Category Archives: Public Policy and Governance

Corporations Will Use Their Windfalls To Create Jobs. NOT.

Part of the mantra obediently recited by advocates of the mis-named “tax reform” bill is their touching (or feigned) belief that corporations will use the funds being repatriated and/or saved from the tax collector to create jobs.

Brings to mind the old adage about the triumph of hope over experience.

Ed Brayton relays the recent, eye-opening response by corporate CEOs to a speech by Gary Cohn, Trump’s chief economic advisor.

Trump’s chief economic adviser, Gary Cohn, took part in an event hosted by the Wall Street Journal that featured an audience full of CEOs, and when a Journal editor asked for a show of hands by those leaders who would invest in new capacity if their taxes were cut, very few hands went up. Cohn seemed shocked.

Cohn really shouldn’t have been shocked. We’ve been here before, and there is no reason to believe that the fundamentals–or the economic incentives– have changed. As Brayton notes, corporate profits are already at record highs, and credit is very cheap and readily available.

If those businesses believed that investing in new factories or equipment that might create more jobs would result in higher profits for them, they would already be doing it. But they’re not. Indeed, while this poll was an informal one, formal surveys of CEOs find the same result.

This summer, Bank of America Merrill Lynch asked 300 companies what they would do if Congress passed a “tax holiday” that allowed them to bring back massive amounts of money being held overseas at a lower tax rate. 65% said they would pay down their debt. Second most popular option? Stock buyback. Neither of those things creates new jobs. Indeed, when George W. Bush did the same thing in 2004, about $300 billion in cash kept in overseas subsidiaries was brought back at a ridiculous 5.25% tax rate. 80% of it was used to buy back stock. Why? Because it makes the shares of CEOs, which are a huge part of their compensation package, much more valuable. So the rich people benefit but no one else does.

I don’t know whether the lawmakers who continue to push this theory have convinced themselves of its credibility through constant repetition, or whether they are knowingly putting the best possible spin on an economic policy that repeated experience tells us is bogus. It probably doesn’t matter whether they are venal or stupid (not that the two categories are mutually exclusive); the outcome is the same: the rich get richer, and their political donations reward the lawmakers who’ve carried their water. Economic inequality and popular resentments continue to grow, along with political cynicism and social distrust.

It’s a prescription for upheaval, for further splintering of our already strained social fabric–and plenty of wealthy people understand that social unrest shrinks, rather than grows, the economy. As the contours of the tax “reform” bill  have become known, more than 400 American millionaires and billionaires have signed a letter to Congress demanding that Republican lawmakers not cut their taxes.

These wealthy Americans argue that reducing taxes on the richest families at a time when the the nation’s debt is high and inequality is at the worst level since the 1920s would be a colossal mistake.

The letter calls on Congress to not to pass any tax bill that adds to the debt and that “further exacerbates inequality.” Instead of cutting taxes of the wealthy, the letter tells Congress to raises taxes on rich people like them.

If money talks, theirs is the money Congress should listen to.
Comments

How Stupid Do They Think We Are?

I really wasn’t going to write any more about the GOP tax plan, at least until we’ve seen whether it is likely to pass in anything like its current form. But I was on the treadmill yesterday morning and, as usual, was watching television to take my mind off the fact that I was exercising. I was absolutely astonished to see a political advertisement touting the tax plan’s benefits to “ordinary middle-class Americans,” who would see an “average” tax saving of over 1,100.

The voice-over went on to reassure listeners about the fairness of the measure, asserting that the tax brackets for the rich weren’t being lowered, and implying–without actually saying it– that the tax liability of the top 1% would not decrease.

The blatant dishonesty of this ad appalled me.

Let’s just examine that bit about the “average middle-class taxpayer.” (Ignore, for the moment, the fact that Congressional Republicans at one point defined an annual income of 450,000 as “middle class”–I don’t know whether the criticism that little item generated has caused them to back off that particular bit of nonsense.) Let’s just talk about averages.

What’s the average of a mouse and an elephant?

More to the point, if my income is “averaged” with the income of Bill Gates, the resulting number is going to be pretty misleading about both of us.

Every analysis I have seen–even those produced by right-leaning think tanks–shows wealthy individuals getting the lion’s share of the tax “relief” under both the House and Senate  versions. According to Politifact,

  • The highest-income 0.1 percent of taxpayers — those who had an income of over $3.7 million in 2015 — would get an average tax cut of more than $1.3 million in 2017.
  • That same group would receive 18 percent of the tax reduction, while the bottom 60 percent of taxpayers would receive 16.4 percent of the reduction.

Credible sources analyzing the plan’s consequences quibble on some of the details, but all of them agree on two points: the cuts disproportionately benefit the rich, and they will add somewhere between 1.5 and 1.7 trillion dollars to the current deficit.

A deficit of that magnitude would be unsustainable, and the result would be savage cuts in social welfare programs like Social Security, Medicare and Medicaid. (Those cuts, of course, would come later–In the time-honored practice of politicians everywhere, the bill pushes the most noticeable negative consequences to a future election cycle.)

