"When fascism comes to America, it will be wrapped in the flag and carrying the cross."
-- Sinclair Lewis
Wednesday, July 03, 2019
Kentucky Doesn't Pay Even Close To Its Fair Share Of Taxes. What Should We Do About That?
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Kentucky's delegation to Congress includes two Republican senators, Mitch McConnell and Rand Paul, plus 6 members of the House, 5 Republicans and one Democrat: James Comer (R), Brett Guthrie (R), John Yarmuth (D), Thomas Massie (R), Hal Rogers (R) and Andy Barr (R). With the exception of Yarmuth, they all have something in common: an often-stated desire to shrink the federal government and reduce taxes. It has a lot to do with how easily them win elections. Kentucky voters also want to shrink the federal government and reduce taxes. They're idiots who don't know how good they have it and would likely suffer mightily if the federal government did shrink. Paul Krugman was ruminating on this for his NY Times column Monday, writing about the various states' federal 'balance of payments'-- "the difference for each state between what the federal government spends in that state and what it gets back in revenue." I bet you can guess where this is going by now. "The pattern," wrote Krugman, "is familiar: Richer states subsidize poorer states. And the reasons are clear: Rich states pay much more per person in federal taxes, while actually getting a bit less in federal spending, because Medicaid and other 'means-tested' programs go disproportionately to those with low incomes. But the magnitudes are startling. Take the case of Kentucky. In 2017, the state received $40 billion more from the federal government than it paid in taxes. That’s about one-fifth of the state’s G.D.P.; if Kentucky were a country, we’d say that it was receiving foreign aid on an almost inconceivable scale." McConnell and his colleagues manipulate a system for their Moocher State. Wondering about your own state? The Rockefeller Institute of Government has all the numbers. The taxpayers of just 10 mostly very blue states-- New York, New Jersey, Massachusetts, Connecticut, Illinois and Washington, North Dakota, Colorado, Nebraska, and New Hampshire-- fund all the rest of them. Who are "what Republicans call the takers, not the makers?" Well... the biggest moochers are, basically, the Old Confederacy and the heart of Trump country. Two states get great deals because of their proximity to DC and all that federal money that gets spent there: Virginia and Maryland. Virginia has an even more favorable balance of payments than Kentucky and Maryland is almost tied with Kentucky. These twenty-one states aren't even coming close to paying their fair share-- from bad to worst (The color-coding is simple. States in red voted for Trump; states in blue voted against Trump):
The takers are being subsidized by the makers in New York, New Jersey, Massachusetts, Connecticut, Illinois, Washington, etc. Bunch of welfare bums! They better hope that AOC and her colleagues agree to keep funding their sorry asses.
The findings are clear: New York’s residents and businesses-- which consistently send more revenue to the Federal government than any other state-- continue to contribute more in taxes than the state receives back in Federal spending. Key findings from this year’s report include:
• Preliminary analysis of 2017 data indicates that at -$35.6 billion, New York’s overall balance of payments remains the least favorable of any state in the nation. New York maintains its rank from 2016 (-$38.6 billion). • New York’s shortfall in 2017 is nearly as large as that of second-ranked New Jersey (-$21.3 billion) and third-ranked Massachusetts (-$16.1 billion) combined. Connecticut and Illinois round out the list of the states with the least favorable balances. • The state’s per capita balance of payments, -$1,792, continues to rank the state as one of the least favorable in the nation. New York’s negative per capita balance of payments is less than all but three other states. This is only a very slight improvement over 2016, when New York ranked the third to last with a per capita measurement of -$1,946. • New Yorkers’ per capita difference between payments made to the Federal government and spending grew slightly to $3,717 more than the national average in 2017 of a positive $1,925. • Since 2016, the US per capita balance of payment gap has grown by $202, reflecting an increase in Federal spending relative to tax revenue. New York has seen an improvement of $155. • While New York’s balance of payments has improved, it has not kept pace with the national average. New York’s shortfall compared to the national average continues to expand.
The Federal Tax Cuts and Jobs Acts of 2017 will have a significant impact on high-income earners in New York beginning in 2018, with changes that are expected to have flow-through effects on state tax burdens in New York. What remains less clear for the impact on New York-- and its balance of payment calculations-- is the potential for Federal spending cuts that may be enacted to absorb expected revenue losses and the extent to which those cuts would impact New York. States will be affected very differently depending on the nature of these changes. Even if the overall distribution of tax burdens and Federal spending does not change dramatically, understanding how the Federal Budget is distributed across the nation and how that distribution has changed over time offers critically important information when evaluating the fairness and appropriateness of proposed changes in fiscal policy.
by Noah Happy TAX DAY everybody! Or, if you like, how about Happy Oligarch Creation Day! Today is a religious holiday for supporters of the Greed Over People Trump/Ryan Tax Scam of 2017. It's a day where the stinking rich celebrate the biggest wealth redistribution of all time, a very efficient upward wealth redistribution right of of your pockets to theirs. Paul Ryan felt so comfy, smug, and happy about the cash his Tax Scam would bring him that he knew he could quit his job. This soak the poor greed fest didn't start with Trump and Ryan, though. They just put their feet down on the accelerator and floored it. That red line in the graph below that indicates what Ronnie Raygun wrought is going straight up by now; completely vertical. Reagan is smiling up from his hovel in Hell, saying "That's my boys!" Even before the Tax Scam, the richest 1% at the top had more wealth than the 99% at the bottom but that wasn't enough. They wanted it to be 99.9%. When they get it all, they'll start tearing at each other like a pack of rabid hyenas. Still waitin' for the trickle down? It ain't comin'. Be careful though. If you point that out, republican politicians and their media goons at FOX will accuse you of "class warfare" or worse. I've said for decades now that it's all about creating a pre-Magna Carta society of nothing but Lords and Serfs. As you file your taxes, always remember, as tonight's meme illustrates: Socialism for you is bad, but for those who rammed the Trump/Ryan Tax Scam down our throats, socialism is fine and dandy. Handouts for the rich aren't socialism but handouts for the rest of us are. The more welfare for the rich the merrier and Trump is the biggest, fattest Welfare Queen of all. Oh, and fuck you, too, Jamie Dimon.
