Tag: GOP Tax Policy

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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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 – 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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Monday Wake Up Call – April 18, 2022

The Daily Escape:

Sunset, Sequoia Lake, CA – April 2022 photo by An Pham

Today is tax day, and Wrongo will get his in on time. But the question of how America deals with its taxing is rightly under scrutiny. Blog reader Ottho H. commented on Wrongo’s Sunday post about the IRS:

“To me it’s an enduring mystery, and a source of anger and disgust, why Congress starves the IRS…. Doubling the IRS budget (by, say, $12B per year) seems like the best and most “sure thing” ROI the gov’t can make….To the extent that the “starve or defund the IRS” movement is due to lobbies and Congressmen out to protect and further enrich the already rich, then at least that should be made more transparent to the public. This is a no-brainer cause that I can get behind.”

The IRS is chronically underfunded. Government data show that millionaires and billionaires are rarely audited, while lower-income families are disproportionately targeted (five times more likely) for enforcement actions. The agency is severely understaffed. It works with outdated technology, meaning that any paper returns must first be transcribed into a computer. It also means hundreds of billions of dollars in taxes go uncollected.

The answer to so many of the IRS’s woes: antiquated tech systems, congested phone lines, threadbare enforcement –  is more funding. It’s one of the few federal agencies that would generate a large and nearly immediate return on investment if it could spend more.

But many Republicans don’t want to fix it. Yesterday’s WaPo article quoted Sen. Rick Scott (R-FL):

“This additional money for the IRS to target all Americans is absolutely wrong…It will target our families, it’s going to target our small businesses, and it’s going to go after them to get them to pay more money.”

And Sen. Todd Young (R-IN) about how new IRS funding would be used:

“We know that most of this $80 billion will be used to enhance the ability of the IRS to target middle Americans…”

The Economist says that the IRS entered this tax season with a backlog of 24 million returns, 20 times worse than normal. At the end of this tax season, it will be nearly two years late in processing many of our returns:

“Spending [at] the agency has declined by nearly 20% since 2010. At the same time, the number of tax returns has increased by 20%. The backbone of the system, a nationwide taxpayer database, is built on top of a 1960s computer language rarely taught in schools.”

The IRS is in the process of hiring 10,000 workers to help clear the backlogs, but the biggest challenge is retaining their senior auditors. About a fifth of agency staff are eligible for retirement. Many have already left as a result of Covid, and they were exactly the kind of people needed to maintain the agency’s enforcement efforts.

The Economist says that the IRS audited 0.3% of corporate tax returns filed in 2018, down from 1.6% in 2010. The number this year may be even lower. They quote Charles Rettig, IRS Commissioner, as estimating that the government loses about $1 trillion in tax revenues annually because of cheating.

Even if new funding is appropriated, it will take time to re-build the agency. Money that is appropriated now for that purpose would be spent over the course of the next fiscal year (which ends on 9/30/2023) and the effects of those reforms probably wouldn’t start to show in the statistics until then.

It’s always been easier to destroy than it is to build. Credit the GOP for understanding this truth.

Time for the Republicans in Congress to wake up! No one likes paying taxes. Even for those who recognize that there’s a societal gain when we all pay them, filing our tax returns is a hassle. It’s time we had a better funded agency that could return the enforcement efforts back toward the richest corporations and wealthy individuals first.

To help our Congress Critters wake up, watch and listen to Mavis Staples perform “Love and Trust” from her album “Live in London”, recorded in 2018 at London’s Union Chapel. She’s joined by Jump Bluesman Rick Holmstrom on his Telecaster:

Sample Lyric:

The simplest things can be the hardest to do
Can’t find what you’re looking for even when it’s looking for you
The judge and criminal, the sinner and the priest
Got something in common, bring em all to their knees

[Chorus]
Do what you can, do what you must
Everybody’s trying to find the love and trust
I walk the line, I walk it for us
See me out here tryin’ to find some love and trust
(Love and trust)
(Love and trust)

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Biden Invites Sinema and Manchin to Talks

The Daily Escape:

Sunset, Cape Disappointment, WA – September 2021 photo by Rick Berk Photography. The lighthouse was built in 1856 and was the first in the Pacific Northwest.

