Category: Tax Policy

Sunday Cartoon Blogging – December 3, 2017

The Senate’s tax bill was written by lobbyists, and was hardly read by lawmakers. About 2 pm Friday afternoon, Claire McCaskill (D-MO) tweeted a list of Manager’s Amendments she’d received from a lobbyist rather than from her Republican colleagues. From McCaskill:

None of us have seen this list, but lobbyists have it.

Republicans just took 200 years of Constitutional process and trashed it so they could tell their constituents corporate benefactors that they had passed something this year.

That doesn’t seem to be the right way to do things, but the GOP no longer trusts that its ideas will carry the day if they are put under scrutiny and debate. Presuming this dog’s breakfast gets through conference, six months from now, the Republican leadership will be standing at a podium, looking very concerned. They will say America needs immediate reforms to Social Security and Medicare (please don’t say “entitlements”) in order to reduce America’s out-of-control deficits. Rubio and a few other high-ranking Republicans have openly said that this is their plan.

Here is a handy chart from the CBO on how the tax cuts for individuals break down:

David Stockman notes that 97% of the $1.412 trillion revenue loss over the next decade, based on the Senate bill, is attributable to the $1.369 trillion cost of cutting the corporate rate from 35% to 20% (along with the repeal of the related AMT).

All the rest of the tax bill is a zero-sum stirring of the pot. Of note, $83 billion of the tax cuts go to the estates of 5,500 dead people per year, since the bill doubles the estate deduction to $20 million per couple.

But they did all of this to help the little guy, amirite? On to cartoons. More than the tax bill happened last week, so let’s review: Flynn and Manafort. House of cards?

Flynn has fans everywhere:

Trump Code-talks too:

Santa uncovers some nasty stuff:

Roy Moore says what he means, and means what he says:

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Saturday Soother – December 2, 2017

The Daily Escape:

St Petersburg Russia’s Church of the Saviour – photo by Amos Chapple

As Wrongo writes this on Friday, it appears that the Senate Republicans have the votes to pass their version of the tax bill. The House passed their version on November 16th. The House Republican’s tax bill includes a major shift in tax policy that will mean a hidden tax increase on every American taxpayer over the coming decades. From the Washington Times:

Republican tax-writers have decided to shift the tax code’s inflation index from the Consumer Price Index, or CPI, to something known as chained CPI, which is a slower-growing method of calculating cost-of-living increases.

How would this work? The new tax proposal replaces the current CPI, which is based on changes in prices for urban consumers, with the chained CPI. Various estimates show that this method would lower reported inflation by as much as 0.30% a year.

This will create two pocketbook issues for taxpayers. First, using a lower rate of inflation to calculate future tax rates will mean that tax brackets will adjust more slowly than with regular CPI. Therefore, taxpayers will move into higher tax brackets if their income increases faster than chained CPI, paying more in taxes. More from the Washington Times: (emphasis by the Wrongologist)

It works out to taxpayers paying $128 billion more to Uncle Sam than they would otherwise over the next decade, and $500 billion more in the subsequent decade.

Second, chained CPI will change how the government calculates inflation for the purpose of adjusting Social Security payments. CPI is the basis for cost-of-living adjustments that affect many government benefits. If the measure of inflation is reduced, then the increases in Social Security payouts to the public would also be lowered.

This, despite the fact that CPI already tends to under-report price increases. If chained CPI is implemented, Barry Ritholtz says: (emphasis and brackets by the Wrongologist)

It would allow Congress to come up with about half of the funds needed to cover the proposed GOP tax cuts by pushing more people into higher tax brackets and [by]…creating a hidden tax on everyone who will ever get Social Security in the future.

This is based on the long-held Republican idea that “if only we could lower inflation as reported in the consumer price index, we could afford more tax cuts.”

And adopting chained CPI will reduce future Social Security payments without America having any sort of honest debate about it. You can compare the two measures of inflation side by side at this Bureau of Labor Statistics page: Chained consumer price index for all urban consumers (C-CPI-U) and the consumer price index.

When Trump was elected, the floodgates were opened. Any old, bad Republican idea is now legitimate.