Elizabeth Warren is like a great idea machine. And its not just because of the presidential campaign. She's always been like a great idea machine. That said, what a wonderful president or vice president she'd be! The new idea, which she fully explains at Medium-- is basically like an alternative minimum tax for corporations that make loads of money but have attorneys who have successfully figured out how to shield those profits from taxation. In her own words: "It’s almost Tax Day, and chances are you’ll be paying federal taxes this year. Maybe it’s a lot, maybe it’s a little. But you’ll be kicking in something for our military, for medical research, for highways and bridges -- the kinds of investments our federal government makes to defend our country and strengthen our economy. Well, guess what? You will be paying more for running the federal government than a bunch of big American corporations that made billions of dollars in profits in the last year." She points out that Amazon reported over $10 billion in profits and paid zero federal corporate income taxes and that Occidental Petroleum reported $4.1 billion in profits and paid the same amount-- zero. And they aren't the only ones. In fact Kathryn Kranhold, reporting for the Center for Public Integrity and NBC News yesterday, wrote in a piece entitled Twice as many companies paying zero taxes under Trump tax plan that "at least 60 companies reported that their 2018 federal tax rates amounted to effectively zero, or even less than zero, on income earned on U.S. operations"... more than twice as many as the year before. Besides Amazon and Occidental, other big recognizable names include Netflix, Chevron, Eli Lilly and Deere. The Institute on Taxation and Economic Policy (ITEP) reported that corporations were "able to zero out their federal income taxes on $79 billion in U.S. pretax income. Instead of paying $16.4 billion in taxes, as the new 21 percent corporate tax rate requires, these companies enjoyed a net corporate tax rebate of $4.3 billion, blowing a $20.7 billion hole in the federal budget last year." Thank the 2017 Republican tax act which "lowers the bar for the amount of tax avoidance it takes to get you down to zero."
Trump's tax cut bill slashed the corporate tax rate and eliminated and tightened certain deductions, while providing other new tax breaks to companies. The cut in the corporate tax rate alone will save corporations $1.35 trillion over the next 10 years, according to the Joint Committee on Taxation, which reports to the Senate and House finance and budget committees. The United States theoretically had one of the highest corporate tax rates in the world, though many firms had an effective rate much lower. Previous administrations, including President Barack Obama's, had sought to modestly cut the corporate tax rate to make it more competitive. After taking office in January 2017, Trump and the Republican-controlled Congress quickly enacted one of the most sweeping tax bills in decades-- an overhaul that is estimated to raise the federal deficit to $900 billion this year, and more than $1 trillion, starting in 2022, according to the Congressional Budget Office, a nonpartisan legislative agency. ...Studies show that many corporations rarely paid the 35 percent rate under the old tax code. Over the years, companies found many ways to cut their tax bills, from sheltering foreign earnings in low-tax countries and banking credits for money spent on research and development to deducting the expense of stock options for executives. ...[T]he new tax law has left most of the old tax breaks intact while cutting the rate by almost half, resulting in a "continued decline in our already low corporate revenues." Revenues from the corporate tax fell by 31 percent in 2018 to $204 billion from $297 billion. "This was a more precipitous decline than in any year of normal economic growth in U.S. history."
Warren's proposal to fight this is based on recognizing how companies report profits. "Companies follow established financial accounting rules to calculate the value of the profits they report to shareholders and the public. But they follow a different set of tax accounting rules to calculate the 'profits' they report to the IRS and pay corporate income taxes on. Because of relentless lobbying, our corporate income tax rules are filled with so many loopholes and exemptions and deductions that even companies that tell shareholders they have made more than a billion dollars in profits can end up paying no corporate income taxes. This is not sustainable. From 1988 to 2012, the effective tax rate for American corporations-- the rate they actually pay relative to their profits-- went down significantly. In a recent eight-year period, 25 big companies alone claimed $286 billion in tax breaks. And that was before the Republican tax bill slashed the corporate tax rate and handed hundreds of billions of dollars more to corporations. That’s why I’m proposing a big new idea: the Real Corporate Profits Tax. This new tax applies to the profits very large American companies report to their investors-- with no loopholes or exemptions. It will make our biggest and most profitable corporations pay more and ensure that none of them can ever make billions and pay zero taxes again."
This new tax only applies to companies that report more than $100 million in profits-- about the 1200 most profitable firms in the country last year. That first $100 million is left alone, but for every dollar of profit above $100 million, the corporation will pay a 7% tax. Any company profitable enough to hit the Real Corporate Profits Tax will pay that tax in addition to whatever its liability might be under our current corporate tax rules. That means Amazon would pay $698 million in taxes instead of paying zero. And Occidental Petroleum would pay $280 million in taxes instead of paying zero. It’s a small new tax-- but because our richest, biggest corporations are so skilled at minimizing their taxes under our current system, that small new tax will generate big new revenue. According to an estimate from economists Emmanuel Saez and Gabriel Zucman at the University of California-Berkeley, the tax will bring in $1 trillion in revenue over the next ten years -- just from the massive profits of the thousand or so richest companies in the country. ...The Real Corporate Profits Tax takes advantage of market incentives to ensure that profitable companies continue to pay their fair share. Corporations will always want to report as low of a profit figure as possible to the IRS. But they want to report as high of a profit figure as possible to investors to drive up the company’s stock price, which in turn drives up bonuses and other compensation for executives. Companies will be hesitant to under-report their profits to investors -- which means they won’t be able to game the tax system as much as they can now. The Real Corporate Profits Tax also helps level the playing field for small businesses trying to compete with the giants. Studies show that the very largest companies pay a lower effective corporate tax rate than smaller companies. That’s because the largest companies have more money to lobby for special tax loopholes and to hire hordes of lawyers and accountants to exploit every single loophole we already have. Big companies can also shift profits to offshore tax havens in a way small businesses can’t. By applying the Real Corporate Profits Tax only to the largest companies-- and taxing their foreign profits just like their US profits-- this new tax will help neutralize these financial advantages and give smaller businesses a fighting chance.
