge fund and private equity guys to move from paying a mere 24% that they pay on earnings today to 15%, if Trump gets the GOP-led Congress to go along.

Trump also wants to repeal the estate tax. Like the prior “improvement”, this one will benefit the Donald personally. The estate size that must pay estate taxes today is $10.9 million. So if a couple has an estate smaller than that, they pay no estate tax. How many are paying it? Only 0.2% of estates (that’s 2 in a 1,000) pay it today.

So none of these are the “small family businesses” and “family farms” that Republicans whine about. If you have the better part of $11 million in assets, you ain’t that small.

A minute more on the LLC: LLCs were created by Congress to give owners of businesses the ability to avoid “double taxation” on taxable income they receive from their businesses. The theory is, business income from a C corporation is taxed twice: once at the corporate level and again at the personal level when dividends are paid to owners. Businessmen could have avoided double taxation by simply operating their businesses as proprietorships or general partnerships. But then they would lose the limited liability protection from creditors that C corporations and limited partnerships provide.

So Congress created the LLC hybrid to enable businessmen to have their limited liability cake and eat it too. But you don’t get the same deal: Wrongo and Ms. Right have paid into Social Security for over a combined one hundred years. Along the way, we could not deduct our yearly SS contributions, which means we paid income taxes on the income that we used to make our contributions. Now that we are receiving Social Security payments, we pay federal and state income taxes again on the payments we receive.

If we use some of our Social Security income to buy gas, we are taxed again in federal and state motor fuel taxes. Same when we buy goods and services, and pay state sales taxes.

Double, triple and quadruple taxation are pervasive throughout our economy, but it’s only the average Joes that pay them. So no tears for Mr. Trump, the Kochs and “job creators” who say they need a break from double taxation.

Or maybe ask your Congressperson for a similar break for you.

Trump is cutting taxes for the rich. If you think he is gonna help the middle class, he is hoodwinking you. You may see a few pennies in tax cuts while the rich take in extra millions to buy bigger, better penthouse apartments.

Meanwhile, the roads and bridges that you use to get to work will crumble even further, because he’s planning to give away the store. Paying your taxes is extremely important and new rules will mean a new way of getting this done, so before you worry, take a look at a tax planning Winnipeg lawyer or one in your state to discuss on how you can plan out your taxes better and keep up to date with any changes.

Capitalism, It’s Not You, It’s Me

There is a meme that has gone global since the early days of the Occupy movement. Here it is as a wall graffiti from Greece that uses the same meme we first saw in NYC in 2011:

Capitalism Lotek

Just kidding capitalism, it really is you.

The artist is a Greek who styles himself as Lotek. The name Lotek is derived from the short story (and later, a film) by William Gibson called Johnny Mnemonic. The story is set in 2021, in a world ruled by corporations. An anti-authoritarian gang that are called Lo-Teks, fight the power. They are in fact not low tech at all, but are high tech hackers. Sound familiar?

Greece is surely a place at war with neoliberalism and free market capitalism. So is it also time for us to reconsider capitalism?

Consider this from Mark Blyth in Foreign Affairs:

An inherent tension exists between capitalism and democratic politics since capitalism allocates resources through markets, whereas democracy allocates power through voting.

The compromises both systems have struck with each other over recent history shapes our contemporary political and economic world. Blyth observes:

In the three decades that followed World War II, democracy set the rules, taming markets with the establishment of protective labor laws, restrictive financial regulations, and expanded welfare systems.
Starting in the 1970s, a globalized, deregulated capitalism, unconstrained by national borders, began to push back.

And today, capital markets and capitalists are setting the rules, and democratic governments follow them.

Some background: Cutting taxes in the 1980s caused government revenues to fall. Deficits widened, and interest rates rose as those deficits became harder to finance. At the same time, conservative governments, especially in the UK and the US, dismantled the regulations that had reined in the excesses of the financial service industry since the 1940s.

The financial industry began to grow unchecked, and as it expanded, investors sought safe assets that were highly liquid and provided good returns: the debt of developed countries.

This allowed governments to plug their deficits and spend more, all without raising taxes.

But the shift to financing the state through debt came at a cost. Since WW II, taxes on labor and capital had provided the foundation of postwar state spending. But, as governments began to rely more on debt, the tax-based states of the postwar era became the debt-based states of today.

