Posted tagged ‘tax cuts’

Master Magician And King Of Deception

October 29, 2018

America is being treated to someone possibly even greater, more outlandish, and more successful than the man who wrote the book, P T Barnum.  The media has falsely accused President Trump of being “over his head”, sorely lacking in understanding of economics and foreign policy, and too spontaneous to put forth a comprehensive set of national policies.  Hmmm, I wonder what the record shows?

  • Tariffs – President Trump declared by executive order that US Steel and Aluminum Industries were core to the US’ national security.  The White House then laid hefty tariffs on imported steel and aluminum. The President also promised that the tariffs would bring jobs back to America.  Most economists and media pundits roundly criticized the President, disputed his logic, and predicted imminent trade wars as foreign nations retaliated with tariffs of their own.  What happened?

Foreign countries retaliated, as predicted, and threatened to put more tariffs on if the US continued with other tariffs (you know, retaliations for the retaliations only brings more retaliation).  But as the dusk has cleared something quite unexpected and unpredicted has happened.  American Steel and Aluminum companies have raised the domestic steel and aluminum prices, about in line with imported steel and aluminum’s old price combined with the new tariffs.  There is no new jobs nor new Steel or Aluminum capacity.

What a hoot.  American aluminum and steel companies gained this competitive advantage where the tariffs made imports more expensive, but then chose to raise their prices eliminating any price advantage the tariffs had brought.  End result, no new investment, no new jobs, just higher prices and more profits for US Steel and Aluminum companies.  Higher costs for everyone else.

  • Corporate tax cuts – The US tax code was “so unfair” to American corporations, the President said.  American corporations were subject to a 35% corporate tax while few other countries in the world had a rate so high.  The message was higher taxes were putting American corporations in an uncompetitive position and this “was costing Americans jobs”.  A lower corporate tax rate would mean more investment and more jobs.  Hmmm.

Overlooked in the political discussions was the facts that America’s “effective tax rate” (the actual amount of federal taxes companies pay which reflects the 35% minus exemptions, rebates, and loopholes, was about 18% which was in line with the rest of the world.

The proposal was to reduce corporate taxes to 22% and with this new found source of cash, corporations would pass on a portion to its workers and of course, invest in new factories and hire new employees.  Even though this concept had been tried before with negative results, the President was sure it would work. Oh, and yes there was no adjustments to the exemptions, rebates, and loopholes,

Just like Linus and Lucy, corporations took lower tax rates, promised to do great things, and then put the savings in their pockets once again. No new jobs, no new investment, and no pay increases for their employees.  Hmmm.

  • Climate, Energy, and Trade – The President has spoken firmly about the adverse impact (on jobs) that the Paris Climate Agreement, the EPA Clean Air regulations, and the Trade balance of payments between most countries and the US represent.   The President promised to “fix” these defective agreements and bring back jobs to America.  Hmmm.

Besides the President’s reasoning being flawed, what was not flawed was the plan to look the other way while favored companies operating in these fields increase their bottom lines.

The Presidential Banner, “Make America Great Again” which calls for rescuing American workers and jobs is instead an unvarnished plan to aide favored corporations and wealthy supporters.  While many still claim President Trump is unfit for his job, Americans would be better served to forget about labeling Trump as unfit and focus on the destructive consequences of his policies and actions.  

President Trump has promised, as did former President Hoover, “a chicken in every pot” but the Americans better keep looking because the fruits of Trump’s policies are flowing only to the top 1% and there may be chicken only in the very wealthiest pots. 

When Logic Fails

December 11, 2017

The Republican designed and President Trump supported “tax reform” is poised to become law. Only a few more horse trades remain before a mockery of fairness and consistency with past positions is presented to the American people, a big beautiful Christmas gift as President Trump has pontificated. The lipstick on this pig can’t mask the mind baffling contradictions from Republican policy and think tank positions.

