Tag: Corporate Tax Breaks

Two Writers Who Speak To What America Needs

The Daily Escape:

Wukoki, Wupatli National Monument, AZ – September 2023 photo by David Erickson

September is underway, and we’re about to have a negotiation about government spending. But that doesn’t mean that the news this month will be any less stupid than last month’s. Also, as the Republican presidential candidates demonstrate every day, we don’t actually know whether the GOP is a dying Party or, the rising single Party of an authoritarian state.

Unless and until the traditional press presents these as the stakes, it is very unclear which it’ll end up being. With this as an introduction, Wrongo wants to introduce two writers who are attempting to break through our chain of bad policies and the bad ideology that threatens our democracy.

First, from Wesley Lowery in the Columbia Journalism Review:

“We find ourselves in a perilous moment. Democracy is under withering assault. Technological advances have empowered propagandists to profit through discontent and disinformation. A coordinated, fifty-year campaign waged by one of our major political parties to denigrate the media and call objective reality into question has reached its logical conclusion: we occupy a nation in which a sizable portion of the public cannot reliably tell fact from fiction. The rise of a powerful nativist movement has provided a test not only of American multiracial democracy, but also of the institutions sworn to protect it.”

Lowery is a Pulitzer Prize-winning reporter. He goes on to say:

“In 2020, I argued that the press had often failed this test by engaging in performative neutrality, paint-by-the-numbers balance, and thoughtless deference to government officials. Too many news organizations were as concerned with projecting impartiality as they were with actually achieving it, prioritizing the perception of their virtue in the minds of a hopelessly polarized audience…”

Lowery also says that news organizations often rely on euphemisms instead of clarity in clear cases of racism (“racially charged,” “racially tinged”) and acts of government violence (“officer-involved shooting”). He says that these editorial decisions are not only journalistic failings, but also moral ones:

“…when the weight of the evidence is clear, it is wrong to conceal the truth. Justified as “objectivity,” they are in fact its distortion.”

Lowery concludes by saying:

“It’s time to set aside silly word games and to rise to the urgent test presented by this moment.”

Second, Bob Lord is a tax attorney and associate fellow at the Institute for Policy Studies. He also serves a senior advisor on tax policy for Patriotic Millionaires. At Inequality.org, he proposes a graduated wealth tax on the rich:

“The United States is experiencing a level of wealth inequality not seen since the original Gilded Age. This yawning gap between rich and poor has unfolded right out in the open, in full public view and with the support of both political parties.

A malignant class of modern robber barons has amassed unthinkably large fortunes. These wealthy have catastrophically impacted our politics. They have weaponized their wealth to co-opt, corrupt, and choke off representative democracy. They have purchased members of Congress and justices of the Supreme Court. They have manipulated their newfound political power to amass ever-larger fortunes.”

More from Lord:

“In well-functioning democracies, tax systems serve as a firewall against undue wealth accumulation. By that yardstick, our contemporary US tax system has failed spectacularly….Our nation’s current tax practices allow and even encourage obscene fortunes to metastasize while saddling working people with all the costs of that metastasizing.”

Lord along with the Patriotic Millionaires propose new legislation, called the Oligarch Act (Oppose Limitless Inequality Growth and Reverse Community Harms). It is being brought forward by Rep. Barbara Lee (D-CA) and Summer Lee (D-PA). The Lees have developed a graduated wealth tax tied directly to the highest wealth in America. The Oligarch Act propose a set of tax rates that escalate as a taxpayer’s wealth escalates:

  • A 2% annual tax on wealth between 1,000 and 10,000 times the median household wealth.
  • A 4% tax on wealth between 10,000 and 100,000 times the median household wealth.
  • A 6% tax on wealth between 100,000 and 1,000,000 times the median household wealth.
  • An 8% tax on wealth exceeding 1,000,000 times the median household wealth.

Per the US Census Bureau, the median household wealth in 2021 was $166,900. So the first tier 2% wealth tax would kick in at $166,900,000, and so on.

This would affect only very high levels of household wealth. To put that in perspective, according to the Federal Reserve, the wealth level that puts you into the top 0.1% of households in 2019 Q3 was $38,233,372. So if enacted, this Act would touch a really small number of outrageously wealthy households. Also, their taxable amount would be peanuts by their own standards.