This transformation had profound political consequences. The increase in government debt has allowed capitalists to override the preferences of citizens:

Bond-market investors can now exercise an effective veto on policies they don’t like by demanding higher interest rates when they replace old debt with new debt.
Investors can use courts to override the ability of states to default on their debts, as happened recently in Argentina
They can shut down an entire country’s payment system if that country votes against the interests of creditors, as happened in Greece in 2015.
Citizens United dictates who runs for office in the US, and in many cases, who wins.

Now that the financial industry has become more powerful than the people, should we blindly follow capitalism’s meme as the only way forward?

Free-market rhetoric hides the dependence of corporate profits on conditions provided for, and guaranteed by, governments. For example:

Our financial institutions insist that they should be free of meddlesome regulations while they depend on continuing access to cheap credit from the Federal Reserve.
Our pharmaceutical firms have resisted any government limits on their price-setting ability at the same time that they rely on government grants of monopolies through our patent system.

To use a sporting metaphor, it’s as if the best football team purchased not only the best coaches and facilities, but also bought the referees and the journalists as well. Those responsible for judging economic competition have lost all authority, which leaves the dream of ‘meritocracy’ or a ‘level playing field’ in tatters.

In our country, the divide between the business oligarchs, the political class and “the people” increasingly appears unbridgeable, marked by hostility and deep distrust. When people are told for a generation that government mustn’t make decisions that interfere with free markets, it is inevitable that people will lose faith in democratic governance, and in government’s capacity to help them solve their problems.

Capitalism in its current form no longer works for the people. We have seen a reaction in the start of movements by Occupy, by Bernie, and by others in Europe.

Remember that the greatest prosperity in living memory in the US came during the brief social democratic moment, in the 1950s and 1960s, when the constraints on business were the greatest.

More democracy and more economic justice are the necessary foundations for the path to a more prosperous, and sustainable economy.

A reformed capitalism must be a part of what emerges from that fight.

How Not to Cut the Deficit

Congress returned from the Independence Day break on Monday. They will leave again on Friday, and won’t return until after Labor Day. From The Hill:

Congress is poised to leave Washington…without passing funding to combat the Zika virus or completing work on spending bills to avoid a government shutdown.

One bill that might get passed is the re-authorization for Federal Aviation Administration programs that expire on Friday. Since Congress likes to fly, most think they will pass an extension that will last through September 2017.

If you’ve taken a flight this summer, you’ve likely been tied up in long TSA security lines. But you may not have focused on the real reason: Funding for the TSA has been sliced by 8.5% over the past five years, leading to a 5.5% drop in the number of screeners.

Yet, in the same period, the number of air travelers has increased by more than 15%. And those business wizards in Congress should be forced to tell the rest of us how a labor-intensive business can successfully process increasing numbers of customers with a smaller work force.

Steven Rattner in the NYT:

This year, discretionary spending — which encompasses airport security, infrastructure, education, research and development and much more — will be lower than it was in 2005. (Adjusted for inflation.

The discretionary portion of the federal budget, including education, research, infrastructure and other programs, has been falling, while spending on mandatory programs (including Social Security, Medicare and Medicaid) has been going up. Rattner reports that total government spending is up by 23% since 2005, while mandatory spending is up 45% in the same period, and discretionary spending is down 3%.

Here are some examples:

Since 2003, the National Institutes of Health (NIH), have seen their funding fall by 23%, forcing an 8% reduction in grants to researchers even as grant applications were rising by 50%.
In the past 10 years, spending on all education has fallen by 11% percent.
Since 2010, the IRS’s budget has been slashed by about 18%, even as the IRS was given new duties in connection with the passage of the Affordable Care Act. The result: The enforcement staff has shrunk by 23%, leading to a similar reduction in the number of audits. Fewer audits have meant additional uncollected taxes, estimated at $14 billion over the past two years. And almost a million pieces of unanswered correspondence from taxpayers need responses.
The EPA’s budget has been cut by an enormous 27% — about $3 billion since 2010. As a result, the agency had to eliminate more than 2,000 workers, bringing its staffing to the lowest level since 1989.

Last fall, a bi-partisan group added $80 billion in new discretionary spending over the next two years. Then, Congress doubled the cost of the deal by giving more money to the military and to Medicare, taking the deal to $154 billion while paying for about half the tab with legitimate savings.

