Category Archives: Public Policy and Governance

That Terrible Corporate Tax Burden

One of the reasons I became a faithful reader of Ed Brayton’s Dispatches from the Culture Wars is that he disdains the euphemisms that “polite” commentators use to convey their criticisms, and simply tells it like it is. A good example is a recent post about the “confusion”–or deliberate obfuscation–surrounding discussions of corporate tax rates.

As he began,

Republicans love to claim that America’s corporate taxes are the highest in the developed world. This is a lie. The marginal tax rates, up to 35%, are among the highest. The actual rates paid are a fraction of that. In fact, some of the most profitable companies in the world pay no federal taxes at all.

The Institute on Taxation and Economic Policy used the tax information filed by  258 profitable Fortune 500 companies to analyze what those corporations actually paid. The companies chosen for the analysis collectively earned more than $3.8 trillion in profits over the eight-year period of the analysis.

Although the top corporate rate is 35 percent, the study found that 100 of the companies  — nearly 40 percent — paid zero taxes in at least one year between 2008 and 2015.

Eighteen, including General Electric, International Paper, Priceline.com and PG&E, incurred a total federal income tax bill of less than zero over the entire eight-year period — meaning they received rebates.

This result was entirely legal. The companies simply took advantage of numerous loopholes in the tax code. Some, including American Electric Power, Con Ed and Comcast, qualified for accelerated depreciation. That allowed them to write off most of the costs of  new equipment and machinery well before it wore out–or in “tax speak,” well before before the end of its “useful life.”

Facebook, Aetna and Exxon Mobil, among others, saved billions in taxes by giving options to top executives to buy stock in the future at a discount. The companies then get to deduct their huge payouts as a loss. Facebook used excess tax benefits from stock options to reduce its federal and state taxes by $5.78 billion from 2010 to 2015, the institute found.

As Ed reminds us, “In the 1950s, corporate taxes were about one-third of all federal revenue; today, it’s under 10%. And the burden is then transferred to individual taxpayers.”

Conservative economists will remind us that ultimately, individual consumers will pay corporate taxes–that the taxes companies pay will be factored into the prices of the goods they sell. And that is absolutely true. But it is a far fairer and much more honest way to do business.

The prices of consumer goods should reflect the actual cost of producing them, and taxes are–or should be– part of that cost. We don’t want the manufacturer who is “disposing” of his waste illegally to be able to undercut the prices of the guy who is following the rules, and we don’t want companies with more “creative” tax avoidance strategies to undercut competitors who are paying their fair share . Capitalist markets only work properly when pricing is honest.

Our current system doesn’t reward innovation; it rewards “game playing.” Lobbyists sneak arcane loopholes into our increasingly complicated tax code. Those loopholes further tilt the playing field, distorting market forces in ways that favor the companies that  can afford the lobbyists.

I’m all in favor of lowering the top marginal corporate tax rate, if we get rid of the loopholes at the same time. (We should start with those that provide an incentive for moving American businesses to off-shore tax havens–but we shouldn’t stop there.)

The current system allows corporations to whine about the tax rate in public, while making out like bandits behind the scenes. It’s dishonest, it’s anti-competitive, and it shifts the tax burden in ways that are unfair to individual taxpayers and a drag on the economy.

A responsible Congress would eliminate or dramatically reduce the loopholes and readjust the tax burden. Our Congress, however, is too busy making the system worse.

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Now For The Numbers….

So–the nonpartisan Congressional Budget Office has released its analysis of “TrumpCare.”

Here are their numbers:

14 million Americans will lose their insurance by 2018
21 million Americans will lose their insurance by 2020
24 million Americans will lose their insurance by 2026
There will be 52 million Americans with no health insurance by 2026 (for comparison, there were 46 million uninsured before Obamacare became law)
The bill will cut $880 billion from Medicaid by 2026
15 percent of Planned Parenthood patients will lose access to care
A 64-year-old making $26,500 would have to pay $14,600 for insurance in 2026 (for comparison, that 64-year-old pays $1,700 under Obamacare), and

After transferring $275 billion from public-health spending to the richest 1 or 2 percent via tax cuts,  it will reduce budget deficits by $336 billion between 2018 and 2026.

AHCA–aka “Trumpcare” or perhaps “Ryancare”– would reduce deficits by $336 billion but would cut government spending on healthcare programs by $1.2 trillion.

When you think about it, this is a brilliant approach to deficit reduction that we could apply across the board.

We can cut billions out of the budget if we stop paving Interstate highways and inspecting and fixing bridges. We can reduce the deficit significantly if we stop hiring those high-priced CPAs to monitor bank compliance with financial regulations and enforce the SEC’s oversight of corporate securities offerings. We can save another bundle if we no longer enforce rules against air and water pollution (actually, Scott Pruitt, the new EPA Chief, has already begun that effort.) Betsy DeVos assures us that schools don’t need oversight, so we don’t need the Department of Education. We probably don’t need those bean-counters at the CBO or the Bureau of Labor Statistics, either.