Trump's Wealth Tax Plan Is A Billion Times More Radical Than Ocasio's Marginal Tax Rate Proposal
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As I've been explaining, Alexandria Ocasio-Cortez's 60-70% marginal tax rate on all annual income over $10,000,000 would struggle be be called moderate. It's actually quite conservative. How many people have annual incomes of over $10,000,000? And those very few people who do, would only have to pay the 60-70% rate on the income over $10,000,000. That threshold is absurd and should be down around $800,000 (with perhaps a 40% rate) then rise to a million dollars with a 50% rate and climb gradually (rates increasing) towards $5 million will the top rate-- 80% kicks in. That's a progressive tax plan. But there's something far more radical than the Howie Klein Tax Plan-- a Federal Wealth Tax, which I haven't seen any member of Congress propose... yet. This week the Institute on Taxation and Economic Policy made the case for one-- making the point that "a federal wealth tax on the richest 0.1 percent of Americans is a viable approach for Congress to raise revenue and is one of the few approaches that could truly address rising inequality." The banksters would be carrying AOC around on their shoulder showering her with rose petals if her plan protected them from this one. This plan would only impact taxpayers with networths of about $32.2 million. There would be an annual 1% tax on these peoples' wealth over the $32.2 million mark and it would raise around $1.3 trillion over a decade. In other words, if Joe Blow sold enough blow to have accumulated a net worth of $30 million, he would pay zero. If he had accumulated $33 million, he would pay $8,000.
Why the United States Needs a Federal Wealth Tax The goals of raising revenue and addressing inequality will be difficult to achieve if federal tax policy continues to focus on taxing income almost exclusively. One reason is that wealth inequality is much greater than income inequality. The 1 percent of Americans with the highest incomes receive about a fifth of the total income in the United States. In contrast, the top 1 percent of wealth holders in the nation own 42 percent of the nation’s wealth... Likewise, the racial wealth gap is far greater than the racial income gap in the United States. According to Census data, median income in 2017 was about $68,000 for white households compared to $50,000 for Latinx households and about $40,000 for black households. The racial wealth gap is far more dramatic because it is a result of generations of compounded inequality. A recent report from Prosperity Now finds that in 2016 median wealth in the nation was $140,500 for white households but just $3,400 for black households and $6,300 for Latinx households. Wealth inequality has grown dramatically in the past several decades... The share of wealth held by the very wealthiest 0.1 percent-- a group of just 160,700 families who all had net worth exceeding $20 million in 2012-- tripled from 7 percent in 1978 to 22 percent in 2012. By 2012, the wealthiest 0.1 percent held nearly as much wealth as the bottom 90 percent, who owned 22.8 percent of the total. ...Much of the economic income flowing to the very wealthy each year is entirely exempt from the personal income tax [unrealized capital gains]. The very thing that is driving inequality-- the rapid appreciation of assets held by the wealthy-- is itself nearly untouched by federal taxes. One solution is for the federal government to tax that wealth directly. The following explains how a mere 1 percent annual federal tax on the wealth of the top 0.1 percent of households would work assuming it takes effect in 2020. ...It is unlikely that the wealth tax would change the behavior of wealthy people in any consequential way. In theory, a tax on wealth could influence a taxpayer’s decisions about how much income to save or consume. Such a tax might reduce the benefit of saving and therefore increase consumption, or it might increase saving if the taxpayer needs to save more to achieve a set target for savings. However, this particular proposal is unlikely to have any significant effects either way because most of the taxpayers affected have so much wealth that there are few practical ways to consume it to avoid paying the tax. Even assuming that the wealth tax does not change taxpayer behavior, it could affect the revenue collected by other types of taxes. But this analysis does not speculate on such effects because they would be very difficult to determine and not necessarily significant. For example, if most of these taxpayers pay the wealth tax out of income that otherwise would have been invested in income-generating assets, then the affected taxpayers would have less dividends, capital gains, interest and other capital income in the future and thus pay less in income taxes. On the other hand, the money collected by the federal government through a wealth tax would be spent by the government somehow, which means it would become income to other people who would pay taxes on it. Also, in the case of a taxpayer whose net worth is great enough to be subject to the wealth tax but whose income in a particular year is low or negative, assets might be liquidated in order to pay the wealth tax (for example, corporate stocks might be sold) which would generate capital gains that would be taxed. In other words, a federal wealth tax could have both negative and positive effects on other types of federal taxes, so it is not clear what the net impact would be. It seems reasonable to assume that effects on other types of federal taxes will not significantly reduce the overall revenue yield of the wealth tax described in this analysis.
Fun fact: In 1999, Señor Trumpanzee proposed a one time 14.25% wealth tax on the net worth of individuals and trusts of $10 million or more. At the time, Señor T asserted that this would generate $5.7 trillion in new taxes, which could be used to eliminate the national debt, although not at the rate that he's been running it up since Putin installed him in the White House, of course. Currently several countries have wealth taxes, including France, Spain, Norway, Italy, Argentina, Holland and Switzerland.
Trumpanzee (version 1999): "No one has put forward a plan to make this country entirely debt free as we enter the next millenium. The plan I am proposing today does not involve smoke and mirrors, phony numbers, financial gimmicks, or the usual economic chicanery you usually find in Disneyland-on-the-Potomac... By my calculations, 1 percent of Americans, who control 90 percent of the wealth in this country, would be affected by my plan. The other 99 percent of the people would get deep reductions in their federal income taxes... Personally this plan would cost me hundreds of millions of dollars, but in all honesty, it's worth it. It is a win-win for the American people, an idea no conventional politician would have the guts to put forward."
After I had written this this morning, I read in the Washington Post that Elizabeth Warren is going to propose an annual wealth tax on Americans with more than $50 million in assets. She's being advised by Emmanuel Saez and Gabriel Zucman, the two economists at UC Berkeley, on whose work the Institute on Taxation and Economic Policy report is based. Jeff Stein and Chris Inhraham wrote that they've advised Warren to levy a 2 percent wealth tax on Americans with assets above $50 million, as well as a 3 percent wealth tax on those who have more than $1 billion.
