Posted tagged ‘tax reform’

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.

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Next Stop, Social Democracy?

December 5, 2017

These past 11 months have witnessed war against Government regulations, a skewed (towards the wealthy) tax reform, and the wanton disregard for healthcare and the environment.  Thanks Mr. President.  To be fair, this is not just a President Trump issue, rather it is the true face of the current Republican Party.

And, more than any other factor, these past 11 months have demonstrated the maturation of years of focused work directed by ultra conservative groups under the Koch Brothers’ flag.

The Koch’s and most of their zealous followers see the world largely from a libertarian perspective. In their minds this means much less government, far fewer regulations, much less government services, and consequently much lower taxes. The Koch’s legions act as a model for others to see what hard work and drive can produce.

Tax reform now rests in a joint Congressional committee charged with reconciling the House and Senate’s tax reform versions into one bill both Houses can accept. Barring a miraculous reenactment of Dickens’ “Christmas Carol”, Americans can look forward to more income inequality as a Christmas present.

In other Trump administrative action, curbs on Big Banks will be slackened, hints companies may not need to provide their employees healthcare, and  “Medicare, Medicaid, and Social Security” will be tossed to the “private” sector severing any connection to the Government or its promises.

For the Koch-type people, panacea could not look better. Hmmm.

One can imagine two outcomes given current choices Republicans are making.

  1. A total breakdown in America’s social contract. The majority of Americans will lose faith in Government and jump to the belief that paying taxes, following laws, or supporting the Country as a whole are no longer a duty since their Government no longer looks out for them.
  2. A strong electorate reaction which in turn elects a government with the mandate to secure access to affordable healthcare, retirement assistance (social security, Medicare, and pension guarantees), and a kind/caring safety net collection of services, (after all America is the wealthiest country in the world).

With respect to these two options, option #1 should increase gun sales and return America to a period more similar to pre-revolutionary times. With option #2, America will be seamlessly connected to the global economy and viewed by others as the latest, intelligent “Social Democracy”. Hmmm.

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).

Want To Be A Sucker?

November 7, 2017

How can any sensible person turn away from lower taxes? Freedom Partners Action Fund, an organ of the Koch Brothers network, is spending real money on television ads which appeal directly to “middle class” families and implore them to contact their Congress Member and demand Congress pass the pending tax cut bill. Is this Democracy in action or a side show “shill operation”?

Would you believe these ads are both?

The Koch Brothers have the money (political spending is an exercise of free speech the Supreme Court has said) so it would seem this is democracy in action. On the other hand, Freedom Partners Action Fund does not reveal how much the Kochs or other wealthy Americans will receive in tax cuts. Current estimates indicate, as expect, the sun will really shine on the very rich.

It would appear that tax cuts will offer “crumbs” to some Americans and a full course, top shelf repast to the top 1%. So, in addition to fairness, the “shill” is betting that many Americans will be “suckers” and not recognize this tax cut bill does not pay for itself.  Remember the consequences of those who think there are “free lunches”. Hmmm.

The US already has an unbalanced budget and a Federal Debt approaching $20 trillion. This tax plan is minimally estimated to add another $1-2 trillion. Republicans, however, are undaunted and promise to cut other government spending, for example entitlements. Hmmm.

Cutting entitlements like Medicare, Medicaid, and Social Security won’t impact the Kochs or for that matter other top 1% earners. Entitlement benefits impact the other end of the wealth spectrum including the “average American”.

It would appear that Freedom Partners Action Fund, Congress, and the Trump Administration are playing the average American as a sucker. Hmmm.

Taxes Make The World Go Round

October 18, 2017

Congress and in particular, the Republican majority are in a whirl. With majorities in both houses and a Republican President, the GOP has nothing to show for its hold on the reigns of power. I should be quick to say, nothing yet.

The two signature pieces of legislation Republican leaders boast about have been the “repeal and replace” for Obamacare and the “tax reform” for individual and corporate taxes. For a host of reasons the GOP has not been able to agree upon legislation which would accomplish these goals and have looked impotent in their efforts.

The most obvious reason for the GOP inability has been the absence of a sound logical rationale for either healthcare or tax reform even in the face of overwhelming evidence that the Affordable Care Act (Obamacare) and the current tax code are badly in need of modifications. One wonders why?

Would you believe that Republicans do not really care about either healthcare or about tax reform? True. Despite all the rhetoric and chest thumping, at the end of the day Republicans do not care about healthcare as a right of all Americans nor do they care about a tax code which generates sufficient revenue to cover government expenses. Hmmm.

One wonders how Republicans can justify a reduction in both benefits and the number of Americans covered with healthcare insurance while at the same time, and with a straight face, push for ending the individual mandate and the taxes higher income Americans pay under Obamacare. Republicans promise more healthcare options and lower costs for coverage without telling many Americans that they better hope they never get really sick (need coverage) or have pre-existing conditions.

But make no mistake Republicans do care about reducing taxes, especially on those Americans who are the major funders of their political campaigns. Hmmm.

The current individual tax code offers another insight.

Marginal Tax rate

On Earnings Per Year

10%

$0 – 9325

15%

$9325 – 37950

25%

$37950 – 91900

28%

$91900 – 191650

33%

$191650 – 416700

35%

$416700 – 418400

39.6%

$418400+

While the specifics of the Republican tax reform bill are not fixed, think about the impact of the rumored new rates and brackets. Gone will be the 10% bracket so one would assume that 15% would apply to all income from $0 to $37950. Sounds like a tax increase to me. (In truth, increased standard deductions could make the increase much smaller or even disappear.)

But let’s look at the other end where the top bracket of 39.6% is said to disappear. Someone earning, say $500,000 per year would see an immediate tax reduction $23,000 (4.6% x $500,000). For the average Fortune 500 corporate CEO earning $15,000,000 the savings looks more like $690,000. And you do the math for the billionaire earners.

For 2018 mid-term elections, it should not take a genius to inform American voters what the GOP has done (or tried to do) for the last two years and what lies in store for them in the future.. Most Americans have employer provided (group plan) health insurance or are on Medicare. They are not affected… now.

If the GOP is content to do dirty with some Americans, what makes anyone think that other Americans will soon be at risk?

The prognosis on taxes is just as dangerous. It is possible that the reformed tax code will only slightly hurt the average American (new deductions could offset those eliminated (like State and local taxes or mortgage interest). The baked in tax break for the very wealthy will reduce overall tax revenues which in turn will limit government spending on a variety of programs, and possibly leading to cuts in Medicare, Medicaid, and Social Security.

And, if Republicans do not try to cut enough spending to offset the tax revenue loss, the difference will go on the “credit card”, our Federal Debt.

Hmmm.