Category: Tax Policy

Prepaying Taxes? Don’t Be Stupid

The Daily Escape:

Saguaro in bloom, Gold Canyon, AZ – May 2023 photo by Karin Ingebrigtsen Hetsler

In the discussion about the Debt Ceiling, it’s become clear that America has a problem with tax collections, which are running behind what was forecast. While tax receipts were always expected to be below 2021’s robust levels, they are even weaker than forecast, down around 35% so far.

That means absent a deal between the Parties, we will hit the Debt Ceiling sooner than we thought. This is largely due to a weaker stock market and lower economic growth than the country had in 2021.

But it’s also true that America has an enormously complicated tax code, built by decades of lobbyists working with the Congress to carve loopholes into the Code to provide legal tax avoidance strategies to their corporate clients.

Imagine a world where corporations and individuals didn’t try to weasel out on their tax obligations to the government…Impossible, you say?

Well, consider Ukraine. We’ve been told that Ukraine is rank with corruption and a large informal economy. Both may be true but read what The Economist has to say about tax receipts during their war with Russia: (emphasis by Wrongo)

“After Russia invaded in February last year, Ukraine’s finance minister, Serhiy Marchenko, braced…for government revenues to “plummet”. He says he expected them to fall by roughly as much as economic activity. That did not happen. Although Ukraine’s GDP plunged by 29% in 2022, the state pulled in just 14% less than the year before.”

Of course the war led to drops in tax revenues from imports and tourism. Blackouts caused by Russian attacks on power plants and the grid disrupted automated reporting of taxable transactions. More from The Economist:

“What, then, is behind the state’s “unique results”, as an official puts it, in wartime revenue collection? One explanation is that firms and taxpayers, eager to support their country’s defense, are paying more tax than required.”

Still more: (brackets by Wrongo)

“According to Ukraine’s finance ministry, in March last year such donations came to 26b[illio]n hryvnias ($880m), rising to 28b[illio]n in May.”

Why are Ukrainian businesses and individuals motivated not to avoid taxes like in the US, but to make donations and pay taxes in advance? The Economist quotes a tax partner with Price Waterhouse Coopers, with responsibility for Ukraine:

“…if Ukraine wins, you’ve got your country; if Russia wins, thuggish authorities will take your money anyway, so why not help out now?”

A lawyer at a Ukraine law firm says that many of his corporate clients have asked for guidance on how to prepay taxes. And now a year later, the lawyer says that nearly all the 100-odd clients he serves have begun to prepay. According to the lawyer, efforts to seek loopholes to lower tax bills have decreased.

Finally, The Economist reports that Ukraine’s State Tax Service continues to receive payments, through its online portal, from the territories occupied by Russia (except for Crimea). Despite the pressure to pay Russian taxes, apparently, last year 2.3 million individuals and organizations in occupied areas paid $9.5 billion in taxes to Ukraine.

They are doing this despite the risk of retribution from their Russian overlords. Can you imagine anything like this happening in the shell of a country we call the United States?

There are other factors at work. Taxes on gas production were raised last year. The Economist quotes Danil Getmantsev, chair of the Ukrainian parliament’s Committee on Finance, Taxation and Customs Policy, who says that a crackdown on corruption also may have had something to do with it.

No one should think that Wrongo is saying that Ukraine is a better place to live and work than is the US. The key point is they are demonstrating that in a country that was thought to be barely unified before the war, it now acts as one. Try to imagine how, under similar circumstances what it would take for companies and citizens in the US to freely prepay their taxes. (Wrongo knows about the need in the US for some Americans to file quarterly returns, which is a form of prepayment).

Or imagine people willingly donating to the government in an effort to keep us free.

Nope. We’re addicted to fiscal gimmickry. Anything to pay less to the government. After all, Trump said not paying taxes showed that he was a smart guy.

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Late Stage Capitalism

The Daily Escape:

A 20 feet x 9 feet sign placed in Times Square, NYC in Sept. 2013. Created by Steve Lambert.

In yesterday’s column about Bed Bath and Beyond’s (BBBY) bankruptcy, Wrongo used the term “Late Stage Capitalism” to describe some of the factors that led to the firm’s demise. Several readers asked what Wrongo meant.

First, some history. A German economist named Werner Sombart seems to have been the first to use the term “Late Capitalism” around the turn of the 20th century. A Marxist theorist named Ernest Mandel popularized it in the 1960s. For Mandel, “late capitalism” described the economic period that started with the end of World War II and ended in the early 1970s, a time that saw the rise of multinational corporations, mass communication, and international finance.