The legislation would also require at least a 30% IRS audit rate on households affected by the new wealth tax. One recent estimate indicated that the richest Americans dodge taxes on more than 20% of their earnings, costing the federal government around $175 billion in revenue each year.

The immediate argument is that this tax will never pass as long as the filibuster is intact. And here’s how the work of both authors comes together. We see the “it will never pass” objection from journalists and pundits who try to appear savvy in the ways of DC. On any cable news show, someone is sure to jump up to say it.

The paradox is that if you look at the Congressional Record and flip to the special orders section and extensions of remarks, you’ll notice they’re filled with speeches and statements on behalf of recently introduced bills which the sponsors know will never pass as written. So why do they do it?

Because the point of introducing a bill is not just to pass it in the current session of Congress. It never has been. There is a tradition going back to the earliest days of Congress of introducing bills to make arguments and advance debate. Many famous members of Congress (think Ted Kennedy, Thaddeus Stevens, John Quincy Adams) sponsored or backed multiple bills they knew were not going to become laws.

They did it because they knew that debates over bills that will become laws don’t occur in a vacuum. They happen in the greater context of the debate in Congress over issues which are influenced by every other bill under consideration. And of course, you’ve gotta start somewhere.

Jumping to the conclusion “it will never pass” isn’t being savvy, it’s a sign you’ve missed the point. And it’s a sign of the vapidity of so many journalists and pundits that it’s the first thing out if their mouths. It’s never a good idea to take cues from the stuffed shirts on Fox, CNN and Meet The Press.

This graduated wealth tax is a good start and sets a precedent: There is an amount of wealth that is ruinous to democracy. Taxing it is a necessary condition for preserving democratic governance.

It is true that Congress, as it is presently constructed, will not pass this, or other badly needed legislation. A genuine revolution in thinking will be required. Both Wesley Lowery and Bob Love point us toward fresh thinking about how we start dealing with what we consider to be intractable problems.

Wrongo still has hope for the younger generations who are suffering the consequences of all this government sanctioned selfishness.

Change is coming.

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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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Lobbyists Are Hiring Democrats to Kill Tax Reform

The Daily Escape:

Sunset, Acadia NP, ME – 2021 photo by Rick Berk Fine Art Photography

From the NYT:

“The wealthiest 1 percent of Americans are the nation’s most egregious tax evaders, failing to pay as much as $163 billion in owed taxes per year, according to a Treasury Department report released on Wednesday. The analysis comes as the Biden administration pushes lawmakers to embrace its ambitious proposal to beef up the Internal Revenue Service to narrow the “tax gap,” which it estimates amounts to $7 trillion in unpaid taxes over a decade.”

The Treasury Department estimates that its tax gap proposals could raise $700 billion over a decade.

This is crucial, since Democrats are counting on collecting unpaid taxes to help pay for the $3.5 trillion spending package they are drafting. The House is set this month to begin advancing the spending package, but liberal and moderate factions of DC Democrats are divided over how much to spend and how to offset the cost.

Republicans are unified in opposition to the legislation, and the US Chamber of Commerce has vowed to defeat it. Among the other players are the Business Roundtable and Americans for Tax Reform. And fronting for them is a former Democratic Senator, Heidi Heitkamp. They have unleashed a lobbying operation targeting a small number of moderate Democrats in Congress who hold the balance of power.

Democrats hold a fragile majority in both Houses of Congress. Any hope to enact an ambitious domestic reform program requires that all Dems be on board. Moreover, increasing taxes on corporations and the very rich will be heavy lifts, given the opposition.

From NY Magazine’s Jonathan Chait: (brackets by Wrongo)

“Last week, Democratic senator turned anti-tax lobbyist Heidi Heitkamp, who represented North Dakota for one term before losing in 2018, appeared on CNBC to make a surprisingly emotional appeal against President Biden’s plan to close a notorious loophole for the wealthy. The loophole, called “stepped-up basis”…[that] allows capital gains to escape any tax at all as long as the owners pass the asset on to their heirs before they sell it.”