The wealth tax would raise $2.75 trillion over a ten-year period from about 75,000 families, or less than 0.1 percent of U.S. households, Saez said. Warren’s campaign declined to comment on details of the plan.
“The Warren wealth tax is pretty big. We think it could have a significant affect on wealth concentration in the long run,” Saez said in an interview. “This is a very interesting development with deep root causes: the fact inequality has been increasing so much, particularly in wealth, and the feeling our current tax system doesn’t do a very good job taxing the very richest people.” Warren’s proposal includes at least three new mechanisms to combat tax evasion, according to a person familiar with the plan. Those are a significant increase in funding for the Internal Revenue Service; a mandatory audit rate requiring a certain number of people who pay the wealth tax to be subject to an audit every year; and a one-time tax penalty for those who have more than $50 million and try to renounce their U.S. citizenship.
Mark DeSaulnier is one of California's most progressive members of Congress. A member of the Education and Labor Committee and a senior member on the Subcommittee on Labor Protections, he told me this afternoon that "America has an extreme inequality problem. In recent years, inequality has reached pre-Great Depression levels. We must take bold action, like taxing big wealth, to right the ship and ensure that the rich pay their fair share. I’ve supported wealth tax legislation before and have included it as part of our Future of Work, Wages, and Labor initiative as a necessary step to addressing inequality and strengthening our economy."
And the last word goes to... Professor Stephanie Kelton, America's greatest contemporary economist, and the reason why enrolling in Stony Brook University is an especially good idea!
Is A 70% Tax Rate On Incomes Beyond A Million Dollars Enough? Why Not Back To 90 Where It Used To Be Before 1963?
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The weekend Paul Krugman was on fire after Republicans cluelessly went on the warpath against Alexandria Cortez again, this time because of her 60 Minutes tax hike for the rich proposal. His NY Times column, The Economics of Soaking the Rich, started by asking "What does Alexandria Ocasio-Cortez know about tax policy?" and then answering... "A lot."
I have no idea how well Alexandria Ocasio-Cortez will perform as a member of Congress. But her election is already serving a valuable purpose. You see, the mere thought of having a young, articulate, telegenic nonwhite woman serve is driving many on the right mad-- and in their madness they’re inadvertently revealing their true selves. Some of the revelations are cultural: The hysteria over a video of AOC dancing in college says volumes, not about her, but about the hysterics. But in some ways the more important revelations are intellectual: The right’s denunciation of AOC’s “insane” policy ideas serves as a very good reminder of who is actually insane. The controversy of the moment involves AOC’s advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like … um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance (although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.) And it’s a policy nobody has every implemented, aside from … the United States, for 35 years after World War II-- including the most successful period of economic growth in our history. To be more specific, Diamond, in work with Emmanuel Saez-- one of our leading experts on inequality-- estimated the optimal top tax rate to be 73 percent. Some put it higher: Christina Romer, top macroeconomist and former head of President Obama’s Council of Economic Advisers, estimates it at more than 80 percent. Where do these numbers come from? Underlying the Diamond-Saez analysis are two propositions: Diminishing marginal utility and competitive markets. Diminishing marginal utility is the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes. Give a family with an annual income of $20,000 an extra $1,000 and it will make a big difference to their lives. Give a guy who makes $1 million an extra thousand and he’ll barely notice it. What this implies for economic policy is that we shouldn’t care what a policy does to the incomes of the very rich. A policy that makes the rich a bit poorer will affect only a handful of people, and will barely affect their life satisfaction, since they will still be able to buy whatever they want. So why not tax them at 100 percent? The answer is that this would eliminate any incentive to do whatever it is they do to earn that much money, which would hurt the economy. In other words, tax policy toward the rich should have nothing to do with the interests of the rich, per se, but should only be concerned with how incentive effects change the behavior of the rich, and how this affects the rest of the population. But here’s where competitive markets come in. In a perfectly competitive economy, with no monopoly power or other distortions-- which is the kind of economy conservatives want us to believe we have-- everyone gets paid his or her marginal product. That is, if you get paid $1000 an hour, it’s because each extra hour you work adds $1000 worth to the economy’s output.
In that case, however, why do we care how hard the rich work? If a rich man works an extra hour, adding $1000 to the economy, but gets paid $1000 for his efforts, the combined income of everyone else doesn’t change, does it? Ah, but it does-- because he pays taxes on that extra $1000. So the social benefit from getting high-income individuals to work a bit harder is the tax revenue generated by that extra effort-- and conversely the cost of their working less is the reduction in the taxes they pay. Or to put it a bit more succinctly, when taxing the rich, all we should care about is how much revenue we raise. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue. And that’s something we can estimate, given evidence on how responsive the pre-tax income of the wealthy actually is to tax rates. As I said, Diamond and Saez put the optimal rate at 73 percent, Romer at over 80 percent-- which is consistent with what AOC said. An aside: What if we take into account the reality that markets aren’t perfectly competitive, that there’s a lot of monopoly power out there? The answer is that this almost surely makes the case for even higher tax rates, since high-income people presumably get a lot of those monopoly rents. So AOC, far from showing her craziness, is fully in line with serious economic research. (I hear that she’s been talking to some very good economists.) Her critics, on the other hand, do indeed have crazy policy ideas-- and tax policy is at the heart of the crazy. You see, Republicans almost universally advocate low taxes on the wealthy, based on the claim that tax cuts at the top will have huge beneficial effects on the economy. This claim rests on research by … well, nobody. There isn’t any body of serious work supporting G.O.P. tax ideas, because the evidence is overwhelmingly against those ideas. Look at the history of top marginal income tax rates (left) versus growth in real GDP per capita (right, measured over 10 years, to smooth out short-run fluctuations.):
What we see is that America used to have very high tax rates on the rich-- higher even than those AOC is proposing-- and did just fine. Since then tax rates have come way down, and if anything the economy has done less well. Why do Republicans adhere to a tax theory that has no support from nonpartisan economists and is refuted by all available data? Well, ask who benefits from low taxes on the rich, and it’s obvious. And because the party’s coffers demand adherence to nonsense economics, the party prefers “economists” who are obvious frauds and can’t even fake their numbers effectively. Which brings me back to AOC, and the constant effort to portray her as flaky and ignorant. Well, on the tax issue she’s just saying what good economists say; and she definitely knows more economics than almost everyone in the G.O.P. caucus, not least because she doesn’t “know” things that aren’t true.
