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 – April 1, 2019

The Daily Escape:

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

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

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

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

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

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

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

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

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

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

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

Maher ends with:

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

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

 

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Sunday Cartoon Blogging – Christmas Eve 2017

(The Wrongologist is taking a brief holiday break. Blogging will resume on Wednesday, 12/27. In the meantime, Merry Christmas!)

The Daily Escape:

Jingle Bell Jog – Ft. Lauderdale FL, 2017. Better for ya than SantaCon.

A final Christmas Eve word about the unwanted gifts the Trump tax cut is foisting on us. In the short term, it will stimulate consumer demand. The economy may “grow”, but our tax receipts cannot.

Soon, these tax cuts will place our government on a fiscally precarious footing. Expect the credit rating agencies (Moody’s, Standard & Poors) to start wagging their tongues, warning of their concerns about the country’s overall debt levels. It is possible that the repatriation of some of the massive off-shore profits that American firms have hoarded may come home. To the extent that they return, and some taxes are paid on them, this (one time) tax receipt will likely make the 2018 and 2019 annual budget deficits somewhat smaller than the colossal ones to follow.

After that, the government’s income will fall, and we will hear bi-partisan calls for deficit reduction, and lower spending targets will be the norm. The effects of tax legislation can take a long time to shake out, and there often are unintended effects.

But make no mistake, the GOP will start talking about the Coming Debt Apocalypse next month.

On to a few cartoons. Here is the difference between the parties:

 

Trump’s year in review:

War is the answer to any question:

Trump’s touting of something terrific slides downhill:

Congress flies home for Christmas:

Congress gives empty present to our kids:

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Sunday Cartoon Blogging – December 3, 2017

The Senate’s tax bill was written by lobbyists, and was hardly read by lawmakers. About 2 pm Friday afternoon, Claire McCaskill (D-MO) tweeted a list of Manager’s Amendments she’d received from a lobbyist rather than from her Republican colleagues. From McCaskill:

None of us have seen this list, but lobbyists have it.

Republicans just took 200 years of Constitutional process and trashed it so they could tell their constituents corporate benefactors that they had passed something this year.

That doesn’t seem to be the right way to do things, but the GOP no longer trusts that its ideas will carry the day if they are put under scrutiny and debate. Presuming this dog’s breakfast gets through conference, six months from now, the Republican leadership will be standing at a podium, looking very concerned. They will say America needs immediate reforms to Social Security and Medicare (please don’t say “entitlements”) in order to reduce America’s out-of-control deficits. Rubio and a few other high-ranking Republicans have openly said that this is their plan.

Here is a handy chart from the CBO on how the tax cuts for individuals break down:

David Stockman notes that 97% of the $1.412 trillion revenue loss over the next decade, based on the Senate bill, is attributable to the $1.369 trillion cost of cutting the corporate rate from 35% to 20% (along with the repeal of the related AMT).

All the rest of the tax bill is a zero-sum stirring of the pot. Of note, $83 billion of the tax cuts go to the estates of 5,500 dead people per year, since the bill doubles the estate deduction to $20 million per couple.

But they did all of this to help the little guy, amirite? On to cartoons. More than the tax bill happened last week, so let’s review: Flynn and Manafort. House of cards?

Flynn has fans everywhere:

Trump Code-talks too:

Santa uncovers some nasty stuff:

Roy Moore says what he means, and means what he says:

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Reagan’s Tax Cuts Are No Model for Today’s GOP

The Daily Escape:

Colima Volcano, Mexico, December 2015 – photo by Sergio Tapiro, National Geographic 2017 photographer of the year

Republicans are patting themselves on the back about their coming tax cuts, comparing it to the famous (infamous?) Regan tax cuts, known as the Tax Reform Act of 1986. From the Economist:

During the three decades since its passage, Democrats and Republicans alike have hailed the law not only for overhauling the country’s tax system…but also for doing so with bipartisan support in both houses of Congress.

Unlike the bi-partisan review of our tax system that occurred from 1984 to 1986, Donald Trump has promised to sign a bill by Christmas, just two months after the first legislative text was introduced.

Congressional Republicans originally promised that any reform would not reduce overall revenues. But they have flip-flopped: The current plan is expected to raise deficits by between $1.3 and $1.5 trillion over its 10-year life. And according to figures from the Joint Committee on Taxation, most of the benefits will go to the rich. Reagan’s reform did the opposite. The left hand chart below shows the Reagan tax cut in blue and the Trump tax cut in red. The x axis is annual income, while the y axis is the percentage of taxpayers receiving a tax cut:

Source: The Economist

The gaps in share of taxpayers receiving a cut are stunning. Between 35-55% of those under $40k in income will receive a benefit under the Trump plan, while between 70-80% of the same group received a cut under the Reagan tax plan.