In America the terms “Late Capitalism” and “Late Stage Capitalism” are used interchangeably. Late-stage capitalism is characterized by greed, corruption, and a focus on profits over people.

The current crisis of capitalism’s legitimacy stems from business pursuing the aberrant form of capitalism known as shareholder capitalism, which began in the 1970s. It causes firms to seek maximizing shareholder value as reflected in the current share price, at the expense of all other stakeholders and society.

Some of the problems with late-stage capitalism include wealth inequality, environmental destruction, and financialization. Financialization refers to the increase in size and importance of a country’s financial sector relative to its overall economy. In the US, the size of the financial sector as a percentage of GDP grew from 2.8% in 1950 to 21% in 2019. The financial services industry, with its emphasis on short-term profits, has played a major role in the decline of manufacturing in the US. Financialization has created “unproductive” capitalism. According to economist Michael Roberts: (brackets by Wrongo)

“…financialization is now mainly used as a term to categorize a completely new stage in capitalism, in which profits mainly come not from…production, but from financial [engineering]

Today, capitalism is no longer the heart of a free market. Algorithms run the stock and foreign exchange markets. Large players in these markets operate freely with the expectation that they will eventually be caught. They then pay off the DOJ or SEC, chalking up the fines to the cost of doing business.

Lobbyists on Capitol Hill curry favor with politicians. Companies then receive substantial tax breaks and move their ever larger profits to offshore tax havens. The revolving door between Wall Street and the banking sector allows former Federal Reserve Chairs to charge speaking fees of $500,000 and earn seats on the boards of the algorithmic trading firms. The Pentagon continues to benefit from budgetary increases while the profits of Boeing, Lockheed Martin, and other defense contractors continue to swell.

Late stage capitalism helped create the current distortion of wealth. From the wealthy one percent living in multiple homes and flying private, to the plight of the working poor in America. In a 2020 survey by Edelman, a marketing and public relations firm, 57% of people worldwide said that:

“capitalism as it exists today does more harm than good in the world”

When you have money, capitalism is your wing man. It opens doors to business leaders and helps develop political influence, all with the goal of amassing more wealth and power.

Late stage capitalism has allowed oligopolies and the oligarchs that run them, to rig the system in their favor. They’ve won Supreme Court cases, such as Citizens United v. FEC (2010), that give corporations the same speech rights as people, allowing them to spend millions on political ads to elect compliant politicians.

In recent years, capitalism’s shortcomings have become more apparent: Prioritizing short-term profits has sometimes meant that the long-term well-being of society and the environment has lost out. Indeed, if you judge by measures such as inequality and environmental damage, as economists Michael Jacobs and Mariana Mazzucato wrote in their book “Rethinking Capitalism”:

“…the performance of Western capitalism in recent decades has been deeply problematic…”

There’s also no denying that this strain of capitalism has led to increased economic growth worldwide, while lifting a significant number of people out of poverty. At the same time, its tenets of lowering taxes and deregulating business has done little to support investment in public services, such as crumbling public infrastructure, improving education and mitigating health risks.

Watch Paul Tudor Jones, a successful hedge fund manager describe why we need to rethink capitalism:

He’s concerned about capitalism’s laser focus on profits. He says that it’s:

“….threatening the very underpinnings of society.”

More people are aware of the term “late, or late-stage capitalism,” due to the growing wealth gap. People now have access to information that exposes the defects of capitalism, and the effects of political and elitist interference in the monetary policy of a country. There is a popular Reddit community devoted to it.

And calling something “late” implies the potential for significant change or revolution, A “late” period always comes near the end of something. Calling it “Late capitalism” says:

“…This is a stage we’re going to come out of at some point…”

Perhaps we’re on the cusp of society dictating that capitalism provide us with a more equitable way of life. Or maybe the wealth gap will continue to grow, and the corporations will continue to seize more power.

Whenever late-stage capitalism eventually comes to an end, you can be sure of one thing – it won’t be a soft landing.