And Krugman's not alone here. Eric Levitz called her 70% top tax rate both moderate and evidence-based policy. He began by reminding his readers that when Reagan took office, affluent Americans paid 70% on all income above $216,000. "In the decades since," he wrote, "our country’s highest earners have seen their annual pay skyrocket, while the median household’s has barely budged. As a result, America’s 160,000 richest families now lay claim to 90% of its wealth. Studies suggest that this kind of inequality erodes social trust, abets plutocracy, and depresses economic growth. Politicians from both major parties routinely suggest that they see inequality as a major problem.
The case for trickle-down economics-- which is to say, the idea that high top-marginal tax rates hurt economic growth-- is much weaker now than it was in 1980. The U.S. saw faster GDP and productivity growth in the decades before Reagan’s tax cuts, than it did in the decades after. And during that latter era, the American economy grew at roughly the same rate as peer nations with higher top tax rates. A separate premise of the trickle-down theory held that raising taxes on the rich eventually costs the government revenue by discouraging work. The latest economic research suggests that this is true-- but only if you raise the top tax rate higher than (approximately) 70 percent. Meanwhile, French economist Thomas Piketty has demonstrated that high tax rates reduce pre-tax inequality-- ostensibly, by discouraging rent-seeking among top executives, whose compensation is often determined less by productivity than a combination of social mores and their own audacity: CEOs are less likely to extract an extra $5 million from their companies (instead of allowing their firms to invest that sum in other purposes) if they know that Uncle Sam will collect 70 percent of their bonus. Thus, there is now some reason to believe that confiscatory top rates can reduce wage inequality, while producing some gains in economic efficiency. All of which is to say: In 1980, taxing incomes above $216,000 (or $658,213 in today’s dollars) at 70 percent was considered a moderate, mainstream idea, even though wage inequality was much less severe, and supply-side economics had yet to be discredited. ...There is nothing substantively extreme about Ocasio-Cortez’s proposal. It is true that, when the top marginal rate was last at 70 percent, there were more loopholes in the tax code enabling the affluent to sneak out of that top bracket. But this does not mean that Ocasio-Cortez’s tax policy would actually be more radical than Jimmy Carter’s was-- after all, the congresswoman’s 70 percent rate kicks in at a much higher threshold, exclusively targeting America’s super-rich (who weren’t nearly as well off in the 1970s as they are now). One can raise a variety of technocratic quibbles with Ocasio-Cortez’s plan (raising taxes on capital gains might be a more effective way of soaking the super-rich; a confiscatory top marginal rate might prove impotent absent a global war on tax havens). But it would not be extreme in its redistributive implications, relative to our country’s past tax practices, or to other nations’ current ones. And a significant number of highly respected economists have endorsed top tax rates roughly as high as the one floated by the congresswoman, while Piketty has advocated for an 80 percent top rate. Meanwhile, in terms of public opinion, Ocasio-Cortez’s view on tax policy for the rich is much more mainstream than Susan Collins’s. Last year, a Data For Progress and YouGov Blue poll asked voters if they would support a 90 percent tax rate on all income above $1 million. Respondents opposed the idea by (just) a two-point margin. In Pew Research polling taken shortly before Congress passed the Trump tax cuts, voters opposed cutting taxes on households that earn more than $250,000 by a 48-point margin.
The notion that confiscatory tax rates on super-high incomes are more popular than the Republican Party’s alternative is buttressed by other data. For example, when Berkley political scientists David Broockman and Douglas Ahler offered voters seven different tax-policy options (ranging from extremely conservative to extremely progressive) in 2014, they found that the furthest left option-- establishing a maximum annual income of $1 million (by taxing all income above that at 100 percent)-- was the third-most-common choice, boasting four times more support than the Republican Party’s 2012 platform on taxation. And yet, the fact that Susan Collins voted to sharply cut taxes on the rich in 2017 has not led nonpartisan news outlets to describe her as a far-right extremist. In fact, just yesterday, the New York Times referred to her as one of the Senate’s “most moderate members.” (Which is enough to make one wonder whether the overrepresentation of the affluent among national reporters-- and the extremely rich, among owners of national media companies-- might bias our political discourse in the upper class’s favor.)
Wonder, wonder, wonder... I say yes, it does! And Susan Collins is a damn fool in any case.
Kushner-In-Law Is A Big-Time Tax Cheat— Surprised?— So What Should We Do About It?
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NY Times reporters Jesse Drucker and Emily Flitter are definitely off the Trumpanzee Christmas card list. They did a fascinating expose on how real estate developers— like Kushner (and, no doubt, his crooked father-in-law)— avoid paying taxes. “Over the past decade, Jared Kushner’s family company has spent billions of dollars buying real estate. His personal stock investments have soared. His net worth has quintupled to almost $324 million. And yet, for several years running, Mr. Kushner— President Trump’s son-in-law and a senior White House adviser— appears to have paid almost no federal income taxes.