It gets worse when we look at the right hand chart above. The x axis shows the percentage change in after-tax income by earnings level. Reagan’s cut gave those making between $10k-$50k an increase in take home pay by between 0.25% and 1.5%. Trump’s plan will leave them at ± 0% change in take-home income, while those who make from $50k to $200k will do significantly better under the Trump plan than under Reagan.

And an article of faith for the GOP is that the tax cut will stimulate the economy. Let’s unpack this a bit. The bill provides interim tax relief of about $1.38 trillion during 2018-2025 before the tax sunset provisions kick-in. That equals 4.2% of current tax revenue collections during the 8- year period, and only about 0.8% of GDP.

It’s hard to see how an 0.8% stimulus to GDP is going to bring on a growth tsunami, or add tons of new jobs.

Back to the Reagan tax cut, it had no measurable effect on the trend rate of economic growth, and when it was fully implemented, it amounted to 6.2% of GDP, not 0.8%, .

Finally, when the Tax Policy Center costed out the Senate Finance Committee bill, it showed that by year 10, not one of the 150 million individual filers will still be getting a tax benefit. And most importantly, the single tax cut item left in the statute, the 20% corporate rate, which stays in place permanently, costs America $171 billion in lost revenue in 2027. From David Stockman:

Likewise, the latest distributional analysis [probably from the Center on Budget and Policy Priorities] shows that in 2025, before the sunset,-the bottom 30 million tax filers would get an average “tax cut” which amounts to the grand sum of $1.15 per week….the next 30 million filers would only get $7 per week; and the middle quintile—-the 30 million tax filers between $55,000 and $95,000 per year and the heart of the middle class—– would get just $17 per week of tax relief in 2025.

Hardly seems worthy of Paul Ryan’s gloating about how he’s helping the middle class. The people know that they have no control over what happens, they just want to see how much more they will have to spend (pay?) when the dust settles.

And that’s why Paul Ryan and Donald Trump gloat. They show the rubes a dollar, and then send $1000 to their corporate benefactors.

This will be the GOP’s paradise after they enact the Trump tax plan:

 

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Here’s Who Benefits From Trump’s Tax Cuts

The Daily Escape:

Floating Village in Lan Ha Bay, North Vietnam – photo by Son Tong

Nobody knows what the final shape of the GOP tax plan will be, but we can see the financial implications of the current bill. Jill Schlesinger has a handy quick and dirty look at who benefits from the proposed cuts posted on her web site. Of the expected $1.5 trillion in tax cuts, only 15.2% will be for individuals. Schlesinger’s conclusion is that Republicans mainly want to help corporations:

  • $1 trillion will accrue to Corporations and Pass-through businesses
  • $228 billion accrues to Individuals
  • $172 billion accrues to Estates

Of the GOP’s $1.5 trillion government handout, corporations get two-thirds. Pass-through businesses are S-Corporations, LLCs, partnerships and sole proprietors. About 95% of businesses fall into this category. Many of these are professional service organizations (lawyers, doctors, accountants, consultants and architects) who otherwise are wealthy individuals, and those infamous hedge funds.

Estates will receive a Republican tax handout that is nearly as large as that provided to individuals. Today, roughly 5,000 people pay estate taxes under current law, but about 3,200 Americans would not have to pay the estate tax next year if the Republican tax bill is passed.

Think about that: 5000 individuals will split up $172 billion in tax relief due to Trump’s largesse!! In 2000, 52,000 estates had to pay the tax. Now it is down to 5,000.

Individuals include everyone who files a tax return. But even here, the WaPo says that the wealthy will do better:

Households with annual incomes over $1 million would see their after-tax incomes increase by 3.2%, 16 times the percentage increase for any income group in the bottom half of the income distribution. . . . (The disparity in average tax cuts measured in dollars would be even larger.)

About 45% of cost of the bill’s tax cuts would go to households with incomes above $500,000 (fewer than 1% of filers). About 38% of the bill’s cost would go to tax cuts for households with incomes over $1 million (about 3 out of every 1,000 filers).

What should the response of Democrats be? Democrats are correct in saying that the Republican plan is tilted too much toward the ultra-wealthy. They propose tilting it more toward the middle class.

Bruce Bartlett was a domestic policy adviser to Ronald Reagan and a Treasury official under George H. W. Bush. Bartlett says that Dems:

Should counter with a $1.5 trillion infrastructure plan and no tax cuts for anyone.

Bartlett points out that since the Clinton administration, Dems have tried to show fiscal responsibility, supporting tax increases and spending cuts. Meanwhile, Republicans abandoned any pretense of concern for the deficit, as their new budget shows.

Bartlett argues that a big infrastructure program will provide a payback for decades to come, just as Eisenhower’s highway program did. Importantly, he points out that building infrastructure will create vastly more jobs than any kind of tax cut, especially given the Republican proposal that largely benefits the wealthy, while providing no incentives for job creation or investment.

