Tag: Tax Reform

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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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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Monday Wake Up Call – June 7, 2021

The Daily Escape:

Sunset, Paines Creek Beach, Cape Cod MA – May 2021 photo by Kristen Wilkinson Photography

People worldwide are finally waking up to the tax mischief of multinational corporations. When Treasury Secretary Janet Yellen announced earlier this year that it was time to end the “race to the bottom” and implement a global minimum tax for corporations, few took her seriously.

But now we could be on the cusp of a once-in-a-generation moment that would benefit funding of our public services immensely.

On Saturday at the G7 meeting, the members agreed to back a new global minimum tax rate of 15% for companies to pay on income, regardless of where they are based. The deal is focused on two main changes: reallocating taxes towards countries where economic activity takes place, rather than where these firms choose to book their profits, along with setting a minimum tax rate.

If enacted, the agreement would stop large multinational companies from locating in tax havens, which will force them to pay more taxes. This is clearly revolutionary. The winners would be large economies where multinationals sell a lot, but where they book little taxable profit, thanks to tax loopholes that allow them to siphon off income into low-tax jurisdictions.

This has become a larger problem since the rise of the digital giants like Apple and Google, companies with mostly intangible assets. The most obvious losers will be the tax haven countries that, more than half a century ago, started taking advantage of globalization by drastically lowering their tax rates.

The most sophisticated firms, those with battalions of tax lawyers and accountants, have for years employed tax loopholes in individual countries’ tax laws to minimize their total tax liability. While not all tax loopholes deal with international sales, they are a prime method that the biggest firms use to avoid income taxes.

The NYT cites a report from the EU Tax Observatory which estimated that a 15% minimum tax would yield an additional $58 billion in tax revenue per year.

Between 2011 and 2020, Amazon, Facebook, Alphabet (the owner of Google), Netflix, Apple, and Microsoft paid roughly $219 billion in income taxes, which amounted to just 3.6% of their more than $6 trillion in total revenue, according to the Fair Tax Foundation.

Had these six firms paid the prevailing tax rates in the countries in which they operate, they would have given global tax authorities over $149 billion more than they did over the past decade.

But tax reform isn’t a sure thing. Next month, the G7 must sell the concept to finance ministers from the broader G20 group of nations. If that is successful, officials hope that a final deal can be signed by the Group of 20 leaders when they meet next in October. Ireland, which has a tax rate of 12.5%, has come out against the global minimum tax. China has been quiet, but is considered unlikely to buy in.

G7 finance officials think that if enough advanced economies sign on, other countries will be compelled to follow suit. They plan to exert political pressure on Ireland to join the agreement.

The Biden administration has been eager to reach an agreement because a global minimum tax is an ingredient in its plans to raise the US corporate tax rate to 28% from the current 21%, to help shave the deficit. While Republicans and corporations think that increasing taxes would make American companies less competitive, getting other countries to go along with a minimum tax rate on overseas profits would minimize the home field disadvantage to American companies.

Time to wake up, America! We need our Congress, along with world leaders, to step up and enact this new tax policy. Changes to the tax code requires approval from both Houses of Congress, so this may never happen.

To help you wake up, listen to a cover of Bob Dylan’s “Everything Is Broken” by RL Burnside, with an all-star supporting cast including Buddy Guy with the first guitar solo, Derek Trucks with the second guitar solo and James Cotton on solo harmonica.

You may not be aware that Rolling Stone has a list of their top 80 Dylan covers . Here’s Burnside’s blues take on Dylan:

Sample lyric:

Broken hands on broken ploughs,

Broken treaties, broken vows,

Broken pipes, broken tools,

People bending broken rules.

Hound dog howling, bull frog croaking,

Everything is broken.

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Monday Wake Up Call – March 18, 2019

The Daily Escape:

View from Angel’s Landing, Zion NP – 2019 photo by ducc517

Sen. Elizabeth Warren (D-MA) says that she favors “capitalism with serious rules.” David Leonhardt wrote in Sunday’s NYT:

Her platform aims to reform American capitalism so that it once again works well for most American families. The recent tradition in Democratic politics has been different. It has been largely to accept that big companies are going to get bigger and do everything they can to hold down workers’ pay. The government will then try to improve things through income taxes and benefit programs.

Warren is trying to treat not just the symptoms of inequality, but the underlying disease. Warren also called for an annual wealth tax, for people with assets greater than $50 million. She has proposed a universal child-care and pre-K program. She favors tougher guidelines on future mergers, and also a breakup of the giant tech companies (Google, Facebook) that resemble monopolies.