His low tax bills are the result of a common tax-minimizing maneuver that, year after year, generated millions of dollars in losses for Mr. Kushner, according to the documents. But the losses were only on paper— Mr. Kushner and his company did not appear to actually lose any money. The losses were driven by depreciation, a tax benefit that lets real estate investors deduct a portion of the cost of their buildings from their taxable income every year. In 2015, for example, Mr. Kushner took home $1.7 million in salary and investment gains. But those earnings were swamped by $8.3 million of losses, largely because of “significant depreciation” that Mr. Kushner and his company took on their real estate… [T]he allowance often represents a lucrative giveaway to developers like Mr. Trump and Mr. Kushner. The law assumes that buildings’ values decline every year when, in reality, they often gain value. Its enormous flexibility allows real estate investors to determine their own tax bills. The White House last year championed a sweeping revision of the nation’s tax laws that expanded many of the benefits enjoyed by real estate investors, allowing them to reap even larger deductions. “The Trump administration was in a position to clean up the tax code and promised to get rid of some of the complexity that certain taxpayers use to their advantage,” said Victor Fleischer, a tax law professor at the University of California, Irvine. “Instead, they doubled down on those provisions, particularly the ones they have familiarity with to benefit themselves.” …Kushner’s father appears to have benefited from the same tax deductions, the documents indicate. The experts interviewed by The Times said Charles Kushner most likely avoided paying federal income taxes from at least 2012 to 2016. The tax code affords real estate investors great leeway in how they calculate their depreciation — flexibility that often is used to inflate their annual deductions. Among the tactics used by many developers: Their tax advisers prepare studies arguing that much of a property’s value is attributable to things like appliances and parking lots, which under the law can be depreciated more quickly than the building. Such strategies are almost never audited, tax professionals say. And the new tax law provides even more opportunities for property investors to take larger deductions. Developers might have to pay capital gains taxes if they sell their properties. But the Kushners, like others in the real estate business, often avoid that tax, too, by using the proceeds of sales to buy more properties within a certain time window. At least in part because of that perk, the Kushners’ property sales in the period covered by the documents— totaling about $2.3 billion, according to Real Capital Analytics, a research firm— generated little or no taxable income for Mr. Kushner. Last year’s tax legislation eliminated that benefit for all industries but one: real estate.
Because the super-wealthy contribute to the careers of crooked politicians, these kinds of benefits are written into tax laws. These are benefits unavailable to working families of course. When Bernie talks about these wealthy people paying their fair share, this is precisely the kind of thing he’s talking about— and why elites, even inside the Democratic Party disparage him.
Republicans At Each Other's Throats Over Tax Policy Again
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Earlier today, we looked at how badly Republicans are expected to do in November. Don't fret; they've earned it. And the sense of likely doom is already starting to spill over into their congressional policy agenda. Yesterday, writing for Politico Nancy Cook and Bernie Becker reported that White House and top congressional Republicans who want to push for a House vote on a second round of tax cuts ahead of the midterms in hopes of bolstering their economic pitch to voters are running into opposition from endangered-- and freaking out-- Republican incumbents in swing districts. In Orange County, for example-- where Republicans are already likely to lose 3 or 4 red seats-- anything that brings up toxic GOP tax policies, is deadly for them at this point.
A dozen House Republicans, all but one of them from the high-tax states of California, New Jersey and New York, voted against the tax law in December because it capped state and local tax deductions, which they said would lead to tax increases on too many of their constituents. Some of those GOP lawmakers have openly said they would prefer to leave the tax issue alone as Congress also grapples with how to fund the government and the House potentially votes on health care measures that might be more politically beneficial to vulnerable incumbents. “If we were to pass that here in the House, it would be an exercise in futility, because it could never pass in the Senate,” Rep. Leonard Lance of New Jersey, who opposed the first bill, said Friday on CNBC. Top House leaders will unveil the second tax overhaul bill this week. Drafted by House Ways and Means Chairman Kevin Brady (R-TX), the bill proposes to make permanent individual tax rate cuts from the Republicans’ first tax bill, while introducing new measures intended to help families save money, especially for retirement, and to spur innovation for businesses.
Sure, why should Brady case? His backward R+28 district north of Houston is 68% white, has no cities and gave Trump a massive 72.7% to 23.9% win over Hillary. If cavemen still lived in America, Kevin Brady's district is where they would be concentrated. Brady, one of Congress' most corrupt members, raised $4,233,536 this cycle against a token Democratic opponent, Steven David, who has raised $25,044. Brady told reporters that regardless of what his vulnerable colleagues are freaking out over, "it's full steam ahead."
Democrats have criticized the amount of stock buybacks that have followed the tax law and maintain it’s done little to help the average worker, and are likely to pound those themes again when discussing the second bill. Democrats might have run from that fight in the past, given how often Republicans label them tax hikers. But these days, they are more than happy to relitigate last year’s tax law, which they have insisted from the start would heap savings on to corporations and the wealthy while leaving behind the middle-class. The more even ground on taxes shows up in polling, too. The new tax law has not been the political plus that many Republicans expected as they try to hold on to the House, only becoming less popular since the beginning of the year.
Democrats and-- at least at election time-- some Republicans, are especially concerned because GOP leaders have made it clear that they hope to pay for these tax cuts by cutting back on crucial and popular programs like Medicare and Social Security and have all but given-up on the big infrastructure spending Trump promised when he campaigned in 2016. Jared Golden, the progressive Democrat and current state House majority whip now running for the Maine congressional seat held by Trump enabler Bruce Poliquin, told us that he's "always supported tax relief targeting the middle class and our small businesses in Maine. That is were my focus will be in the US House of Representatives. Unfortunately, my opponent voted to give millionaires and big corporations a windfall in the Trump tax plan. Now he's proposed legislation that will cut food stamps for struggling families in Maine as a way to pay for his misplaced priorities. That's going over like a lead balloon so I can understand why some of the sensible Republicans are worried about a round 2 of tax give-aways to the wealthy right before the election."
Randy Bryce, the much-celebrated Wisconsin everyman, @IronStache, on the cusp of replacing Paul Ryan in Congress, is eager to move forward with a massive infrastructure bill to bring good-paying jobs back to his region and the rest of the country. He's also vowed to sign on to the Medicare-For-All legislation on his first day in the House. This morning he told us that "at this point Republicans feel the water at neck level. They know the ship is sinking. It’s obvious to everyone that control of the House will be taken back by Democrats this November. It appears that what’s going on now is a final show of gratitude to reward the wealthy Republican donors that have helped them get elected. Some GOP Congressmen admitted that they needed to pass the initial tax scam or their donors were going to cut them off. The American public was wise to it and saw right through it for being the heist that it was. We see through this as well. No amount of contributions are going to save them from what’s going to take place this November."