I was flabbergasted at the out-and-out dishonesty of the television spot. I’ve seen plenty of spin, but this went far beyond that–it took flat-out lying to an entirely new level. The extra adrenaline probably improved my workout, but all I could think of was “how stupid do the people who created this ad think Americans are?”

And then all I could think about was, what if they’re right?

Comments

This Is Why We Can’t Have Nice Things….

Economists like to talk about “opportunity costs”–if you do X, you’ve lost the opportunity to do Y. I’ve been thinking about what we could do with the taxes we don’t get on the funds rich people hide from the IRS in those tempting tax havens, as disclosed by the Paradise Papers.

A column in the New York Times explained

A treasure trove of documents given the name of the Paradise Papers was unveiled last week, giving us a clearer idea of how rich people and powerful companies keep their money from the prying eyes of the Internal Revenue Service.

It seems that–if you are rich enough to afford the right law firm and tax haven–you can navigate the Internal Revenue Code in such a way as to legally evade lots and lots of taxes. It turns out that sixty-three percent of foreign profits made by American multi-national corporations are squirreled away in those hideouts, out of the sight of those pesky IRS agents.

That disclosure was annoying enough, but what really pissed me off were a couple of estimates of what those evaded taxes might have paid for.

We worry a lot about the cost of social programs in this country, saying we simply can’t afford many things that we know could bring big rewards. But that missing $70 billion from corporate offshore tax avoidance would go a long way. A mere $140 million could replace the lead water pipes poisoning children in Flint, Mich. It would cost just an estimated $22.5 billion to end homelessness by providing all needy families with rental assistance. President Barack Obama asked Congress for $75 billion for his initial universal preschool plan; universal preschool for all 3- and 4-year-olds would cost $98.4 billion over 10 years.

Senator Bernie Sanders’s College for All Act doesn’t even require the federal government to cover the entire $70 billion cost of public college tuition, but it could if this money were available to the government. Divvying up $70 billion a year to each parent in the country would be a huge step toward ending childhood poverty. And the available pot of money, were offshore tax avoidance not an option, would be even larger if rich individuals were taxed at the rates we all face here at home.

According to The Hill, if those writing our tax laws didn’t prefer letting their donors off the hook for their fair share, we could afford pretty much anything. Here are just a few of the things The Hill says we could pay for if we weren’t rushing a $1.5-trillion debt-financed gift to billionaires through the legislative process:

What makes this effort to take from the poor to give to the rich especially galling is the hypocrisy of the GOP “deficit hawks.”

 After spending eight years railing against the evils of deficits, after blocking numerous important investments because we “couldn’t afford it” and after swearing time and again that debt was our No. 1 enemy, most Republican representatives have tossed their anti-deficit positions aside in the blink of an eye. That is galling, yes.

But perhaps even more galling is that, having thrown their fiscal caution to the wind and having decided that now, with a Republican in the White House, debt is no longer a concern, their best idea for spending hundreds of billions of dollars is to give it all to the rich. For that, they should be truly ashamed of themselves.

When you wonder why Americans can’t have universal health care, or great trains that run every 20 minutes on tracks that are smooth and well-maintained, or other public services and amenities that citizens of other developed countries enjoy, just remember: we give  money to our billionaires instead.

Comments

Undocumented Lawbreakers

The other day, several news outlets carried an emotional scene from an airport, where an undocumented woman who had been in the United States for 30 years, and given birth to  three children who are American citizens, was being deported. She’d come here as a teenager and was being “returned” to a country she only dimly remembered.

Ah yes! In Donald Trump’s America, we’re getting rid of those dangerous criminals from other countries. It’s particularly rewarding to see ICE ramp up deportation for those who came to the U.S. illegally as two- and four-year-olds, using their criminal parents to carry them over the border. Getting rid of them will make America Great Again–and that’s good, because there are so many things we won’t do to make America great.

We won’t try to make America great by tightening gun laws to cut down on the daily mayhem and violence (caused almost exclusively by angry native-born white guys). We won’t work to make America great by repairing our crumbling roads, bridges and other infrastructure. We aren’t even willing to make America fair by really reforming the tax code to eliminate loopholes that unnecessarily favor the wealthy, or by raising the minimum wage so that working people can make ends meet, or by ensuring that everyone has access to health care.

No–in Trump’s America, we’re not only deporting people whose only “crime” was coming here without going through a tortuous legal process that can take years, we’re repealing the minimal protections the Obama Administration extended to undocumented persons who were children when they were brought here by their parents.

DACA–Deferred Action for Childhood Arrivals–addressed the utter cruelty of uprooting children who had no part in the decision to come here, young people who have been productive and law-abiding, who grew up here and have known no other country. As USA Today recently summarized the measure, DACA

allows two-year stays for certain undocumented immigrants who entered the country before their 16th birthday who have attended school or joined the military and have not committed any serious crimes.

They receive a renewable two-year period of deportation protections and eligibility for a work permit. Some enrollees are currently on their third term.

There are roughly 800,000 individuals temporarily protected from deportation by the DACA program.