 

Sources and reading list:

https://wrongologist.com/2023/04/bed-bath-and-beyond-another-retailer-bites-the-dust/

https://en.wikipedia.org/wiki/Werner_Sombart

https://www.theatlantic.com/business/archive/2017/05/late-capitalism/524943/

https://www.investopedia.com/terms/f/financialization.asp

https://www.linkedin.com/in/prof-michael-r-roberts/

https://www.fec.gov/legal-resources/court-cases/citizens-united-v-fec/

https://www.wiley.com/en-gb/Rethinking+Capitalism%3A+Economics+and+Policy+for+Sustainable+and+Inclusive+Growth-p-9781119120957

https://www.bbc.com/future/article/20210525-why-the-next-stage-of-capitalism-is-coming

https://www.edelman.com/sites/g/files/aatuss191/files/2020-01/2020%20Edelman%20Trust%20Barometer%20Global%20Report.pdf

https://www.reddit.com/r/LateStageCapitalism/

Alternative Views:

https://tomdehnel.com/crushing-the-myth-of-late-stage-capitalism/

https://www.nytimes.com/2023/04/20/opinion/american-capitalism-good.html

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Sunday Cartoon Blogging – April 23, 2023

Another busy week filled with news we didn’t want to hear. Fox’s huge $787.5 million payout in the Dominion lawsuit seems appropriate, but Lever News reports that Fox can take a tax deduction from the settlement. Ironically the financial consequences of lying are just a cost of doing business for Murdoch and Co.

Fox Corporation reported $1.2 billion in net income in 2022, so the $787 million Dominion settlement is equivalent to about two-thirds of the company’s profits last year. The Lever quotes Daniel Shaviro a tax professor at NYU:

“If your business model is to tell lies so that you’ll get viewers and have lots of advertising revenues, then, odious though this business model may be, the tax system’s job is to tax you on the profits that you actually make from it…”

Fox reported paying an effective income tax rate of 27% in 2022 (the  combination of federal and New York taxes). If Fox can write off the full settlement payment to Dominion, it could amount to an estimated $213 million in tax savings. On to cartoons.

Fox didn’t even have to do this:

Losing the lawsuit didn’t cost Fox any viewers:

Justice Sam Alito was in an especially grumpy mood after the other Justices on the Supreme Court ruled that access to Mifepristone will remain unchanged while the case continues to wind through the courts. Alito and Thomas dissented even though the underlying suit is frivolous:

Note that Thomas is drinking a coke.

That the SpaceX rocket crashed and burned was totally on brand for Elon:

Kevin McCarthy explains his position:

Dalai Lama must retire:

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Saturday Soother – March 11, 2023

The Daily Escape:

Sunset, Santa Elena Canyon, Big Bend NP, TX – March 2023 photo by Rick A. Ludwig. Cliff on left is in Mexico, the one on the right is in US. The Rio Grande is in the middle.

Signs that we’re starting to think about the 2024 election are everywhere. Wrongo wants to connect a few dots regarding Biden’s recent efforts to move the Democratic Party more to the middle on crime and immigration while staying left on financing the country’s social and military needs.

Biden proposed a budget to reduce the deficit, protect Medicare and Social Security, and raise taxes on wealthy individuals and corporations. From the NYT:

“In a speech in Philadelphia on Thursday, Mr. Biden said that his budget was designed to ‘lift the burden on hard working Americans’ and drew sharp contrasts with the proposals that Republicans have offered, which the president argued would threaten the nation’s social safety net programs and benefit the rich.”

This contrasts with Biden’s right-leaning position on the recent DC crime bill. Since DC is controlled by the Congress, it’s legislation can be vetoed by the US Senate. Also from the NYT:

“The Senate…voted overwhelmingly to block a new District of Columbia criminal code that reduces mandatory minimum sentences for some violent offenses, with Democrats bowing to Republican pressure to take a hard line on crime in a move that underscored the rising political potency of the issue ahead of the 2024 elections.”

By an 81-to-14 vote, with 31 Democrats voting with the Republicans, the Senate passed the Republican-written measure to undo the District’s law. It now goes to Biden, who after initially opposing it abruptly changed course and said he would sign it.

So, Biden’s tacking left on spending but to the center-right on crime. He’s making a series of calculated moves to position his Party to compete successfully in 2024. Still, it’s disappointing that Biden and 31 Democrats joined with the Right to deny DC residents the right to govern their own city.

But this shouldn’t be surprising. Last year, Biden and the Democrats turned their backs on labor during their contract battle with the railroads.

Here’s Nick Catoggio in the Dispatch: (Brackets by Wrongo)

“[Biden has]…begun to tiptoe toward the center lately on another major Democratic liability, immigration…..Centrist analysts…have warned Biden and his Party that their political viability depends on escaping the…“cultural bubble” in which an unsecured border is treated as a civic good.”

And last week Biden changed his immigration policy. He’s requiring asylum seekers to seek refuge in nations they pass through rather than waiting to do so in the US.

These new policies bring Biden closer to public opinion. Among Democrats, a plurality want to see the number of asylum applicants increased rather than reduced. Among the overall public, it’s the opposite. Biden is tilting toward the latter.