And of course, we could stop paying Social Security to all those useless old people. Think of what that would save us!

It’s true that if we did all these things, government would no longer function, and we’d be thrown into a Hobbesian, dog-eat-dog world, but that’s actually the result many Republican Congress-critters have been working toward. The President wouldn’t mind, because he really has no idea what most of government does anyway.

Of course, if we wanted to make a real dent in the national debt, we could dramatically reduce the bloated amounts we spend on the military. But something tells me that might be a bridge too far…..

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It’s Not Just Complicated…

Trump generated a lot of well-deserved criticism–not to mention sarcasm–for his recent expression of surprise at the complexity of health policy, saying “Who knew it was so complicated?” The universal response was “Apparently, everyone but you!”

Which brings us to the bill currently before Congress.

Virtually every headline about Paul Ryan’s proposed ACA replacement has been negative: NBC’s said bluntly “Experts: The GOP Healthcare Plan Just Won’t Work.”

While their objections vary depending on their ideological goals, the newly introduced American Health Care Act (AHCA) is facing an unrelenting wave of criticism. Some experts warn that the bill is flawed in ways that could unravel the individual insurance market.

Among other problems, the article pointed out that the bill is almost certain to reduce overall coverage and result in deductibles increasing. It will also phase out Obamacare’s Medicaid expansion. Older, sicker and lower-income patients will be the bigger losers.

The headline of the Washington Post’s Plum Line was equally direct: “The New Republican Health-Care Plan is Awe-Inpiringly Awful.”  

Noting that Trump had campaigned on a promise to replace the ACA with “something terrific,” Paul Waldman, who authors the Plum Line, observed that the bill is

so far from terrific that there doesn’t seem to be anyone other than House Speaker Paul D. Ryan (R-Wis.) himself who thinks this bill isn’t a disaster. It’s being attacked not just from the left but from the right as well. Heritage Action and the Club for Growth, two groups that exist to browbeat Republicans into upholding hard-right principles, have just come out against it.

Waldman marveled that

House Republicans have accomplished something remarkable: They have written a bill that would make every problem they’ve complained about much, much worse. If there’s any saving grace, it’s that almost no one will be happy about it, except for the wealthy people to whom it gives a gigantic tax cut.

So… Republicans are going to drastically reduce the number of Americans with health insurance while increasing costs pretty much across the board:  individuals, state governments and the federal government will all pay more. According to insurance experts, the bill will also do enormous damage to the insurance market. The GOP is evidently willing to inflict all that pain in order to give rich people a tax cut.

The problems with the bill range from the ludicrous to the outrageous, and you can all decide for yourselves which parts you find more horrific or ridiculous, but as a number of observers have pointed out, the promises of a genuine Republican replacement for Obamacare were always impossible to keep.

Today’s GOP is an increasingly uncomfortable amalgam of true believers who oppose the very notion that government has an obligation to provide access to health insurance, and who are working frantically to eliminate Medicare and Medicaid, and the party’s realists, who know that taking health insurance away from Americans who finally have been able to access it–not to mention Medicare recipients– is political suicide.

That’s a political fence that can’t be straddled.

What Ryan and his minions are trying to do is square the circle: drastically reduce coverage while pretending they are doing no such thing.

Some day–if and when sanity and a modicum of honesty return to American government– the United States will join virtually every other first-world country and provide universal coverage. I’ve previously posted about the multiple benefits and clear superiority of Medicare for All.

In 2006, the Economist—hardly a leftwing publication—had this to say about the U.S. healthcare system:

“America’s health care system is unlike any other. The United States spends 16% of its GDP on health, around twice the rich country average, equivalent to $6,280 for every American each year. Yet it is the only rich country that does not guarantee universal health coverage. Thanks to an accident of history, most Americans receive health insurance through their employer, with the government picking up the bill for the poor (through Medicaid) and the elderly (through Medicare).

[…]

In the longer term, America, like this adamantly pro-market newspaper, may have no choice other than to accept a more overtly European-style system.”

Obamacare was a step in the right direction, but America still spends more per person on healthcare than any other country–and we still rank 37th in outcomes. (If our infant mortality rate was as good as Cuba’s—Cuba’s!—we would save the lives of an additional 2,212 babies every year.)

Other countries have opted for more efficient–and more humane– national systems.

In 2017 America, we are still arguing over whether healthcare should be viewed as a right (or at least a utility), or whether we should continue to treat it as a consumer product, available to those who can afford it and “tough luck” to those who can’t.

That circle can’t be squared.

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That Social Safety Net

It may be time to re-conceptualize the social safety net.

Most of the people who refer to a social safety net use the term as shorthand for a variety of so-called “welfare” programs, from Social Security, Medicare and Medicaid to TANF and other income-support measures. Defining the social safety net in that way—and focusing, as so many Republican political figures do, on support for needy Americans—facilitates criticisms of measures intended to help the poor.

After all, the comfortable ask, why should the prudent and solvent among us have our hard-earned monies taxed to support “those people”?