A couple of the best Texas progressives running for Congress this cycle are Mike Siegel (TX-10, west of Houston) and Dayna Steele (TX-36, east of Houston). Mike told me that he's "yet to meet a single working Texan who prefers the idea of 'tax cuts' to essential programs like health care and Social Security. The Republicans are selling a fiction-- essentially, a new version of trickle-down economics. They want us to believe that helping corporations will eventually help American families. But the people here don’t have time to wait. They need support now." Dayna was quick to note that "You can live large every day but eventually the bottom will fall out. I learned this from watching countless "rock stars" crash and burn in the music business. The initial tax cuts, and now these new tax cuts, will be good for many in the short term. However, for success, you have to plan for the long term and it appears the Republicans are grifting as much as they can from the system before they take leave..."
How Badly Will The Republican Tax Scam Hurt The GOP In The Midterms?
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In Pennsylvania an ungerrymandered congressional map spelled doom and gloom for the GOP. That's why, at least in part, Charlie Dent, Ryan Costello, Bill Shuster and Pat Meehan all announced early retirements and why Brian Fitzpatrick, Rothfus and Mike Kelly still may (or wish they did). The PVIs of these districts changed significantly enough to drive these Republicans out of office. Costello's old district went from an R+2 to a D+2. Meehan's went from a R+1 to a D+13. Dent's went from an R+4 to a D+1. Fitzpatrick's went from R+2 to R+1. Scott Perry's went from an R+11 to an R+6. And Rothfus' went from an R+11 to an R+3. Yesterday Muhlenberg College and Morning Call released a new poll of Pennsylvania voters that indicates as choppy seas for Republicans as Republican incumbents suspected. Trump's numbers are in the toilet; only 39% of respondents approve of the way he is doing his job. And only 12% approve off the way the Republican-controlled Congress it doing its job. At the top of the state's ticket-- Governor Tom Wolf and Senator Bob Casey are both way ahead of all their potential GOP opponents. Asked "If the elections for Congress were being held today, which party's candidate would you vote for?" The Democrats led 47% to 38%. At a Lincoln Day Republican dinner last weekend, Wisconsin Governor Scott Walker told the crowd that "The wind’s not at our back. It’s not at our side. It is firmly in our face. This election is going to be tougher than any one I have been involved with, including the recall... My number-one concern for almost a year has been complacency, not just of [GOP] voters but even of activists" And, back in Pennsylvania, when the pollsters asked "Do you approve or disapprove of the tax reform law that was passed by Congress and signed by the President in December," only 39% approved and 46% disapproved. Those results very much fit with the results of a new national Gallup poll released this week. 39% approve of the Trump-GOP tax law and 52% disapproved.
More Americans realize the tax bill was a scam, "showering the wealthy with deficit-financed tax breaks, while leaving workers and the American middle class behind."
It makes sense that Americans continue to hold a negative view of the bill. For one, the overwhelming majority of the benefits are going to the already wealthy. In 2018, the richest 1 percent will see a tax break of more than $50,000, or almost $1,000 per week. The poorest 20 percent will see a mere $60 spread out over the course of the entire year, slightly more than $1 per week.
Tax hikes will arrive for millions of Americans in the coming years, with some kicking in this year. For example, homeowners in Los Angeles will see a 30-year mortgage cost up to $76,000 more, thanks to new changes in the tax bill. Republicans dismissed the concerns of critics, who warned their bill would primarily benefit corporations, not average Americans. As predicted, rich corporations are spending their Congressional kickbacks to enrich Wall Street through record-setting dividend payments and stock buybacks, not investing in workers. According to USA Today, “it is the massive spending on dividends and share buybacks that critics pounce on, as this use of cash benefits the wealthy and company shareholders, rather than middle-class workers.” After all, the wealthiest 10 percent of households own an astounding 84 percent of all stocks owned by Americans, according to a New York University economist. USA Today further reports that less than 10 percent of Fortune 500 companies gave bonuses to workers as a result of the tax bill. And the majority of workers say they have not seen any increase in their own paychecks. Speaker Paul Ryan once boasted about a secretary who will receive $1.50 extra per week. Six quarters is hardly the change Republicans promised. Republicans claimed the bill would be a boon to small business. Instead, the unfair advantage given to wealthy corporations drew a quick rebuke from small business owners, who soured on a bill heaping even more advantages on the richest Americans, people who already have the most resources. Claims that the deficit-financed boondoggle-- promoted as “rocket fuel” for the economy-- would lead to an abundance of new jobs and increasing wages for workers didn’t pan out either. The most recent jobs report from the Labor Department shows an economy performing largely as it did in years past. The economy continues to grow like it did under President Obama, except America is now saddled with more debt. Thanks to a recent report, Americans now know 80 percent of gains from the tax bill are going offshore to foreign investors. In other words, the United States will borrow money to pay for an unpopular tax bill so that foreign investors can receive four out of every five dollars of economic gain. On top of that, there are provisions in the bill designed to incentivize corporations to outsource jobs and hide profits overseas to avoid paying their fair share of taxes. The unpopularity of the tax bill isn’t only about its skewed rewards system. Massive changes to health care policy, which is leading to dramatic health care cost increases, is also an issue for the public. In some parts of the country, health care premiums are estimated to increase by up to 94 percent in the next three years, mainly due to Republican-backed provisions in the tax bill. An estimated 13 million Americans will lose health insurance in the coming years. And of course, the corporate kickbacks doled out are not free; Republicans in Congress decided to pay for the tax bill through a massive increase to the national deficit. It didn’t matter that Republicans like Ryan, who so loudly backed the bill, once called the nation’s debt and deficit the defining issue of the day. (“The facts are very, very clear,” he said in 2011, “the United States is headed towards a debt crisis.”) Now, the Republicans’ tax scam is a major component in the nation’s additional $2.4 trillion deficit. The fiscal recklessness of the tax bill even threatens America’s credit rating. The tax scam is so bad even Republicans struggle, and fail, when campaigning on its merits. In a recent Pennsylvania congressional special election, the bill was so unpopular Republicans stopped talking about it, pivoting instead to Trump-like race-baiting, anti-immigrant advertising. (In a district Trump won by 20 points, the Democratic challenger won.)