Tax reform involves elimination of loopholes, exemptions, and other special interest sponsored deductions followed by a readjustment of the prevailing tax rates. Among the loopholes, exemptions, and deductions are those included to specifically encourage certain parts of the economy, or reward certain persons or industries normally for loyal support.

For example, the home mortgage deduction is intended to stimulate home ownership and incidentally benefits the building industry. Other loopholes, exemptions, or deductions are clearly targeted at key donors, for example, in the oil and gas exploration community.

Where has logic failed?

  • The US economy is already one of the strongest in the world. Why is there a need to stimulate?
  • The corporate tax rate is 35% and is the highest among similar modern countries. The effective tax rate (that is what corporations actually pay) is only 18%. This reflects the 35% minus all the loopholes, exemptions, and deductions. The 18% effective rate put the US right in the middle of other like countries. Why the need for corporate tax reform?
  • Our country already has a yearly budget deficit and a total debt of $20 trillion. The President and Congressional Republicans claim this “tax reform” which will cost itself $1.5 trillion, will so stimulate the economy that everyone wins.
  • Republicans claim economic growth alone will cover the $1.5 trillion and in the process will create more higher paying jobs. Despite two previous attempts (George W Bush and Ronald Reagan’s Administrations) where taxes were cut and corporations kept the windfall profits, Americans are asked to believe this time will be different. Hmmm.
  • The height of chutzpah falls to the GOP’s billing of this tax reform as a “middle class” tax cut. Under the questionable claim of middle class tax cut, the very wealthy and pass through business owners will reap the greatest amount of the $1.5 trillion in cuts.

As details are being ferreted out, mortgage interest and State/local taxes deductions will make the tax reduction less helpful to the middle class. Changes in how university endowments are treated will hurt many Universities financially and are likely to make higher education more difficult (read expensive) for the middle class to obtain.

President Trump has been in office 11 months and on every single claim he has made or policy action he has issued by executive order, there is overwhelming evidence that the President’s words are not supported by logic or fact.  A logical person must assume the President’s words are wrong again.

The Republican controlled Congress, on this issue, is equally and shamefully wrong. Following the money, one can explain the Republican Congress members’ action by who is buying the Republican Congressional members’ loyalty, for example the Kochs, the Mercers, and Sheldon Adelson.

The notion that America’s tax code should undergo a tax reform is not illogical or unnecessary. Tax reform targeted, however, for the wealthy and corporations is a dead end proposition for everyone else, and clearly destined to not deliver on its promises.

Governance Gone

December 3, 2017

With the Senate passage of the GOP tax reform bill Saturday evening/Sunday morning, any semblance of a political party worthy to hold the reins of government vanished. The current Republican crowd in control of both houses of Congress resembles more a mob than a deliberative body. What is even worse is that the Republican majority clearly do not care what others think or who may be severely disadvantaged by tax reform.

Was this rough shod action new to the Senate?

Not long ago, Republicans were closing in on “repeal and replace” legislation which would impact 1/3rd of our national economy and could take away coverage for our most at risk Americans.

  • Were there any hearings?
  • Were their any requests for public comments?
  • Were there any efforts made by Congress to educate the public ahead of time on what changes were actually in the bill?

The answer to all these questions was no.

The tax reform bill’s passage was even worse.

  • Bill preparation is private,
  • Sloganeering replacing printed copies of the proposed legislation,
  • Horse trading (often just promises and not changes in the law) to get 50 vote Republican majority,
  • The final copy of the 500 page bill issued two hours prior to the actually Senate vote

These reckless behaviors demonstrated absolute “zero” Republican interest in governance and 100% recognition of what they owed the moneyed interests who bankrolled their individual campaigns.

When Americans go to the polls, most think they are exercising their Constitutional right (and duty) to select those who will run the Government in a way that recognizes (and balances) all Americans’ best interest. On December 2, 2017, Americans learned that

  • the Republican majority in Congress has no interest in all Americans,
  • no interest in a transparent and interactive process,
  • and a thorough willingness to do what ever is necessary to meet the needs of their wealthy campaign donors.