It turns out that Heitkamp is one of several Democrats lobbying against the Biden tax plan. Chait cites former Democratic Congressman Nick Rahall, who published an op-ed in his hometown West Virginia newspaper advising Democrats that they:

“…can avoid alienating rural states by keeping family-owned businesses and farms in mind.”

Former Democratic Senator Max Baucus (MT) has also stepped forward to write an op-ed advising Democrats that their political fortunes hinge on maintaining low tax rates for wealthy heirs.

The NYT reported that Heitkamp was recruited to the anti-Biden side by superlobbyist John Breaux, a former Louisiana Democratic Senator and Congressman, who once confessed:

“My vote can’t be bought, but it can be rented.”

Washed up politicians all move on to their second act: Monetizing their influence.

Heitkamp told the NYT that she’s finding a receptive audience among potential swing voters in rural areas, especially owners of family farms, even though Democrats say those voters would never be affected by the proposed tax changes:

“This is very consistent with my concern about revitalizing the Democratic Party in rural America….You may want to do this…but understand there will be risk….”

Is her point that if Democrats don’t preserve the loophole that allows fabulous amounts of wealth to escape taxation when passed down to wealthy heirs, they might alienate hardscrabble rural voters?

Will Dems risk losing more of those voters if they put a crimp in the elites’ efforts to maintain entrenched and inherited privileges across generations? Whatever happened to the narrative that rural Real Americans™ voted for Trump to protest America’s rigged economy?

Rural people, like everybody else, want elected officials who will have their backs and fight for them.

We’ve had this kind of manipulation for the last 50 years. It’s how we got a society where some can buy $3 million weekend “cottages”, while so many other Americans line up at food banks or can’t get basic health care.

It’s true that enacting a big tax hike comes with risks: Corporations and the wealthy will fund a lot of Republican TV ads attacking Dems over it.

The risk is worth it. Otherwise, for every dollar in tax hikes Democrats concede to Republicans and the US Chamber of Commerce, they will have to give up a dollar in spending on programs like Medicare, Medicaid, or the child tax credit.

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Saturday Soother – July 10, 2021

The Daily Escape:

Sunset at White Sands NP, NM – 2021 photo by Guyin6300dollarsuit.

Gabriel Zucman and Gus Wezerek had an opinion piece in the NYT about the divergence between personal and corporate tax rates:

“In the decades after World War II, close to 50% of American companies’ earnings went to state and federal taxes. Economically, it was a golden period. Middle-class incomes grew at roughly the same rate as those of the richest Americans.

But as globalization gave companies the ability to choose where they recorded profits, Congress scrambled to keep their business by lowering corporate taxes. In 2018, American companies were taxed at an average effective rate of less than 14%, by our calculations.”

For the past 30 years, corporate tax breaks have helped business owners amass huge amounts of money, much of which is kept offshore. Their gain has been the loss for middle-class Americans, who have footed the bill, as Congress has supported our federal budgets by raising taxes on wages:

This chart shows the result of Republican policies. Corporate taxes are at an all-time low, while many profitable corporations pay no tax at all, and workers’ taxes on wages have risen. This has caused a huge and still growing gap in income and wealth between the rich who lead America’s corporations and the rest of us.

Let’s spend a minute on some tax arcana. There used to be a tax regulation that kept income out of tax havens. It is called unitary taxation, a method of allocating corporate profit to a particular state (or country) where that corporation has a taxable presence. It attributes the corporation’s total worldwide profit (or loss) to each jurisdiction, based on factors such as the proportion of sales, assets, or payroll in that jurisdiction.

If this were in effect, it would slow the parking of profits in tax havens by multinationals. California and other states used to use unitary taxation. It was the subject of two US Supreme Court cases: Mobil Oil v. Vermont and Exxon v. Wisconsin, both decided in 1980 in favor of the unitary tax principle. In other words, in favor of the states.

In 1983, the US Supreme Court again ruled in favor of unitary taxation but this time on a worldwide basis in their Container Corporation vs. Franchise Tax Board decision.

That’s when St. Ronnie pressured California and other states to adopt a restricted version known as the water’s edge method that excludes the profits of foreign affiliates from a state’s pre-apportionment tax base. This allowed profit-shifting to tax haven affiliates to mushroom to what we see today.