A few months later, Congress retroactively extended a raft of expired tax provisions — without even a pretense of paying for them.

As a result of Congress’s fudging, the projected 2017 deficit rose to $561 billion, from the $416 billion that was estimated just six months earlier.

We shouldn’t expect that Congress will make any big decisions involving taxes or spending in an election year. But at the least Republicans need to stop using the appropriations tool to take aim at agencies such as the IRS and the EPA, whose missions they reject.

In the case of the TSA, Republicans want it privatized. Not because privatizing will save any money or make the TSA more effective, but to help a few of their corporate sponsors have another feed at the government trough. Republicans want to see schools, prisons, and the postal service privatized. The people who are employed by these private, profit-making companies will not be paid as well, and will not receive benefits they have today.

This is what you get when you believe that government should be “run like a business.” Certainly, we need a more efficient, better managed bureaucracy, but the deficit-cutting value of their fix is peanuts compared with the simple act of generating revenue.

You know, that would be raising taxes sufficient to pay for the critical tasks we require of the government.

The GOP would like you to think that Donald Trump represents a threat to Republican tax and deficit-cutting orthodoxy. To the extent Trump has revealed his thinking on tax policy, it looks consistent with the Republican Party. Trump’s grand accomplishment is to create an alliance between the true economic interests of the Republican Party and that segment of the American electorate largely marginalized and displaced by the actions of that same elite.

Welcome to the Republican paradise.

It’s Always Groundhog Day in America

Do Conservatives Have a Learning Disability? A few who read the Wrongologist are convinced that Wrongo is just a clueless, woolly-headed Progressive who hates America and the baby Jesus. None of that is true, except for the Progressive part.

From Krugman’s Monday column:

Marco Rubio has yet to win anything, but by losing less badly than other non-Trump candidates he has become the overwhelming choice of the Republican establishment.

PK points out that Rubio:

• Proposes tax cuts, like completely eliminating taxes on investment income — which would mean, for example, that Mitt Romney would end up owing zero in federal taxes.
• Proposes tax cuts that would be almost twice as big as George W. Bush’s as a percentage of GDP, despite the fact that Republicans have spent the Obama years warning incessantly that budget deficits will destroy America, any day now.
• Insists that his tax cuts would pay for themselves, by unleashing incredible economic growth. Never mind the complete absence of any evidence for this claim, or that the last two Democratic presidents, both of whom raised taxes on the rich, presided over better private-sector job growth than Mr. Bush did.
• Called for a balanced-budget amendment, which makes no sense, since he is calling for budget-busting tax cuts. Also this amendment would have been catastrophic during the Great Recession, when deficit spending helped bring us out of a crash.

Finally, Marco Roboto said a few days ago that it’s “not the Fed’s job to stimulate the economy” (although the law says that it is precisely their job). Krugman closes with: (brackets by the Wrongologist)

In short, Mr. Rubio is peddling crank economics. What’s interesting, however, is…he’s not pandering to ignorant voters; he’s pandering to an ignorant [GOP] elite.

It doesn’t require a Nobel Prize in Economics to see the entrenched divisions in our politics. But let’s focus today on the great coup by American Conservatism, convincing its followers that personal opinion counts for as much as any fact.

We live in an America that Conservatives have turned into an oligarchy. The system has been gamed to support the interests of the wealthy. Politicians are able to choose their voters through a cynical, manipulative gerrymandering re-redistricting process. The idea of “one man, one vote” has, via Citizens United, been turned into a largely meaningless exercise in which those with big bucks and an agenda pay to propagandize the American voter, many of whom are far more comfortable reacting emotionally, than thinking critically.

Conservatives like Rubio (and the rest of the GOP) have retreated into a content-free bubble, where they manufacture truth on the fly to suit their purpose. You know this since few on the Far Right put forward cogent, supportable arguments for their ideas, instead lazily relying on a smug arrogance which allows them to laugh off opposing ideas, as does Mr. Rubio.

The problem is, the vast majority of our electorate are largely oblivious to the nuances of the underlying issues. What information they have is derived from main stream media, or right wing propaganda organs, or social media.

Data are boring and unacceptable: My belief is superior to your data or to my own education. It is easier to just vote for the candidate promising to make America Great Again, ignoring the reality of the deep and nuanced causes of our problems.