In politics as in business, there’s theater, and then there’s the real work. Biden outlined his goal of raising taxes on the wealthy to strengthen the middle class and boost the economy in remarks on Thursday afternoon at the White House.

On Wednesday, Biden met with Sens. Joe Manchin (D-WVA) and Kristen Sinema (D-AZ), looking to find a path forward on the infrastructure bill, along with the big social spending package and Machin’s voting rights bill.

Democrats will use budget reconciliation for the social spending bill, bypassing Republican opposition. It allows them to win Senate passage with 51 votes, with VP Harris casting the tie breaking vote, rather than the 60 votes that would otherwise be required.

But that means Manchin and Sinema need to vote for the big bill, something they have said they won’t do. No one who was in the room when the talks took place came out and said that a deal was pending. But there’s still time for that to emerge.

The House Ways and Means Committee unveiled a tax proposal this week to pay for the $3.5 trillion package, which includes Democrats’ plans for universal pre-K, expanding Medicare, child and elder care, and the environment. The committee approved its portions of the big bill in a near party-line vote Wednesday, which included the new tax provisions.

Predictably, the WSJ’s editorial board weighed in on the proposed tax plan, saying:

“…this bill looks like a House Democratic suicide note.”

More from the WSJ: (Emphasis by Wrongo)

“If Americans are successful, Democrats want to tax more of their income. The top individual tax rate will rise to 39.6% from 37%, as Mr. Biden promised. But wait: The higher tax rate will kick in at a mere $400,000 for individuals and $450,000 for married couples. That’s down from $523,600 and $628,300 under current law.”

A mere $450,000. They trot out their “pity the poor rich” trope any time the possibility that tax rates might be raised shows up. Let’s unpack this:

This opens the possibility that there will be some families that are below the 99th percentile of household income and above the 98th threshold. Under the new law, they would be forced to pay about $700 more in taxes than they do now. That’s assuming the Democrats’ latest effort at socialism in America is enacted. This paltry tax increase might cut into the nanny’s Christmas bonus. Why are Democrats so cruel?

More from the WSJ:

“This is a steep rate increase on two-earner upper-middle-class families. They may reach these income levels after a long career, and only for a couple of years, but Democrats want more than 40% if you include the 1.45% Medicare payroll tax and the 3.8% Obamacare surcharge on investment income.

If you make more than $5 million, there will also be a three-percentage-point income-tax surcharge. That would take the top tax rate to something like 46.4%. Add California or New York taxes, and government will take about 60%. “

The put-upon high-income salaried professionals follow this mantra:

“Why do I consider myself successful? Because I am rich! Why am I rich? Well, I was successful! All the other Whites in our gated community are exactly like me, only they’re slightly less successful!”

Note that the WSJ’s editorial board treats these proposed marginal tax rates as if they were effective tax rates. Effective tax rates are notoriously lower. For the top 1% of US taxpayers, (average income of $1.16 million in 2018), all federal taxes: income, payroll, corporate, estate, and excise, averaged 29.6% last year.

More from the WSJ on the Democrats’ plans for the estate tax: (emphasis by Wrongo)

“The death tax exemption would also be cut in half to $5.5 million—which would also hit small businesses and savers who have built up a small nest egg.”

The way the estate tax works is that you also get the full benefit of your spouse’s exemption, should you outlive him/her. So, the proposed $5.5 million exemption means that married couples would still get to pass on their “first” $11 million tax-free to their heirs.

In what world is $11 Million a “small” nest egg?

Republicans (and their media enablers) are always against tax increases. Derailing taxes, while appointing more conservative Supreme Court Justices are their political red lines.

It’s time for Democrats, including Manchin and Sinema, to stand shoulder-to-shoulder and get tax reform done this year.