The Art Of Distraction

November 30, 2017

Today could be the day that Republicans pass their “massive” tax reform. A reform, that by any other name, would be just an old fashion tax cut and give away. A give away, not to all but to the Republican friends who have bank rolled so many of the elected officials. Why isn’t this done deal since Republicans control both Houses of Congress and the Presidency as well?

There are ideological reasons. For example, the fiscal hawks are really between a rock and hard place since this “tax reform” will send probably $1.5 trillion or more to the already $20 trillion Federal Debt. Archival TV footage will show these same Senators and Representatives who vote for this tax bill, full throatily denouncing government spending because (sob, sob), “we are leaving our mess for future generations to deal with”. Never the less, ideology only goes so far, especially when there are millions involved in campaign donations.

Other ideologues want to ensure the right type of corporations get the right amount of tax cuts. Large, globally competing corporations have a different sense of what a globally competitive tax code might look like than a group of doctors, lawyers, or small town manufacturers would. Of course there is nothing in the “tax reform” legislation that requires corporations to reinvest these windfall profits, or to hire more workers, or to increase the pay of anyone. If you believe the free market will produce these wondrous results I have a bridge you might be interested in too.

The overall process the GOP has employed could be described as obfuscate and distract.

The creation of the specific House and Senate versions has been done in secret, without public hearings, and with no solicitation of public ideas. In addition the bill drafting process has been done hastily to minimize any time to discover the full ramifications and even less time to inform Americans of who gets what and who loses what.

For example, today it was reported that the House bill would classify student grants such as that received in scholarships for graduate work, as income and fully taxable at the total estimated value of a graduate program. The result would be that students might become responsible for paying taxes as if they were earning $80,000 a year when in fact they earn far, far less if anything. It would appear that Republicans do not think anyone other than the already wealthy should have access to higher education. Hmmm.

The more clever and sinister part of the obfuscation and distraction strategy goes to the hands of the President. President Trump may be the modern master of distraction, either by intent or by sheer incompetence. The President has opened one issue after another (such as defense of Judge Roy Moore, attacks on the New York Times and Washington Post, and retweets of racist and hateful British tweets dignifying what others have refuted with the Presidential stamp. The impact is when the news media chooses to cover this outrageous behavior, by default the media dilutes the time/space for fuller coverage of the tax reform debate.

Pundits predict that the Senate vote is still too close to call and the votes may not be there. On the other hand, any Republicans not voting for this tax bill can expect a far right challenge in their next election.

It might take a lot of courage for some GOP members to vote no on this bill. but Ironically, I wonder whether Republicans realize the tidal wave of anger which will come next year, should the bill be passed, and Republicans are forced to reduce farm subsidies, Medicare and Medicaid, and Social Security to stop the Federal Debt hemorrhaging?

Political “No Win” ?

November 27, 2017

Republicans are in the home stretch. This month they could pass the largest tax reform (actually tax cuts) in at least 30 years. And paying less in taxes is what most everyone wants. Right?

Yes but but chances are high that the Republican tax cuts represent a “political no win”

Republicans in Congress are poised to begin thumping their chests once the bill passes. Republicans sense a double victory coming their way.

  • First,  the tax cuts themselves will represent a victory. The Koch brothers, the Mercers, and dozens of other really rich supporters will be pleased with Congressional GOP (read more money in the future). Everyday Americans will gladly accept the scraps that fall off the tax cut table too. Does it get much better?
  • Yes it does. The second reason for GOP’s glee is that Congress will have to cut government spending in order to keep the deficit from exploding. And cutting the deficit means paring back massively entitlements.

You can see it now. Statesmanly Republican leaders worriedly calling for spending reduction action or otherwise out grandchildren’s children will inherit massive debt and an America bankrupted by Medicare, Medicaid, and Social Security. Can you imagine those wrinkled foreheads?