The rigidity of the Republican doctrine on taxes as outlined by Rubio looks like an alternate version of the movie, “Groundhog Day“, where Bill Murray experiences a time loop in which he repeats his experience until he corrects the problems that had landed him in limbo.

Sadly, in the GOP alternative version, they begin every presidential election cycle with a demand for lower taxes. The tax policy of the previous four years has no effect on this mantra. Nor do the economic trends of the time alter their robotic claim that lower taxes will cure all difficulties. In the Conservative view, a smaller tax bite will trigger an economic boom that offsets the costs of GOP tax cuts to our budget.

In the GOP version of “Groundhog Day”, the GOP doesn’t learn from its mistakes. Unfortunately, this means the entire country suffers from the inability or unwillingness of Republicans to learn from experience.

It’s time to turn off Fox News and set out on a walkabout in the reality-based world.

News you can’t use – January 11, 2016

Powerball vs. Trump’o Rama:

COW Powerball

“They say the odds of winning are one in two-hundred and ninety-two million,just slightly better than the chance Donald Trump makes America great again.”

More political news you can’t use:

Trump supporters appear to be misinformed, not uninformed. (538) Americans who have incorrect information can be divided into two groups: the misinformed and the uninformed. Trump’s backers show signs of being misinformed. The difference between the two is stark. Uninformed citizens don’t have any information at all, while those who are misinformed have information that conflicts with the best evidence and expert opinion. Political science research has shown that the behavior of misinformed citizens is different from those who are uninformed, and this difference may explain Trump’s staying power. 538 quotes political researchers as saying the most misinformed citizens tend to be the most confident in their views and are also the strongest partisans.

The towns that love Donald Trump the most. (WaPo) Trump is increasingly holding rallies in cities that rarely see presidential candidates in the primary season. They are also often places that are struggling. They lag behind the country (and their home states) on a number of economic measures. Their median household incomes are lower, and they often have lower rates of home ownership or residents with college degrees. Even though most of these cities have sizable minority populations, the crowds at Trump’s rallies are nearly entirely white. Is Trump planning a third-party run?

Sanders outperforming Clinton in general-election match-ups. (NBC News) Sanders outperforms Clinton in hypothetical general-election match-ups in NH and Iowa. In Iowa:

• Clinton leads Trump by eight points among registered voters (48% to 40%), but Sanders is ahead of him by 13 (51% to 38%)
• Cruz tops Clinton by four points (47% to 43%), while Sanders beats him by five (47% to 42%)
• Rubio is up by five points over Clinton (47% to 42%), but he’s tied with Sanders (44% each)

In New Hampshire:

• Clinton leads Trump by one point (45% to 44%), but Sanders tops him by 19 points (56% to 37%)
• Cruz beats Clinton by four points (48% to 44%), but Sanders leads him by another 19 points (55% to 36%)
• Rubio bests Clinton by 12 points (52% to 40%), while Sanders leads him by nine points (50% to 41%)

The primary reason why Sanders tests better in these general-election match-ups is due to his stronger performance with independent voters.

Other news you can’t use:

Who owns US business? How much tax do they pay? (NEBR) Pass-through entities, partnerships, tax code subchapter S corporations and sole proprietorships, are not subject to corporate income tax. Their income passes directly to their owners and is taxed under whatever tax rules those owners face. In 1980, pass-through entities accounted for 20.7% of US business income; by 2011, they represented 54.2%. Over the same period, the income share of the top 1% of income earners doubled. The growth of income from pass-through entities accounted for 41% of the rise in the income of the top 1%. By linking 2011 partnership and S corporation tax returns with federal individual income tax returns researchers find that over 66% of pass-through business income received by individuals goes to the top 1%.

Last fall, a 7-inch well pipe ruptured 500 feet below the surface of Los Angeles. It was 60 years old. The resulting methane leak is now being called one of the largest environmental disasters since the BP oil spill has pushed thousands of people out of their homes. (Vox) But it’s not the first time this well sprang a leak, and Southern California Gas Company (So Cal Gas), which owns and operates the well, knew it. Will heads roll?

Licensed gun owners can now bring their firearms into Texas’ 10 state psychiatric hospitals. (American-Statesman) Until this year, guns were banned at Texas’s state-run psychiatric facilities. The new Texas open carry law allows gun license holders to openly carry their firearms, including inside the psych hospitals. A second Texas law fines state agencies for wrongly hanging “no guns” signs. Yet hospital employees are prohibited from bringing guns to work.