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Monday Wake Up Call – August 16, 2021

The Daily Escape:

Bear Sculpture, Kent CT – August 2021 iPhone photo by Wrongo

ProPublica reported that: “Secret IRS Files Reveal How Much the Ultrawealthy Gained by Shaping Trump’s Big, Beautiful Tax Cut”. The article shows how billionaire business owners deployed lobbyists to make sure Trump’s 2017 tax bill was tailored to their benefit: (emphasis by Wrongo)

“In the first year after Trump signed the legislation, just 82 ultrawealthy households collectively walked away with more than $1 billion in total savings….Republican and Democratic tycoons alike saw their tax bills chopped by tens of millions, among them: media magnate and former Democratic presidential candidate Michael Bloomberg; the Bechtel family…and the heirs of the late Houston pipeline billionaire Dan Duncan.”

Trump’s Tax Cuts and Jobs Act was the biggest rewrite of the tax code in decades. It is arguably the most consequential legislative achievement by any one-term president. It was crafted in secret, with lobbyist input, and then rushed through the legislative process.

ProPublica says that as the draft of the bill made its way through Congress, lawmakers and hired lobbyist friendly to billionaires were able to shape the bill’s language to accommodate special interests. The final version of the bill led to a vast redistribution of wealth to the pockets of a few wealthy families.

This siphoned away billions in tax revenue from the nation’s coffers. Here’s a chart of the tax savings of the big winners:

This gets a little technical. Corporate taxes are paid by what are known as C corporations, including large firms like AT&T or Amazon. But most businesses in the US aren’t C corporations, they’re what are called pass-through corporations. The name comes from the fact that when one of these businesses makes money, the profits are not subject to corporate taxes. Instead, the profits “pass through” directly to the owners, who pay taxes on the profits on their personal returns.

Pass-throughs include the full gamut of American business, from small barbershops to law firms to, in the case of Uline, #2 on the list above, a packaging distributor with thousands of employees.

Republicans touted the Trump tax cut as boosting “small business” and/or “Main Street,” and it’s true that many small businesses got a modest tax break. But a recent study by the Treasury Department found that the top 1% of Americans by income have reaped nearly 60% of the billions in tax savings created by the provision. And most of that amount went to the top 0.1%.

That’s because most of the pass-through profits in the country flow to the wealthy owners of a limited group of large companies. The tax break is due to expire after 2025, and Democrats in Congress want to end the provision early.

Senate Finance Chair Ron Wyden, (D-OR), has proposed legislation that would end the tax cut early for the ultrawealthy. He wants to end the gravy train for anyone making over $500,000 per year. It would be extended to the business owners below that threshold. Wyden’s proposal would make the policy both fairer and less complex, while also raising $ billions for priorities like childcare, education, and health care.

Time to wake up America! The current complaints by Republicans about the Biden efforts to rebuild the economy say that we shouldn’t have the nice things Biden has promised. They now (again) complain about the federal deficit. They continue to sit on their hands about raising taxes on their donors, despite those same donors reaping most of the benefits not only from the Trump tax cut, but from the surge of the national economy since it bottomed while Trump was managing the pandemic.

To help you wake up, watch and listen to “Patria Y Vida” (homeland and life)  the song that has defined this summer’s uprising in Cuba. The title is a take-off on the slogan used by Fidel Castro, “Patria O Muerte” (homeland or death) for 62 years, since the start of the Cuban revolution.

This song of summer is also a deep protest song:

This is a rough time in Cuba. Trump’s sanctions policy sharply restricted the foreign remittances on which many Cubans rely. Then came the pandemic, which decimated the tourism industry. Cuba’s GDP has dropped roughly 11% since 2019.

In response to a recurring chorus saying, “It’s over now,” the singers call to Cuban officials and tell them: “Your time is done, the silence has been broken…we’re not afraid, the trickery is over now, 62 years of doing damage to our country.”

They add, “Let’s start to build what we’ve dreamed of; of what they destroyed by their own hand.”

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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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Monday Wake Up Call – March 2, 2020

The Daily Escape:

St. Augustine, FL – photo by Wrongo

Hot takes:

First to politics: Joe Biden rolled to a big win in South Carolina, and billionaire Tom Steyer and former mayor Pete Buttigieg both folded their tents. Some in the media say that Biden is once again the front runner, but Sanders’s win in Nevada remains significant, and he remains on track to pick up a lot of delegates in California and Texas.