Biden is trying to end the race to the bottom on corporate tax rates. But even if Congress approves the 15% global minimum corporate tax, it won’t be sufficient to close the growing economic gap between America’s corporations and its workers. Taxing multinationals at 15% would still leave them facing a lower rate than the average American pays in state and federal income tax.

What’s really needed is a 25% percent minimum corporate tax. That would bring in about $200 billion in additional revenue annually. Over 10 years, that would be enough to pay for nationwide high-speed internet, free community college and universal preschool for 3- and 4-year-olds.

All are worthy uses of tax dollars, but it’s doubtful that all Senate Democrats, much less enough Senate Republicans would support a 25% floor for corporations.

A Republican Congress took a shot at reforming the hiding of offshore profits with their 2017 Tax Cut and Jobs Act, which failed. Data from the Bureau of Economic Analysis suggest profits booked in foreign tax havens have not declined since the law was passed.

In 2018, US corporations reported more profit in Ireland than in Mexico, China, Germany and France combined. For example, in 2018, Facebook made $15 billion in profit in Ireland, about $10 million for each of its Irish employees, while Bristol Myers Squibb’s reported profit in Ireland worked out to about $7.5 million per employee.

For decades, Congress tried unsuccessfully to play catch-up as business owners and a handful of tax havens have driven our tax policy. The result is that we’re a nation where working-class Americans are left with underfunded public schools while the wealthiest Americans are boarding rocket ships in some ego-fueled game.

Time for a post-tropical storm Elsa break! Just when you think all is lost, you discover it isn’t. For the first time, Queen Elizabeth has decided that you can now have a picnic on the front lawn of Buckingham Palace. Don’t get too excited, there are rules: No knives to slice your cheese, no dogs, no prosecco. Besides, 78,000 people are already on the waiting list:

Now take a moment, and listen to Czech composer BedĹ™ich Smetana’s String Quartet No.1 In E Minor “From My Life“, the Largo movement by the Amadeus Quartet, recorded in 2013:

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New Relief Bill Rewards Businesses

The Daily Escape:

Hayden Valley, Yellowstone NP – December 2020 photo by Jack Bell

Politico reports that Congressional leaders are nearing a deal on Covid relief. The deal could be done by the time you read this.

The relief package is divided into two parts. The first bill, with a stated cost of $748 billion, funds the Paycheck Protection Program (PPP), along with $300 per week for unemployment benefits.

The second bill ties liability protections for companies demanded by Republicans to the Democrats’ demand for funding for state and local governments.

The big-ticket items in the first bill include one-time stimulus checks to individuals in the $600 to $700 range, an extension of federal unemployment benefits with an additional weekly amount of $300. There is $325 billion for small businesses, $257 billion for the PPP, some $ billions for vaccines, and to help schools open safely.

Delayed until the New Year is bill two, including money for state and local governments faced with laying off municipal workers, and liability protection for companies that put their employees in danger from the virus through inadequate safety measures. The items in the second bill are what have stalled negotiations for weeks.

Lee Fang of the Intercept reports that the draft of the first bill circulating on Capitol Hill contains several adjustments to the PPP, the centerpiece of the government’s earlier efforts to curb job loss stemming from the pandemic. One of the revisions is a radical change that would result in a major windfall for the highest-income Americans and large corporations. That provision allows businesses claiming expenses reimbursed by PPP forgivable loans, (already tax-free), to also be used as deductions when calculating taxable income.

In other words, the change would allow a corporation that claimed $1 million in PPP reimbursements to also deduct the same $1 million on its tax return, thereby reducing their taxable income by $1 million. Until now, IRS rules prohibited tax-free government grants and reimbursements from being used as deductions. The Intercept quotes Steven Rosenthal from the Tax Policy Center, who estimates that this PPP deduction provision could reduce the taxes of the highest-income taxpayers by at least $100 billion without benefiting workers or the unemployed.

This tax deduction provision technically applies to all PPP recipients, but few will be able to take the additional tax benefit. Wealthy business owners and large corporations claim the lion’s share of business expense deductions. This group would include wealthy doctors and financial consultants, and those who make over $1 million in yearly income.