Assuming that the House and Senate bills are reconciled and a tax bill is passed and signed by Trump, it may well be the worst piece of legislation in a century. It would finally undo the legacy of both FDR and Lyndon Johnson, something that has been a wet dream of the Right for generations. Emboldened by its passage, the GOP will follow it by taking a scythe to much of what remains of the social safety net.  Worse still, since the GOP is doing away with the inheritance tax, Republicans will have ensconced themselves as a permanent, hereditary financial and governing elite.

That will surely make America Great Again.

We have to get up off the couch, and fight for what remains of the New Deal and Great Society programs. This fight will be town-by-town, political office by political office, until progressives can compete in every red state for control of its legislature and governorship.

It’s another Saturday, the end of a long week in which it became clear that the country is approaching a cliff. We need some inspiration. So we turn to Meghan Markle.

Wrongo hadn’t heard of Meghan Markle until her engagement to the guy who is 6th in the line of succession to the throne in England, splashed across the news. But, it turns out she is an intelligent, independent person with agency. Markle was named the UN’s Woman’s Advocate for Political Participation and Leadership in 2015. Here she is speaking about advocacy at the 2015 UN Women conference. It’s a winning and inspiring performance, and, while it’s a sample of one, it shows that Millennials are gonna do a fine job with the planet:

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

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Reagan’s Tax Cuts Are No Model for Today’s GOP

The Daily Escape:

Colima Volcano, Mexico, December 2015 – photo by Sergio Tapiro, National Geographic 2017 photographer of the year

Republicans are patting themselves on the back about their coming tax cuts, comparing it to the famous (infamous?) Regan tax cuts, known as the Tax Reform Act of 1986. From the Economist:

During the three decades since its passage, Democrats and Republicans alike have hailed the law not only for overhauling the country’s tax system…but also for doing so with bipartisan support in both houses of Congress.

Unlike the bi-partisan review of our tax system that occurred from 1984 to 1986, Donald Trump has promised to sign a bill by Christmas, just two months after the first legislative text was introduced.

Congressional Republicans originally promised that any reform would not reduce overall revenues. But they have flip-flopped: The current plan is expected to raise deficits by between $1.3 and $1.5 trillion over its 10-year life. And according to figures from the Joint Committee on Taxation, most of the benefits will go to the rich. Reagan’s reform did the opposite. The left hand chart below shows the Reagan tax cut in blue and the Trump tax cut in red. The x axis is annual income, while the y axis is the percentage of taxpayers receiving a tax cut:

Source: The Economist

The gaps in share of taxpayers receiving a cut are stunning. Between 35-55% of those under $40k in income will receive a benefit under the Trump plan, while between 70-80% of the same group received a cut under the Reagan tax plan.

It gets worse when we look at the right hand chart above. The x axis shows the percentage change in after-tax income by earnings level. Reagan’s cut gave those making between $10k-$50k an increase in take home pay by between 0.25% and 1.5%. Trump’s plan will leave them at ± 0% change in take-home income, while those who make from $50k to $200k will do significantly better under the Trump plan than under Reagan.

And an article of faith for the GOP is that the tax cut will stimulate the economy. Let’s unpack this a bit. The bill provides interim tax relief of about $1.38 trillion during 2018-2025 before the tax sunset provisions kick-in. That equals 4.2% of current tax revenue collections during the 8- year period, and only about 0.8% of GDP.

It’s hard to see how an 0.8% stimulus to GDP is going to bring on a growth tsunami, or add tons of new jobs.

Back to the Reagan tax cut, it had no measurable effect on the trend rate of economic growth, and when it was fully implemented, it amounted to 6.2% of GDP, not 0.8%, .

Finally, when the Tax Policy Center costed out the Senate Finance Committee bill, it showed that by year 10, not one of the 150 million individual filers will still be getting a tax benefit. And most importantly, the single tax cut item left in the statute, the 20% corporate rate, which stays in place permanently, costs America $171 billion in lost revenue in 2027. From David Stockman:

Likewise, the latest distributional analysis [probably from the Center on Budget and Policy Priorities] shows that in 2025, before the sunset,-the bottom 30 million tax filers would get an average “tax cut” which amounts to the grand sum of $1.15 per week….the next 30 million filers would only get $7 per week; and the middle quintile—-the 30 million tax filers between $55,000 and $95,000 per year and the heart of the middle class—– would get just $17 per week of tax relief in 2025.

Hardly seems worthy of Paul Ryan’s gloating about how he’s helping the middle class. The people know that they have no control over what happens, they just want to see how much more they will have to spend (pay?) when the dust settles.