One must wonder, however, whether Republicans see the trap hidden amongst the tax cut changes?

The proposed Republican tax cuts can only be described as an unforced error. The American economy is strong and expanding. There is need for a government stimulus program and a good deal to worry about if the economy overheats.

On top of that, the promise of a huge boost in GDP growth is nothing short of a pipe dream. Only members of the flat earth society could seriously accept the notion that America’s economy could consistently outstrip the two dozen or so modern industrial nations.

The US economy, of course, can be stimulated to grow faster but what makes anyone think that faster growing economy would not contract after a short period of high growth? Add to that the risk of igniting inflation and higher interest rates (read a slowing force on the economy) amplifying a decrease in demand because most Americans have not seen real increases in the income.

Passage of a tax cut bill is not assured but should it happen, and should Republicans press forward with an assault on entitlements, “open season” at the polls will almost certainly follow.

Most Americans, strangely, do not pay federal income taxes anyways. They make to little. So they do not need any of the GOP tax cuts but are far more likely to feel the impact of cuts to Medicaid, Medicare, and Social Security.

The proverbial “middle class” will soon realize they too have not received anything when they get an opportunity to pay higher federal income taxes since deductions for State and local taxes as well as mortgage interest will be pared back.

And the probability of higher wages being the fruit falling from the tax cut tree is de minimis.

In 2018 and again in 2020, Republican candidates should have no shortage of campaign donations. In a relatively evenly divided electorate given 2016 election, it won’t take much to tip the Republican to Democrat Congressional ratio and put Democrats back in control of one or both houses. Such an outcome would be poetic justice for Democrats and could signal an end to Trump’s agenda (whatever that is).

Living Ones Priorities

June 25, 2017

The “repeal and replace” saga, brought to America by the Grand Old Party (GOP) clearly underscores the priorities of Party leaders, and dare I say, the big money interests who make it all happen. So why are Republicans against healthcare?

The answer is Republicans are not against healthcare, healthcare just gets in the way of what they seek.

The Affordable Care Act is only a slight variant of what the US has had for decades. Health insurance companies are the same, hospitals are the same, doctors are the same, and drug companies ditto. ACA changed the individual market’s healthcare delivery model by specifying “essential” healthcare services which must be covered for a healthcare policy to be eligible for government subsidies. (No more catastrophic only policies).

ACA defined what “basic” healthcare might be. For non-group policy holders, these individual consumer could purchase one of three types of policies, each differing only in price and amount of co-pay/deductible.

ACA also added a new route to providing healthcare insurance coverage. ACA expanded the eligibility definition for Medicaid and found millions of Americans who previously could not afford basic healthcare and had not qualified for Medicaid.

What could be so wrong about ACA (Obamacare) to drive Republicans to focus so strongly on repeal and replace efforts?

We hear much about the price of individual policies with year over year huge increases in premiums. But for those who earn more than certain amounts and do not qualify for subsidies, that is a problem. Surely, however, there are other means to convince insurers to set more reasonable rates. (Remember these same insurers who are announcing their withdrawal from certain States’ individual policies market are still quite happy to cover “group” plans in the same States.)

We also hear about returning healthcare to “patient centered” insurance and removing “government” from the place between the patient and their doctor. Hmmm. And what is the difference in substituting a for-profit insurance company as the middle person?

The American Heath Care Act negotiations are illustrative. With control of both the House and the Senate and the White House, Republicans have looked impotent in passing a replacement law. Why?

Well, it turns out that Americans overall have found Obamacare a step forward versus what preceded it. As the debate has unfolded. Americans are learning that Republicans are more intent on sharply reducing Medicaid both as an adjunct to Obamacare and as a stand alone program. It is beginning to dawn on Americans that Medicaid is very important program paying for about half of all births.  I wonder why so many Americans cannot afford healthcare insurance with pregnancy benefits? Medicaid is also critical to treating the Opioid crisis and for nursing home assistance for the elderly. And yet the Republicans are pressing on. Why?