Biden wants to be seen as strong on crime. Democrats walk a fine line of being against crime but not wanting to wholly support the police. Doing that would risk looking anti-Black in cities that are so important to their political success. Dems support compassionate justice and not retributive justice, so they get tied up in knots when violent crime increases, which is rising in America. The problem of course is that the descriptor “violent” isn’t consistently applied.

Biden’s idea is to try to win more votes from people who are not fanatic MAGA types. That means picking off White suburban voters, Asian voters and Hispanic and Black voters, all of whom are concerned about crime.

Tom Sullivan points out that while the moderate-to-conservative White population is in slow decline, their votes remain significant, and that Democrats shouldn’t ignore them over the next two years:

“Sadly, Democrats often do. Campaigning in concentrated urban areas that tend to vote your way is simply easier and more cost-effective. What it means for largely rural states like North Carolina is that while it remains possible to elect a Democrat like Roy Cooper as governor, Democrats’ urban focus bequeaths him a Republican-dominated legislature…”

Sullivan says the Democrats need to start acting like the big-tent party that they used to be.

And that’s what Biden is attempting to do.

Time to say “enough” to war-gaming the 2024 election. It’s time for our Saturday Soother. The daffodils have sprung through the snow, a sure sign of spring. We turn back the clocks tomorrow night, another win for those who hate dark days.

So, it’s time to take a few minutes to center yourself. Start by sitting in a comfy chair and watch and listen to Lili Boulanger’s “D’un matin de Printemps” (On a spring morning). She wrote this piece in 1917 when she was 23. Boulanger battled bronchial pneumonia throughout her short life, dying a year later at age 24. Here, it is played by the Seattle Symphony conducted by Cristian Măcelaru.

Listen and think about her writing this during the darkest days of her life:

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What’s The GOP Plan For Negotiating On The Debt Limit?

The Daily Escape:

Dream Lake, Estes Park CO – January 2023 photo by Rick Berk Photography

(Wrongo and Ms. Right send healing thoughts to friend and blog reader Gloria R.)

We’re all aware that House Republicans are refusing to lift the debt ceiling unless Biden gives them well, something? And Republicans still haven’t decided what they want. The GOP also wants a balanced budget, but they can’t say what should go, or what should stay.

From the WaPo: (Brackets by Wrongo)

“They [GOP] say they want to reduce deficits — but meanwhile have ruled out virtually every path for doing so (cuts to defense, cuts to entitlements, wiping out nondefense discretionary spending, or raising taxes).”

The fact that Republicans are up in the air about what to do highlights the likely Democratic strategy is against their threats about the debt ceiling. Again, from the WaPo:

“Sensing Republicans are on the verge of a blunder in their schemes to use the debt ceiling to hold the economy hostage and try to extract draconian spending cuts, the White House has developed a two-part response strategy.

Part 1: Lay out the simple argument that Republicans are recklessly inviting an economic meltdown even by talking about a possible default.

Part 2: Force House Republicans to put forward a plan on the table and watch as they struggle with the fallout.”

The Democrats along with Senate Minority Leader McConnell (R-KY) are daring Republicans to put forward a plan. Senate Majority Leader Schumer (D-NY) said:

“If House Republicans are serious about taking the debt limit hostage in exchange for spending cuts, the new rules that they adopted require them to bring a proposal to the floor of the House and show the American people precisely what kind of cuts they want to make….”

Everyone who follows politics knows that Republicans never take much interest in fiscal sobriety when their Party is in control. They agreed to raise the debt limit three times while Trump was in power.

It seems that Republicans are doing the Democrats’ job for them. They are asking for an economic catastrophe and seeking draconian cuts that their base doesn’t want.

Consider the Republican desire to reduce our deficits. They have pledged to balance the budget (that is, to have a zero annual budget deficit) within 10 years. But they haven’t laid out any plausible mathematical path for getting there. And of the current debt ceiling, 90% of it was committed before Biden took his job.

Some Republican House members want to cut military spending, an idea that both Speaker Kevin McCarthy (R-CA) and Rep. Jim Jordan (R-OH) are on board with. But others, including House Appropriations Chair Kay Granger (R-TX), have said defense spending cuts aren’t on the table. Rep. Michael Waltz (R-FL) said:

“We’ve got to get spending under control, but we are not going to do it on the backs of our troops and our military,”

Waltz thinks Republicans should focus on “entitlements programs,” such as mandatory spending programs like Social Security, Medicare, and Medicaid. But the bi-partisan popularity of these programs makes them hard to cut.