And that’s why Paul Ryan and Donald Trump gloat. They show the rubes a dollar, and then send $1000 to their corporate benefactors.

This will be the GOP’s paradise after they enact the Trump tax plan:

 

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Saturday Soother – November 25, 2017

The Daily Escape:

Blue Mosque, Istanbul -2013 photo by Wrongo

Wrongo planned on taking the rest of the week off, but couldn’t resist this:

We live in a time when inequality of wealth, income and influence is thought to be greater than at any time in history. Inequality strengthens social injustice and with it the existence of The Privileged and The Disadvantaged. Of those who have influence and feel they are entitled to everything, and those who expect little, receive even less but need most. Government policies are fashioned by The Privileged for their own benefit. The Disadvantaged, having little or no voice, are ignored, allowing the Cycle of Containment to be maintained, change to be suppressed and social divisions to deepen.

This is from a post entitled What Price Humanity? at Dissident Voice, and it is a pretty accurate description of where we are in America. More:

Sitting at the center of this socio-economic tragedy is an economic ideology that is not simply unjust, it is inhumane. Compassion and human empathy are pushed into the shadows in the Neo-Liberal paradigm, selfishness, division and exploitation encouraged. The system promotes short-term materialistic values and works against mankind’s natural inclination towards unity, social responsibility and cooperation, inherent qualities that are consistently made manifest in times of crisis, individual hardship and collective need.

Graham Peebles is asking what are We the People entitled to in 2017 America? And his answer is grim.

Wrongo thinks nothing is more appropriate to this discussion than FDR’s Second Bill of Rights as stated January 11, 1944 in his message to the US Congress on the State of the Union:

  • The right to a useful and remunerative job in the industries or shops or farms or mines of the nation;
  • The right to earn enough to provide adequate food and clothing and recreation;
  • The right of every farmer to raise and sell his products at a return which will give him and his family a decent living;
  • The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad;
  • The right of every family to a decent home;
  • The right to adequate medical care and the opportunity to achieve and enjoy good health;
  • The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment;
  • The right to a good education.

FDR could foresee the end of WWII when he gave this speech. He concluded that: (emphasis by the Wrongologist)

All of these rights spell security. And after this war is won we must be prepared to move forward, in the implementation of these rights, to new goals of human happiness and well-being.

Sadly, on this 2017 Thanksgiving weekend, we remain very far from these goals.

The inequality and sense of entitlement we see today won’t be turned around without work. Financialization is a poisonous monster. It dictates government policy, and makes the rules about how our businesses and governments at all levels engage with our people and our environment.

People are little more than sources of revenue: Their capacity to spend, to invest and consume determines how they are valued. Driving virtually every decision within the suffocating confines of the ideal is an addiction to profit.

FDR’s ideas seem quaint in 2017. The US cannot even ensure basic civil rights such as racial equality, much less “life, liberty, and the pursuit of happiness.” Most Americans have freely indentured themselves to the financial sector so that they can pretend to own a house in which to raise their kids, and a car to drive to work in order to earn income so they can make loan payments on the house and the pick-up.

Enough! Let’s forget about life for a while. Grab a cup of Climpson & Sons Signature Espresso that is 100% Adamo Sasaba from Ethiopia, and stay away from the turkey Tetrazzini at lunchtime.

Now, watch and listen to Narciso Yepes interpret Joaquin Rodrigo’s Concerto d’Aranjuez (Adagio) on his 10-string guitar. The 10-string was conceived in 1963 by Yepes, who ordered it from JosĂ© RamĂ­rez [III].

The conductor is Raphael FrĂŒbeck de Burgos with the Radio Symphony Orchestra of Frankfurt. It’s a lovely piece with a remarkable guitar:

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

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Here Comes the Retail Apocalypse

The Daily Escape:

The Oberlausitzische Library of Science, Gorlitz Germany

There is a growing concern that the mall as we know it is in big trouble. RadioShack, The Limited, Payless, and Toys“R”Us were among 19 retail bankruptcies this year. From Dave Dayden: (brackets by the Wrongologist)

This story is at odds with the broader narrative about business in America: The economy is growing, unemployment is low, and consumer confidence is at a decade-long high. This would typically signal a retail boom, yet the [retail store] pain rivals the height of the Great Recession.