This tax provision has been pushed by Rep Richard Neal, (D-MA), and Sen Chuck Grassley, (R-IA). There has been little pushback to these tax giveaways, reflecting a general consensus in Congress around the value of more business tax cuts. Lawmakers, including Senate Majority Leader Mitch McConnell, (R-KY), have described the PPP extension and expansion as an “uncontroversial” aspect of stimulus talks.

This should be pretty simple. If you get a PPP loan, and it is later forgiven, the expenses paid with the loan proceeds shouldn’t be deductible. The company didn’t pay taxes on the PPP loan cash proceeds and thus shouldn’t receive a deduction against taxable income for the expenses paid. That’s double-dipping.

The big idea behind PPP loan forgiveness was to help businesses retain employees and pay certain qualified expenses like rent and utilities, not to enrich employers.

Also buried in the bill is another bailout for US Airlines. They stand to get another $17 billion taxpayer-funded bailout if the first bill becomes law. From Wolf Richter:

“Democrats and Republicans may not agree on much of anything these days, but they both love to bail out airline shareholders and bondholders. And that’s what this is – dressed up as payroll protection and airline support program.”

The new airline bailout comes on top of what they received in the original stimulus bill: $25 billion in payroll support, an additional $25 billion in loans for passenger airlines, and over $10 billion in grants and loans for cargo airlines and aviation contractors.

Let’s remember that the top four airlines have burned their cash by repurchasing $45 billion of their shares since 2012. They don’t need more of our money, Chapter 11 bankruptcy works. Delta, American and United have previously restructured in bankruptcy court, and it worked fine. They know how to do that.

And let’s tell it like it is: If there wasn’t a majority of Republicans in the Senate, the people would get the checks and the unemployment relief they really need.

Win in Georgia!

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Monday Wake Up Call – May 18, 2020

The Daily Escape:

Colorado River, from South Kaibab trail, Grand Canyon NP, AZ  – photo by DJ Memering. The bridge is called the Black Suspension Bridge. It is 5,260 ft below the canyon rim.

The CARES Act was sold as emergency funding for individuals and small businesses. In all, Congress has authorized $3.3 trillion in coronavirus relief in four separate acts over the last two months. The stated intent of those bills was to protect the American economy from long-term harm caused by the overall impact of the virus.

Alas, Congress also took care of their true constituents, Big Oil and other fossil fuel companies. Those companies got CARES Act tax breaks. The subsidies were supposed to help bail out small businesses pounded by the pandemic, but at least $1.9 billion of it was sent to fossil fuel companies and their executives.

Bloomberg News reports:

“$1.9 billion in CARES Act tax benefits are being claimed by at least 37 oil companies, service firms, and contractors”

Bloomberg used the example of Diamond Offshore Drilling Inc. who manipulated the bailout: (emphasis by Wrongo)

“As it headed toward bankruptcy, Diamond Offshore Drilling Inc. took advantage of a little-noticed provision in the stimulus bill Congress passed in March to get a $9.7 million tax refund. Then, it asked a bankruptcy judge to authorize the same amount as bonuses to nine executives.”

But, Diamond’s refund wasn’t all. Some went to their larger competitors. More from Bloomberg:

“…$55 million for Denver-based Antero Midstream Corp., $41.2 million for supplier Oil States International Inc. and $96 million for Oklahoma-based producer Devon Energy Corp.”

In addition, Kevin Crowley reports that Marathon Oil got $411m, Occidental $195m, and Valero $110m.

Hats off to all of our Senators, Congresscritters and the Trump administration! They all continue pursuing a pro-fossil fuel agenda, even as the economic disaster of the pandemic unfolds. Bernie Sanders tweeted:

“Good thing President Trump is looking out for the real victims of the coronavirus: fossil fuel executives,”

But, Bernie apparently voted for the bill, which passed the Senate in a unanimous vote. Hypocrisy much, Bernie?

These loopholes in the Act were deliberately written in so that corporations could feed at the trough along with small businesses, and we the people. Moreover, the initial bill was written in the House, although presumably in consultation with Trump and the Republicans. So, you can view this as either the cost of doing business for Democrats, or as just another day at the office listening to the lobbyists. Subsidy legislation has been a bipartisan objective.