At the conservative WashingtonExaminer.com, right-wing reporter David Drucker wrote that "Trump is undermining voter support for the Tax Cuts and Jobs Act with erratic messaging after it was gaining popularity, alarming Republicans counting on the law to save the party’s vulnerable House majority. Senior Republicans are declining to publicly finger Trump for the heralded tax overhaul’s sagging approval ratings. Views of the law steadily climbed during the first two months of the year on the strength of a unified push from the White House and Capitol Hill ahead of the midterm. Privately, Republicans complain that the president’s sudden shift to tariffs, with threats of trade wars, distracted from the positive impacts of $1.3 trillion in tax cuts and allowed Democrats to regain the upper hand. Concluding that Trump is unreliable, Republicans say it’s their responsibility to turn public opinion around."
In a fresh NBC News/Wall Street Journalsurvey conducted jointly by Democratic and Republican pollsters, the law was underwater: 27 percent approved, 36 percent disapproved. Those results track with private data Republicans have monitored, sparking anxiety about their chances of surviving a tough November election with their House majority intact. "Republicans have a lot of work in front of them to make sure people understand the benefits of the tax bill, and nobody is going to be driving this but them. They need to understand that it’s not just-- we’ve done this, let’s go on to the next thing,” said David Winston, a GOP pollster who advises House and Senate Republicans. “The signature achievement for Congressional Republicans for this Congress will have been the tax bill-- no matter what else they do,” he added.
Senator Bob Corker (R-TN), who is retiring rather than continue working with Trump said he wouldn't campaign against the Democrat running for his seat in November. And yesterday he described the White House as being the center of "constant chaos," blasting Trump's spending bill as "grotesque, adding ominously, "This president, obviously, is not a president who’s interested in fiscal issues. Is this president a president who cares about the fiscal health of our nation? No. No." Voters-- even Republican voters-- aren't going to be happy about that.
After Colluding With Trump, Republicans In Congress Deserve Everything The Public Gives Them
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Young people don’t seem to like Trump much. A new poll from the Associated Press shows that Americans 34 and under understand that he’s racist, dishonest and “mentally unfit” for office. 33% of people between 15 and 34 approve of Trump’s job performance, significantly lower than the whole population. This younger cohort, which rarely votes— especially not in midterms— claims they will vote in greater numbers in November. But the GOP has other problems than Trump’s sky-high disapprove ratings among young people. Almost no one feels any benefits from that cockamamie tax cut the GOP is counting on to keep them in power.
More than three months after the passage of the GOP’s tax-cut law, new surveys suggest that many people don’t think they are getting bigger paychecks, which could cut into support for Republicans in this fall’s midterm elections. A CNBC poll this week stated that just 32 percent of working adults reported having more take-home pay due to the new law, a problem for Republicans hoping to run on the measure and the health of the economy in November. …Tax experts said there are a number of reasons why people might not be reporting seeing an increase in their take-home pay. One reason is that many taxpayers won’t end up receiving a particularly large tax cut, especially if the benefit is spread out over the course of the year. For example, the Urban-Brookings Tax Policy Center has estimated that people with incomes between $48,600 and $86,100 will, on average, receive a tax cut of $930 for 2018, which is around $35 per pay period if divided equally among 26 pay periods. The group said that people with income of below $25,000 will, on average, get a tax cut of only $60 over the course of the whole year. “The tax bill just doesn’t provide much benefit to most people,” said Vanessa Williamson, a fellow in governance studies at the Brookings Institution. The CNBC survey seemed to confirm that result. It showed that people with higher incomes were more likely to notice an increase in take-home pay than low-income individuals— an outcome that Democrats could use against the GOP in their midterm campaign. …Only a small subset of adults surveyed by CNBC said that they saw their paychecks go up and it was significantly beneficial. Of those surveyed in the CNBC poll, only 60 percent were employed to begin with. Among those, only 32 percent said that they noticed their income go up as a result of tax changes. Breaking that group down further, just 38 percent thought the amount their wages went up helped a fair amount or a great deal. That means only 12 percent of employed adults thought the tax plan helped them in a significant way, which amounts to only 7.2 percent of the overall sample. The poll comes after employers were supposed to have adopted guidance from the IRS that adjusted the amounts withheld from people’s paychecks for federal taxes in light of the new law. The withholding guidance took into account three key parts of the tax law: the lower rates, larger standard deduction and repeal of personal exemptions. Treasury Secretary Steven Mnuchin said that 90 percent of wage earners would see more take-home pay due to the guidance. Conservatives said that GOP lawmakers should do more to highlight the tax law’s benefits. “The amplification needs to go up. If a congressman is only talking about it once a week, he needs to talk about it twice a week,” said Ryan Ellis, senior tax adviser for the Family Business Coalition. The Republican National Committee is planning a "week of action" during the week of the April 17 filing deadline to tout the benefits of the new law, according to a spokeswoman.
Also bear in mind that if businesses were seeing Trumpism as a winning formula, they wouldn’t be rushing to, for example, distance themselves from Regime avatars, like Laura Ingraham. Yesterday, CBS News reported that 11 advertisers have joined the boycott against her Fox show. She announced a “sudden” vacation while The Atlantis, Paradise Island resort; Office Depot, Jenny Craig, Hulu, Nutrish, TripAdvisor, Expedia, Wayfair, StitchFix, Nestlé and Johnson & Johnson have all pulled their ads from her show, responding to a flare up between Ingraham and the Parkland survivors. On Wedmnesday she “posted a mocking tweet of high school senior David Hogg, taunting him for not getting into some colleges he had applied to. In response, Hogg tweeted a list of advertisers on Ingraham's show and called on followers to contact them.”