And last Sunday, Rep. Nancy Mace (R-SC) was asked to name one thing she was willing to suggest as a spending cut. She instead stated things she wouldn’t put on the table:

“Well, obviously no cuts to Medicare or Medicaid or Social Security….That’s a nonstarter for either side.”

Wrongo has repeatedly suggested tax increases which would help lower deficits, but Republicans have ruled that out.

Instead they’ve changed the House rules so tax cuts will be much easier to pass, and tax increases harder to pass. The House’s rules package now says that any increase in taxes would require a three-fifths vote (60%) rather than a simple majority as previously.

They’ve also proposed doing away with income taxes, payroll taxes, estate taxes and even the IRS itself in favor of a supersized sales tax that would provide most revenue to the government. Republicans would substitute a 30% sales tax on all purchases and in exchange, do away with income, Social Security and Medicare taxes.

That means workers would keep the gross amount of their paychecks. But it also means that buying everything from groceries to automobiles would be hugely more expensive. It also provides a big tax cut for the wealthy and businesses.

The result is a smaller tax burden for the highest earners and a bigger one for people in the middle.

Once you reject trimming entitlements or defense spending and bake in the cost of the GOP’s proposed tax cuts, you’re left with an additional $20 trillion hole in the Federal budget over the next decade.

OTOH, the White House is expected to release its detailed budget in early March. It will build on budgets it has released previously. Republicans want Biden to negotiate on what to do about money we’ve already spent.

Try doing that with YOUR creditors.

 

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Monday Wake Up Call – January 23, 2023

The Daily Escape:

Near Government Camp, OR – January 2023 photo by Mitch Schreiber Photography

Everyone is talking about the national debt and/or about increasing the nation’s debt limit. Congress should increase the debt limit because it’s the right thing to do. But there are many in the “very serious” media who are concerned that the Fed can’t continue to hike interest rates to 5.0% or higher because the government can’t afford to pay such high interest rates on our gargantuan debt.

Some pundits are pushing the idea that the Fed must cut interest rates or else. Or else what? The US government won’t go broke, regardless of how high interest rates rise.

While it’s true that the government’s cost of borrowing rises when interest rates rise, what these pundits are missing is that US tax receipts (which are used to pay that interest expense) have also spiked. They’re also missing the fact that interest expense as a percent of tax receipts was at a historic low in Q1 2022. And while it has moved up, it remains quite close to historic lows. Interest expense as a percent of tax receipts is one primary measure of whether the government can afford the interest expense or not. Wolf Richter of Wolf Street provides us with a chart:

As you can see, while the percentage of interest/tax receipts has “spiked” in 2022, it was at a historic low in 2021. And compare that to when the ratio hovered around 50% in the 1980s and early 1990s. In Q3 2022, it was 22.9%, still very near a historical low.

One reason for this was that inflation helped to increase tax receipts thereby lowering the government’s burden for paying interest on our existing debt.

Between the Trump and Biden administrations, the government’s debt spiked by 34%, or by $8 trillion, in the past three years. That additional debt quickly added a lot of interest expense for the government, as we see with the spike above on the chart in 2022.

As older Treasury securities mature, and assuming the national debt doesn’t go down, they are replaced by new Treasury securities with today’s higher interest rates, and the higher interest costs of those new securities are starting to show up in the government’s interest expense. Richter says that total interest expense in Q3 2022 spiked by 24% from a year ago and by 43% from two years ago. This spike in interest expense looks like this:

And this scary chart is what the GOP will be presenting as their reason to cut the debt. When you omit the spike in tax receipts and the historically low level of interest expense as a percent of tax receipts, as we saw in the first chart, you’re not presenting the whole picture.

Another way to look at the situation is Government interest payments as percent of nominal GDP. This is a classic measure of the cost of government debt compared to the overall economy. Richter offers us another chart:

As you can see, by this measure, interest on our national debt remains lower than it was at any time between 1977 and 2003. And it has remained in a narrow band from 2004 to today.

Without question, we should reduce our national debt. But unless and until interest expense on our debt returns to the level of 50% of tax receipts as it was in the 1980s, we shouldn’t expect much to change in Washington. If it starts to get near those highs, maybe we’ll see action by Congress to increase revenues and reduce spending. And despite all the GOP’s screaming, the Federal Reserve is doing the right thing: Hiking interest rates to stem inflation.

Time to wake up, Congress! The Fed is trying to gently nudge you into thinking that the country needs to raise revenues while also cutting expense. You need to consider the revenue side of the equation more seriously, if for no other reason than what will happen to our currently high tax receipts whenever the coming recession strikes.