Monday Wake Up Call – November 30, 2015

Today’s wake up is for the American worker. While you were sleeping, corporate executives were piecing together an economy and associated tax regulations that allowed them to become America’s oligarchs.

The Center for Effective Government just came out with a study of CEO retirement funds. You already know the conclusion, but you didn’t know the facts:

• The 100 largest CEO retirement funds are worth a combined $4.9 billion. That’s equal to the entire retirement account savings of 47 million American families
• Nearly half of all working age Americans have no access to a retirement plan. The median balance in a 401(k) plan at the end of 2013 was $18,433, enough to generate a monthly retirement check of $104.

In addition, 73% of Fortune 500 firms have also set up special tax-deferred compensation accounts for their executives. These are similar to the 401(k) plans that some Americans have through their employers. But average workers face limits on how much pre-tax income they can invest each year in similar plans, while the plans the F500 provides to their top executives do not. They are free to shelter unlimited amounts of compensation in their retirement funds where their money can grow tax-free, until retirement.

But for the average employee? The GAO says that 29% of workers approaching retirement (aged 50-65) do not have pension or retirement savings in a 401(k) or IRA. While according to a study by the Schwartz Center at the New School, 55% of those aged 50-64 will be forced to rely solely on Social Security (which averages $1,233 a month).

The current rules mean that if CEO’s slash worker retirement benefits, they can boost corporate profits and thereby, stock prices. And since much of executive compensation is tied to the company’s stock price, these rules (and company practice) create a powerful incentive for CEO’s to choose their pocketbooks over those of their employees.

We are talking about market power. The CEO’s and their firms have little to fear from Mr. Market. In turn the rising wealth at the top buys growing political influence, through campaign contributions, lobbying, and the rewards of the revolving door between government jobs and those in the private sector. Political influence in turn is used to write the rules of the game—the tax laws we are speaking of here, antitrust laws, deregulation, union-busting—all in a way that reinforces income concentration.

The result is a feedback loop between political power and market power that created, and now maintains, a vicious circle of oligarchy.

Well, time to wake up from a snooze that allowed our politicians and the largest corporations and their CEOs to turn our country and economy into their private sandbox.

To help with today’s wake-up, here is Rage Against the Machine, the gone but not forgotten band, with Zach de la Rocha on vocals and the superb Tom Morello on guitar. They are performing “No Shelter”, written in 1998:

https://www.youtube.com/watch?v=6NEoesmnYU4

Sample Lyrics:
Empty ya pockets son, they got you thinkin’ that
What ya need is what they selling
Make you think that buying is rebelling
From the theaters to malls on every shore
Tha thin line between entertainment and war

Chained to the dream they got ya searchin’ for
Tha thin line between entertainment and war

There be no shelter here
Tha front line is everywhere
There be no shelter here
Tha front line is everywhere

American eyes, American eyes
View the world from American eyes
Bury the past, rob us blind
And leave nothing behind

Just stare
Just stare
Relive the nightmare

Those who read the Wrongologist in email can view the video here.

The Republican “Free Stuff” Meme

At the last Republican presidential debate, Chris Christie (R-NJ) characterized the Democratic candidates’ debate as:

A parade of, ‘I’ll give you this for free; I’ll give you that for free’.

Senator Marco Rubio said: (brackets by the Wrongologist)

It [the first Democratic debate] was basically a…debate about who was going to give away the most free stuff: Free college education, free college education for people illegally in this country, free health care, free everything.

Jeb Bush says that black voters should back him, since his:

…message is one of hope and aspiration, not one of division and get in line and we’ll take care of you with free stuff…

For the record, Medicare, Medicaid, Social Security, and unemployment have dedicated tax revenue streams. If we back out those funded benefits, all other elements of the so-called social safety net “free stuff” adds up to ~$405 billion, a fraction of the $1.2 trillion in “unfunded” Federal entitlements, and most of the rest goes to top income earners.

So, what do Republicans mean when they say “Free Stuff”? From Jared Bernstein:

There are at least three definitions of “free stuff.” The broadest would simply include all government benefits. A narrower version might apply only when people receive more in benefits than they pay in taxes. A third might refer to any net gain relative to the status quo.

