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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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 (Not) – March 28, 2020

The Daily Escape:

Mono Lake, CA, just after sunset – 2020 photo by hodldeeznutz. Those columns are called tufa, and are made of limestone.

Trump has finally made America number 1! We’re again showing the world our exceptionalism by having more COVID-19 cases than any other country in the world.

The House has also passed the stimulus bill, and Trump has signed it, so we will also spend the greatest amount of money on the pandemic, with the smallest fraction of it going to the people who really need it.

Or on the medical equipment that we need the most.

Don’t let anyone tell you that the $2 trillion does a whole lot more than provide relief to very rich people and corporations. This from the NYT:

“Senate Republicans inserted an easy-to-overlook provision on page 203 of the 880-page bill that would permit wealthy investors to use losses generated by real estate to minimize their taxes on profits from things like investments in the stock market. The estimated cost of the change over 10 years is $170 billion.”

The NYT explains that under the existing tax code, when real estate investors generate losses from depreciation, they can use some of those losses to offset other taxes.

This is a big tax break because depreciation is a paper loss, resulting in cash flowing to the investor while tax deductions also flow to the investor.

But the use of those losses was limited by the 2017 tax cut. The paper losses could be used only to shelter the first $500,000 of a married couple’s nonbusiness income. Any leftover losses had to be carried forward and used in future years.

The new stimulus bill lifts the $500,000 restriction for three years, this year, and two retroactive years, a boon for couples with more than $500,000 in annual capital gains or income from sources other than their business.

The IRS says the group that benefits comprises the top 1% of taxpayers. Final words to the NYT:

“A draft congressional analysis this week found that the change is the second-biggest tax giveaway in the $2 trillion stimulus package.”

As we approach a new week, doesn’t it seem like fear is setting in? One thing that might have helped would be an empathetic leader in the White House, but you fight the pandemic war with the bozo you have.

In the Thursday evening Coronavirus briefing he acted like a mafia boss, saying that one governor:

“Used to be a big wise guy but not so much anymore…we saw to it he’s not so much anymore.”

He’s referring to New York’s Andrew Cuomo asking for more ventilators. This is GoodFellas meets House of Cards.

As long as Trump controls the distribution of federal resources, he will use it to bully and threaten states for his own political benefit. And think about this: Trump is willing to hand out $500 billion to corporations to save executives, but isn’t willing to spend $1 billion on more ventilators to save sick Americans?

This is what the Trump administration has become:

Trump is NEVER going to do what is necessary to bring this pandemic under control. Success will only be achieved through cooperative action by the States. And, by the rest of us.

Reality is sinking in, we’re gonna be in our houses for a long time. 2020 is becoming the people vs. Donald Trump.

But, there are uplifting moments if you look carefully. Here’s a small effort at a Saturday Soother, aided by the students of Berklee College of Music in Boston MA. After the school closed down and the kids left for home, they created a virtual performance of Bert Bacharach’s “What The World Needs Now”:

Despite Trump, the rest of us are in this together. Protect yourself and your loved ones, this will eventually end, and you want to be here.

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

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