To help you wake up, listen to the late David Crosby’s song “Laughing” from his first solo album, 1971’s “If Only I Could Remember My Name. Crosby wrote it for the former Beatle George Harrison, who never used it, so Crosby used it instead:

Several legendary musicians appeared on this recording, including Graham Nash and Joni Mitchell on background vocals; Jerry Garcia on pedal steel guitar, and Bill Kreutzmann on drums. Garcia is magical.

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Sunday Cartoon Blogging – January 22, 2023

There’s a difference between America’s national debt and our debt limit. Without question, our national debt must be reduced. That can happen only two ways, or by a combination of the two. We can increase taxes, or reduce future spending, or do both.

The debt limit is how much in total the US government can borrow. It uses borrowing (issuing treasury notes and bonds) to meet obligations for previously contracted goods and services. This is what must be increased as soon as possible by both Houses of Congress.

But Republicans say they won’t agree to increase the debt limit without action to reduce the national debt. The national debt is the accumulation of all the annual deficits (and any surplus – thanks, Bill Clinton!) that various administrations have racked up. It currently sits at $31.4 trillion.

The four Republican presidents from Reagan to Trump are responsible for more than half of that debt; they added $17.46 trillion to it by running whopping deficits each year. Trump was responsible for nearly half of that, $8.2 trillion, in just four years. About $3.9 trillion was pandemic relief and $2 trillion was the big tax cut he gave to the wealthy.

Republicans can’t explain why they voted to increase the debt ceiling every year of Trump’s administration. Even as he was racking up trillions of dollars of debt by increasing the annual budget deficit from the $665 billion he inherited from Obama, to a whopping $2.1 trillion deficit in just four years  ̶   the highest in US history.

But in the past two years, Biden has cut that $2.1 trillion deficit by 33%, to $1.4 trillion. That isn’t stopping the GOP from screaming that spending has to be curbed because there’s a Democrat in the White House. On to cartoons.

A high-stakes game of chicken:

Their plan is to never have a plan:

Alec Baldwin’s on line one Mr. Speaker:

Truth is always in the eye of the beholder:

Floods in California have people looking for new places to stay:

David Crosby would be spinning in his grave:

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Releasing Trump’s Taxes

The Daily Escape:

Surfing Santa via Pinterest

After more than 3Âœ years of pursuit, Rep. Richie Neal (D-MA), Chair of the House Ways and Means Committee finally was given access to Donald Trump’s tax returns. Trump had refused to provide them and sued to prevent the IRS from giving them to Congress.

But after a federal district court waited 2 Âœ years before opining and a subsequently, a federal appeals court ruled in favor of the Committee, the Supreme Court declined to block the release of the returns to the panel last month. The Committee debated over whether to release Trump’s returns to the public and decided by a Party-line vote to do so.

The NYT tells us about the big takeaway from the release:

“The Internal Revenue Service failed to audit former President Donald J. Trump during his first two years in office despite a program that makes the auditing of sitting presidents mandatory, a House committee revealed on Tuesday after an extraordinary vote to make public six years of his tax returns.”

It’s called the Mandatory Presidential Audit Program, but the IRS never even got around to looking at Trump’s. It was only after the Committee asked about Trump’s returns in 2019 that the IRS finally opened an investigation of Trump’s 2016 returns, even though it had been tasked by that time with auditing him from 2015 through 2018.

That he wasn’t audited is strange, to put it mildly. Getting his returns has validated the Committee’s stated premise for opening the case. The Committee is now recommending that the Mandatory Audit Program, which has been in place since the Carter administration, be codified into law.

While not auditing the president, the IRS was quite busy auditing the returns of the FBI’s James Comey and Andrew McCabe, two enemies of Trump instead.

The Republican objection to releasing Trump’s returns was based on the idea that even public servants have a right to privacy about their financial matters. Wrongo has some sympathy for that, but the tax returns of all top government officials should be made public by law.

Rep. Kevin Brady (R-TX) warned that releasing Trump’s tax returns could lead to the release of tax returns of Supreme Court Justices:

Are you trying to hurt the Democrats, Kevin? Shouldn’t we routinely audit every senior government employee? Shouldn’t those audits be public? And especially the Supreme Court Justices, for whom ethics seem to be optional.

There’s also the threat that Republicans who will control of the House in January, will release the tax returns of Democrats. Wrongo thinks they should release any elected official’s return. After all, a government employee is paid by your taxes, so you have some right to transparency.

The difference is that Trump refused to release his, while most politicians release theirs after they are nominated for office.