Its always been this way. Here’s a cartoon from 1920 that could be drawn today:

Let’s remember that a big issue was the requirement for oversight, particularly after Trump said he wasn’t interested in having any. A compromise was struck so that an oversight commission could be empaneled to keep track of how the money was spent.

Today, it remains without a leader. Four of the five members of the Congressional Oversight Commission have been appointed, but Speaker Nancy Pelosi, (D-CA) and Senate Majority Leader Mitch McConnell, (R-KY) have not agreed on a chair.

While the current members of the panel can perform some oversight, without a leader, it can’t hire staff or set up office space. In addition, the four members have not met as a group since the economic rescue law was passed. The PBS NewsHour quotes John Coates, a professor of law and economics at Harvard Law School:

“If the commission is not functioning — which it is not — then there is no oversight on a huge part of the economic rescue law…”

We seem to be able to bail out the rich every few decades, and we always seem to do it on the backs of the poor. It will probably happen again in another 10 years or so. Between these bailouts, politicians and pundits appear on all of the news shows, and write very serious articles proclaiming the need to resist socialism and to preserve “the free market” for the sake of “wealth creation and innovation”.

Time to wake up America! This great con has been going on for all of Wrongo’s lifetime and by looking at the cartoon above, for a few lifetimes before. Yet voters seem to be oblivious to this insidious form of corruption each and every time they go to the polls.

To help America wake up, let’s listen to Drive by Truckers, and their tune “Armageddon’s Back in Town” from their 2020 album, “The Unraveling”

Sample Lyric:

There’ll be no healing
From the art of double-dealing
Armageddon’s back in town again

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

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America Is OK With a Wealth Tax

The Daily Escape:

Navajo Trail, Bryce Canyon NP, UT – November 2019 photo by biochemistry_unicorn

Over the past year, progressives have made a wealth tax a central part of the policy discussions in the Democratic primary. Both Sens. Bernie Sanders and Elizabeth Warren have proposals to tax the wealth of billionaires to help pay for improvements to the social safety net and infrastructure.

Currently, the US mostly taxes individuals on the income earned from their jobs and investments. The wealth tax is different since it would tax assets like stocks, yachts, artworks, and vacation homes.

Critics of the wealth tax have made a variety of arguments against them. The most prominent that the US government couldn’t enforce them effectively. Consider this from Business Insider:

“Usually, progressives cast Europe as a model for the cradle-to-grave social benefits that nations like Norway provide because of steeper tax rates on richer citizens. But most…countries have ditched them [wealth taxes] over the last few decades.”

Twelve European countries had a wealth tax in 1990, but the number now stands at four: Spain, Switzerland, Norway, and Belgium, which just introduced a limited wealth tax of its own.

Emmanuel Saez, economist at the University of California, Berkeley, who has analyzed the Warren and Sanders wealth tax proposals, says the European wealth taxes failed because governments created many exemptions that undercut their ability to draw revenue:

“The wealth taxes in Europe have failed by and large….they didn’t raise that much revenue because of big exemptions for asset classes….”

Others argue that the super-rich already donate big amounts to charity. One of Saez’s co-authors, Gabriel Zucman, says that the annual giving of Bill Gates and Warren Buffett equates to ~3%–4% of their wealth, while the other top 20 billionaires’ giving equals ~0.3% of their wealth. Like a really tiny wealth tax. Here’s his chart:

Annual charitable giving of the top 20 richest Americans: $8.7 billion, equaling just three tenths of one percent of their wealth. For the top 400 richest Americans, their taxes paid = 1.5% of their wealth, while their charitable giving = 0.4% of their wealth.

But, the average American paid taxes equal to 5.5% of their wealth, while their charitable giving = 0.3% of their wealth. Joe Six-pack gave the same amount of his assets to charity as did the top 20 billionaires.

If Warren’s 6% wealth tax was enforced on the top 20 richest Americans above, they would pay $60 billion to support the social safety net.

Moreover, despite the nay-saying by the rich, surveys show that Warren’s 2% tax is broadly popular:

(This was an online survey of 2,672 adults conducted by the polling firm SurveyMonkey from Nov. 4 to Nov. 11)

The survey by the NYT and Survey Monkey shows that 75% of Democrats and more than half of Republicans say they approve of the idea of a 2% tax on wealth above $50 million. The proposal receives majority support among every major racial, educational and income group.