The real news from South Carolina is that Biden has become the Not-Sanders candidate. For Super Tuesday, Bloomberg essentially replaces Steyer as the billionaire in the race. Super Tuesday results are less than 48 hours away, and after that, we’ll have a real idea of who really remains a viable candidate.

Second, peace in Afghanistan: After 18 years of war, we signed an agreement with the Taliban. The deal does not end the civil war, but it has placed the outcome of the conflict in the hands of the Afghan people. Heather Cox Richardson quotes Laurel Miller, the former deputy and then acting Special Representative for Afghanistan and Pakistan from 2013 to 2017 for the State Department: (emphasis by Wrongo)

 “There’s nothing new in the Joint Declaration signed in Kabul today. It reaffirms existing commitments and it re-states some of US-Taliban agreement. Its purpose is evidently political symbolism.”

She explained: It includes the Afghan government and its opposition in future discussions. It draws down US troops to 8600 people—the number who were there when Trump took office, and promises “all” will be gone within 14 months. The 8600 drawdown has long been planned. In exchange, the Taliban will “not allow any of its members, other individuals or groups, including al-Qa’ida, to use the soil of Afghanistan to threaten the security of the United States and its allies.”

Miller’s conclusion:

“The Taliban got a lot. It got its main goal—a clear timeline for US withdrawal—and fast removal of sanctions and prisoner releases. The US got the power to decide whether “vaguely-stated conditions are met, so that in reality can withdraw when it chooses—will be political not military decision.” The Afghan government didn’t get much, but “this deal wasn’t really about the Afghan government.”

Trump, America’s Man of Peace. This looks a lot like what he did in North Korea, a PR moment that resembles a deal, but turns out not to be much of a deal.

Finally, the WaPo features a new report published by the Manhattan Institute, a conservative think tank, that clearly demonstrates the disconnect between the “great” economy described by economists, and the economy experienced by regular people. This chart shows the problem:

 

From the article (emphasis by Wrongo)

“In 1985, the typical male worker could cover a family of four’s major expenditures (housing, health care, transportation, education) on 30 weeks of salary….By 2018 it took 53 weeks. Which is a problem, there being 52 weeks in a year.”

Lead study author Oren Cass (formerly Mitt Romney’s domestic policy director) calls this calculation the Cost-of-Thriving Index. It measures the median male annual salary against four major household expenditures:

  • Housing: the annual rent for a three-bedroom house in the 40th percentile of the local housing market
  • Health care: the annual premium on a typical family health insurance policy
  • Transportation: the average cost of owning and operating a car driven 15,000 miles per year
  • Education: the average cost of tuition, fees, and room and board at a four-year public college

In 1985, the typical male breadwinner could cover those costs, and still have 22 weeks of pay left for other family needs, such as food, clothing, entertainment and savings. Today, the typical salary doesn’t even cover the four basics.

They also looked at female earners. The typical woman needed to work 45 weeks to cover the four big annual expenses in 1985. Today she needs 66 weeks. The most astonishing conclusion is that it was easier for a female breadwinner to provide for her family in 1985 than it is for a lone male earner today.

Remember that the study comes from a conservative-leaning institute. Here’s Cass:

“You can have a rising GDP….but if it’s in the context of collapsing families and people no longer getting married and declining fertility rates and so on and so forth, you haven’t necessarily enhanced well-being.”

Wake up America! The GOP has undone 50 years of economic gains that produced a robust middle class and vastly more economic and social justice than the country had ever known before, or since.

They have chosen candidates whose real agenda was to assist the corporatocracy in fleecing the very people who voted for them. Their candidates ran on issues like the Second Amendment, abortion, gay marriage and immigration. And then, the GOP shifted the tax burden onto the middle class. They deregulated industry and socialized corporate losses, eliminating any downside risk for banks.

We can begin undoing these things by electing Democratic majorities in the  House and Senate in November.

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It’s Time to Raise Taxes

The Daily Escape:

Autumn in Hunza Altit Valley Pakistan – 2017 photo by Nasr Rahman. This shows that beauty can exist in very difficult places.