It’s easy to see the persistent attacks on income-supports for disadvantaged folks as both dishonest and mean-spirited, and most efforts to rebut them tend to revolve around the realities of social supports: the percentages of recipients who are children, elderly and/or disabled, the overwhelming numbers of impoverished Americans who work forty or more hours a week, etc.

We may be missing the forest for the trees.

A “social safety net,” properly conceived, is the web of institutions and services that benefit all members of a given society while building bonds of community and cross-cultural connection. In this broader understanding, the safety net includes public education, public parks, public transportation and other services and amenities available to and used by citizens of all backgrounds and income categories.

Public education is a prime example. Even granting the challenges—the disproportionate resources available to schools serving richer and poorer neighborhoods, the barriers to learning created by poverty—public schools at their best integrate children from different backgrounds and give poor children tools to escape poverty. Public schools, as Benjamin Barber has written, are constitutive of a public.

Common schools create common cultures, and it is hard to escape the suspicion that attacks on public education have been at least partially motivated by that reality. While supporters of charter schools and voucher programs have promoted them as ways of allowing poor children to escape failing schools, the data suggests that most children—including poor children—are better served by schools that remain part of America’s real social safety net.

This point was recently underscored by Thomas Ratliff, a Republican member of the Texas Board of Education—a board not noted for progressive understandings of the role of education. After setting out the comparative data about costs and outcomes achieved by traditional public schools in Texas and those operating via various “privatization” programs, he concluded

When you hear the unending and unsubstantiated rhetoric about “failing public schools” from those that support vouchers or other “competitive” school models, it is important to have the facts. ISDs aren’t perfect, but they graduate more kids, keep more kids from dropping out and get more kids career and college ready than their politically connected competitors. Any claims to the contrary just simply are not supported by the facts and at the end of the day facts matter because these lives matter.

Recognition that “these lives matter” is the hallmark of a society with a capacious understanding of citizenship—both in the sense of who counts as a citizen, and what constitutes the mutual obligations of citizens to one another.

The actual social safety net is not limited to the (grudging and inadequate) financial assistance given to the most disadvantaged in our society. The true safety net consists of the many institutionalized avenues within which the citizens of a nation encounter each other as civic equals, and benefit from membership in a society built upon the recognition that all their lives matter.

Defining the social safety net that way allows us to see that the portion of our taxes used to assist needy fellow-citizens isn’t “forced charity.” It’s our membership dues.

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There’s Talking and Then There’s Doing….

Over at Talking Points Memo, Josh Marshall makes a really important point. In a post reflecting on the various reasons that the rollout of the proposed healthcare overhaul has been going so badly, he points to the important role of a President in the passage of complex or controversial legislation.

True, the health-care bill has numerous glaring defects. As Marshall also points out, the defects should have been expected, since the GOP has been promising to do something that is basically impossible–continuing to cover people while offering more carrots and employing fewer sticks.

Even though Republicans control both houses of Congress and the Presidency, the bill faces formidable obstacles. Major stakeholders hate it,  Republican lawmakers are divided, and the bill won’t get a single Democratic vote. Faced with significant opposition, what is needed is what Marshall calls “the mix of formal and informal powers, favors and threats, public presence, the ability to protect or punish” that only a President can bring to bear.

This is something President Trump has shown virtually no interest in doing. We’re at roughly a month and a half into the administration. The GOP has unified control of the government and yet no significant legislation has moved at all. That is a stunning reality which the storm and chaos of Trump’s short presidency has largely obscured. But it is an almost unprecedented development. Some of this may be an inherent limitation because the President came into office as a minority President. But as I argued a month ago, the President simply has no appetite for the hard work of passing laws. He has defaulted to rolling out executive order after executive order, in most cases Potemkin decrees with vaguely legalistic language and limited actual impact. Like so much with Trump, it’s a mix of authoritarianism on the one hand and impatience and flimflam on the other. The upshot isn’t so much a poor man’s as a lazy man’s authoritarianism.

I think it is deeper than Trump’s obvious aversion to actual work. It is equally obvious that he has not the faintest understanding of how government actually works–and even less interest in learning what he doesn’t know. He is used to running a family business where he issued orders and people who were related to him and dependent upon his largesse obediently followed them. He wasn’t even the typical CEO of a publicly-traded company who would at least have to answer to a Board of Directors and shareholders.

A diligent and intellectually curious person with Trump’s background would be disadvantaged by that lack of relevant experience.  Trump is neither diligent nor intellectually curious (judging from his vocabulary and spelling of his tweets, he isn’t even very bright). Several of the skills that Marshall identifies as critical to the passage of legislation are simply beyond his capacity to acquire or exercise, and his self-obsession  precludes any engagement in the sorts of “schmoozing” required to cajole recalcitrant lawmakers. (It is impossible to imagine Trump strategically stroking the egos of crucial legislators.)

Ironically, the very traits that make Trump so manifestly unqualified for the Presidency  may end up saving healthcare….

Fingers crossed.

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