The Congressional Budget Office (CBO) has routinely provided estimates to Congress showing that direct spending by government on infrastructure has a bigger multiplier effect on economic growth than any tax cut. Their February 2015 report showed that purchases of goods and services by the federal government raises GDP by as much as $2.50 for every $1 spent.

The report also says that a temporary tax cut for the wealthy, such as Republicans are now proposing, would create at most 60 cents of GDP for every $1 of foregone revenue. Corporate tax cuts are the worst, creating 40 cents of GDP for every $1 of revenue loss.

Our government is starved for revenue. This is not the time to even consider a tax cut for the wealthiest.

A true conservative tax policy would raise taxes to balance the budget, reduce deficits and debt, while investing in basic infrastructure, education, job training, research, technology and other drivers of growth.

That is the kind of conservatism we should get behind.

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Saturday Soother – November 4, 2017

The Daily Escape:

Grand Tetons early morning – 2011 photo by Wrongo

Two short thoughts for your Saturday. First, hidden in the language of the GOP’s Tax Bill  is a something that would change the Johnson Amendment, a provision in the tax code that prohibits churches, faith communities, and other non-profits from outright endorsing political candidates:

…The provision is not a complete repeal of the Johnson Amendment. As written, it would only free up religious communities—not all non-profits—to endorse candidates and appears to prohibit churches from going out of their way to campaign for a candidate outside of their normal religious activities.

The GOP wants to erode the separation of church and state. Let’s see who, if anyone, in Congress is willing to fight for the Constitution.

Second, the Democrats had a grenade go off inside the DNC when an excerpt from Donna Brazile’s new book was published by Politico. She claims that the Clinton administration assumed control over the Democratic National Committee (DNC) in exchange for keeping it solvent, then funneled most of the funds raised into her campaign, leaving the states with very little to support down-ballot races.

The states kept less than half of 1 percent of the $82 million they had garnered from the Hillary fund-raisers the campaign was holding to support state-level candidates. That’s about $4.1 million.

When Howard Dean was chair of the DNC he instituted a 50-state policy, saying the DNC would maintain full time workers in each state, to contest seats up and down the ballot from the county, to state legislature to house and senate races.

When Obama won, Dean was out, and the 50-state policy was dismantled. After that, the DNC was reorganized to serve only national level elections. And Obama For America took its place as the funds-raising vehicle for the presidential re-election. And Hillary did much the same with the Hillary Victory Fund, but she went further, as Brazile reveals: The DNC would covertly back Hillary in the primaries.

And now, through these efforts, the Democrats have lost the White House, the Senate and the House, in addition to most state governments.

It’s hard to decide what’s worse, that the party is run by incompetents, or that it is just hopelessly corrupt.

Time for a hostile takeover of the Democratic Party.

On to the weekend. You obviously need to go to a happy place that doesn’t include continual assaults by our national media. So brew up a cup of London-based Union Hand-Roasted Coffee’s El Topacio Microlot, El Salvador, available online for £8/200g.

Now kick back someplace you can see the natural world outside, and listen to Peter Mulvey playing his instrumental, “Black Rabbit”. Mulvey is known for his guitar chops and songwriting. He got started by playing in the Boston metro. This short acoustic gem is executed with ease, and pure musicality:

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

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Sunday Cartoon Blogging – October 8, 2017

(There will be limited blogging until 10/17, as Wrongo and Ms. Right are visiting London to see five plays in seven days. We are also having dinner at Highclere Castle (Downton Abbey). Please keep your tray tables in the locked position while we are away.)

Another week of shocks to the system. Cartoons may help. The GOP reaction to Las Vegas is almost automatic, just like bump stocks:

Some are reluctant to give up their Congress:

The Senate is always on sale:

Tillerson tries to explain Trump’s undermining:

Trump tosses different kinds of paper depending on the audience:

RIP Tom Petty:

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Sunday Cartoon Blogging – October 1, 2017

(There will not be a Monday Wake Up Call column tomorrow, you are on your own! There will be a Tuesday Wake Up, however.)

A few last thoughts on the controversy about kneeling during the National Anthem. This is by David French at the National Review, not some liberal snowflake:

If we lose respect for the First Amendment, then politics becomes purely about power. If we no longer fight to secure the same rights for others that we demand for ourselves, we become more tribal, and America becomes less exceptional.

A comparison for your consideration: A year ago, Colin Kaepernick knelt for the Anthem, and then pledged to donate $1 million to American citizens in oppressed communities. He has donated $800k so far. In the past eight months, now deposed HHS Secretary Tom Price has sat on chartered jets, stealing $1 million from American citizens.

And who do most Americans think is a real patriot?

On to cartoons. Trump’s helping hand for Puerto Rico is insufficient:

Trump’s tax plan looks like it will cost $2.4 TRILLION, but he alone can fix it:

Trump moves on in his quest to make America great:

With so many pre-existing conditions, the GOP should insist they are included in Trumpcare:

Wrongo doesn’t understand the Hefner mania:

 

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