Many point to Amazon and other online retailers as taking away market share, but e-commerce sales in the second quarter of 2017 were 8.9% of total sales. There are three reasons for so many sick retailers.

First, while online sales are “only” 8.9% of total retail sales, these businesses have very high fixed costs and low net profit margins. The Stern School at NYU tracks net profit margins on thousands of businesses across many sectors, including retail. The margins for Specialty retail for the year ending January 2017 was 3.17%. It was 1.89% for Grocery and 2.60% for General retailers. If a high fixed cost business loses 9% of sales, it can easily wipe out the bottom line.

Second, many retail companies carry high debt levels. Bloomberg explains that private equity firms (PE’s) have purchased numerous retail chains over the past decade via leveraged buyouts, where debt is the primary source of the money used to buy the business. There are billions in borrowings on the balance sheets of troubled retailers, and sustaining that load is only going to become harder if interest rates rise.

Third, there are just too many stores in our cities and suburbs to sustain sales in a world where online shopping is growing rapidly.

Worse, billions of dollars of that PE-arranged debt come due in the next few years. More from Bloomberg:

If today is considered a retail apocalypse…then what’s coming next could truly be scary.

This chart shows what percentage of retail real estate loans are delinquent by area:

Source: Trepp

There are large areas of America where more than 20% of the loans are past due. More from Bloomberg: (emphasis by the Wrongologist)

Through the third quarter of this year, 6,752 locations were scheduled to shutter in the US, excluding grocery stores and restaurants, according to the International Council of Shopping Centers. That’s more than double the 2016 total and is close to surpassing the all-time high of 6,900 in 2008…Apparel chains have by far taken the biggest hit, with 2,500 locations closing. Department stores were hammered, too, with Macy’s Inc., Sears Holdings Corp. and J.C. Penney Co. downsizing. In all, about 550 department stores closed, equating to 43 million square feet, or about half the total.

This threatens the retail sales staff and cashiers who make up 6% of the entire US workforce, a total of 8 million jobs. These workers are not located in any one region; the entire country will share in the pain.

These American retail workers could see their careers evaporate, largely due to the PE’s financial scheme. The PE’s, however, will likely walk away enriched, and policymakers will share the blame since they enabled the carnage.

Our tax code makes corporate interest payments tax-deductible. So the PE kingpins load up these companies with debt and when they walk away, they get tax credits for any write-offs, incentivizing them to borrow and play the game again. The PE firm might lose some or all of its equity, but in most cases, it already drew cash out via special dividends and fees, so it has made its money.

The lenders, employees, state development authorities are the ones left holding the bag.

The GOP’s new tax plan proposes a cap on the deductibility of interest payments over 30% of a company’s earnings. But, the GOP left a loophole: Real estate companies are exempt from the cap.

Surprisingly, this benefits Donald Trump’s businesses! It also helps PE firms that split the operating side of the businesses they buy from the property side, as most do. They put the borrowing onto the property side, and continue to deduct the interest.

So financialization businesses like PE will continue to strip the value out of companies with hard assets.

Billions in asset-stripping and thousands of operations sent overseas. Labor participation rate is stagnant, yet we are assured that if we pass big corporate tax cuts, the US economy will grow fast enough to more than compensate for the losses.

What’s wrong with this picture?

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Monday Wake Up Call – November 20, 2017

The Daily Escape:

El Ateneo Grand Splendid bookstore in Buenos Aires, which has more bookstores per person than any other city in the world – photo by Alamy

One of the arguments that Republicans use to support their tax bill is that it will unleash investment, but the data say otherwise. Currently, most US economic sectors are operating far below maximum capacity utilization. Here is a Federal Reserve chart showing current industrial utilization/capacity:

The left axis shows the percentage of utilization across both durable and non-durable goods. The US is currently tracking at about 75% utilization, which is about as low as it gets in non-recession times. What that implies is corporations have no need to invest in additional capacity in the US. They have plenty of spare capacity to meet any spike in demand, should it arise. So, today, it makes far more sense for companies to bring unused capacity back online rather than to buy new equipment.

So, what would corporations do with a windfall tax cut that they didn’t need to invest in the US? Won’t they just invest it outside the US in order to keep expanding their global markets? There would be no increased revenues or jobs from investment at home, so why would they keep the windfall at home? That wouldn’t be smart, and those guys and their tax lawyers are pretty smart.