DACA was a short-term, emergency, humanitarian measure extended by President Obama due to persistent Congressional failure to act on desperately needed immigration reforms. Trump’s attack on DACA is further evidence of his willingness to hurt innocent people in furtherance of a white nationalist agenda that–so far as we can tell–is his only agenda. (Other than self-aggrandizement, of course.)

We should certainly deport people who came here illegally and committed serious crimes. We can argue about deporting undocumented people who came here as adults and subsequently committed minor crimes. However, I am unable to conceive of any argument that would justify expelling young people who had no part in the decision to cross the border, who have spent most of their lives in the United States (and often speak only English), and who are contributing to society in a multitude of ways.

One of my students is a DACA enrollee. Her younger brother is an American citizen, born after her parents settled in the United States. She’s an excellent student. She’s also understandably passionate about fixing both immigration law and state laws that burden undocumented persons. She volunteers for several nonprofit organizations, and she knows a lot more about the U.S.Constitution than most of my native-born students. I fail to see how deporting her would make America great.

In fact, deporting her–and those like her–would make America very, very small.

Comments

Tax Policy Winners And Losers

I’ve posted previously about the GOP’s tax “reform” plan, and some of the truly despicable provisions hidden in the fine print. As more details emerge, it appears that my list–like the one below–barely scratches the surface.

Whatever the arguments in favor of the $1 trillion in corporate tax breaks contemplated by the measure, the original idea–the justification for reducing the rate– was that the rate could be lowered if the loopholes that allow large profitable corporations to pay little or no tax despite the published rate were eliminated. Somehow, however, the current version of the “reform” bill leaves corporations with both lower rates and their loopholes.

Speaking of corporations, Dana Milbank reported a revealing exchange in a recent Washington Post column.

Individuals lose the ability to deduct state and local taxes, tax preparation, moving expenses and most medical expenses. But corporations — think of them as Very Important Persons with superhuman privileges — can still deduct these same expenses.

At Monday’s markup, Rep. Suzan DelBene (D-Wash.) quizzed a tax expert on this corporate exceptionalism:

“Will a teacher in my district who buys pens, pencils and paper for his students be able to deduct these costs from his tax returns under this plan?” He will not.

“Will a corporation that buys pens, pencils and papers for its workers be able to deduct those costs from its tax returns?” It will.

“Will a firefighter in my district be able to deduct the state and local sales taxes that she pays from her tax return?” She will not.

“Will a corporation be able to deduct sales taxes on business purchases?” It will.

“If a worker in my district had to move because his employer was forcing him to relocate . . . can he deduct his moving expenses under this plan?” He cannot.

“Can a corporation under this plan deduct outsourcing expenses incurred in relocating a U.S. business outside the United States?” It can.

We Americans just love our corporations….they’re people, you know.

And isn’t it nice that Republican Americans are so “pro-life”? (Well, they’re pro pre born life; once that little bugger emerges from the womb, they are considerably less solicitous.) Among the non-fiscal measures in the tax “reform” bill is one intended to “protect babies”–aka fetuses and fertilized eggs. You’d think these pro-life men (they’re all men) would do anything they could to support  adoption as an alternative to abortion. But you’d be wrong.

The House Republican tax reform bill would completely eliminate the adoption tax credit, which has been in the tax code since 1997. It was a bipartisan achievement pushed through by former Texas Republican Rep. Bill Archer, who was chair of the House Ways and Means Committee. Designed to help cover “reasonable and necessary adoption fees, court costs, attorney fees, and other expenses,” the credit is available for up to $13,460 per child.

Some employers also offer adoption assistance in the form of financial aid and paid leave time. As of now, this type of assistance is tax-exempt, but the proposed bill would make such benefits subject to taxation.

The bill would also make adoption assistance from employers — which usually takes the form of financial aid and paid leave time — taxable.

Words fail.

I’m less surprised by the measures that would effectively destroy graduate education; the current crop of Republicans considers educated people snotty elitists. GOP officeholders sneer at scientists, oppose research funding, and think college professors are unAmerican.

Most graduate students get through their degree programs depending on assistantships, tuition waivers and lots of ramen noodle dinners. As Forbes reports,

Currently, these tuition waivers are paid by the college directly to itself, on behalf of the graduate student, and are not counted as taxable income. Under the current “reform” proposal, tuition waivers would be taxed as regular income, making graduate school an unaffordable proposition except for those already independently wealthy.

And then there’s that pesky little detail that the Congressional Budget Office finds problematic: this monstrosity will add 1.7 trillion to the deficit. (And that’s evidently after robbing Medicare and Social Security…) If you are looking for some of those Republican “deficit hawks” of yore, you are probably out of luck.

On the other hand, if you’re wondering why Paul Ryan is reportedly optimistic about passing this Thanksgiving turkey, Representative Chris Collins explained it the other day.

Rep. Chris Collins (R-NY) got points for honesty Tuesday while advocating for Republicans’ tax bill to slash the corporate tax rate and eliminate the estate tax, among other things.

“My donors are basically saying, ‘Get it done or don’t ever call me again,’” Collins said.

I’m sure those donors are selfless patriots who simply want to see middle-class Americans get some tax relief. (And if you believe that, I have a swamp in Florida to sell you…)

Comments