Of the current crop of Democrats, she’s the reform capitalism candidate. But one idea that Warren hasn’t espoused is the Financial Transactions Tax, (FTT). Wrongo first wrote about a FTT in March 2013.

Sen. Brian Schatz, (D-HI) and Rep. Peter DeFazio (D-OR) introduced a tax of one-tenth-of-one-percent, or 10 basis points (100 basis points equals 1 percentage point), on securities trades, including stocks, bonds, and derivatives. The CBO estimates that the FTT would raise $777 billion over 10 years. Sens. Chris Van Hollen (D-MD), Jeff Merkley (D-OR), and Kirsten Gillibrand (D-NY) are co-sponsors of the bill.

For the math-challenged, 10 basis points on a $1,000 trade equals one dollar. Jared Bernstein says:

FTTs exist in various countries, including the UK and France, with Germany considering the tax (also, Brazil, India, South Korea, and Argentina). The UK is a particularly germane example, where an FTT has long co-existed with London’s vibrant, global financial market.

More from Bernstein: (brackets by Wrongo)

Because the value of the stock holdings is highly skewed toward the wealthy, the FTT is highly progressive: The TPC [Tax Policy Center] estimates that 40% of the cost of the tax falls on the top 1% (which makes sense as they hold about 40% of the value of the stock market and 40% of national wealth).

Vox also reports that an FTT would mostly affect wealthy Americans, because an estimated 84% of the value of stocks is owned by the wealthiest 10% of households. Schatz isn’t the first Democrat to suggest an FTT, Bernie Sanders ran on a similar idea in the 2016 Democratic primary. He pitched it as a way to pay for free college.

Globally, there is plenty of experience with FTTs. In the UK, a 0.5% “stamp tax” is charged when someone buys shares on the stock market, and the UK market is fine. France in 2012 introduced a tax on financial transactions, and a study from the European Commission found that trading volumes declined slightly, but share prices and volatility weren’t meaningfully changed. France and Germany have pushed for a European Union-wide FTT.

Opponents include the high-frequency traders, who note that even a small FTT could upend their extremely low margin business model. Although a dollar on a $1,000 trade doesn’t sound like much, if the industry is making 4 billion trades a day, it can add up.

Time to wake up and support an FTT, America. Sens Warren and Sanders support this idea, and you should too. Those who think that the government should use the tax code to ensure that everyone has an equal opportunity to get ahead, and that we should do more to ensure the well-being of our citizens aren’t socialists.

If that makes us socialists, then Eisenhower, who presided over a 90% top tax bracket, was also a socialist.

To help you wake up, here’s Steely Dan with “Any World That I’m Welcome To” from their 1975 album “Kay Lied”. This tune gives you the benefit of hearing the late, great, Hal Blaine on drums. Blaine may have been the most recorded drummer in pop music history. From the late 50s through the mid-70s, Blaine did sessions with Sam Cooke, Ray Charles, The Righteous Brothers, Henry Mancini, Ike & Tina Turner, The Monkees, Nancy Sinatra, The Fifth Dimension, The Byrds, Sonny & Cher, Mamas and the Papas, and The Grass Roots.

The famously picky Steely Dan only used Blaine for this one tune:

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

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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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Tax Abatements Are Killing School Budgets

The Daily Escape:

Egmont National Park, NZ – photo by vicarious_NZ

A new report shows that US public schools in 28 states lost at least $1.8 billion in tax revenues last year as a result of tax incentives granted to corporations. The study analyzed the financial reports of 5,600 of the nation’s 13,500 independent public school districts.

Good Jobs First examined the first full year of reporting under a new accounting standard for school districts, adopted by the Governmental Accounting Standards Board (GASB), the body that sets accounting rules for all states and most localities. The new rule, GASB Statement No. 77 on Tax Abatement Disclosures, requires most state and local governments to report annually on the amount of revenue they’ve lost to corporate tax abatements.

This is extremely important, since most local schools are very dependent on revenue from property taxes, but they rarely have influence over corporate tax abatements granted by their towns, and/or the cities or counties where they are located.

And local voters have had no way to see how much they are forced to pay in additional taxes that were lost to enrich the pockets of corporate employers.

Good Jobs found that the 10 most affected states could have hired more than 28,000 new teachers if they were able to use the lost revenues. Or, they could have avoided higher home property taxes, or provided their teachers with better resources, or higher pay.

States and cities have long used abatements and other tax incentives to lure companies, or to keep them from leaving, and/or to encourage them to expand locally. Often, those companies make their choice of location based on the quality of local schools and colleges.

These abatement deals are made by local politicians and are meant to boost local economic development. Their proponents say the lost tax revenue is worth it, because they grow the local economy. But it is difficult to know whether the benefits outweigh the burdens.