What corporations might do with increased after-tax income:

  • Buy back more of their own stock
  • Update their factories in Mexico, China or elsewhere around the world
  • Invest in companies working on artificial intelligence or robots with human-like dexterity. You know, something on the bleeding edge!

The corporates will ask the question: What do Americans need that they do not have? More self-driving cars?

American consumers simply do not earn enough money to purchase the products that are already available. Total household debt now exceeds the previous peak in the 3rd quarter of 2008. You know, the peak driven by the housing bubble and the accompanying refinancing of debt.

So if a corporation does come up with some product for which there is a genuine need, who will have the money to buy it? What products (or services) would Americans stop purchasing so that they could use their borrowed money to buy this new product?

And given that the tax cuts will not accrue to anyone who makes under $75k the way the GOP has designed their tax cuts, there won’t be any more money in the pockets of the middle class to add jobs and GDP growth here at home. Here is a chart from David Leonhardt in the Sunday NYT, showing what everyone who will gain from their discredited trickle down tax plan, once it is fully implemented:

Notice that it doesn’t go to the people who really need it.

The Republican’s belief in tax cuts and supply side economics is a cult religion. They just don’t care about evidence.

So, time to wake up! We have broken subways, broken bridges, and stagnant wages. Why not spend the money on infrastructure instead of giving it away in tax cuts to be used offshore?

That might actually do some good. This could be the final opportunity for the Senate (the House is a lost cause) to do the right thing and actually represent the interests of the middle class in the US. It is way past time for this 100-member body to set aside the petty complaints of their corporate benefactors and the rich, and offer something real to the ordinary tax-paying citizens who try to pay their bills and put a little aside for retirement.

Time to wake up Senators! We need you to escape your cognitive dissonance, and think about what you are doing. To help you wake up, here is U2 with “Stuck in a Moment” from their 2000 album, “All That You Can’t Leave Behind”:

Takeaway Lyric:

You’ve got to get yourself together

You’ve got stuck in a moment

And now you can’t get out of it

Don’t say that later will be better

Now you’re stuck in a moment

And you can’t get out of it

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

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Sunday Cartoon Blogging – November 19, 2017

The week was dominated by two stories, the Republican tax cut efforts; and the variations on the sexual harassment theme by men in positions of power.

Let’s talk about sexual predation by men. We shouldn’t be pushing all predators to the front of the same firing squad. Without diminishing or excusing what any of these scumbag politicians have done (Al Franken, Bill Clinton) pedophiles are in a detestable class all by themselves. We are now in the middle of a teachable moment, where publicizing how badly men have treated women in our society might bring about real behavioral change. This is solely due to those many, if not most, women who are saying that they aren’t going to take it anymore. This tsunami of accusations and personal testimony will bring down some of the worst of the predators. In this case, sunlight is the best disinfectant.

The GOP wrote the bill. Now, we’ll see who votes for it:

The elephant will always protect his best constituents:

Using the Pot/Kettle meme brings risk:

Mitch has selective beliefs when women tell their truth:

The sexual predator issue focuses the thinking of Republicans:

Trump chose Jeff Sessions for Attorney General in part because Alabama would be a lock to elect another Republican. We’ll see in 3 weeks if that works out as planned.

Bonus Republican hypocrisy: Do these people ever hear themselves?

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Saturday Soother – November 18, 2017

The Daily Escape:

Sunrise at Mesa Arch, Canyonlands National Park, Utah

It’s Saturday, and the dominant issue should be the Republicans’ efforts to enact a tax cut, now that the House has passed its version of the legislation. The plan distills Republican economic philosophy perfectly: Take lots of money and give it to the people at the top, while pretending that doing so will help everyone else.

Speaker Paul Ryan said it’s a middle-class tax cut:

This plan is for the middle-class families in this country who deserve a break. It is for the families who are out there living paycheck to paycheck, who just keep getting squeezed… The Tax Cut and Jobs Act will deliver real relief for people in the middle, people who are also striving to get there.

David Leonhardt offered this view:

Amazingly, the bill…would increase taxes, on net, for families that have at least one child and make less than $100,000. That conclusion comes from a rigorous independent analysis of the bill, released yesterday afternoon by the Tax Policy Center.