In 1785, Thomas Jefferson called for a geometric progression in taxes on assets of property holders as a way of lessening inequality. People with more assets would pay much higher taxes. Today, we’re still in search of policies that will do the trick. From The Fiscal Times:

Democratic Sen. Elizabeth Warren and Rep. Alexandria Ocasio-Cortez have sparked intense debate this month by proposing higher taxes on the rich, with Warren calling for a wealth tax and Ocasio-Cortez proposing a 70% top marginal tax rate.

But, Senate Republicans are moving in the opposite direction. Three GOP senators reintroduced legislation to permanently repeal the federal estate tax. The 2017 GOP tax overhaul has already reduced the number of estates subject to the tax by roughly doubling the value of assets that can be excluded from the tax. For 2019, this tax will only be paid by 1,700 families, but that’s all too much for Republicans.

Axios just reported on what Americans think about taxes:

Polling has found tax increases on the wealthy to be popular. A survey earlier this month by The Hill and HarrisX found that 59% of registered voters, including 45% of Republicans, support increasing the top income tax bracket to 70%. A Fox News poll released last week found that 70% of voters favor tax increases on families making over $10 million a year and 65% favor tax hikes on incomes over $1 million annually. Paying taxes is a complicated and controversial issue. What is not controversial is the need for people to take advantage of tax services that can help ensure they pay the right tax and thus appease the ever-lurking IRS. Going to http://daveburton.nyc/tax-services-nyc/ will provide more detail on this.

Those numbers suggest that a complete repeal of the estate tax might be about as popular as the polar vortex.

This shows how vast the gulf is between Republicans and Democrats on taxes. A poll by Axios, along with SurveyMonkey, ironically presented at Davos, showed that 70% of Americans think the economic system is skewed toward the wealthy and the government should do more to fix it. It further showed respondents are ready to vote for a 2020 candidate who agrees.

  • 58% of people surveyed say that “unfairness in the economic system that favors the wealthy” is a bigger problem than “over-regulation of the free market that interferes with growth and prosperity”
  • Among 18-24 year-olds, that gap is a chasm: 76% to 21%
  • Among those 65 and older, it’s a very narrow 51% to 46%
  • 89% of Democrats agree
  • 68% of independents agree
  • But 77% of Republicans say over-regulation of the free market is a bigger problem than economic unfairness
  • A huge majority of Democrats (90%) said they would be excited to vote for a candidate who promises to reform the economic system, with 71% of independents saying the same.

(SurveyMonkey’s online poll was conducted January 16 through 18, 2019 among a national sample of 2,277 adults.)

After WWII, America had very high marginal tax rates, and one result was corporate income was reinvested in the company, rather than given to top management or shareholders. Why give 70% of every dollar to the government?

Back then corporations, in exchange for limited liability, assumed they had fiduciary duties to the public and to their employees as well as shareholders. But the Right got behind the doctrine that a corporation’s only duty was to their shareholders. CEO’s became significant shareholders through stock options.

Then, Reagan and Bush lowered taxes on corporate and personal income, and dividends.

Our basic political issue in America has become: “Does the economy exist to serve the nation, or does the nation exist to serve the economy?”

Our affirmative vote must be for the economy to serve the nation. Over the past 40 years, we have reduced taxes for high earners and corporations. We’ve added loopholes that subsidize corporations, but our need for infrastructure spending hasn’t declined, and our military spending has grown dramatically.

Over the past forty years, the share of income taxes paid by corporations has declined. It is now only 9% of US government tax revenues. It was about 24% in 1960.

We’ve financed the tax cuts for high earners and corporations with ever growing budget deficits. The golden age for these policies must end now.

We need to go back to the days of socially responsible capitalism, not the predatory capitalism we have today. High marginal income tax rates will help. In addition, taxing dividends at the same as ordinary income is a good idea.

Let’s raise the capital gains tax above its current 20% rate.

Let’s find a Constitutional way to tax wealth as Elizabeth Warren suggests. Add a very small transaction tax on sales of stock on all public markets.

It’s time to move past the politics of “What can America do about inequality without corporations and rich people actually giving anything up?”

This isn’t an anti-corporate, anti-wealth assault, it is a necessary corrective to bad tax policy from the 1970s to today.

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