And until GASB 77, it has been impossible to see just how much a school system may have lost because of a company’s tax break. The new rule is especially helpful in understanding local schools finances, because it requires the reporting of revenue losses even if they are suffered passively by the school system as the result of decisions made by another body of government.

Of the five districts that lost the most, three are in Louisiana. Together, they lost more than $158 million, or $2,500 for each student enrolled. The School District of Philadelphia, which only last year regained local control from the state after climbing out of a deep fiscal crisis, lost the second most revenue at $62 million.

Overall, nearly 250 school districts lost at least $1 million each, and in four districts, tax abatements reduced classroom resources by more than $50 million.

But most school districts have not yet complied with Rule 77, which was implemented in 2015. Good Jobs First estimates that another $500 million of subsidies and abatements are currently unreported.

Most of us believe that our governments are supposed to govern in the interests of the “general welfare,” that when voters put people in positions of power, based on the legitimacy of our electoral process, is the limit of our responsibility as voters.

We accept that somebody has to say what the rules are, and then enforce them.

But in our neoliberal economic times, voters have to remember that our governments often act as wholly owned subsidiaries of the 1%. It takes suspension of belief to accept that our republic, ruled as it is by an oligarchy, is working for the general welfare of all of our citizens.

Why do we think that, our “governments”, all of which are subject to capture and ownership by the few, are going to somehow provide decency, comity, or fairness to all of us?

We need to abandon the article of faith that the free market, one without government oversight, promotes the best economic outcome for all of us.

Today’s inequality says the opposite.

We need a new vision of the role of government. But it isn’t really a “new” vision. It is simply a return to insisting on the “promotion of the General Welfare for all” as the paramount object of government.

Here’s another thought from Gordon Wood, in his book, Creation of the American Republic:

In a republic each individual gives up all private interest that is not consistent with the general good, the interest of the whole body. For the republican patriots of 1776 the commonweal was all encompassing—a transcendent object with a unique moral worth that made partial considerations fade into insignificance.

The last outcome that American revolutionaries wanted was to be ruled by oligarchs. But, here we are.

We need to reform our capitalism.

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Monday Wake Up Call – October 30, 2017

The Daily Escape:

Fall at the Statehouse in Augusta, Maine – photo by Robert F. Bukaty

Welcome to what we may start to call Robert Mueller Monday. Ray Dalio, the founder of the Bridgewater Associates, the world’s largest hedge fund has serious concerns about the uneven recovery of the US economy.

In a LinkedIn post, Dalio said that if politicians and business people look only at the economy’s average statistics about how Americans are doing, they could easily make “dangerous miscalculations” because the averages mask deep differences in how people in various income segments are doing.

Dalio divides the economy into two sections: the top 40%, and the bottom 60%. He then shows how the economy for the bottom 60% of the population, (that’s three in five Americans for you English majors), has been much less successful than for those in the top bracket.

For example, Dalio notes that since 1980, real incomes have been flat or down for the average household in the bottom 60%. Those in the top 40% now have 10 times as much wealth as households in the bottom 60%, up from six times as much in 1980.

Dalio says that only about one-third of people in the bottom 60% (20% overall) save any of their income. Only a similar number have any retirement savings. These three in five Americans are experiencing increasing rates of premature death. They spend about four times less on education than those in the top 40%. Those in the 60% without a college education have lower income levels, and higher divorce rates.

Dalio believes these problems will intensify in the next five to ten years. The inequality problem is caused by our politics and our fiscal policies, not by the Fed’s monetary policies.

OTOH, Dalio’s concerns aren’t a surprise to anyone who follows the political economy. In fact, it isn’t a surprise to anyone who has walked through any mid-sized American city, or driven through any small town in the heartland.

The problem is not low wage growth.

The problem is not long-term unemployment, as degrading and humiliating as that is.

The problem is that the US economy has been restructured over the past 30 years as an underemployment, low-wage economy in which most new jobs created are temporary jobs (whether you are a laborer, a technician, a service worker or a professional) with no job security, low wages and few benefits.

The real question is can we solve the problem? Many old lefties argue for a Universal Basic Income, (UBI), but Wrongo thinks that’s, er, wrong. If the UBI were high enough to provide even a subsistence living for every American, it would be massively inflationary. And it would merely allow businesses to pay lower wages, which is why some wealthy business people, like Peter Thiel, support a UBI.

Wrongo thinks we should support guaranteed work, not guaranteed income. Most people need and want to work in order to keep their place in our society. Getting a check just isn’t sufficient. If people matter at all, and if 95% of them lack the means to live without working, society must strive to employ all of those who have been deemed redundant by the private sector.