The elevator version of the Republican plan is to add $1.5 trillion to the deficit in order to give permanent tax cuts to corporations. Since that sounds terrible, the GOP proposes holding down the bill’s total cost by raising taxes on middle-class and poor families. More from Leonhardt:

A big reason is that personal exemptions — the $4,000 in income, per person, that families can write off — would disappear. The bill would increase standard deductions that all taxpayers can take, but the increase isn’t large enough for many families to make up for the disappearance of per-person exemptions…

OTOH, households making at least $5 million would receive an ANNUAL tax cut of almost $300,000 once the bill is fully phased in.

The cynicism is spectacular: Congressional leaders want to raise taxes on most of the middle and lower classes, while claiming that the bill does just the opposite. Senate Leader Mitch McConnell, said:

At the end of the day, nobody in the middle class is going to get a tax increase.

Worse, if the GOP tax bill becomes law, and we look a few moves ahead, we know that Republicans will once again pose as deficit hawks and look to gut Medicare and Medicaid.

On our backs. Happy Thanksgiving!

Our Republican friends plan to fund a permanent tax cut for their beloved constituents, American corporations. For decades Americans have been against increased taxes. We bought the idea that cutting taxes would give people an incentive to work harder and thus make the American economy flourish. The GOP tells us this as they try to roll back corporate taxes, as they plan to eliminate the estate tax, and as they continually work to prevent the government from taking action against offshore tax havens.

We endure potholes, we live in fear of collapsing highway bridges because our leaders want their special constituents to have more. Our kids sit in underfunded schools so that a handful of wealthy individuals can sit in gated communities or on their own private beaches.

Think of what we might do with the sums we will lose to this GOP “tax reform” over our lifetimes. Think about the crumbling infrastructure that could be fixed. Think of all the young people saddled with student-loan debt: We could make that unnecessary, rather than give more to corporations by denying students the deductibility of the interest on their loans. Think of the drug-addicted people all over America: With these tax cuts, we will never help them.

Until the words “discredited trickle down tax plan” come out of the mouth of every single Democratic politician, we won’t have a great chance of killing the Republican’s tax plan.

Enough! It’s Saturday, and time to let the mind wander. So grab a Vente cup of Union’s Hand-Roasted Coffee, Brewer’s El Topacio Microlot, El Salvador (just £8 for 200g). Now sit near a big window and watch the last days of fall, while listening to Beethoven’s “Violin Concerto in D major Op, 61” here performed in 1959 by violinist David Oistrakh with the French National Radio Orchestra, directed by Andre Cluytens.

Listen to the sound of a Stradivarius played by one of the giants on 20th Century violin:

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Sunday Cartoon Blogging – November 12, 2017

We live in the greatest country ever. Our elected leaders won’t even admit to global warming, much less try to fix it. They only offer tax cuts for corporations and rich guys. They don’t even want gays to have wedding cakes. And then, there’s Roy Moore.

President Trump wanted to call it the Cut Cut Cut Act. Congressional Republicans settled on the less catchy and less descriptive Tax Cuts and Jobs Act. What the legislation actually does is sharply reduce taxes for business while rearranging the personal income tax with a mix of cuts and increases. What’s needed is to throw out the tax code as we know it. The Paradise Papers show us where to find the changes we need.

From Hullabaloo:

Suzan DelBene (D-WA) demonstrated how corporations have successfully reconfigured government of, by, and for the people to prioritize the need and wants of business over those of the living and breathing. DelBene questioned Thomas Barthold, chief of staff for Congress’ Joint Committee on Taxation on the proposed GOP tax overhaul:

Will a teacher in my district who buys pens, pencils paper, for his students be able to deduct these costs from his tax return under this plan?
Simple answer: No.

Will a corporation that buys pens, pencils, and papers for its workers be able to deduct those costs from its tax returns under this plan?
Simple answer: Yes.

Will a firefighter from my district be able to deduct the state and local sales taxes that she pays from her tax returns under this plan?
Simple answer: No.

And will a corporation be able to deduct sales taxes on business purchases under this plan?
Simple answer: Yes.

Will a homeowner in my district be able to deduct more than $10,000 in property taxes under this plan?
Simple answer: No.

Will a corporation be able to deduct more than $10,000 in property taxes under the plan?
Simple answer: Yes.

And if a worker in my district had to move because his employer is forcing him to relocate his family or potentially lose his job, can he deduct his moving expenses under this plan?
Simple answer: No.