For those Democrats who are now saying that it was a mistake to release them because of the Republicans’ possible retaliation, the last 30 years have been about Republicans going after Democrats with investigations and inventing scandals out of thin air for partisan political reasons. They will continue to do this irrespective of whether Trump’s tax returns were released.

Some media are reporting that Republicans are saying:

“….the Democrats don’t want to go down the road of releasing tax returns because where will it stop? with releasing tax returns of ordinary citizens?”

This is hyperbole. The media should ask Republicans who say this:

“Why are you so concerned about the House releasing the tax returns of ordinary citizens? Your Party will control the House. Are you concerned that your fellow Republicans would release tax returns of ordinary citizens?”

Next thing you know they’ll be asking for official college transcripts! Or, certified birth certificates. Oh, wait, they’ve already done that.

Because the Committee released Trump’s tax returns, we now know is that the IRS did not even begin its mandatory audits of Trump’s taxes until 2019 and hasn’t completed any of them.

Let’s close today with a tune for Hanukkah which this year is at almost the same time as the Christmas holidays. Let’s watch and listen to the Maccabeats perform “Latke Recipe” to the tune “Shut Up And Dance” originally performed by Walk the Moon. It’s fun, and who doesn’t like latkes?:

 

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Monday Wake Up Call – November 14, 2022

The Daily Escape:

Bison at Grand Teton NP, WY – October 2022 photo by Kerry Key

As we peel the onion of the midterms we learned something from Massachusetts that’s worth thinking about:

“Massachusetts voters approved an amendment to the state constitution that will increase taxes on those earning more than $1 million a year…. The state’s constitution currently requires all income be taxed at uniform rates. The $1 million threshold will be adjusted each year to reflect cost-of-living increases.”

Fifty-two percent of voters approved the amendment which will add a 4% tax on annual incomes above $1 million, on top of the state’s current 5% flat income tax. It takes effect in 2023, and will fund public education, roads, bridges, and public transportation.

It’s expected the new tax will affect roughly 0.6% of Massachusetts households, according to an analysis from Tufts University. The new tax also applies to “one-time millionaires,” including people who make more than $1 million in taxable income from selling their homes or businesses. It’s estimated to bring in roughly $1.3 billion in revenue during fiscal 2023, according to Tufts.

Supporters applauded the new tax as a necessary step to address MA’s income inequality gap. The Economic Policy Institute ranks Massachusetts as the sixth-worst state in the country when it comes to income inequality.

It is true that the US is one of the most economically unequal nations in the developed world. Most of the income and wealth gains of the last decade have gone to the richest 0.1%—households with annual incomes of $2.4 million and wealth of at least $32 million.

So it isn’t surprising that a similar idea has floated around DC for some time. In October 2021, Biden introduced a “millionaire’s surtax,” bill that would raise taxes on all forms of income, including wages, capital gains, and dividends. It would have imposed a 5% tax on incomes above $10 million and an 8% tax on incomes above $25 million, raising $230 billion over 10 years from the wealthiest 0.02% of Americans.

Naturally, it didn’t pass.

So the effort moved to the states, with success in 2022 Massachusetts and failure in California, where its millionaire’s surtax was defeated, 59%-41%.

In some ways, the millionaire tax debate is emblematic of the nation’s deep political divide. Republicans everywhere only want to see taxes go down, and Democrats are seeking to raise them to fund long term problems like battling climate change and adding better infrastructure.

The GOP asks: If climate change is an existential issue affecting us all, does it make sense to address the issue by taxing only a handful of households? Your answer may be different from Wrongo’s who sees the question as a way to deflect the discussion into an endless loop of “whataboutism” regarding who pays taxes.

Republicans have refused to support carbon use taxes. They’ve refused to support cap-and-trade carbon taxes. Most of them deny that climate change is happening and refuse to pro-actively plan to moderate greenhouse gas emissions, here or anywhere else. So they aren’t engaging in a serious discussion when they ask the question.

Although efforts to raise taxes on millionaires have stalled in Washington, they haven’t gone away. That will happen if Republicans control the House in January 2023.

Time to wake up America! Deficits can grow to the sky at the national level but states have to balance their budgets yearly. That’s why some states are making the choice to raise taxes on millionaires, the very people who have gained the most in the past 50 years. Raising taxes is a must in most states for the remainder of this decade.

To help you wake up, watch, and listen to Molly Tuttle channel Grace Slick while covering the Jefferson Airplane’s “White Rabbit“. Tuttle was just named the International Bluegrass Music Association’s Guitar Player of the Year, so you’re seeing “White Rabbit” done as bluegrass, performed in October 2022 in Portland, ME:

Tuttle is an amazing performer. You can learn more about her here.