And there is plenty to do around America. Start with the 5,000+ bridges and dams that need replacing, or the 104 nuclear power plants that are falling apart.

We need real tax reform that can’t be loopholed. Corporations must pay more, not less. Stop the move to give corporations incentives to repatriate offshore earnings by lowering their effective tax rates. That only compromises our future tax stream. Corporations have to pay more in taxes, and agree to increase the wages of average workers.

Economically, we are in a pretty scary place. People across party lines and socio-economic levels are frightened for their financial security. We need a jobs guarantee, not a UBI.

So, wake up America! Letting corporations and the rich dictate our investment in human capital or infrastructure has us on the road to eclipse as a country. To help you wake up, here is Todd Snider performing “Conservative Christian, Right Wing, Republican, Straight, White American Male“, live at Farm Aid 2014 in Raleigh, North Carolina in September, 2014:

Why aren’t the Dixie Chicks singing harmony on this?

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

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Tax Cuts Won’t Pay for Irma and Harvey

The Daily Escape:

Talking Heads Decision Wheel

It’s time to question how we pay for disasters. The estimated costs of Harvey and Irma are $290 billion. That might turn out to be high or low, it is still early days in assessing total costs. The insurance industry says that they expect to take a $70 billion combined hit for Irma and Harvey.

That leaves $220 billion to be funded by individuals, or taxpayers. Where will that money come from?

The president and his GOP buddies want to cut taxes on corporations and the wealthy, but they call it tax reform. They’ll throw some chump change at the middle class, so that their base feels they got something for their vote last November, but at best, their tax plan will be revenue-neutral. That will provide nothing new for the rebuild of Texas and Florida.

We shouldn’t accept the usual “revenues can’t be increased” mantra when we know cities and people may not be able to afford rebuilding on their own. There are many costs that need to be considered, for example victims of the flood will have to contact some of the roofing companies austin has to offer in order to get their roof fixed, or they will have to find a roofing service closer to their home. They will also have to pay for all new furniture, and decorating services. Getting their lives back on track will be extremely difficult and costly, but with the help of donations they’ll get there. We could also raise revenues. It’s time for a specific and time-limited National Recovery Tax. And everybody has to chip in. This can be a unifying moment. Nobody wants to pay more, but the job must be done.

Think for a second about the Hand In Hand benefit. The idea was that celebrities would induce the average person to donate to disaster relief. The minimum donation that Hand In Hand asked for on their web site is $25. The average US Net worth for 45-54 year olds is around 84k. $25 is .0003% of the average US family’s net worth.

Celebrities should ask us to open our wallets, but that can’t be the way we raise the billions necessary to fund this recovery. And we can’t count on the corporations. Apple gave $5 million, that’s nice. Apple is worth about $850 billion; $5 million is .0000058% of Apple’s net worth. They gave less proportionately than the average American. Apple pays very little tax relative to their profits, most of which are kept overseas. Here is a link to how Apple’s income is sheltered.

Think about where Apple’s money comes from. You bought the iPhone, iPad and maybe a MAC computer. You were the source of their money. The same is true for Michael Dell’s $36 million donation to Harvey relief. He gave a heroic amount, but it’s a pittance when we need $220 billion.

Disasters happen. We need a fund to make people whole, and it has to come from increased revenues. Some could be from state-level taxation in the states impacted, but other states won’t do that voluntarily. That assessment has to come from a new federal tax assessment. Congress should work out the details.

We need to wave off any discussion of additional tax breaks for corporations or for the wealthy, until we rebuild Texas and Florida.

We are all beneficiaries of living in America, including those companies that keep their money offshore. We all should be in this together. If we don’t look out for each other, we’re screwed.

There are other questions, such as, should we be rebuilding in the “bathtub” parts of Houston or Florida? Should we continue allowing coastal homeowners access to federal flood insurance when they tap into it every few years? Maybe we shouldn’t build on waterfront. The NYT had a piece about St. Augustine, FL. They routinely have sunny day flooding caused by rising sea water. What do we need to do to protect historic sites like St. Augustine? Should we protect them?

Can we even ask these questions? Can we agree to do a study? Views differ. But the truth doesn’t travel far in America, because the truth hurts. So, we never ask the big questions, or seek answers to them. We just occasionally donate a little to the disaster of the moment in order to feel a little better.

How can we keep America great if we fail to fund the recovery from disasters? A temporary tax on everyone is the best answer to what just happened in the South.