Under any of these definitions, the Republican claims are misleading: they attack help for people who need it, while implicitly condoning tax subsidies for the wealthy. What the Republicans want us to focus on are public education, Medicaid, and direct cash assistance to the poor, but the government provides other subsidies, some of which the GOP seems perfectly happy to keep in place.

For example, Rubio and Bush want to cut capital gains taxes below the current level (Rubio would completely abolish them). But today’s reduced cap gains rate already provides a significant benefit to people who invest in assets (i.e., the wealthy). Then there are things like regressive housing tax breaks, about 70% of which go to those in the top 20%. In addition, 68% of the tax benefits for retirement savings and 64% of subsidies for individual retirement accounts (IRAs) accrue to the top 20%.

Can it be that government benefits for poor people are “free stuff”, while benefits for the wealthy are not?

Maybe Christie, Rubio, and Bush subscribe to the second definition described above: It’s “free stuff” if you receive more in benefits than you pay in taxes, but not if you pay more in taxes than you receive in benefits.

The third way to think about “free stuff” mirrors the most accepted concept of “free”. Bernstein asks:

Suppose, for example, that you opened your email today to find an unexpected $100 Amazon gift card. No matter how much money you had spent or planned to spend at Amazon, you would call this “free” money. Or imagine that you go out to dinner at a restaurant and a waiter decides to “comp” your dessert. Regardless of the overall price of your meal, you would likely consider that dessert item to be “free.”

Under this definition, “free stuff” from the government would be new benefits or reduced taxes relative to one’s current situation. Since the Christie, Rubio, and Bush tax plans all contain massive tax cuts, they would give away huge amounts of foregone tax revenue as “free stuff,” and unlike the “free stuff” proposed by the Democratic candidates – the GOP “free stuff” would go to their very wealthy patrons.

From the carried interest loophole, to drug patent law, to defense industry markups, to sweetheart deals for the oil industry, the total “free stuff” for the 1% dwarfs that available to the rest of us. Yet, the nattering nabobs of trickledown continue to target removing the scraps doled out to the 99%.

Social stability is the reason the rich should not begrudge the support given to those that are less fortunate in our society. The rich have the most to lose should the vast majority decide they have suffered enough, and we see an “off with their heads” moment.

Extra money in the hands of the 1% or the .01% just creates bidding wars for penthouse apartments that the 2% can no longer afford.

Monday Wake Up Call – June 29, 2015

Mylan, a generic drug maker based outside Pittsburgh, abandoned its status as a US corporation, gaining tax advantages by moving its headquarters to the Netherlands. The move reduced the taxes the company pays on profits from sales of drugs overseas, but Mylan continues to maintain most of its operations in Pennsylvania.

Mylan was viewed by some in Congress and the Obama administration as a symbol of corporate greed when they undertook a corporate inversion that placed profits above any commitment to its home country.

But now, Mylan is demanding that the US Federal Trade Commission (FTC) protect it from a hostile takeover bid by an Israeli company, Teva Pharmaceuticals. Mylan asked the FTC to examine Teva’s purchase of Mylan stock for possible violation of the requirement that large purchases of stock of US firms must be reviewed by antitrust authorities, because Mylan is still listed on the NYSE. The company claims that its principal office remains in Pennsylvania, which makes it a “US issuer” of stock for federal anti-trust purposes.

The irony of this is not lost in Washington. Rep. Chris Van Hollen (D-MD), the senior Democrat on the House Budget Committee said:

Mylan is trying to have its cake and eat it too…It is an intolerable abuse of a loophole when US corporations pretend they are based overseas in order to get out of paying their fair share and duck their responsibilities to the United States. It’s just plain hypocrisy when one of those same inverted companies claims that it is actually a US company because it needs the special protections US law gives to American companies.

Mylan may have a case. Its plea for help from the US government could pass legal muster but, the optics of a company that abandoned its US citizenship in order to pay less in federal taxes, and then seeking the protection of a federal agency is problematic.

Compounding the farce, Mylan is attempting its own hostile takeover of Perrigo, in order to stave off Teva.

Mylan’s unabashed lack of shame is impressive. Maybe the FTC’s decision-making on this case should take quite a while.

So, wake up Congress, and deal conclusively with corporate inversions! Our wake-up calls for the next few weeks will be songs about summer. We start with the Lovin’ Spoonful’s only #1 hit, “Summer in the City”:

For those who read the Wrongologist in email, you can view the video here.