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An Economic Closing Argument for Democrats

The Daily Escape:

Snake River, Grand Teton NP, WY – October 2022 photo by Hilary Bralove

Yesterday, Wrongo said that the Dems should add a focus on inflation and the economy to their closing argument when asking voters to keep them in power. Here’s a suggestion of what that argument might look like from David Doney (@David_Charts on Twitter). Doney draws his stats from the Federal Reserve Economic Data (known as FRED) and the Congressional Budget Office (CBO). Below is an extract from his Twitter feed:

Jobs: More Americans are working than at any time in history: 153 million. The economy now has 500k more jobs than it did before the pandemic. The unemployment rate is 3.5%, the lowest since 1969. With more people working there’s more spending.

Wealth: The bottom half of US households have an average real net worth of $67,200, the highest ever. Under Trump, it was just $34,648. (While Trump gave tax cuts to the wealthy. Biden gave them to the middle and lower class.) Even those in the 50th to 90th percentile are doing better under Biden: average real net worth is now $747,010 vs. $699,530 under Trump. It’s important to remember that these are averages not median net worth numbers, which are lower. Median net worth in the US is $121,700, up 17.6 % from 2016.

Income: Real wages are higher than before the pandemic. Despite what some pundits say, they have outpaced inflation. From February 2020 to last month, wages for production and non-supervisory workers have risen 15.6%, while the Consumer Price Index (CPI) has risen 14.6%. So Americans’ purchasing power is greater today than it was in 2019.

The deficit: Our annual federal budget deficit is 50% lower than it was last year. It was $2.8 trillion in fiscal year 2021 and is $1.4 trillion this year, according to CBO estimates. Government income is up and government spending is down: Revenues are $850 billion (or 21%) higher and spending is $548 billion (or 8%) lower.

This continues the historical pattern of Democratic administrations being more fiscally responsible than Republicans. Yet the GOP’s closing argument includes screaming about Democratic spending which they say caused inflation. They are trying to convince Americans who either don’t read or bother to check facts that it’s the Democrats who spend like crazy. The opposite is true.

The economy: The Gross Domestic Product (GDP) hit an all-time high of $20 trillion in the fourth quarter of 2021, and currently is $19.9 trillion (for the second quarter of this year). The Atlanta Fed thinks GDP will grow 2.8% in the third quarter. So no recession just yet. In fact, Doney reports that the six key indicators that the National Bureau of Economic Research (NBER) uses to decide if we’re in a recession  were all up from June to September.

Health insurance: Biden revived the Obamacare signup campaigns and advertising that Trump had eliminated. And now 92% of Americans (and more than 98% of kids) have health insurance, an all-time high. Before Obamacare, close to 18% of Americans had no health insurance.

There’s no doubt that many Americans are worried about the high prices at the grocery store and at the gas pump. But one reason inflation has increased is because people have more money in their pockets. Americans have $4 trillion more in their bank accounts than they did before the pandemic. So they’re working, earning money, and spending it.

The other factor driving inflation is the consolidation of companies into just a handful of major corporations, and the ability of those corporations to jack up prices. Corporate profits are at a 70-year high, yet American corporations are still raising prices. They’re doing so because there’s so little competition.

Republicans in Congress won’t stop corporate price gouging. And we know the GOP will blame Dems for high federal spending (which, as said above, is down 8% so far vs. last year). But the GOP won’t let the facts get in the way of their bad policies. They’ll use this manufactured crisis, along with refusing to raise the debt ceiling, to try to force Democrats to support cuts to Social Security, Medicare, and other social safety net programs.

As blog reader T. Grosso commented yesterday: (Brackets by Wrongo)

“It is such a good question to ask what the Republicans will do if they gain control. We obviously know the answer. They will block anything and everything that might help people so they can blame Biden for [it in] 2024.”

The Democrats’ closing argument needs to include a strong, populist message. They should be saying that Democrats believe people must come before profits. Dan Pfeiffer reports:

“The folks at Data for Progress tested a series of messages on inflation and found that emphasizing corporate greed was an effective pushback on concerns about inflation.”

OTOH, the inflation and economic message must be carefully crafted. It could backfire with some who have missed the current jobs market and are struggling to pay their bills.

Democrats should acknowledge the pain caused by high prices while pointing out that a strong economy and the Party’s fiscal responsibility are helping many people cope with higher prices today and will help to reduce inflation in the near future.

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