Here are the Talking Heads with “Once in a Lifetime” from their 1980 album, “Remain In Light”:

https://www.youtube.com/watch?v=I1wg1DNHbNU

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

Takeaway lyric:

Letting the days go by, let the water hold me down
Letting the days go by, water flowing underground
Into the blue again after the money’s gone
Once in a lifetime, water flowing underground

And you may ask yourself
What is that beautiful house?
And you may ask yourself
Where does that highway go to?
And you may ask yourself
Am I right? Am I wrong?
And you may say to yourself, “My God! What have I done?”

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Saturday Soother – August 26, 2017

The Daily Escape:

Depression Bread Line by George Segal, 1999, at the NJ Grounds for Sculpture – 2017 photo by Wrongo

There are two political imperatives facing America by the end of September: The House, Senate and the president must extend the Federal borrowing limit, and pass a budget. When Obama was president, extension of the borrowing limit was a dicey thing, as was passing a budget. From 2008-2016, we largely avoided government shutdowns, we passed spending bills, but not an entire budget.

And we never even considered tax reform, but it’s the third item on the GOP’s 2017 to-do list.

In some sense, everything except increasing the debt ceiling is optional. As of now, there are only twelve days in September when the House and Senate are jointly in session. The Senate has a few more legislative days on their schedule than the House, but it’s unclear how they’ll use them.

Republicans and Wall Street used to have concerns about the consequences for America if we didn’t get our finances under control. They said that the growing federal debt could eventually drag down the economy, burden future generations, and even threaten national security. CEOs of corporations and the biggest banks joined a campaign called Fix the Debt, arguing that the size of our debt was our most pressing issue.

But now these same people are all in on Trump’s plan to cut taxes for corporations and high earners, saying it is the way to fuel economic growth. That, despite estimates that Trump’s plan could reduce federal revenue by $3.9 trillion over 10 years, thereby increasing the debt that CEOs used to hate. From Bloomberg:

Goldman Sachs Group Inc. CEO Lloyd Blankfein, a Fix the Debt supporter…in 2012 told CNBC he’d be for higher taxes if they helped mend the fiscal gap. After the 2016 election, Blankfein told colleagues…that Trump’s proposals, including tax reform, ‘will be good for growth and, therefore, will be good for our clients and for our firm.’

Hmmm. Aren’t Treasury Secretary Steve Mnuchin and Trump’s Economic Adviser Gary Cohn both from Goldman?

Dean Baker, co-director of the Center for Economic and Policy Research sees the policy shift clearly: (brackets by the Wrongologist)

They [CEOs] were yelling, Deficits, deficits, deficits… [and] as soon as George W. Bush gets in the White House? Oh, we’ll have a big tax cut.

The same thing is happening now. Bloomberg reports that according to Seth Waugh, chairman of wealth adviser Alex. Brown, many in finance have moved on from the debt: (brackets and emphasis by the Wrongologist)

It’s not a fun, sexy thing to talk about…Waugh, another Fix the Debt member, recalls playing golf with a private equity executive…Waugh told his friend it would be nice if Congress addressed deficits… [but]…The private equity executive said nobody was talking about that. It was a dead issue, and they should take the good news: Paying less in taxes, the friend reminded him, means getting richer.

It’s probably a distant dream. The GOPs plan for tax reform involves using the budget reconciliation process, which allows them to pass it with just 51 votes, that is, without Democrats. Otherwise, they face a filibuster. Reconciliation starts with passing a budget resolution for the coming fiscal year. In that budget resolution, they need to include special budget directives or instructions:

To start the reconciliation process, the House and Senate must agree on a budget resolution that includes “reconciliation directives” for specified committees. Under the Congressional Budget Act, the House and Senate are supposed to adopt a budget resolution each year to establish an overall budget plan and set guidelines for action on spending and revenue.

So they need to pass a budget, but before that, Republicans need to vote to raise the borrowing authority of the government. That may be impossible without support from Democrats.

We’ll know very soon if Dems are willing to get on board with Paul Ryan and Mitch McConnell on any of this.

It’s Saturday again, and despite the brief three-minute respite from politics brought by the solar eclipse, Trump had another successful week. (If success is his continued destruction of what remains of America’s psyche).

We are now in desperate need of something soothing to kick off next week’s war for truth. So grab a couple of Trader Joe’s Cold Brew Latte Dessert Bars (40 calories and 7 grams of sugar each), put on your best Bluetooth headphones, and listen to the late guitarist John Abercrombie, who died this week. Here is Abercrombie with Dave Holland on bass, and Jack DeJohnette on drums doing “Homecoming” live in 1995. Let’s hope it’s not the best few minutes of your week:

Pay attention to Abercrombie’s remarkable and airy technique.

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