But if a company, a corporation, decides to close its facilities in my district, fire its workers, and move its operation to China, say, can it deduct associated moving expenses under this plan? Or stated another way: Can a corporation under this plan deduct outsourcing expenses incurred relocating a U.S. business outside of the United States?
Simple answer: Yes.

Rep. DelBene told you all you need to know. Now, go tell your Congress critter to block what’s coming. On to this week’s target-rich cartoon environment:

Trump’s Chy-na visit showed who could out-negotiate whom:

Roy Moore defenders display GOP hypocrisy

Words to live by:

The Dem’s election results in VA and NJ show Trump’s pickup lines don’t work for the Elephant:

GOP reconsiders their 2018 option:

The Pervpocalypse is cratering plenty of careers:

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Here’s Who Benefits From Trump’s Tax Cuts

The Daily Escape:

Floating Village in Lan Ha Bay, North Vietnam – photo by Son Tong

Nobody knows what the final shape of the GOP tax plan will be, but we can see the financial implications of the current bill. Jill Schlesinger has a handy quick and dirty look at who benefits from the proposed cuts posted on her web site. Of the expected $1.5 trillion in tax cuts, only 15.2% will be for individuals. Schlesinger’s conclusion is that Republicans mainly want to help corporations:

  • $1 trillion will accrue to Corporations and Pass-through businesses
  • $228 billion accrues to Individuals
  • $172 billion accrues to Estates

Of the GOP’s $1.5 trillion government handout, corporations get two-thirds. Pass-through businesses are S-Corporations, LLCs, partnerships and sole proprietors. About 95% of businesses fall into this category. Many of these are professional service organizations (lawyers, doctors, accountants, consultants and architects) who otherwise are wealthy individuals, and those infamous hedge funds.

Estates will receive a Republican tax handout that is nearly as large as that provided to individuals. Today, roughly 5,000 people pay estate taxes under current law, but about 3,200 Americans would not have to pay the estate tax next year if the Republican tax bill is passed.

Think about that: 5000 individuals will split up $172 billion in tax relief due to Trump’s largesse!! In 2000, 52,000 estates had to pay the tax. Now it is down to 5,000.

Individuals include everyone who files a tax return. But even here, the WaPo says that the wealthy will do better:

Households with annual incomes over $1 million would see their after-tax incomes increase by 3.2%, 16 times the percentage increase for any income group in the bottom half of the income distribution. . . . (The disparity in average tax cuts measured in dollars would be even larger.)

About 45% of cost of the bill’s tax cuts would go to households with incomes above $500,000 (fewer than 1% of filers). About 38% of the bill’s cost would go to tax cuts for households with incomes over $1 million (about 3 out of every 1,000 filers).

What should the response of Democrats be? Democrats are correct in saying that the Republican plan is tilted too much toward the ultra-wealthy. They propose tilting it more toward the middle class.

Bruce Bartlett was a domestic policy adviser to Ronald Reagan and a Treasury official under George H. W. Bush. Bartlett says that Dems:

Should counter with a $1.5 trillion infrastructure plan and no tax cuts for anyone.

Bartlett points out that since the Clinton administration, Dems have tried to show fiscal responsibility, supporting tax increases and spending cuts. Meanwhile, Republicans abandoned any pretense of concern for the deficit, as their new budget shows.

Bartlett argues that a big infrastructure program will provide a payback for decades to come, just as Eisenhower’s highway program did. Importantly, he points out that building infrastructure will create vastly more jobs than any kind of tax cut, especially given the Republican proposal that largely benefits the wealthy, while providing no incentives for job creation or investment.

The Congressional Budget Office (CBO) has routinely provided estimates to Congress showing that direct spending by government on infrastructure has a bigger multiplier effect on economic growth than any tax cut. Their February 2015 report showed that purchases of goods and services by the federal government raises GDP by as much as $2.50 for every $1 spent.

The report also says that a temporary tax cut for the wealthy, such as Republicans are now proposing, would create at most 60 cents of GDP for every $1 of foregone revenue. Corporate tax cuts are the worst, creating 40 cents of GDP for every $1 of revenue loss.

Our government is starved for revenue. This is not the time to even consider a tax cut for the wealthiest.

A true conservative tax policy would raise taxes to balance the budget, reduce deficits and debt, while investing in basic infrastructure, education, job training, research, technology and other drivers of growth.

That is the kind of conservatism we should get behind.

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