Could it be the GOP is single-mindedly focused upon tax cuts?

Replacing Obamacare comes with a $200 million tax cut for the wealthy. The Trump/GOP’s tax reform (code for tax cuts), a separate piece of legislation, will represent billions in savings for the wealthy. Hmmm.

Back to the current Senate AHCA debate. Most Senators are aware that cuts to benefits (like eliminating pre-existing condition coverage) are very unpopular with constituents. They are now learning that critical health services are tied to Medicaid coverage. So, if AHCA keeps most or all of ACA benefits and ends the individual mandate while eliminating the associated taxes, the AHCA will cost the government more than ACA now does. Hmmm.

At this hour, the Washington soap opera is still underway. There are more than enough “no” votes to preclude Senate passage of AHCA 1.5. No matter how many times President Trump tweets that “it’s a great plan”, “people will love it”, or “AHCA is another campaign pledge kept”, certain facts remain.

Any ACA replacement which includes tax breaks for the wealthy will by budget necessity, also bring Americans less benefits at higher costs and fewer insured. Hmmm.

I guess if you number one priority is tax cuts for wealthy individuals and corporations, healthcare doesn’t really matter.

The Eastern Front?

May 22, 2017

Most historians cite Hitler’s decision to attacked Russia and opening a second front on the East as the crucial event which ultimately lead to Germany’s defeat in World War II. The argument goes that Germany spread its resources too thin and consequently could not win either in the west or the east. I wonder if history will repeat.

President Trump has a serious political and legal fight on his hands with regards to Russian Government involvement in the 2016 election. According to American security agencies, Russian entities did engage in hacking and dissemination of fake news during the campaign. After denying there was any Russian involvement, President Trump now asserts there was no “collusion” between his campaign and the Russians. The FBI and both the House and Senate have now investigations underway with the potential for serious political and criminal determinations. To make a matters worse and in true Roy Cohn style, the President fired FBI Director James Comey and told the Russian Foreign Minister that he had fired the “real nut job” (James Comes) and that would take pressure off this investigation. Hmmm.

Surprisingly this Russian investigation is not either the western or eastern front. Hmmm.

Instead, President Trump’s “western front” lays in his (and the Republican controlled House’s) tax cut proposals. The President is proposing “huge” cuts which will gift million and maybe billions to the wealthiest Americans. And, this Trump tax cut budget hole will need to be offset by budget cuts.

Therefore, the “eastern” (second) front will be Trump’s budget proposal itself.

Reports today say the President will propose sharp cuts to Medicaid in his budget proposal. Medicaid covers healthcare for the poorest of Americans and in many States covers millions of Obamacare newly covered Americans. While most Americans do not receive Medicaid benefits, these proposed Medicaid cuts signal the beginning of a wider attack, an all out attack upon healthcare coverage (America Health Care Act), followed by Medicare, and ultimately Social Security.

While tax cuts for the wealthy are shameful and unnecessary, offsetting these corporate and individual windfall tax gifts with cuts to programs used by the other 99% of Americans is mean spirited to the max.

Going for tax cuts is a mighty lift. Going for a huge reduction in government spending, particularly safety net and entitlement spending is an even bigger challenge. Going for both is likely to resemble a war with two fronts.

The Russian meddling investigation is a complication even Hitler did not have. While it is unlikely the President ever engaged directly with the Russians, it is not unlikely that several of his key staff and advisors did. The irony might turn out to be that any contacts with the Russians was really about potential future business deals (making money). not intent to sway the election.

The even larger irony might turn out to be that the President gets ensnared by coverup or obstruction activities (wanting the FBI investigation to simply go away) and not collusion with the Russians.  One would think the President would want, if only as an insurance policy, to boast high popularity ratings if the investigations were to turn political.  Offsetting tax cuts for the wealthy with entitlement cuts for everyone else may not appear popular as Americans think about things.  Hmmm.

It will certainly be hard fighting a war on two fronts.