The majority of college-educated Republican men disapproved, with only 41.5% approving of it.

The NYT reports that the proposed wealth tax is even more popular than the Trump tax-cut enacted in 2017. Only 45% of Americans said the tax cut was a good move:

“The movement against the Trump tax cuts since then has been powered, oddly enough, by Republicans. They largely still back the law — by 76% over all, compared with 20% of Democrats — but that support has dropped six percentage points since April.”

The shift on the tax cut is highest among high-earning Republicans: Americans earning more than $150,000 a year are far more likely to favor a tax increase on the very wealthy than the Trump tax cuts.

America’s tax code is designed to allow massive fortunes to grow ever larger. Wealth is concentrating in a tiny segment of the population, as the middle class shrinks.

We see that even the most high-minded billionaires can’t even give money away faster than their piles of dough are growing. And when Democrats like Warren and Sanders suggest a way towards tax reform, the GOP and the conservative think-tanks condemn them as socialists who want to punish success.

Most Americans are fed up with a government and an economy that overwhelmingly benefit corporations and the rich at the expense of everyone else. A wealth tax can work if Congress doesn’t get rolled by lobbyists that demand loopholes for their clients.

Wrongo will have no trouble backing a candidate who supports a wealth tax. But, increasing the taxes on corporations and a financial transactions tax should come first.

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Monday Wake Up Call – April 1, 2019

The Daily Escape:

Racka Sheep, Hungary, April 2017 – photo by Laszlo Balogh.

The Trump legacy keeps on giving. Forbes reports that when Trump’s tax bill passed in late 2017, it included:

“A new tax on litigation settlements: no deduction for legal fees…..That means many plaintiffs must pay taxes even on monies their attorneys collect. Of course, the attorneys must also pay tax on the same money.”

Robert W. Wood, a Forbes contributing writer who follows taxes, cites the case of Edwin Hardeman who won $80.5 million in a suit against Monsanto’s Roundup. From Forbes:

“Hardeman was awarded a bit over $5 million in compensatory damages, and $75M in punitive damages. The combined contingent fees and costs Mr. Hardeman pays his attorneys might total as much as 50%. If so, the plaintiff would get to keep half, or $2.5 million of the $5 million compensatory award. Since it is for his…non-Hodgkin’s lymphoma, that part for physical injuries should not be taxed. Then, of the $75 million punitive award, $37.5 million goes to legal fees and costs, and $37.5 million to Hardeman. So before taxes, the plaintiff’s take home is $40 million.”

But because of Trump’s new math, Hardeman’s $75 million punitive damages award is fully taxable, with no deduction for the fees he pays to his lawyer. Between federal taxes of 37% and California taxes of about 13.3%, Hardeman could lose about 50% to the IRS and California Franchise Tax Board. He would still owe another $37.5 million to his lawyers, so his after-tax take from an $80 million verdict only $2.5 million.

A $2.5 million award isn’t chump change, but this is another effort by corporations and Republicans to discourage law suits seeking punitive damages by plaintiffs. Notably, compensatory damages for physical injuries or physical sickness are still tax-free, but not punitive damages.

Doesn’t paying taxes on money you don’t receive seem un-American? The reach of corporate interests into our laws cannot be overstated. It will take a generation to reverse all of the inroads corporate lobbyists have made into our tax laws alone.

So, wake up America! It’s time to change capitalism so that it works for the people, not just for the owners and managers of corporate America. Bill Maher had a great discussion on his show “Real Time“. He echoed FDR’s “Four Freedoms” while commenting on how countries with a higher socialism-to-capitalism mix rank as happier than the US in the recent World Happiness Report. Maher says;

“Happiness isn’t only about what you have. It’s also about what you don’t have to worry about,”

Maher recommends rebranding Capitalism Reform as “Capitalism Plus.” Because, “It’s a plus when you get sick and you can focus on getting better instead of not going broke“. Or, ending up sleeping under an overpass.

Maher ends with:

“Does pure unbridled capitalism work? I guess that depends whether you’re on the board of Boeing, or onboard a Boeing.”

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

 

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