Monday’s Hot Links:

The return trip often seems shorter than the initial trip, even though the distance traveled and the actual time spent traveling are identical. This is called the “return trip effect”. Two studies say it is real, but you already knew that.

Trucker jobs will be the first casualty of driving robots. Trucker salaries average $40,000/year. Most truck accidents are due to user error: Driving too fast, driving while tired, or driving while intoxicated. Robots don’t drink, don’t get tired, and won’t drive unsafely in order to get to a destination faster. Drivers will still be needed for inner-city driving (at least initially), but most long-haul operations will quickly vanish as soon as licensing is complete in most states.

Three years ago, Saudi Arabia announced a goal of building, by 2032, 41 gigawatts of solar capacity by 2032, slightly more than Germany has today. The Saudis burn about a quarter of the oil they produce—and their domestic consumption has been rising at 7% a year, nearly three times the rate of population growth. According to a British think tank, if this trend continues, domestic consumption could eat into Saudi oil exports by 2021 and make the kingdom a net oil importer by 2038.

Privail Diagnostics, has developed a simple, portable blood test that can detect the HIV virus (not antibodies) for the first time. That means an earlier diagnosis, and reduced infection rates. Privail’s at-home testing device is like a diabetes test, needing only one drop of blood. It shows the results in a color bar, like an at-home pregnancy test or digital output, like a diabetes meter. Invest at your own risk.

Hackers have apparently cracked the computer systems responsible for issuing flight plans to pilots of every airline. The apparent weak link? The flight plan-delivery protocol used by every airline. Ground computers calculate the appropriate flight plan for planes, and someone on ground approves the plan before distributing it to pilots. Pilots receive plans before taking off, as well as enroute, when a change occurs during a flight. Plans are uploaded to planes via a datalink. Once a hacker figures out those protocols, it is possible to issue a bogus flight plan. But, the industry says, not to worry.

Your thought for the week: Giving money to poor people is socialism, or even communism…..giving money to AIG or Goldman Sachs is capitalism, and that’s what made this nation grrrreat!!!

Sunday Cartoon Blogging – June 14, 2015

Let’s talk taxes. Specifically, let’s focus on a Republican governor, Jindal of Louisiana. Louisiana faced a massive shortfall ($1.6 billion) due to the fact they are governed by Bobby Jindal and a bunch of Republicans who can’t admit that they are raising taxes because otherwise, Grover Norquist will get angry at them. From the NYT:

With less than two hours left in the 2015 session, Louisiana legislators agreed Thursday on a solution to the worst budget shortfall in decades, approving a funding arrangement that drew bipartisan criticism

The legislators had looked at raising taxes, but Jindal said that he would veto anything that violated his pledge to Norquist. The big losers if no deal was reached would have been public education and health care.

So, the governor consulted with Americans for Tax Reform, the Washington anti-tax advocacy group led by Norquist, and came up with a complicated plan that was an accounting fiction, in order to solve the budget crisis.

• The plan obligated $350 million of the revenue raised during the session to higher education, thus preventing cuts
• That was augmented by an “assessment” of $1,600 per student on the state’s public college students
• Nobody would actually pay the assessment because students would also be granted a tax credit against that assessment
• The student’s tax credit, in turn, would be transferred to the state Board of Regents, the body that runs higher education

The board would then use the credit to draw money from the Department of Revenue. It’s confusing, and not just to the accounting-challenged. But, under the plan, no one’s tax burden went up or down, which allowed the Louisiana Legislature to raise the cigarette tax by 50 cents a pack, increase costs for businesses by reducing a variety of tax credits and raise fees on car buyers and other Louisianians.

Lawmakers have called the provision everything from “money laundering” to “stupid,” and that was just the Republicans. Robert Travis Scott, president of the nonpartisan Public Affairs Research Council of Louisiana said:

There is no way you can explain that it’s an offset…This is a vehicle that allows Governor Jindal to raise taxes, period.

The fact that Norquist helped Republicans in Louisiana figure out a way around HIS OWN PLEDGE tells you that this “no new taxes” nonsense has become simply theater. Now Jindal can run for president with Norquist’s blessing. Isn’t that nice?

On to cartoons. The big news of the week included the Trade Fast Track fail, sending more troops to Iraq, and a new Jurassic Park movie.

Fast Track is side tracked: