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Tax policy and tax avoidance under neoliberal regime

Neoliberal government which adopted neoliberal ideology with its belief of self-regulation market and in  which no outside oversight is possible, due to the ability of the kleptocrat(s) to personally control both the supply of public funds and the means of determining their disbursal.

Kleptocratic elite typically treat their country's treasury as though it were their own personal bank account, spending the funds on luxury goods as they see fit. Many members of kleptocratic elite (especially financial elite) also secretly transfer public funds into secret personal numbered bank accounts in foreign countries in order to provide them with continued luxury if/when their criminal behavior was exposed and they are forced to leave the country.

Kleptocracy is the political regime to which countries in which the governing ideology is neoliberalism gravitate.  Such incomes constitute a form of economic rent and are therefore easier to siphon off without causing the income itself to decrease (for example, due to capital flight as investors pull out to escape the high taxes levied by the kleptocrats).

Tax avoidance is just one manifestation of neoliberal kleprocracy


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Old News ;-)

[Jul 16, 2021] The Most-Overlooked Tax Breaks for Retirees by Rocky Mengle , Kevin McCormally

Jul 01, 2021 | www.kiplinger.com
Unfortunately, seniors often miss tax-saving opportunities that are available to them. Don't let that happen to you!

For new retirees, it's more important than ever to take full advantage of every tax break available. That's especially true if you're on a fixed income. After all, you have to stretch out your retirement savings to cover the rest of your life. But holding on to your money during retirement is easier said than done. That's why retirees really need to pay close attention to their tax situation.

Unfortunately, though, seniors often miss valuable tax-saving opportunities . In many cases, it's simply because they just don't know about them. Don't let that happen to you -- check out these often-overlooked tax breaks for retirees . You could save a bundle!

When you turn 65, the IRS offers you a gift in the form of a larger standard deduction . For example, a single 64-year-old taxpayer can claim a standard deduction of $12,550 on his or her 2021 tax return (it was $12,400 for 2020 returns). But a single 65-year-old taxpayer will get a $14,250 standard deduction in 2021 ($14,050 in 2020).

The extra $1,700 will make it more likely that you'll take the standard deduction rather than itemize. And, if you do claim the standard deduction, the additional amount will save you over $400 if you're in the 24% income tax bracket .

Couples in which one or both spouses are age 65 or older also get bigger standard deductions than younger taxpayers. If only one spouse is 65 or older, the extra amount for 2021 is $1,350 – $2,700 if both spouses are 65 or older. Be sure to take advantage of your age!

For new retirees, it's more important than ever to take full advantage of every tax break available. That's especially true if you're on a fixed income. After all, you have to stretch out your retirement savings to cover the rest of your life. But holding on to your money during retirement is easier said than done. That's why retirees really need to pay close attention to their tax situation.

Unfortunately, though, seniors often miss valuable tax-saving opportunities . In many cases, it's simply because they just don't know about them. Don't let that happen to you -- check out these often-overlooked tax breaks for retirees . You could save a bundle!

When you turn 65, the IRS offers you a gift in the form of a larger standard deduction . For example, a single 64-year-old taxpayer can claim a standard deduction of $12,550 on his or her 2021 tax return (it was $12,400 for 2020 returns). But a single 65-year-old taxpayer will get a $14,250 standard deduction in 2021 ($14,050 in 2020).

The extra $1,700 will make it more likely that you'll take the standard deduction rather than itemize. And, if you do claim the standard deduction, the additional amount will save you over $400 if you're in the 24% income tax bracket .

Couples in which one or both spouses are age 65 or older also get bigger standard deductions than younger taxpayers. If only one spouse is 65 or older, the extra amount for 2021 is $1,350 – $2,700 if both spouses are 65 or older. Be sure to take advantage of your age!

The rules are clear: To qualify for tax-free profit from the sale of a home, the home must be your principal residence and you must have owned and lived in it for at least two of the five years leading up to the sale. But there is a way to capture tax-free profit from the sale of a former vacation home.

Let's say you sell the family homestead and cash in on the break that makes up to $250,000 in profit tax-free ($500,000 if you're married and file jointly). You then move into a vacation home you've owned for 25 years. As long as you make that house your principal residence for at least two years, part of the profit on the sale will be tax-free.

Basically, the $250,000/$500,00 exclusion doesn't apply to any profit that is allocable to the time after 2008 that a home is not used as your principal residence. For example, assume you bought a vacation home in 2001, convert it to your principal residence in 2015 and sell it in 2021. The post-2008 vacation-home use is seven of the 20 years you owned the property. So, 35% (7 ÷ 20) of the profit would be taxable at capital gains rates; the other 65% would qualify for the $250,000/$500,000 exclusion.

[Jul 03, 2021] U.S. Wins International Backing for Global Minimum Tax

Jul 02, 2021 | www.wsj.com

The U.S. has won international backing for a global minimum rate of tax as part of a wider overhaul of the rules for taxing international companies , a major step toward securing a final agreement on a key element of the Biden administration's domestic plans for revenue raising and spending.

Officials from 130 countries that met virtually agreed Thursday to the broad outlines of what would be the most sweeping change in international taxation in a century. Among them were all of the Group of 20 major economies, including China and India, which previously had reservations about the proposed overhaul.

Those governments now will seek to pass laws ensuring that companies headquartered in their countries pay a minimum tax rate of at least 15% in each of the nations in which they operate, reducing opportunities for tax avoidance .

[Jun 12, 2021] Tech giants and tax havens targeted by historic G7 deal by David Milliken and Kate Holton

Jun 05, 2021 | finance.yahoo.com

David Milliken and Kate Holton Sat, June 5, 2021, 4:01 AM

...Hundreds of billions of dollars could flow into the coffers of governments left cash-strapped by the COVID-19 pandemic after the Group of Seven (G7) advanced economies agreed to back a minimum global corporate tax rate of at least 15%.

Facebook said it expected it would have to pay more tax, in more countries, as a result of the deal, which comes after eight years of talks that gained fresh impetus in recent months after proposals from U.S. President Joe Biden's new administration.

"G7 finance ministers have reached a historic agreement to reform the global tax system to make it fit for the global digital age," British finance minister Rishi Sunak said after chairing a two-day meeting in London.

The meeting, hosted at an ornate 19th-century mansion near Buckingham Palace in central London, was the first time finance ministers have met face-to-face since the start of the pandemic.

U.S. Treasury Secretary Janet Yellen said the "significant, unprecedented commitment" would end what she called a race to the bottom on global taxation. German finance minister Olaf Scholz said the deal was "bad news for tax havens around the world". Yellen also saw the G7 meeting as marking a return to multilateralism under Biden and a contrast to the approach of U.S. President Donald Trump, who alienated many U.S. allies. "What I've seen during my time at this G7 is deep collaboration and a desire to coordinate and address a much broader range of global problems," she said.

Ministers also agreed to move towards making companies declare their environmental impact in a more standard way so investors can decided more easily whether to fund them, a key goal for Britain.

... ... ...

Key details remain to be negotiated over the coming months. Saturday's agreement says only "the largest and most profitable multinational enterprises" would be affected.

... ... ...

The G7 includes the United States, Japan, Germany, Britain, France, Italy and Canada.

[May 05, 2021] The Fed Finally Gets Some Tough Questions... And Fails To Answer Them by Robert Aro

May 05, 2021 | www.zerohedge.com

Authored by Robert Aro via The Mises Institute,

Last Wednesday, Federal Reserve Chair Jerome Powell showed how simple questions do not always get simple answers. When speaking to the media after the latest Federal Open Market Committee ( FOMC ) meeting, some difficult questions were asked. So much so, Powell had to repeat one question to himself, asking:

When will the economy be able to stand on its own feet?

He immediately followed with:

I'm not sure what the exact nature of that question is.

FOX News correspondent Edward Lawrence elaborated, asking when the Fed would lower the number of treasuries it buys, and when the economy would function "without having that support from the monetary side."

Powell found ways to avoid answering the idea of a nation which stands without central bank supports, but he did refer to various "tests" the Fed will do in order to make decisions like shrinking the balance sheet, explaining:

we've articulated our test for that, as you know, and that is just we'll continue asset purchases at this pace until we see substantial further progress.

He went on to say that prior to making any decisions, such as buying fewer treasuries, they will give the public a lot of notice beforehand.

There was also a question related to the Fed's influence in the housing market:

the housing market is strong, prices are up. And yet, the Fed is buying $40 billion per month in mortgage related assets. Why is that, and are those purchases playing a role at all in pushing up prices?

Despite amassing nearly $2.2 trillion of mortgage-backed securities (MBS), Powell defended the central bank on the grounds that:

I mean, we started buying MBS because the mortgage-backed security market was really experiencing severe dysfunction, and we've sort of articulated, you know, what our exit path is from that. It's not meant to provide direct assistance to the housing market.

To be clear, the "severe dysfunction" occurred over a decade ago, when the Fed entered the MBS market. As for the public knowing the exit path or not providing assistance to the housing market, both ideas are highly debatable, to say the least.

But even more puzzling is when Powell says that during the current COVID crisis:

We bought MBS, too. Again, not intention to send help to the housing market, which was really not a problem this time at all.

Strange, the Fed would commit to buying $40 billion a month of MBS when, according to the Chair, there were no problems in the market. He concludes that purchases will go to zero over time, but the "time is not yet."

The final question asked was in regards to market intervention:

if you get out of the markets, there aren't enough buyers for all of the Treasury debt? And so, rates would have to go way up. Bottom line question is what do we get for $120 billion a month that we couldn't get for less?

Powell never explained what exactly "we get for $120 billion" a month, but assured us the Fed was looking to reach its goals, and this was part of its plan. However, he did comment on purchases, saying:

But if we bought less, you know, no. I mean, I think the effect is proportional to the amount we buy And we articulated the, you know, the test for withdrawing that accommodation. And we think, you know. So, we're waiting to see those tests to be fulfilled, both for asset purchases and for lift off of rates. And, you know, when the tests are fulfilled, we'll go ahead as, you know, we've done this before.

Between various tests to determine policy, vague responses, and a general avoidance of answering questions directly, not much was offered other than providing perpetual liquidity injections under accommodative monetary conditions. It was refreshing to see the mainstream media ask more questions about the plan ahead; we can only hope the mainstream economic community will do the same.

[May 05, 2021] Rabo -- Who's Really In The Driver's Seat

May 05, 2021 | www.zerohedge.com

Janet Yellen caused market ructions when she noted in public that: "It may be that interest rates will have to rise somewhat to make sure that our economy doesn't overheat, even though the additional spending is relatively small relative to the size of the economy."

Firstly, because rates aren't the Treasury Secretary's job to comment on - EVER. Yes, there is the same need for endless hockey-stick-projection optimism on growth, the same silken spiel, and the same one-size-fits-all Panglossian policy prescriptions (of various vintages: Slash taxes! Raise taxes!) in both roles: but there is a separation of powers between the two.

Secondly, because that very same Panglossian policy from the Fed has got global markets to the point where the mere idea of small increase in US rates is going to bring a whole lot of precariously-levered objects tumbling down. It's a good job that interest rates never, ever, ever have to go up again then, isn't?

Naturally, Yellen immediately had to walk back these comments when qualifying that rate increases " are not something that I am predicting or recommending ." So just what was the correct verb then? Speculating? Hypothesizing? Imagining? Dreaming? Deluding?

For now, markets can happily seize on all of the usual Fed-driven speculative hypotheticals to imagine, dream, and delude themselves to greater wealth as usual . US couples everywhere can keep fantasizing that they too can one day get a billionaire divorce. Yet it's not as if Yellen doesn't have just *a little* bit of experience in this rate field thing. It's not as if she might not end up thinking a certain way on autopilot in the new job, and saying the quiet part out loud – is it?

Of course, the question of who is driving applies to the Fed itself . Yellen added: "If anyone appreciates the independence of the Federal Reserve I think that person is me." Yet unlike the BOE, for example, the Fed allows US banks a major role (if not "ownership") in its 12 regional Reserve Banks, alongside balancing presidential appointees. So it a fusion body, and even if it is independent of the Treasury, that is hardly true of all influence: the reason for having 12 regional Reserve Banks was originally to water down that of Wall Street. Yet how is that working out, and where are the union/labour representatives, for example? That's a structural issue the US press doesn't talk about much even as much of it obsesses about power structures everywhere else; but, sadly, anti-Semitic conspiracy theorists more than compensate, because that's their defined role.

Meanwhile, we all know the Powell Fed is still firmly in pedal-to-the-metal mode . Yellen just agreed to stay in the back seat in that regard, even if her proposed fiscal policy is the equivalent of winding down the window and sticking her head out of it, like a dog having a good time, which should see any caring central bank driver reduce speed accordingly.

The question remains, however, as to exactly what is driving the massive surge in commodity prices we are still seeing all round us? Headlines yesterday were that corn hit USD7 a bushel, the highest since 2013. Today Bloomberg reports "Raw materials surging across tighter markets and recovery; Consumer prices rising as manufacturers pass on higher costs." Once upon a time, central banks used to do something when headlines like this were seen. So why no need to brake? Because this is all transitory, as Powell and Yellen, at the second attempt, just underlined.

But how so? Is it Covid-19 related? We already hear that semiconductor supply will be pinched for years. Or perhaps it is all just happening "because markets", as seems to be the general consensus? Or, just maybe, the Fed, and other major central banks, are also playing a role via their pedal-to-the-metal liquidity? Another key driver is Wall Street realising commodities are an inflation hedge too – even as that creates the inflation they are trying to avoid. (Don't worry: they still get to eat. Others might not though.) Another is China's voracious commodity appetite. (Don't worry: they still get to eat. Others might not though.) One thing we can be sure of. Prices seem to be moving significantly higher, and not just due to the expected base effects.

Ironically, the only way in which Powell --and Yellen-- can be sanguine about this is in the knowledge that even if prices go up, US wages almost certainly won't. Yes, at the moment we are anecdotally seeing US labour shortages as millions of previously low-paid workers prefer to live off of their last stimulus cheque rather than report for the daily drudgery. But have you heard any anecdotes of wages going up as a result – or rather of businesses closing down, or automating? As has been repeated here many times, are the structures *really* being put in place to support sustained higher wages? If not, it's just higher prices - and so lower real wages.

I am not sure that the 12 regional Reserve Banks and those in DC are aware of what that will feel like to Joe Public. More so if their logical response is to keep monetary stimulus high, and so pushing real wages even lower. If mishandled, this could easily drive us off a cliff. As such, who is really in the driver's seat?


3 play_arrow

Cloud9.5 3 hours ago (Edited)

Who is running the show? The front is the CIA. Who is behind it? A collection of oligarchs.

Brill 3 hours ago

No mention of Rothschild?

No mention of Rockefeller?

Joe Bribem 2 hours ago

The biggest cockroaches are never mentioned.

Lordflin 3 hours ago remove link

Geopolitics are in the driver's seat...

The economy is along for the ride...

radical-extremist 2 hours ago

If Antifa had any brains (which they don't), they'd be marching and rioting against the CIA and the Fed - not the Proud Boys, ICE and local police stations. They're fighting to tear down the SYSTEM, and they don't even know what or where the SYSTEM really is.

PAsucks 2 hours ago

"I am not sure that the 12 regional Reserve Banks and those in DC are aware of what that will feel like to Joe Public." It's called a lack of empathy, an important trait of sociopaths. Federal Reserve is an arm of .gov - a criminal organization.

Apollo Capricornus Maximus 2 hours ago

The unelected Council of Foreign Relations kleptocratic oligarchy is in charge of the kinetic and psychological manipulation of Western finances and zeitgeist. The Federal Reserve, CIA, National Security state, MSM, Congress all report and obey this criminal cabal of whom every member should be hung by the American people.

[May 05, 2021] The Fed Finally Gets Some Tough Questions... And Fails To Answer Them

May 05, 2021 | www.zerohedge.com

Authored by Robert Aro via The Mises Institute,

Last Wednesday, Federal Reserve Chair Jerome Powell showed how simple questions do not always get simple answers. When speaking to the media after the latest Federal Open Market Committee ( FOMC ) meeting, some difficult questions were asked. So much so, Powell had to repeat one question to himself, asking:

When will the economy be able to stand on its own feet?

He immediately followed with:

I'm not sure what the exact nature of that question is.

FOX News correspondent Edward Lawrence elaborated, asking when the Fed would lower the number of treasuries it buys, and when the economy would function "without having that support from the monetary side."

Powell found ways to avoid answering the idea of a nation which stands without central bank supports, but he did refer to various "tests" the Fed will do in order to make decisions like shrinking the balance sheet, explaining:

we've articulated our test for that, as you know, and that is just we'll continue asset purchases at this pace until we see substantial further progress.

He went on to say that prior to making any decisions, such as buying fewer treasuries, they will give the public a lot of notice beforehand.

There was also a question related to the Fed's influence in the housing market:

the housing market is strong, prices are up. And yet, the Fed is buying $40 billion per month in mortgage related assets. Why is that, and are those purchases playing a role at all in pushing up prices?

Despite amassing nearly $2.2 trillion of mortgage-backed securities (MBS), Powell defended the central bank on the grounds that:

I mean, we started buying MBS because the mortgage-backed security market was really experiencing severe dysfunction, and we've sort of articulated, you know, what our exit path is from that. It's not meant to provide direct assistance to the housing market.

To be clear, the "severe dysfunction" occurred over a decade ago, when the Fed entered the MBS market. As for the public knowing the exit path or not providing assistance to the housing market, both ideas are highly debatable, to say the least.

But even more puzzling is when Powell says that during the current COVID crisis:

We bought MBS, too. Again, not intention to send help to the housing market, which was really not a problem this time at all.

Strange, the Fed would commit to buying $40 billion a month of MBS when, according to the Chair, there were no problems in the market. He concludes that purchases will go to zero over time, but the "time is not yet."

The final question asked was in regards to market intervention:

if you get out of the markets, there aren't enough buyers for all of the Treasury debt? And so, rates would have to go way up. Bottom line question is what do we get for $120 billion a month that we couldn't get for less?

Powell never explained what exactly "we get for $120 billion" a month, but assured us the Fed was looking to reach its goals, and this was part of its plan. However, he did comment on purchases, saying:

But if we bought less, you know, no. I mean, I think the effect is proportional to the amount we buy And we articulated the, you know, the test for withdrawing that accommodation. And we think, you know. So, we're waiting to see those tests to be fulfilled, both for asset purchases and for lift off of rates. And, you know, when the tests are fulfilled, we'll go ahead as, you know, we've done this before.

Between various tests to determine policy, vague responses, and a general avoidance of answering questions directly, not much was offered other than providing perpetual liquidity injections under accommodative monetary conditions. It was refreshing to see the mainstream media ask more questions about the plan ahead; we can only hope the mainstream economic community will do the same.


ReadyForHillary 1 hour ago

When will the economy be able to stand on its own feet?

He immediately followed with:

I'm not sure what the exact nature of that question is.

HA HA HA HA!

HA HA HA HA HA HA HA HA!

CovidBannedTard 1 hour ago

C'mon man!!!

Lordflin 1 hour ago

The entire point to the Fed is to fail to answer tough questions...

no cents at all 1 hour ago

Or doublespeak. The fed probably has a talented linguistics department at their employ

Paul Bunyan 1 hour ago (Edited)

What they have always said is moronic. Yet the world is full of morons, so the people can't see through the lies.

Miniminer1 1 hour ago

Not a confidence builder

SDShack 1 hour ago (Edited)

Good god, how many 'you know' responses did Powell have? Sounds like some brain dead zoomer...'it's like, you know, complicated, and like, you know, we are working on it.' A complete 'Emperor has no clothes' moment. And these are supposed to be the smartest people on the planet. Clueless or just evil liars. Or both.

mtl4 53 minutes ago

I'll take both for $1000 Alex

Ajax_USB_Port_Repair_Service_ 1 hour ago

The Fed intervenes everyday, all day, because they have to. There is no market without the Fed.

CovidBannedTard 1 hour ago

You know!!!....The Thing!!!

C'mon Man!!

Paul Bunyan 1 hour ago (Edited)

The game is almost over. The dollar has 1-2 years left before a complete monetary reset. Make sure you get out soon. You won't want to make last minute decisions.

JOHNLGALT. 1 hour ago

My last minute decision is:

1). Do I buy Ounces?

2). Do I buy Kilograms? 🦍🦍🚀🚀🚀😂🤣😎.

Emmet Fitz-Hume 1 hour ago

Powell, Greenspan, et al are just word-salad machines

BorisTheBlade 1 hour ago

True, though it's just money .

LeeBoy 44 minutes ago

He was not asked this.

Why should seniors and retirees be sacrificed with ZIRP in order to advance the interests of the US Treasury and Corporate borrowers?

I would call it elder abuse. He should be required to address this question. Let's have the Press do their job

Ben A Drill 41 minutes ago

Why should anyone gamble with their hard earned money to keep up with inflation?

AhabQuixote 50 minutes ago

This is a ponzi scheme in plain sight. It is as if Bernie Madoff told his clients that his firm is a scam but a scam is the only way the system can function. It will all be fixed at some point in the future when pigs fly.

nuerocaster 29 minutes ago

You may think that the Mises Institute and Rabo Bank are idiots. But think how hard it is to present all this as managerial error and make stupendous wealth transference and money laundering sound like oopsie.

archipusz 1 hour ago

Why even ask.

They are going to print. Congress wants them to print. All the elite benefit from the printing.

It is not going to stop.

JOHNLGALT. 1 hour ago

WE will stop them!!

We are a community that loves Silver, Period. 72.4k. Silverbacks. 2.2k. Online now Created 29 Jan 2021.

Go SILVERBACKS 🦍🦍🦍🦍.

This is a movement to bring the 🐍🐍🐍BANK$TER$🐍🐍🐍DOWN.

https://www.reddit.com/r/Wallstreetsilver/

Backhandslicer 23 minutes ago

Biden the moron dictator doesn't like to answer questions either

ChromeRobot 47 minutes ago

Basically, if you haven't figured it after 108 years, these clowns don't have the slightest clue what they're doing or worse....do.

Revolution_starts_now 1 hour ago

Do you prefer GITMO or SuperMax?

Ajax_USB_Port_Repair_Service_ 17 minutes ago

I'll take GITMO. Nonsmoking, non-vaccinated, section please.

CrabbyR 1 hour ago (Edited)

Politicians and banker's first language is bafflegab

Misesmissesme 1 hour ago (Edited)

Answers? We ain't got no answers! We don't need no answers! I don't have to give you any steenking answers!

Backhandslicer 23 minutes ago

Life support? They have created a monster and the monster is ravaging the country side

Backhandslicer 25 minutes ago

Powell is thinking I'm a currency printing machine and all the chicks dig me I shouldn't have to answer any questions

Backhandslicer 35 minutes ago

Powell sounds like the absent minded janitor

Backhandslicer 36 minutes ago (Edited)

Eliminate the central bank and use only metals as money with paper currency withdrawable for any of the metals at any bank or credit union

CosmoJoe 35 minutes ago

Seriously? I haven't carried cash in years. I don't want to. I don't want to carry a bunch of gold and silver around in a little money sack. It isn't the f&cking middle ages.

zorrosgato 31 minutes ago

A paper currency backed by gold would work fine enough.

MASTER OF UNIVERSE 18 minutes ago

Would cement bricks painted gold work well enough if we never allowed anybody to test gold samples to verify authenticity?

That's what Fort Knox is, right?

MOU

Backhandslicer 26 minutes ago

Does a 100 dollar bill in your pocket give you a rash?

CosmoJoe 19 minutes ago

I wouldn't know, I don't carry $100 in my pocket.

permanent victim 55 minutes ago

The fed will be all powerful till the world abandons the dollar. Until then they will print shamelessly

Ben A Drill 48 minutes ago

Understand the free masons and you will see how much evil is in the world.

Realism 1 hour ago

The list of paid liars keeps growing

VWAndy 1 hour ago

Why shouldnt they be hung from lamp posts is a valid question too.

Rainman 1 hour ago

By now we all know the bankster-owned Fed and the US Treasury are one and the same entity.

Old Hickory twitches in his grave...

dlfield 1 hour ago

A: Why never, because then I would be out of a job.

sarret PREMIUM 1 hour ago

Here's a difficult question Powell. Do you identify more with a disabled penguin or a gay orangutan? Get it wrong and you will be cancelled ya numpty.

JohnnyCrypto 19 seconds ago

Yeah, MadeofTheta was right!

It's over!

ClamJammer 2 minutes ago

Learned everything he knew about not answering questions from Pompeo........we lie, we steal, we cheat.........

permanent victim 10 minutes ago

As long as the markets are up I am doing what I am getting paid to do

cowdiddly 14 minutes ago

Ummm....errrr... Questions? We don't need no stinking questions.

IDESofMARCH 16 minutes ago remove link

FED policy picks and chooses which busines fails and which makes all the money.

FED kills Ma and Pa Bus DEAD, Wall Mart, HD, Chain Restaurants and Dollar Stores all having a good time raising prices.

[Mar 22, 2021] How to Collect $1.4 Trillion in Unpaid Taxes: Wealthy Americans are concealing large amounts of income from the I.R.S. There is a straightforward corrective.

Mar 22, 2021 | www.nytimes.com

Most tax havens are either American possessions or British possessions. Then there are the tax havens that are firmly under American geopolitical control (Switzerland, Monaco, Luxembourg, Ireland). Then there is the State of Delaware (of which the present POTUS is from). There are no tax havens under the control of an enemy of the West.

The USA should stop with that charade. If it wanted to curb on tax evasion, it would've already done so decades ago.

Capitalism is value that self-valorises. The rich must get richer and the poor must get poorer over the long term. That's how a healthy capitalist system operates. To try to claim USD 1.4 trillion from their bourgeoisie is not how the American Empire should work. This is a desperate attempt of the American Federal State to survive.

[May 29, 2020] Trump's Tax Cuts Get an "F" for enriching the Globalist Elite by Michael Cuenco

Highly recommended!
Notable quotes:
"... Instead of reining in the "globalist elites" he so vociferously ran against or those corporations "who have no loyalty to America," his one legislative achievement has been to award them a massive tax cut. Through it, he has maintained their favorite mix of low revenue intake and high deficits which gives Republicans a pretext to "starve the beast" and induce fiscal anorexia. ..."
"... Trump ran as a populist firebrand -- a fusion of Huey Long and Ross Perot -- and while he never abandoned that style, he has governed for the most part as a milquetoast free market Republican in perfect tandem with Paul Ryan and Mitch McConnell, one whose solution to everything is more tax cuts and deregulation: a kind of turbo-charged "high-energy Jeb." ..."
"... With the outbreak of COVID-19, many on the reformist right are hoping for the emergence of the President Trump they thought they were promised, a leader just as ready to break out of the donor-enforced "small government" straitjacket while in power as he was during the campaign. ..."
"... The heightened rhetoric against China will continue -- the one thing Trump is good at -- but it is unlikely to be matched with the required policy ..."
"... If neoliberalism excused inequality at home by extolling the equalization of incomes across the globe (millions of Chinese raised from poverty, while millions of American workers fall back into it!), the new position must shift emphasis back to ensuring a more equitable domestic distribution of wealth and opportunity across all classes and communities in this country. ..."
"... It is worth pondering what might have happened if the administration had gone the other way and followed the last piece of policy advice given by Steve Bannon before his ouster in August 2017. Bannon suggested raising the top marginal income tax rate to 44 percent while "arguing that it would actually hit left-wing millionaires in Silicon Valley, on Wall Street, and in Hollywood." ..."
"... It might well have put Trump on the path to becoming what Daniel Patrick Moynihan once proposed as a model for Richard Nixon when he gifted the 37th president a biography of Disraeli, namely a Tory Republican who could outsmart the left by crafting broad popular coalitions based on a blending of patriotic cultural conservatism with class-conscious economic and social policy. ..."
"... Then and even more so now, the idea resonates: a Reuters/Ipsos poll from January found that 64 percent of Americans support a wealth tax, a majority of Republicans included. Poll after poll has reaffirmed this. It seems as if there is right-wing populist support for taxing the rich more. ..."
"... There is one more thing to be said about the significance of taxing the rich. Up until very recently, there has been a prevailing tendency among the reformist right (with some important exceptions) to couch criticism of the elites primarily or even exclusively in cultural terms. There seems to have been a polite hesitation at taking the cultural critique to its logical economic conclusions. It is easy to excoriate the excesses of elite identity politics, the "woke" part of woke capitalism; it's something all conservatives -- and indeed growing numbers of liberals and socialists -- agree on. Fish in a barrel. ..."
"... But to challenge the capitalism part, i.e. free market orthodoxy, not in a secondary or tertiary way, but head on and in specific policy terms as Lofgren and a few others have done, would involve confronting difficult truths, namely that the biggest beneficiaries of tax cuts and Reaganite economic policy in general, which most conservatives enthusiastically promoted for four decades, are the selfsame decadent coastal elites they claim to oppose. It is they who more than anyone else thrive on financialized globalization, arbitrage and offshoring. ..."
"... In other words, it amounts to an honest recognition of the complicity of conservatism in the mess we're in, which is perhaps a psychological bridge too far for too many on the right, reformist or not. (Trigger Warning!) This separation of culture and economics has led to the farce of a self-styled nationalist president lining the pockets of his nominal enemies, the globalist ruling class. ..."
"... A conservative call to tax the rich would signal that the right is ready to end this charade and chart a course toward a more patriotic, public-spirited and yes, proudly hyphenated capitalism. ..."
"... Michael Cuenco is a writer on politics and policy. He has also written for American Affairs. ..."
May 26, 2020 | www.theamericanconservative.com

They also left worker wages stagnant and increased the deficit. Where is our more nationalist economic policy?

Much has been written about the disappointment of certain segments of the right in the apparent capitulation of Donald Trump to the agenda of the conservative establishment.

Instead of reining in the "globalist elites" he so vociferously ran against or those corporations "who have no loyalty to America," his one legislative achievement has been to award them a massive tax cut. Through it, he has maintained their favorite mix of low revenue intake and high deficits which gives Republicans a pretext to "starve the beast" and induce fiscal anorexia.

The president has granted them as well their ideal labor market through an ingenious formula: double down on mostly symbolic raids (as opposed to systemic solutions like Mandatory E-Verify) and ramp up the rhetoric about "shithole countries" to distract the media, but keep the supply of cheap, exploitable low-skill labor (legal and illegal) intact for the business lobby.

Trump ran as a populist firebrand -- a fusion of Huey Long and Ross Perot -- and while he never abandoned that style, he has governed for the most part as a milquetoast free market Republican in perfect tandem with Paul Ryan and Mitch McConnell, one whose solution to everything is more tax cuts and deregulation: a kind of turbo-charged "high-energy Jeb."

With the outbreak of COVID-19, many on the reformist right are hoping for the emergence of the President Trump they thought they were promised, a leader just as ready to break out of the donor-enforced "small government" straitjacket while in power as he was during the campaign.

Despite signs of progress, what's more likely is a return to business as usual. Already the GOP's impulse for austerity and parsimony is proving to be stronger than any willingness to think and act outside the box.

The heightened rhetoric against China will continue -- the one thing Trump is good at -- but it is unlikely to be matched with the required policy, such as a long-term plan to reshore U.S. industry (that doesn't just rely on blindly giving corporations the benefit of the doubt). At this point, we already know where the president's priorities lie when given a choice between the advancement of America's workers or continued labor arbitrage and carte blanche corporate handouts.

Lest they be engulfed by it like everyone else, the reformist right should ask: is there any way to stand athwart the supply-side swamp yelling Stop?

Many of these conservatives lament the Trump tax cut not just because it was a disaster that failed to spark reinvestment, left wages stagnant, needlessly blew up the deficit and served as a slush fund for stock buybacks, but more fundamentally because it betrayed the overwhelming intellectual inertia and lack of imagination that characterizes conservative policymaking.

More than in any other issue then, a distinct position on taxes would make the new conservatism truly worth distinguishing from the old: tax cuts were after all the defining policy dogma of the neoliberal Reagan era.

If neoliberalism excused inequality at home by extolling the equalization of incomes across the globe (millions of Chinese raised from poverty, while millions of American workers fall back into it!), the new position must shift emphasis back to ensuring a more equitable domestic distribution of wealth and opportunity across all classes and communities in this country.

A reformulation of fiscal policy along populist economic nationalist lines can help with that.

It is worth pondering what might have happened if the administration had gone the other way and followed the last piece of policy advice given by Steve Bannon before his ouster in August 2017. Bannon suggested raising the top marginal income tax rate to 44 percent while "arguing that it would actually hit left-wing millionaires in Silicon Valley, on Wall Street, and in Hollywood."

Such a move would have been nothing short of revolutionary: it would have been a faithful and full-blown expression of the populist economic nationalism Trump ran on; it would have presented a genuine material threat to the elite ruling class of both parties, and likely would have pre-empted the shock value of Alexandria Ocasio-Cortez proposing a 70 percent top marginal rate.

It might well have put Trump on the path to becoming what Daniel Patrick Moynihan once proposed as a model for Richard Nixon when he gifted the 37th president a biography of Disraeli, namely a Tory Republican who could outsmart the left by crafting broad popular coalitions based on a blending of patriotic cultural conservatism with class-conscious economic and social policy.

Not that Trump would have needed to go back to Nixon or Disraeli for instruction on the matter. In 1999, long before Elizabeth Warren came along on the national scene, a presidential candidate eyeing the Reform Party nomination contemplated the imposition of a 14.25 percent wealth tax on America's richest citizens in order to pay off the national debt: his name was Donald Trump.

What ever happened to that guy? The Trump of 1999 was onto something. Maybe this could be a way to deal with our post-pandemic deficits.

Then and even more so now, the idea resonates: a Reuters/Ipsos poll from January found that 64 percent of Americans support a wealth tax, a majority of Republicans included. Poll after poll has reaffirmed this. It seems as if there is right-wing populist support for taxing the rich more.

To the common refrain, "the rich are just going to find ways to shelter their income or relocate it offshore," I have written elsewhere about the concrete policy measures countries can and have taken to clip the wings of mobile global capital and prevent such an outcome.

I have written as well about how taxing the rich and tightening the screws on tax enforcement have implications that go beyond the merely redistributive approach to fiscal policy conventionally favored by the left; about how it can be a form of leverage against an unaccountable investor class used to shopping at home and abroad for the most opaque assets in which to hoard vast amounts of essentially idle capital.

A deft administration would use aggressive fiscal policy as an inducement for this irresponsible class to make things right by reinvesting in such priorities as the wages and well-being of workers, the vitality of communities, the strength of strategic industries and the productivity of the real economy – or else Uncle Sam will tax their wealth and do it for them.

It would also be an assertion of national sovereignty against globalization's command for countries to stay "competitive" by immiserating their citizens with ever-lower taxes on capital holders and ever more loose and "flexible" labor markets in a never-ending race to the bottom.

Mike Lofgren has penned a marvelous essay in these pages about the virtual secession of the rich from the American nation, "with their prehensile greed, their asocial cultural values, and their absence of civic responsibility."

What better way to remind them that they are still citizens of a country and members of a society -- and not just floating streams of deracinated capital -- than by making them perform that most basic of civic duties, paying one's fair share and contributing to the commonweal? America need not revert to the 70-90 percent top marginal rates of the bolshevik administrations of Truman, Eisenhower or Kennedy, but proposals for modest moves in that direction would be welcome.

There is one more thing to be said about the significance of taxing the rich. Up until very recently, there has been a prevailing tendency among the reformist right (with some important exceptions) to couch criticism of the elites primarily or even exclusively in cultural terms. There seems to have been a polite hesitation at taking the cultural critique to its logical economic conclusions. It is easy to excoriate the excesses of elite identity politics, the "woke" part of woke capitalism; it's something all conservatives -- and indeed growing numbers of liberals and socialists -- agree on. Fish in a barrel.

But to challenge the capitalism part, i.e. free market orthodoxy, not in a secondary or tertiary way, but head on and in specific policy terms as Lofgren and a few others have done, would involve confronting difficult truths, namely that the biggest beneficiaries of tax cuts and Reaganite economic policy in general, which most conservatives enthusiastically promoted for four decades, are the selfsame decadent coastal elites they claim to oppose. It is they who more than anyone else thrive on financialized globalization, arbitrage and offshoring.

In other words, it amounts to an honest recognition of the complicity of conservatism in the mess we're in, which is perhaps a psychological bridge too far for too many on the right, reformist or not. (Trigger Warning!) This separation of culture and economics has led to the farce of a self-styled nationalist president lining the pockets of his nominal enemies, the globalist ruling class.

Already, the White House is proposing yet another gigantic corporate tax cut. Using the exact same discredited logic as the last one, senior economic advisor Larry Kudlow wants Americans to trust him when he says that halving the already lowered 2017 rate to 10.5 percent will encourage these eminently reasonable multinationals to reinvest. There he goes again.

A conservative call to tax the rich would signal that the right is ready to end this charade and chart a course toward a more patriotic, public-spirited and yes, proudly hyphenated capitalism.

Michael Cuenco is a writer on politics and policy. He has also written for American Affairs.


Kent 3 days ago

"America need not revert to the 70-90 percent top marginal rates of the bolshevik administrations of Truman, Eisenhower or Kennedy, but proposals for modest moves in that direction would be welcome."

Those tax rates were offset by direct investment in the US economy. So if I invested in the stock market, I'd get a 90% tax rate because that doesn't produce actual wealth. On the other hand, if I invested in building factories that created thousands of jobs for American citizens, my tax rate may fall to 0%. And those policies created a fantastic economy that we oldsters remember as the golden age. That wasn't bolshevism, it was competitive capitalism. What we have today is libertarianism. And as long as conservatives are going to let the libertarian boogey-man's nose under the tent, we are going to have this ugly, bifurcated economy. Your choice. Man up.

Winston Nevis Kent 3 days ago • edited
You ever tell hear of sarcasm, bud? I think that's what the author was going for. Don't think he was trying to say that Ike and Truman were Bolsheviks but was rather making fun of libertarians who hyperbolically associate high tax rates with socialism and Soviet Communism...
K squared Winston Nevis 3 days ago
Plenty of goldwater's supporters in 1964 called President Eisenhower a communist
GAguilar K squared 2 days ago
Particularly the John Birchers, including my parents!
SKPeterson Kent 3 days ago • edited
We absolutely do not have libertarianism operating in this country today. There is simply no evidence that there is any sort of libertarian economic or political system in place. Oh sure, you'll whine "but globalism without actually defining what globalism is, or what is wrong about precisely, but just that it's somehow wrong and that libertarians are to blame for it. There's a good word for such an argument: bullshit.
We have an economy that is extraordinarily dominated by the state via mandates, regulations, and monetary interference that is most decidedly not libertarian in any way whatsoever. The current system though does create and perpetuate a system of rent-seeking cronies who conform rather nicely to the descriptions of said actors by Buchanan and Tullock. The problems of the modern economy are the result of state interference, not its absence, and Cuenco's sorry policy prescriptions do nothing to minimize the state but instead just create a different set of rent-seeking cronies for which the wealth and incomes of the nation are to be expropriated.
marku52 SKPeterson 3 days ago
O dear, No True Scotsman....
SKPeterson marku52 2 days ago
If you can point to how the current situation is in any way "libertarian" without creating your own perfect little lazy straw man definition then by all means do so. Until then your retort is without
substance (you see a no true Scotsman reply doesn't work if the facts are in the favor of the person supposedly making such an argument. Here you fail to establish why what I said is such a case; saying it doesn't make it so). When Kent makes some throwaway comment that we're somehow living in some sort of libertarian era he's full of it, you know it, and all you can do is provide some weak "no true Scotsman" defense? Come on and man up, stop appealing to artificial complaints of fallacious argumentation, and give me an actual solid argument with evidence beyond "this is so libertarian" that we're living in some libertarian golden age that's driving the oppression of the masses.
cka2nd SKPeterson 3 days ago
Busted unions, contracting out and privatization, deregulation of vast swaths of the economy since the late 1970's (Jimmy Carter has gotten kudos from libertarian writers for his de-regulatory efforts), lowered tax rates, especially on financial speculation and concentrated wealth, a blind eye or shrugged shoulder to anti-trust law and corporate consolidation. Yeah, nothing to see here, no partial victories for the libertarian wings of the ruling class or the GOP, at all. The Koch Brothers accomplished nothing, absolutely nothing, since David was the Libertarian Party's nominee for Vice President in 1980; all that money gone to waste. Sure.
SKPeterson cka2nd 2 days ago
So, now some sort of "partial victory" means we're living in some sort of libertarian era? And what exactly was so wonderful about all the things you listed being perpetuated? So, union "busting" is terrible, but union corruption was a great part of our national solidarity and should have been protected? Deregulation of vast swathes of the economy? You mean the elimination of government controlled cartels in the form of trucking and airlines? You mean the sorts of things that have enabled the working class folks you supposedly favor to travel to places that were previously out of reach for them and only accessible to the rich for their vacations? Yes, that's truly terrible. Again, you're on the side of the little guy, right? Lowered taxes? Are you seriously going to argue that the traditional conservative position has been for high tax rates? What are taxes placed upon? People and property. What do conservatives want to protect? People and property. So... arguing for higher taxes or saying that low taxes are bad or even especially, libertarian, is really going off the rails. That's just bad reasoning. And regarding financialization, those weren't especially libertarian in their enacting, but rather flow directly out of the consequences of the modern Progressive implementation of neo-Keynesian monetary and fiscal policy. Suffice it to say, I don't think you'll find too many arguments from libertarians that the policies encouraging financialization were good or followed libertarian economic policy prescriptions. Moreover, they led entirely to the repulsive "too big to fail" situation and if there's one thing that libertarians hold to is that there is no such thing (or shouldn't be) as "too big to fail." The objection to anti-trust law is that it was regularly abused and actually created government-protected firms that harmed consumers. If you think anti-trust laws are good things and should be supported by conservatives then by all means encourage Joe Biden to have Elizabeth Warren as his vice-presidential running mate and go vote Democrat this fall.
Blood Alcohol SKPeterson 3 days ago
"The problems of the modern economy are the result of state interference, not its absence". That's because the "state interference" is working as proxy for the interests of vulture capitalist.

What we have today is vulture capitalism as opposed to free enterprise capitalism.

DUNK Blood Alcohol 2 days ago • edited
You could also call it "crony capitalism" or "inverted totalitarianism".

Chris Hedges: "Sheldon Wolin and Inverted Totalitarianism" (November 2, 2015)

GAguilar DUNK 2 days ago
Princeton professor Sheldon Wolin's excellent book is entitled, "Democracy Incorporated."

He lays out how we're living in a totalitarian, capitalist surveillance state, as if that's not already obvious to most people around here.

SKPeterson Blood Alcohol 2 days ago
Exactly. The existence of a vulture capitalist or crony capitalist economy, which we have in many sectors, is evidence that "libertarianism" is nothing more than a convenient totem to invoke as a rationale for complaint against the outcomes of the existing crony capitalist state of affairs. My contention is that Cuenco, et al are simply advocating for a replacement of the cronies and vultures.
1701 3 days ago
A very similar article(but probably coming at it from a slightly different angle) wouldn't look out of place in a socialist publication.
The culture war really is a pointless waste of time that keeps working class people from working towards a common solution to shared problems.
bumbershoot 3 days ago
Trump wants to "keep the supply of cheap, exploitable low-skill labor (legal and illegal) intact for the business lobby."

Well of course he does -- otherwise how would he staff Mar-A-Lago and other Trump Organization businesses?

SKPeterson 3 days ago
I used to think that conservatism was about protecting private property and not, like Cuenco, in coming up with ever more excuses for expropriating it.
Kent SKPeterson 3 days ago
No, that's libertarianism (or more properly propertarianism). Conservatism is first and foremost about responsibility to God, community, family and self. Property is only of value in its utility towards a means.
GAguilar Kent 2 days ago • edited
As I see it, here are examples of how "conservatives" have actually practiced their "responsibility to God, community, family and self":

The genocide of Native Americans
The slavery and murder of blacks

Their opposition to child labor laws, to womens' suffrage, etc.
Their support of Jim Crow laws
Their opposition to ending slavery and opposition to desegregation
Opposition to Civil Liberties Laws

Willingness to block, or curtail, voting rights.

Hyping the "imminent threat" of an ever more powerful communist menace bearing
down on us from the late 40s to the "unanticipated" collapse of the
USSR in '91. All of which was little more than endless "threat inflation" used
by our defense industry-corporate kleptocrats to justify monstrous increases
in deficits that have been "invested" in our meddlesome, murderous militarism all around the world, with the torture and deaths of millions from S. E. Asia, to Indonesia, to Latin America, to the Middle East, to Africa, etc.

Violations of privacy rights (conservative hero J. Edgar Hoover's illegal domestic surveillance and acts of domestic terrorism, "justified" by
his loopy paranoia about commies on every corner and under every bed.)

Toppling of democracies to install totalitarian despots in Iran
("Ike" '53), Guatemala (Ike, again, '54), Chile (Nixon '73), Brazil (LBJ, '64) and many, many more countries.

Strong support of the Vietnam War, the wars in Laos and Cambodia, and the Iraq War, which, according to conservative W. Bush, God had inspired.

The myriad "dirty wars" we've fought around the world, and not only in Latin America.

With a few, notable exceptions, conservatives have routinely been on the wrong side of these issues. For the most part, it has been the left, particularly the "hard left," that has gotten it right.

AdmBenson SKPeterson 2 days ago
"conservatism was about protecting private property"

You're conflating conservatism and libertarianism. Conservatives realize they are citizens of a country. Libertarians wish they weren't.

SKPeterson AdmBenson 2 days ago
So conservatism should be entirely about taking people's property "for the good of the country"? That the purpose of a country is to loot the people? That the people exist for the government and not the government for the people? Seems Edmund Burke and Russell Kirk would like to have a word with you Adm.

To quote Kirk as just one example of your fundamental error:

Seventh, conservatives are persuaded that freedom and property are closely linked . [Apparently, Adm. you dispute Kirk's assertion and accuse him thereby of conflating libertarianism and conservatism. Yes, I know Kirk was a hater of the idea of patriotism, but he was such a raging libertarian what else could he do?] Separate property from private possession, and Leviathan becomes master of all. Upon the foundation of private property, great civilizations are built. The more widespread is the possession of private property, the more stable and productive is a commonwealth. Economic levelling [this is the outcome of Cuenco's policy prescriptions by the way] , conservatives maintain, is not economic progress. Getting and spending are not the chief aims of human existence; but a sound economic basis for the person, the family, and the commonwealth is much to be desired.

So, either "Mr. Conservative" Russell Kirk wasn't really a conservative but a man who horribly conflated libertarianism and conservatism, or we can say that Kirk was a conservative and that he recognized the protection of private property as crucial in minimizing the control and reach of the Leviathan state. If the latter holds, then maybe what we've established is that AdmBenson isn't particularly conservative.

Winston Nevis SKPeterson 2 days ago • edited
"The more widespread is the possession of private property, the more stable and productive is a commonwealth." This status quo has produced precisely the opposite of this. Wealth, assets, capital has been captured by the elite. The pitchforks are coming. See this CBO chart: View Hide
AdmBenson SKPeterson 2 days ago
Conservatives accept taxes as a part of citizenship. Since taxes can't be avoided, a conservative insists on democratic representation and has a general desire to get maximum bang for their taxpayer buck.

Libertarians, on the other hand, see everything through the lens of an individual's property rights. Taxes and regulation are infringements on those rights, so a libertarian is always at war with their own government. They're not interested in bang for their taxpayer buck, they just want the government to go away. I can't fault people for believing this way, but I can point out that it is severely faulty as the operating philosophy beyond anything but a small community.

As for me not being particularly conservative, ya got me. It really depends on time of day and the level of sunspot activity.

SKPeterson AdmBenson 2 days ago
Sunspots, eh? And here I thought it was your reliance on tinfoil.
AdmBenson SKPeterson 2 days ago
The tinfoil and the mask were scaring people. The tinfoil had to go, but that's had side effects.
SKPeterson AdmBenson 2 days ago
I should have put the /s on my reply, but your response did give me a good chuckle. Besides, for that finger pointing at you, there were three more pointing back at me.
JMWB 3 days ago
And somehow people continually fall for the Trickle Down economic theory. George HW Bush was correct when he called this VooDoo economics. Fiscal irresponsibility at it's finest.
Victor_the_thinker JMWB 3 days ago
Nah people don't fall for it, republicans do. The rest of us know this stuff doesn't work. We didn't need an additional datapoint to realize that. The Tax Cuts and Jobs act was the single most unpopular piece of legislation to ever pass since polling began. It never had support outside of the Republican Party which is why it's never had majority support.

https://news.gallup.com/pol...

Blood Alcohol JMWB 3 days ago
John Kenneth Galbraith called Trickle Down "economics", "Oats and Horse Economics". If you feed the horse a lot of oats, eventually some be left on the road...
Nelson 3 days ago
The leader of Republicans isn't Trump. It's Mitch McConnell.
J Villain Nelson 3 days ago
Mitch is fully owned by Trump as is every republican that holds office except Romney. Mitch can't go to the bathroom with out asking Trumps permission.
Nelson J Villain 3 days ago
Mitch is owned by corporations and he likes it that way. He basically says as much whenever campaign finance reform pops up and he defends the status quo.
aha! Nelson 2 hours ago
Yep. The guy who declared war on the Tea Party. The guy who changed his tune entirely about China when he married into the family of a shipping magnate.
SeekingTruth 3 days ago
I'm eagerly awaiting a GOP plan for economic restructuring. I've been waiting for decade(s). Surely there is someone in the entire body of think tanks, congressional staffers, and political class that can propose a genuine and comprehensive plan for how to rebalance production, education, and technology for the better of ALL Americans. Surely...
Tradcon SeekingTruth 3 days ago
American Affairs (the policy journal this author writes for) and The American Compass are both very good.
cka2nd SeekingTruth 3 days ago
I honestly wonder if Jack Kemp might have had a "Road to Damascus" conversion away from his pseudo-libertarian and supply side economic convictions if he had lived through the decade after the Great Recession. Probably not, given his political and economic activity up until his death.
Barry_II 3 days ago
"They also left worker wages stagnant and increased the deficit. Where is our more nationalist economic policy?"

In your dreams, just like those many large projects which Trump drove into bankruptcy.

Right alongside the money owed to the many people he's stiffed.

Name 3 days ago
So after 30 years or more of " globalism" , the GOP is adopting Bernie Sanderism?
Johnny Larue Name 3 days ago
Uh, no.
Name Johnny Larue 2 days ago
Uh, it seems so. Did you even read?
TheSnark 3 days ago • edited
Trump pushed the tax cut because it saves him at least $20 million each year in taxes, probably closer to $50 million. That's the only reason he does anything, because he benefits personally.
kouroi 3 days ago
Thank you very much for posting the link to the wonderful essay by Mike Lofgren. Written 8 years ago it feels even more actual than then. I have bookmarked it for future reference.

Looking at the US it always comes to my mind the way Rome and then Byzantium fell: a total erosion of the tax-base the rich refused to pay anything to the imperial coffers, and then some of the rich had land bigger than some modern countries... And then the barbarians came...

Kent kouroi 3 days ago
And, by then, the population welcomed the barbarians.
kouroi Kent 3 days ago
Likely true, with some exceptions... The Huns - and on that one I keep wondering if there isn't a whiff of "Yellow Peril" smell in all that outcry...
Ray Woodcock kouroi 2 days ago • edited
Lofgren: "What I mean by secession is a withdrawal into enclaves, an internal immigration, whereby the rich disconnect themselves from the civic life of the nation and from any concern about its well being except as a place to extract loot."

That was in 2012, but that was what struck me about my well-to-do classmates when I transferred from Cal State Long Beach to Columbia University in 1977 . Suddenly I was among people who saw America, American laws, and a shared sense of civic responsibility as quaint, bothersome, rather tangential to the project of promoting oneself and/or one's special interest.

kouroi Ray Woodcock 2 days ago
Cold, eh mate? Reptiles, lizards...?
Adriana Pena 3 days ago
Did you ever hope that Trump would do what you wanted? You are adorable
sam 3 days ago
The only way that factories would come back is when Americans start buying made in America. We can't wait for ANY government to bring those factories and jobs ( and technology) . Only people voting with their pocketbooks can do it.
J Villain 3 days ago
Still waiting for the day the first American asks "What have WE done wrong?" Rather than just following in Trumps step and playing the victim card every step of the way and wondering why nothing gets better.
Blood Alcohol J Villain 3 days ago
nuffsaid. The blood is on everyone's hands.

[Jan 27, 2020] Everybody's Talkin' 'Bout Taxes especially Wealth Taxes and Mark-to-Market of Capital Gains by Linda Beale

Jan 27, 2020 | angrybearblog.com
Not surprisingly for those of you who are members of the ABA Tax Section, there is a meeting of that group next week in Florida when a thousand tax lawyers (give or take a few) will be talking about everything from basis to wealth taxes; GILTI, BEAT, Dual BEIT, to EITC. Yours truly will be on a panel of the Tax Policy and Simplification Committee, meeting Friday morning, to discuss how the tax system should respond to the wealth gap. Joining me on the dais will be Roger Royse (moderator and panelist), Rich Prisinzano from the Penn Wharton Budget Model, and Dan Shaviro, Wayne Perry Professor of Taxation at NYU and a blogger at Start Making Sense. We'll talk about the income and wealth gap data, including the different perspectives of Saez & Zucman, serving as wealth tax advisers to Senator and Democratic presidential candidate hopeful Elizabeth Warren; Penn Wharton Budget Model, applying a more standard budget model to determine harms and benefits of the Warren Wealth Tax; and Cato INstitute. We'll also discuss Sen. Ron Wyden's proposal for a mark-to-market system of capital gains taxation (including a lookback charge of some kind for hard-to-value assets, Prof. (and former Cleary partner) Edward Kleinbard's Dual Business Enterprise Income Tax proposal, and other means of making the regular tax system more progressive such as rates, removing the capital gains preference, and reinvigorating the estate tax that has been the object of a GOP murder squad for the last 20-30 years at least.

Meanwhile, today in Florida there was a Tax Policy Lecture at the University of Florida on Taxing Wealth, with Alan Viard, resident scholar at the American Enterprise Institute, David Kamin, Professor at NYU School of Law, Janet Holtzblatt, Senior Fellow at the Tax Policy Center, and William Gale, Arjay and Frances Fearing Miller Chair in Federal Economic Policy7 at the Brookings Institution.

Last fall, the Tax Policy Center held a program on Taxing Wealth (w ebcast recording available at this link ) with Mark Mazur, Ian Simmons, Janet Holtzblatt, Beth Kaufman, Greg Leiserson, Victoria Perry, and Alan Viard. Sony Kassam from Bloomberg Tax served as moderator. The link has a series of power point presentations from that meeting as well, for your edification.

Ian Simmons, for example, includes the letter from billionaires dated June 24, 2019, asking that "[ t]he next dollar of new tax revenue should come from the most financially fortunate, not from middle-income and lower-income Americans ." Such a tax " enjoys the support of a majority of Americans–Republicans, Independents, and Democrats ." It's not a new idea, since all those millions of middle-income Americans who own their home " already pay a wealth tax each year in the form of property taxes on their primary form of wealth–their home ." The billionaires are asking " to pay a small wealth tax on the primary source of our wealth as well "–such as Elizabeth Warren's proposal, which would tax " only 75,000 of the wealthiest families in the country " (those with assets over $50 million) and would generate an estimated $3 trillion over ten years to "f und smart investments in our future, like clean energy innovation to mitigate climate change, universal child care, student loan debt relief, infrastructure modernization, tax credits for low-income families, public health solutions, and other vital needs ." All this is necessary because of the wealth gap: " [t]he top 1/10 of 1% of households now have almost as much wealth as all Americans in the bottom 90% ." The signatories support a wealth tax because:

Janet Holtzblatt discussed whether wealth should be taxed, with a set of powerful powerpoint charts . As she notes, there are a number of reasons to think taxing the wealthy is a good idea because it (slide 4) :

Those not supportive (or, as JH puts it, "less optimistic") suggest that (slides 5, 7)

There are lots of issues with wealth taxes: (slides 8-20)

Greg Leiserson discussed the idea of mark-to-market taxation (an idea that Ron Wyden has endorsed), in " Taxing wealth by taxing investment income: An introduction to mark-to-market taxation " (Sept 11, 2019). The key to MTM taxation is that a tax is assessed annually on investments, whether or not they are sold or otherwise disposed of ('through a transaction that results in "realization" for federal income tax purposes). The burden of such a tax falls predominantly on the wealthy, since those are the primary owners of bonds, stocks, real estate empires, and pass-through businesses that produce investment income, as well as the appreciation of those assets that is taxed currently as a capital gain on disposition. Leiserson provides a chart (below) showing the nominal investment income of US households and nonprofits including an offset for inflation.

As he notes, much of this income is taxed at preferential capital gains rates, and much of the income tax is deferred because capital gains and losses are generally taxed only when the asset is sold. Deferral amounts to a reduction in taxes paid under time-value-of-money principles. But yet another way in which owners of investment assets escape taxation is the estate tax: appreciation in property in the estate (such as unrealized capital gains from stock that has appreciated in value significantly over decades) is never taxed, since the heirs get a step up in basis to market value, so that if the asset were then immediately sold, there would be no gain remaining.

MTM taxation eliminates the deferral advantage. MTM taxation combined with elimination of the preferential rate for capital gains would eliminate the preferential treatment of capital gains that exists in current law. Leiserson notes the difficulties for a MTM system: which assets are covered, rate of tax applied, and whether there are special rules for volatility. Further, "[ i]f a comprehensive system of mark-to-market taxation is enacted, then there would be no unrealized gains at death going forward, because gains will have been taxed on an annual basis, including in the year the person dies " so long as the system applies over some transition period to gains accrued prior to enactment. Otherwise, the system would have to tax gains at death (repealing step-up in basis rule) or at any other disposition, including gifts, to ensure fair and equal treatment. He suggests other measures–such as limiting the home sales capital gain exclusion or requiring mandatory distributions of pension account balances above a threshold, that would be reasonable in a MTM context.

One difficulty with MTM taxation is valuation of assets that are not regularly traded. Ron Wyden's proposal suggests a lookback charge–an additional tax payment for assets not subject to MTM taxation that is collected upon disposition to account for the deferral value while still relying on realization as a trigger for taxation. Wyden and Leiserson suggest different possible methods. One is to take the gain upon sale and allocate it ratably to each year between purchase and sale, compute the tax on each year's income at the rate applicable in that year, and then calculate interest on those unpaid taxes for the years til payment. Unrealized gains would be deemed realized on death or gift and taxed accordingly.

Three key ideas here:

image from equitablegrowth.org

Of course, while everybody is talking about taxes, some of that talk is the same old endless market fundamentalist myth (Reaganomics) about how tax cuts are what make the economy grow and will actually pay for themselves -- in spite of near 4 decades of evidence to the contrary, where highest growth rates have generally been in times of higher tax rates, with some consideration for stimulus impact of tax cuts after periods of recessions. See, e.g., NY Times editorial, There's No Such Thing as a Free Tax Cut (Jan 22, 2020).

The op-ed notes that Treasury Secretary Steven Mnuchin "r epeated the risible fantasy that the Trump administration's 2017 tax cuts will bolster economic growth sufficiently for the government to recoup the revenue it lost by lowering tax rates " [in the 2017 tax legislation] even though 2 years in, the " budget deficit has topped $1 trillion ."

This is because, as most of us who haven't drunk the Laffer-curve tax cut kool-aid know and the Times op-ed reiterates, " businesses responded to increased demand more than they did to the lower tax rates ." Nonetheless, we should not be surprised that the Trump Administration is talking about two "big ideas" for taxes if the man gets reelected: 1) cutting Medicare and Social Security: see, e.g., Trump Opens Door to Cuts to Medicare and Other Entitlement Programs , NY Times (Jan 22, 2020) and 2) passing another tax cut bill: see Steven Mnuchin Confirms Trump's New Tax Plan is Imminent , USNews (Jan 23, 2020). Those two ideas go hand in hand.

T hough Trump doesn't dare state what he is really doing to his base, who he has deceived with typical right-wing rhetoric into thinking that he is trying to rightsize the economy to serve them when he instead engages in class warfare to stuff his own pockets, he is hip to hip with Newt Gingrich's desire t o "starve the government" to create a huge deficit (we are up to $1 trillion in our new "gilded age economy") that then provides cover for the wealthy to suck in even more of the country's wealth by downsizing Medicare and Social Security, programs essential for those who are not among the wealthy.

[Jan 19, 2020] US External Balance Sheet: Big Borrower and Giant Corporate Tax Dodge

Jan 19, 2020 | www.cfr.org

"At the end of the day, perhaps, the equity side of the U.S. external balance sheet should be understood not by thinking of the U.S. as a giant and very successful private equity fund that borrows to buy equity -- but rather as one giant corporate tax dodge for U.S. based multinationals

If you think I am exaggerating, I would encourage you to take a look at the IRS data on the location of U.S. corporate profits -- and the location of the taxes that American firms pay abroad. U.S. firms are earning big profits in jurisdictions where they don't pay tax, and small profits in jurisdictions where they do and in the process, reducing their U.S. tax bill as well. That's real exorbitant privilege."

Brad Setser, US External Balance Sheet: Big Borrower and Giant Corporate Tax Dodge

[Dec 24, 2019] Eviscerating one's sources of income while weakening the overall economy including the general population does not make for a strong state able to withstand an unanticipated emergency. Somehow people keep doing the same thing over and over.

Dec 24, 2019 | www.nakedcapitalism.com


John , December 23, 2019 at 2:20 pm

In China's history when the largest landowners, the wealthiest individuals connived or bribed their way out of paying taxes and the burden shifted down the income scale, the result sooner rather than later was an uprising that ended with a new dynasty.

Why is there always more money than is even asked for for the "defense budget", but social security and medicare are budget problems?

JBird4049 , December 23, 2019 at 9:08 pm

This is a constant in Chinese history, even the French Revolution was set up by the exclusive taxation of the poor and middle classes. Eviscerating one's sources of income while weakening the overall economy including the general population does not make for a strong state able to withstand an unanticipated emergency. Somehow people keep doing the same thing over and over.

[Dec 24, 2019] In the US pols are still making masssive tax cuts for billionairs and big corporations 60 of America's largest corporations in the US paid no federal taxes last year

Dec 24, 2019 | www.nakedcapitalism.com

in the US pols are still making masssive tax cuts for billionairs and big corporations – 60 of America's largest corporations in the US paid no federal taxes last year.

At the same time, both parties say there isn't enough money to continue Social Security, as we know it, because of deficits. They say Social Security is the budget problem. right .

France's govt is doing the economic same trick, imo.

[Dec 07, 2019] http://cepr.net/blogs/beat-the-press/donald-trump-boasts-about-taxing-middle-class-for-billions-and-billions

Dec 07, 2019 | cepr.net

November 21, 2019

Donald Trump Boasts About Taxing Middle Class for "Billions and Billions"
By Dean Baker

This was in the context of the tariffs he has imposed on imports from China. According to the Washington Post, * Trump boasted:

"I like what's happening right now. We're taking in billions and billions of dollars."

Tariffs of course are taxes on imports. The evidence is overwhelming that the vast majority of these taxes are being borne either by consumers or retailers in the United States. According to the Bureau of Labor Statistics ** the price of imports from China has fallen just 1.6 percent over the last year. This means that people in the United States are paying the overwhelming majority of the tariffs that run as high as 25 percent and apparently Donald Trump is very happy about that.

* https://www.washingtonpost.com/business/economy/trump-says-china-isnt-stepping-up-and-trade-talks-show-signs-of-languishing/2019/11/20/7137b522-0be2-11ea-bd9d-c628fd48b3a0_story.html

** https://www.bls.gov/news.release/ximpim.t07.htm Reply Monday, December 02, 2019 at 09:12 AM

[Dec 07, 2019] Could Tax Increases Speed Up the Economy?

Dec 07, 2019 | economistsview.typepad.com

Fred C. Dobbs , December 05, 2019 at 04:53 AM

Could Tax Increases Speed Up the Economy?
Democrats Say Yes https://nyti.ms/2RlDbJx
NYT - Jim Tankersley - December 5

WASHINGTON -- Elizabeth Warren is leading a liberal rebellion against a long-held economic view that large tax increases slow economic growth, trying to upend Democratic policymaking in the way supply-side conservatives changed Republican orthodoxy four decades ago.

(Warren Would Take Billionaires Down
a Few Billion Pegs https://nyti.ms/2CtMPRN
NYT - November 10)

Generations of economists, across much of the ideological spectrum, have long held that higher taxes reduce investment, slowing economic growth. That drag, the consensus held, would offset the benefits to growth from increased government spending in areas like education.

Ms. Warren and other leading Democrats say the opposite. The senator from Massachusetts, who is a leading candidate for the Democratic presidential nomination, contends that her plans to tax the rich and spend the revenue to lift the poor and the middle class would accelerate economic growth, not impede it. Other Democratic candidates are making similar claims about their tax-and-spend proposals. Some liberal economists go further and say that simply taxing the rich would help growth no matter what the government did with the money.

Democrats in the past, including the party's 2016 nominee, Hillary Clinton, have argued that a more modest combination of tax increases and spending programs would expand the economy. But no Democratic nominee before Ms. Warren had ever proposed so many new taxes and spending programs, and leaned so heavily into the argument that they would be, in economist parlance, pro-growth.

That argument tries to reframe a classic debate about the economic "pie" in the United States by suggesting there is no trade-off between increasing the size of the pie and dividing the slices more equitably among all Americans.

Ms. Warren has proposed nearly $3 trillion a year in new taxes on businesses and high-earners, largely focused on billionaires but sometimes hitting Americans who earn $250,000 and above per year. The taxes would fund wide-reaching new government spending on health care, education, and family benefits like universal child care and paid parental leave.

Last month, Ms. Warren wrote on Twitter that education, child care and student loan relief programs funded by her tax on wealthy Americans would "grow the economy." In a separate post, she said student debt relief would "supercharge" growth.

The last batch of economists to disrupt a political party's consensus position were conservative -- the so-called supply-siders who built influence in the late 1970s and gained power in the Reagan administration. Previous Republican presidents had focused on keeping the budget deficit low, which constrained their ability to cut taxes if they did not also cut government spending. Supply-siders contended that well-targeted tax cuts could generate big economic growth even without spending cuts. ...

Fred C. Dobbs said in reply to Fred C. Dobbs... , December 05, 2019 at 04:57 AM
Ms. Warren is making the case that the economy could benefit if money is redistributed from the rich and corporations to uses that she and other liberals say would be more productive. Their argument combines hard data showing that high levels of inequality and wealth concentration weigh down economic growth with a belief that well-targeted government spending can encourage more Americans to work, invest and build skills that would make them more productive.

They also cite evidence that transferring money to poor and middle-class individuals would increase consumer spending because they spend a larger share of their incomes than wealthy Americans, who tend to save and invest.

"The economy has changed, our understanding of it has changed, and we understand the constricting effects of inequality" on growth, said Heather Boushey, the president of the Washington Center for Equitable Growth, a think tank focused on inequality.

Inequality has widened significantly in America over the last several decades. The Congressional Budget Office estimates that the incomes of the top 1 percent of Americans more than tripled from 1979 to 2016, before taxes and government transfer payments are taken into account. For the middle class, incomes grew 33 percent. More than a decade after the recession, wage growth for the middle class continues to run well behind previous times of economic expansion, like the late 1990s.

Research by the economist Emmanuel Saez and colleagues shows that the last time such a small sliver of Americans controlled such a large share of the nation's income and wealth was in the late 1920s, just before a stock market crash set off the Great Depression. World Bank researchers have warned that high levels of inequality are stifling growth in South Africa, which has the globe's worst measured inequality.

"We have an economy that isn't delivering like it used to," said Ms. Boushey, who advised Hillary Clinton's 2016 Democratic presidential campaign. "That's leading people to say let's re-examine the evidence."

The contention that tax and spending increases can lift economic growth is not the only challenge to traditional orthodoxy brewing in liberal economic circles. Some Democrats have also embraced modern monetary theory, which reframes classic thinking that discourages large budget deficits as a drag on growth. Its supporters, including Representative Alexandria Ocasio-Cortez of New York and the economist Stephanie Kelton, an adviser to Senator Bernie Sanders of Vermont, argue that the United States government should be spending much more on programs to fight inequality, like a federal job guarantee, without imposing new taxes.

Some of the inequality-focused economists say they are hoping to build new economic models to predict the effects of their policies, though they acknowledge few of those models exist yet. Instead, they rely on evidence about the likely effects of individual programs, added together.

Many economists who study tax policy contend that Ms. Warren's plans -- and other large tax-and-spend proposals from Democratic candidates this year -- would hurt the economy, just as classic economic models suggest.

"Some elements of the large increase in government spending on health and education proposed by Senator Warren would promote economic growth" through channels like improved education, said Alan Auerbach, an economics professor at the University of California, Berkeley, who has written some of the most influential research in the profession on the relationship between tax rates and growth.

But, he said, "I am very skeptical that these growth effects would offset the negative effects on growth of the higher taxes, particularly given that the spending increases are not specifically targeted toward enhancing growth."

Ms. Warren disagrees. In the latest Democratic debate, she said the spending programs funded by her wealth tax would be "transformative" for workers. Those plans would raise wages, make college tuition-free and relieve graduates of student debt, she said, adding, "We can invest in an entire generation's future."

An emerging group of liberal economists say taxes on high-earners could spur growth even if the government did nothing with the revenue because the concentration of income and wealth is dampening consumer spending.

"We are experiencing a revolution right now in macroeconomics, particularly in the policy space," said Mark Paul, an economist who is a fellow at the liberal Roosevelt Institute in Washington. "We can think of a wealth tax as welfare-enhancing, in and of itself, simply by constraining the power of the very wealthy" to influence public policy and distort markets to their advantage.

Taken together, Ms. Warren's proposals would transform the role of federal taxation. If every tax increase she has proposed in the campaign passed and raised as much revenue as her advisers predict -- a contingency hotly debated among even liberal economists -- total federal tax revenue would grow more than 50 percent.

The United States would leap from one of the lowest-taxed rich nations to one of the highest. It would collect more taxes as a share of the economy than Norway, and only slightly less than Italy.

Mr. Sanders's plan envisions a similarly large increase in tax levels. Former Vice President Joseph R. Biden Jr.'s proposals are much smaller in scale: He would raise taxes on the wealthy and corporations by $3.4 trillion over a decade, in order to fund increased spending on health care, higher education, infrastructure and carbon emissions reduction.

If Ms. Warren's tax program is enacted, said Gabriel Zucman, an economist at Berkeley who is an architect of her wealth tax proposal, "in my view, the most likely effect is a small positive effect on growth, depending on how the revenues are used."

Another economist who has worked with the Warren campaign to analyze its proposals, Mark Zandi of Moody's, said he would expect her plans to be "largely a wash on long-term economic growth."

Researchers at the Levy Economics Institute of Bard College projected this summer that Ms. Warren's wealth tax and spending policies would generate a 1.7 percent increase in the size of the economy. A preliminary study of a wealth tax like Ms. Warren's proposal, by the Penn Wharton Budget Model, found that it would reduce the size of the economy by a similar 1.7 percent. The model uses the sort of classic methodology that liberals are now rebelling against and did not evaluate Ms. Warren's spending proposals.

Historical experience offers few parallels for assessing the economic effects of a taxation-and-spending program on the scale of Ms. Warren's ambitions. A 2002 study of wealth taxes in rich countries found that those taxes, most of which have since been abandoned, reduced economic growth slightly on an annual basis.

Conservative economists roundly disagree that large tax increases can spur faster growth, even those who say government spending on paid leave and child care may get more Americans into the labor force. They say a wealth tax on the scale of Ms. Warren's proposal would greatly reduce savings and investment by the rich.

"What a wealth tax does is, it directly taxes savings," said Aparna Mathur, an economist at the conservative American Enterprise Institute who favors a narrow paid leave program and whose research finds benefits from reducing tax rates on business and investment. "If you're taxing savings, you're implicitly taxing investment. So how can that possibly be pro-growth?"

The supply-side economists' plans were similarly denounced -- George Bush called them "voodoo economic policies" while running for president in 1980 -- but in time dominated Republican proposals.

Some members of the new liberal revolt against tax orthodoxy welcome the comparison to the supply-side uprising.

"While I think that the supply-siders were wrong, and were always wrong, they were reacting to very real economic problems in the 1970s," said Michael Linden, the executive director of the Groundwork Collaborative, a liberal policy and advocacy group. "There was something really wrong with the economy at the time. I think there is now."

[Nov 21, 2019] FED as the inflator of the bubble: It seems the Fed's abundant-reserve regime may carry a new set of risks by supporting increased interconnectedness and overly easy policy (expanding balance sheet during an economic expansion) to maintain funding conditions that may short-circuit the market's ability to accurately price the supply and demand for leverage as asset prices rise.

Nov 21, 2019 | www.moonofalabama.org

psychohistorian , Nov 15 2019 0:42 utc | 137

I don't know how well this will retain format but it is the latest from the US Fed on providing "liquidity" to the private banking system
"
Friday, 11/15/2019- Thursday, 12/12/2019 The Desk plans to conduct overnight repo operations on each business day as well as a series of term repo operations over the specified period.

OVERNIGHT OPERATIONS DATES AGGREGATE OPERATION LIMIT
Friday, 11/15/2019 - Thursday, 12/12/2019 At least $120 billion

TERM OPERATION DATE MATURITY DATE TERM AGGREGATE OPERATION LIMIT
Tuesday, 11/19/2019 Tuesday, 12/3/2019 14-days At least $35 billion
Thursday, 11/21/2019 Thursday, 12/5/2019 14-days At least $35 billion
Monday, 11/25/2019 Monday, 1/6/2020 42-days At least $25 billion
Tuesday, 11/26/2019 Tuesday, 12/10/2019 14-days At least $35 billion
Wednesday, 11/27/2019 Thursday, 12/12/2019 15-days At least $35 billion
Monday, 12/2/2019 Monday, 1/13/2020 42-days At least $15 billion
Tuesday, 12/3/2019 Tuesday, 12/17/2019 14-days At least $35 billion
Thursday, 12/5/2019 Thursday, 12/19/2019 14-days At least $35 billion
Monday, 12/9/2019 Monday, 1/6/2020 28-days At least $15 billion
Tuesday, 12/10/2019 Monday, 12/23/2019 13-days At least $35 billion
Thursday, 12/12/2019 Thursday, 12/26/2019 14-days At least $35 billion
"
Some take away quotes from various ZH postings
"
In short, the Fed's dual mandate has been replaced by a single mandate of promoting financial stability (or as some may say, boosting JPMorgan's stock price) similar to that of the ECB.

Here BofA adds ominously that "by deciding to dynamically assess bank demand for reserves and reduce the risk of air pockets in repo markets, we believe the Fed has entered unchartered territory of monetary policy that may stretch beyond its dual mandate." And the punchline: "By running balance-sheet policy to ensure overnight funding markets remain flush, the Fed is arguably circumventing the most important brake on excess leverage: the price."

So if NOT QE is in fact, QE, and if the Fed is once again in the price manipulation business, what then?

According to BofA's Axel, the most worrying part of the Fed's current asset purchase program is the realization that an ongoing bank footprint in repo markets is required to maintain control of policy rates in the new floor system, or as we put it less politely, banks are now able to hijack the financial system by indicating that they have an overnight funding problem (as JPMorgan very clearly did) and force the Fed to do their (really JPMorgan's) bidding.

And this is where BofA's warning hits a crescendo, because while repo is fully collateralized and therefore contains negligible counterparty credit risk, "there may be a situation in which banks want to deleverage quickly, for example during a money run or a liquidation in some market caused by a sudden reassessment of value as in 2008."

Got that? Going forward please refer to any market crash as a "sudden reassessment of value", something which has become impossible in a world where "value" is whatever the Fed says it is... Well, the Fed or a bunch of self-serving venture capitalists, who pushed the "value" of WeWork to $47 billion just weeks before it was revealed that the company is effectively insolvent the punch bowl of endless free money is taken away.

Therefore, to Bank of America, this new monetary policy regime actually increases systemic financial risk by making repo markets more vulnerable to bank cycles. This, as the bank ominously warns, "increases interconnectedness, which is something regulators widely recognize as making asset bubbles and entity failures more dangerous."

It is, however, BofA's conclusion that we found most alarming: as Axel writes, in his parting words:

"some have argued, including former NY Fed President William Dudley, that the last financial crisis was in part fueled by the Fed's reluctance to tighten financial conditions as housing markets showed early signs of froth. It seems the Fed's abundant-reserve regime may carry a new set of risks by supporting increased interconnectedness and overly easy policy (expanding balance sheet during an economic expansion) to maintain funding conditions that may short-circuit the market's ability to accurately price the supply and demand for leverage as asset prices rise."

"


psychohistorian , Nov 15 2019 0:49 utc | 138

What I didn't include in comment # 137 above but did in the last Weekly Open Thread is the following about the recent NOT SHORT TERM actions of the US Fed:

The POMO is a Permanent Open Market Operation (purchases from the primary private banks of Treasuries & MBS) that bought $20 billion between mid-August to mid-September, another bought $20 billion between mid-September to mid-October and $60 billion between mid-October to mid-November....totaling $100 billion of US taxpayers money, so far, and is expected to continue at the $60 billion/month until, supposedly, the middle of next year. (This is the one that should concern folks the most because the economy has supposedly not crashed yet and here the Fed is "foaming the runway" of the private banking system on the backs of Americans already

MBS = Mortgage Backed Securities

psychohistorian , Nov 15 2019 12:18 utc | 157
@ William Gruff # 156 who wrote
"
There is no increase in the domestic US production of anything but bullshit, which America is cranking out in record quantities, and with delusional fascists leading that productivity surge.
"
I agree and want to summarize my comments # 137, 138 to add that on top of the manufacturing recession that you write of and link to that the US has been in a financial recession since the August/September time frame.

The US Fed has and continues to foam the private banking runway with billions of dollars to prop up and delay price/value assessment. One reason that I can think of for that is the coming IPO of Aramco for Saudi Arabia.

Another reason is likely to be a huge game of musical chairs being played where those in control are arranging a specific set of very few chairs to be available for them when the music stops. It will all be legal of course since all these financial derivative instruments that will be in place will have Super-Priority in bankruptcy which gives those creditors of a bankrupt debtor (America) the right to receive payment before others who would seem to have superior claims to money or assets. The other losers in this case will be Social Security, pension funds, state and municipal bonds to say nothing of the savings of the public that think they are protected with FDIC.

If this event does not incite the pubic to nationalize the private banking system and imprison many then a super-national cult of folk will own what is left of the Western world and be defended by xxxx army.

[Nov 04, 2019] 'Another Gift' to Big Business as Trump Treasury Moves to Eliminate Rules Against Corporate Tax Avoidance by Jake Johnson

Notable quotes:
"... I noticed that the Treasury General Account cash balance hit $435 billion at the end of October, up over $300 billion from the balance in that account at the end of August. That action basically pulled over $300 billion in cash liquidity from the financial system, all while short term money market rates spiked as high as 10 percent ..."
"... I suspect something along the lines of the stock market drop in the fourth quarter of last year when they basically pulled the same stunt ahead of their partial government shutdown. ..."
"... The D party reminds me of the 'union' I belonged to while building refrigerated truck bodies in the south. On Sundays, the head of the 'union' sat in the same pew as the owner of the factory. When real union folks started agitating from within, they were fired. ..."
Nov 02, 2019 | www.nakedcapitalism.com

Yves here. Hahaha! While you were distracted by the impeachment drama, the Trump Administration soldiered on with launching more corporate gimmies, this one in the form of another tax break.

By Jake Johnson, staff writer at Common Dreams. Originally published at Common Dreams

President Donald Trump's Treasury Department on Thursday took the first step toward eliminating remaining regulations designed to prevent corporations from avoiding U.S. taxes by storing profits overseas, a move critics decried as yet another harmful giveaway to big business.

Treasury Secretary Steve Mnuchin, a former Goldman Sachs executive, said in a statement that the 2017 GOP tax law -- which disproportionately benefited the rich -- rendered Obama-era rules against offshore tax avoidance "obsolete" by significantly reducing the corporate tax rate.

Sen. Ron Wyden (D-Ore.), the top Democrat on the Senate Finance Committee, disagreed with Mnuchin's assessment, warning in a statement that the Treasury Department's plan "only provides an opening for corporations to again dodge their taxes."

"The corporations that got a massive taxpayer handout are getting another gift from Donald Trump," said Wyden. "The Obama administration had essentially shut down inversion -- transactions whose only purpose is to help big multinational corporations move overseas to avoid paying taxes."

According to Bloomberg, the Treasury Department's proposal, detailed in a policy guidance (pdf) released Thursday, "could make it easier for firms to use accounting tactics to minimize their U.S. earnings and inflate their foreign profits, which are frequently taxed at rates lower than the current 21 percent domestic corporate levy."

"The existing regulations were aimed at stopping American companies from moving their headquarters to a lower-tax country, a process known as a corporate inversion," noted Bloomberg .

Contrary to Mnuchin's claim that the GOP's 2017 tax law eliminated incentives for corporations to shift profits overseas, advocacy groups and Democratic lawmakers have argued the law made it easier for businesses to avoid U.S. taxes.

"The Tax Cuts and Jobs Act (TCJA) will allow companies to avoid taxes on $235 billion in profits each year going forward," a coalition of more than 50 progressive organizations led by Americans for Tax Fairness wrote in a letter (pdf) to Congress last May.

"Moreover, the law created new incentives for multinational corporations to move their real operations offshore," the groups said. "The law guarantees that U.S. multinational corporations will pay at most one-half the domestic tax rate on their offshore earnings, with many companies paying little or nothing in taxes on these earnings."

Dan , November 2, 2019 at 8:00 am

You would think this could be used to weaken Trump's base in flyover country, if not for the
Democrats in support of it also ..

inode_buddha , November 2, 2019 at 8:57 am

The majority of Trump's base believes, as an article of faith, that we need to eliminate corporate taxes so the poor starving business owners can support more employees.

Completely denying reality, of course, and offering no solutions to it. It's the "temporarily embarassed millionaire's club".

flora , November 2, 2019 at 12:06 pm

Pretty much. Both parties are in the pocket of the monopolies that have grown up since deregulation became the thing, imo. Once upon a time the FDR/New Deal Dems opposed monopoly power. The New Dems seem to love monopoly power.

shinola , November 2, 2019 at 9:05 am

Donald Trump, again, reduces taxes for Donald Trump! That it reduces taxes for anyone else is purely coincidental.

Summer , November 2, 2019 at 11:11 am

And at the same time, he's not doing any of this all by himself.
I think it's more along the lines of he knows an idea that will benefit himself when he hears it.

TG , November 2, 2019 at 10:02 am

One sees why the Democrats are pushing so hard for the "Russiagate" thing, and making a circus of impeachment – because on matters of substance they are as bad as the Republicans.

The Democrats have no problem blocking any serious attempt at enforcing the laws against illegal immigration (something favored by the super-rich, who love cheap labor more than anything else – Bernie Sanders 2015). The Democrats have no problem blocking Trump's (admittedly somewhat pathetic) attempts to pull us out of these pointless winless foreign wars. But as regards Trump's massive corporate tax cut – they basically just let it pass with only a few pro-forma grumbles. Because you gotta have your priorities. Especially when these priorities have been paid for.

DHG , November 2, 2019 at 10:45 am

I dont get distracted, I see it all. These people will all be destroyed by the Almighty in his great day along with adherents to and all nation/states. This is the love of money and me me me attitude forecast in the last days.

inode_buddha , November 2, 2019 at 11:50 am

you and me both, I have been seeing it for a long time. I would like to remind people that there is a world of difference between a guy on the bottom wanting more, and a guy on the top wanting more.

Corporate Welfare at all Cost , November 2, 2019 at 10:47 am

Given the left-wing surge through Sanders I am convinced that the corporate paid-for Democrats see the writing on the wall. Their paid mission is now to discredit the Democratic party as much as possible to make sure that 1) in short-term Trump wins and continue the corporate and 1%-er welfare-programs and 2) that no left-winger, similar to Sanders can ever rule through the Democratic party since it has become a joke and it will cost a lot of time and money to build a new party that will be trusted

sharonsj , November 2, 2019 at 10:52 am

I'll make you a bet that the corporate media does not cover this story.

coboarts , November 2, 2019 at 12:12 pm

No, no, no It's certainly a move in 11 dimensional chess. First we lure these corporations back onto American soil. Then, once they're comfy, we nationalize them all and seize all their overseas holdings. Surely, that's the plan.

Chauncey Gardiner , November 2, 2019 at 12:50 pm

The good news is that all it will take to reverse these executive orders that benefit the few are new executive orders by a different president.

On the related topic of the Mnuchin Treasury acting in the shadows while the spotlight is trained elsewhere, I noticed that the Treasury General Account cash balance hit $435 billion at the end of October, up over $300 billion from the balance in that account at the end of August. That action basically pulled over $300 billion in cash liquidity from the financial system, all while short term money market rates spiked as high as 10 percent and this president was railing against Fed policy makers for tight monetary conditions and high interest rates. I hate to think what would have happened to their precious stock market if the Powell Fed had not implemented new policies to offset the current administration's borrowing for the purpose of hoarding cash. I suspect something along the lines of the stock market drop in the fourth quarter of last year when they basically pulled the same stunt ahead of their partial government shutdown.

Why is the US Treasury hoarding cash? There is no apparent reason to do so in the name of lowering interest payments as the Fed remits its interest income to the Treasury at the end of each fiscal year. I expect we will find out soon enough.

doug , November 2, 2019 at 2:52 pm

The D party reminds me of the 'union' I belonged to while building refrigerated truck bodies in the south. On Sundays, the head of the 'union' sat in the same pew as the owner of the factory. When real union folks started agitating from within, they were fired.

[Nov 03, 2019] How to Tax Our Way Back to Justice: It is absurd that the working class is now paying higher tax rates than the richest people in America

Nov 03, 2019 | economistsview.typepad.com

anne , November 01, 2019 at 04:28 AM

https://www.nytimes.com/2019/10/11/opinion/sunday/wealth-income-tax-rate.html

October 11, 2019

How to Tax Our Way Back to Justice: It is absurd that the working class is now paying higher tax rates than the richest people in America.
By Emmanuel Saez and Gabriel Zucman

America's soaring inequality has a new engine: its regressive tax system. Over the past half century, even as their wealth rose to previously unseen heights, the richest Americans watched their tax rates collapse. Over the same period, as wages stagnated for the working classes, work conditions deteriorated and debts ballooned, their tax rates increased.

Stop to think this over for a minute: For the first time in the past hundred years, the working class -- the 50 percent of Americans with the lowest incomes -- today pays higher tax rates than billionaires.

The full extent of this situation is not visible in official statistics, which is perhaps why it has not received more attention so far. Government agencies like the Congressional Budget Office publish information about the distribution of federal taxes, but they disregard state and local taxes, which account for a third of all taxes paid by Americans and are in general highly regressive. The official statistics keepers do not provide specific information on the ultra-wealthy, who although few in number earn a large fraction of national income and therefore account for a large share of potential tax revenue. And until now there were no estimates of the total tax burden that factored in the effect of President Trump's tax reform enacted at the end of 2017, which was particularly generous for the ultra-wealthy.

To fill this gap, we have estimated how much each social group, from the poorest to billionaires, paid in taxes for the year 2018. Our starting point is the total amount of tax revenue collected in the United States, 28 percent of national income. We allocate this total across the population, divided into 15 income groups: the bottom 10 percent (the 24 million adults with the lowest pretax income), the next 10 percent and so on, with finer-grained groups within the top 10 percent, up to the 400 wealthiest Americans.

The Regressive American Tax System

How combined federal, state and local taxes fall on American adults, by income percentile.

Three regressive taxes account for most of the burden on the working class:

Consumption taxes
Payroll tax
Residential property taxes

Our data series include all taxes paid to the federal, state and local governments: the federal income tax, of course, but also state income taxes, myriad sales and excise taxes, the corporate income tax, business and residential property taxes and payroll taxes. In the end, all taxes are paid by people. The corporate tax, for example, is paid by shareholders, because it reduces the amount of profit they can receive in dividends or reinvest in their companies.

You will often hear that we have a progressive tax system in the United States -- you owe more, as a fraction of your income, as you earn more. When he was a presidential candidate in 2012, Senator Mitt Romney famously lambasted the 47 percent of "takers" who, according to him, do not contribute to the public coffers. In reality, the bottom half of the income distribution may not pay much in income taxes, but it pays a lot in sales and payroll taxes. Taking into account all taxes paid, each group contributes between 25 percent and 30 percent of its income to the community's needs. The only exception is the billionaires, who pay a tax rate of 23 percent, less than every other group.

The tax system in the United States has become a giant flat tax -- except at the top, where it's regressive. The notion that America, even if it may not collect as much in taxes as European countries, at least does so in a progressive way, is a myth. As a group, and although their individual situations are not all the same, the Trumps, the Bezoses and the Buffetts of this world pay lower tax rates than teachers and secretaries do.

This is the tax system of a plutocracy. With tax rates of barely 23 percent at the top of the pyramid, wealth will keep accumulating with hardly any barrier. So too will the power of the wealthy, including their ability to shape policymaking and government for their own benefit.

From Kennedy Through Trump, the Rich Have Done Very, Very Well

Here's the change in total wealth per adult since 1962, on average, from the poorest to the richest slices of America. Circles representing wealth are proportionate, which is why they're almost too small to see for the bottom 50 percent of Americans. All wealth figures are in 2018 dollars.

By Bill Marsh/The New York Times | Source: Emmanuel Saez and Gabriel Zucman, University of California, Berkeley; wealth includes all non-financial assets plus financial assets net of debts; tax rates account for all taxes paid at all levels of government (federal, state and local) and are expressed as a fraction of pre-tax income; adults in analysis are age 20 and older.

The good news is that we can fix tax injustice, right now. There is nothing inherent in modern technology or globalization that destroys our ability to institute a highly progressive tax system. The choice is ours. We can countenance a sprawling industry that helps the affluent dodge taxation, or we can choose to regulate it. We can let multinationals pick the country where they declare their profits, or we can pick for them. We can tolerate financial opacity and the countless possibilities for tax evasion that come with it, or we can choose to measure, record and tax wealth.

If we believe most commentators, tax avoidance is a law of nature. Because politics is messy and democracy imperfect, this argument goes, the tax code is always full of "loopholes" that the rich will exploit. Tax justice has never prevailed, and it will never prevail.

For example, in response to Elizabeth Warren's wealth tax proposal -- which we helped develop -- pundits have argued that the tax would raise much less revenue than expected. In a similar vein, world leaders have become convinced that taxing multinational companies is now close to impossible, because of international tax competition. During his presidency, Barack Obama argued in favor of reducing the federal corporate tax rate from 35 percent to 28 percent, with a lower rate of 25 percent for manufacturers. In 2017, under President Trump, the United States cut its corporate tax rate to 21 percent. In France, President Emmanuel Macron is in motion to reduce the corporate tax in 2022 to 25 percent from 33 percent. Britain is ahead of the curve: It started slashing its rate under Prime Minister Gordon Brown in 2008 and is aiming for 17 percent by 2020. On that issue, the Browns, Macrons and Trumps of the world agree: The winners of global markets are mobile; we can't tax them too much.

But they are mistaken. Tax avoidance, international tax competition and the race to the bottom that rage today are not laws of nature. They are policy choices, decisions we've collectively made -- perhaps not consciously or explicitly, certainly not choices that were debated transparently and democratically -- but choices nonetheless. And other, better choices are possible.

Take big corporations. Some countries may have an interest in applying low tax rates, but that's not an obstacle to making multinationals (and their shareholders) pay a lot. How? By collecting the taxes that tax havens choose not to levy. For example, imagine that the corporate tax rate in the United States was increased to 35 percent and that Apple found a way to book billions in profits in Ireland, taxed at 1 percent. The United States could simply decide to collect the missing 34 percent. Apple, like most Fortune 500 companies, does in fact have a big tax deficit: It pays much less in taxes globally than what it would pay if its profits were taxed at 35 percent in each country where it operates. For companies headquartered in the United States, the Internal Revenue Service should collect 100 percent of this tax deficit immediately, taking up the role of tax collector of last resort. The permission of tax havens is not required. All it would take is adding a paragraph in the United States tax code.

The same logic can be applied to companies headquartered abroad that sell products in America. The only difference is that the United States would collect not all but only a fraction of their tax deficit. For example, if the Swiss food giant Nestlé has a tax deficit of $1 billion and makes 20 percent of its global sales in the United States, the I.R.S. could collect 20 percent of its tax deficit, in addition to any tax owed in the United States. The information necessary to collect this remedial tax already exists: Thanks to recent advances in international cooperation, the I.R.S. knows where Nestlé books its profits, how much tax it pays in each country and where it makes its sales.

Collecting part of the tax deficit of foreign companies would not violate any international treaty. This mechanism can be applied tomorrow by any country, unilaterally. It would put an end to international tax competition, because there would be no point any more for businesses to move production or paper profits to low-tax places. Although companies might choose to stop selling products in certain nations to avoid paying taxes, this would be unlikely to be a risk in the United States. No company can afford to snub the large American market.

These examples are powerful because they show, contrary to received wisdom, that the taxation of capital and globalization are perfectly compatible. The notion that external or technical constraints make tax justice idle fantasy does not withstand scrutiny. When it comes to the future of taxation, there is an infinity of possible futures ahead of us.

What Taxes Should Look Like

A proposal to return tax rates at the top to where they were in 1950.

Are these ideas for greater economic justice realistic politically? It is easy to lose hope -- money in politics and self-serving ideologies are powerful foes. But although these problems are real, we should not despair. Before injustice triumphed, the United States was a beacon of tax justice. It was the democracy with the most steeply progressive system of taxation on the planet. In the 1930s, American policymakers invented -- and then for almost half a century applied -- top marginal income tax rates of close to 90 percent on the highest earners. Corporate profits were taxed at 50 percent, large estates at close to 80 percent.

The history of taxation is full of U-turns. Instead of elevating some supposedly invincible and natural constraints -- that are often invincible and natural only in terms of their own models -- economists should act more like plumbers, making the tax machinery work, fixing leaks. With good plumbing -- and if the growing political will to address the rise of inequality takes hold -- there is a bright future for tax justice.


Emmanuel Saez and Gabriel Zucman are economists at the University of California, Berkeley.

[Oct 29, 2019] Although they are not officially called taxes, insurance premiums paid by employers are just like taxes but taxes paid to private insurers instead of paid to the government.

Oct 29, 2019 | economistsview.typepad.com

Joe , October 26, 2019 at 10:02 PM

https://www.theguardian.com/commentisfree/2019/oct/25/medicare-for-all-taxes-saez-zucman

Although they are not officially called taxes, insurance premiums paid by employers are just like taxes – but taxes paid to private insurers instead of paid to the government.
---

This is Saez, and official member of tour Orwellian group here. He almost calls premium taxes. He needs to equate taxes and insurance premiums to prove his priors, it is all one cost. He is using the tax concept to prove a prior that emichael and the gang insist upon.

No need to complain about his assumption, we will choose our own fiction, just note he used the term taxes.

Let me help out more. The Supreme Court called mandatory Obamacare premiums taxes. Saez needs to use the word taxes so he can prove his priors, and his priors are ordained by our Orwellian masters. So it is OK to say Medicare for All is paid with taxes, we now have that in our talking points.

Fell free to say Medicare for All taxes are wonderful gifts from Godot as our prior dictate, but you are hereby ordered by the official in charge of talking points that Medicare for All taxes is an acceptable semantic. It is OK, we have it from the high central planners, it is OK to use medicare taxes, we now have an expectation story to explain it as a cost savings. We have met our expectation theory requirements.

[Oct 15, 2019] We Are Taxing Our Way to Greater Inequality

Oct 15, 2019 | economistsview.typepad.com

Fred C. Dobbs , October 12, 2019 at 05:03 AM

We Are Taxing Our Way to Greater Inequality

How to Tax Our Way Back to Justice
https://nyti.ms/2M7DK6C
NYT - Emmanuel Saez and Gabriel Zucman - October 11

It is absurd that the working class
is now paying higher tax rates than
the richest people in America.

America's soaring inequality has a new engine: its regressive tax system. Over the past half century, even as their wealth rose to previously unseen heights, the richest Americans watched their tax rates collapse. For the working classes over the same period, as wages stagnated, work conditions deteriorated and debts ballooned, tax rates increased.

Stop to think this over for a minute: For the first time in the past hundred years, the working class -- the 50 percent of Americans with the lowest incomes -- today pays higher tax rates than billionaires.

The full extent of this situation is not visible in official statistics, which is perhaps why it has not received more attention. Government agencies like the Congressional Budget Office publish information about the distribution of federal taxes, but they disregard state and local taxes, which account for a third of all taxes paid by Americans and are in general highly regressive. The official statistics keepers do not provide specific information on the ultra-wealthy, who although few in number earn a large fraction of national income and therefore account for a large share of potential tax revenue. And until now there were no estimates of the total tax burden that factored in the effect of President Trump's tax reform enacted at the end of 2017, which was particularly generous for the ultra-wealthy.

To fill this gap, we have estimated how much each social group, from the poorest to billionaires, paid in taxes for the year 2018. Our starting point is the total amount of tax revenue collected in the United States, 28 percent of national income. We allocate this total across the population, divided into 15 income groups: the bottom 10 percent (the 24 million adults with the lowest pretax income), the next 10 percent and so on, with finer-grained groups within the top 10 percent, up to the 400 wealthiest Americans.

The Regressive American Tax System

(graphic at the link)

How combined federal, state and local taxes fall on American adults, by income percentile.

Our data series include all taxes paid to the federal, state and local governments: the federal income tax, of course, but also state income taxes, myriad sales and excise taxes, the corporate income tax, business and residential property taxes and payroll taxes. In the end, all taxes are paid by people. The corporate tax, for example, is paid by shareholders, because it reduces the amount of profit they can receive in dividends or reinvest in their companies.

You will often hear that we have a progressive tax system in the United States -- you owe more, as a fraction of your income, as you earn more. When he was a presidential candidate in 2012, Senator Mitt Romney famously lambasted the 47 percent of "takers" who, according to him, do not contribute to the public coffers. In reality, the bottom half of the income distribution may not pay much in income taxes, but it pays a lot in sales and payroll taxes. Taking into account all taxes paid, each group contributes between 25 percent and 30 percent of its income to the community's needs. The only exception is the billionaires, who pay a tax rate of 23 percent, less than every other group.

The tax system in the United States has become a giant flat tax -- except at the top, where it's regressive. The notion that America, even if it may not collect as much in taxes as European countries, at least does so in a progressive way, is a myth. As a group, and although their individual situations are not all the same, the Trumps, the Bezoses and the Buffetts of this world pay lower tax rates than teachers and secretaries do.

This is the tax system of a plutocracy. With tax rates of barely 23 percent at the top of the pyramid, wealth will keep accumulating with hardly any barrier. So, too, will the power of the wealthy, including their ability to shape policymaking and government for their own benefit.

From Kennedy Through Trump, the Rich Have Done Very, Very Well

(graphic at the link)

Here's the change in total wealth per adult since 1962, on average, from the poorest to the richest slices of America. Circles representing wealth are proportionate, which is why they're almost too small to see for the bottom 50 percent of Americans. All wealth figures are in 2018 dollars.

The good news is that we can fix tax injustice, right now. There is nothing inherent in modern technology or globalization that destroys our ability to institute a highly progressive tax system. The choice is ours. We can countenance a sprawling industry that helps the affluent dodge taxation, or we can choose to regulate it. We can let multinationals pick the country where they declare their profits, or we can pick for them. We can tolerate financial opacity and the countless possibilities for tax evasion that come with it, or we can choose to measure, record and tax wealth.

If we believe most commentators, tax avoidance is a law of nature. Because politics is messy and democracy imperfect, this argument goes, the tax code is always full of "loopholes" that the rich will exploit. Tax justice has never prevailed, and it will never prevail.

For example, in response to Elizabeth Warren's wealth tax proposal -- which we helped develop -- pundits have argued that the tax would raise much less revenue than expected. In a similar vein, world leaders have become convinced that taxing multinational companies is now close to impossible, because of international tax competition. During his presidency, Barack Obama argued in favor of reducing the federal corporate tax rate from 35 percent to 28 percent, with a lower rate of 25 percent for manufacturers. In 2017, under President Trump, the United States cut its corporate tax rate to 21 percent. In France, President Emmanuel Macron is in motion to reduce the corporate tax in 2022 to 25 percent from 33 percent. Britain is ahead of the curve: It started slashing its rate under Prime Minister Gordon Brown in 2008 and is aiming for 17 percent by 2020. On that issue, the Browns, Macrons and Trumps of the world agree: The winners of global markets are mobile; we can't tax them too much.

But they are mistaken. Tax avoidance, international tax competition and the race to the bottom that rage today are not laws of nature. They are policy choices, decisions we've collectively made -- perhaps not consciously or explicitly, certainly not choices that were debated transparently and democratically -- but choices nonetheless. And other, better choices are possible.

Take big corporations. Some countries may have an interest in applying low tax rates, but that's not an obstacle to making multinationals (and their shareholders) pay a lot. How? By collecting the taxes that tax havens choose not to levy. For example, imagine that the corporate tax rate in the United States was increased to 35 percent and that Apple found a way to book billions in profits in Ireland, taxed at 1 percent. The United States could simply decide to collect the missing 34 percent. Apple, like most Fortune 500 companies, does in fact have a big tax deficit: It pays much less in taxes globally than what it would pay if its profits were taxed at 35 percent in each country where it operates. For companies headquartered in the United States, the Internal Revenue Service should collect 100 percent of this tax deficit immediately, taking up the role of tax collector of last resort. The permission of tax havens is not required. All it would take is adding a paragraph in the United States tax code.

The same logic can be applied to companies headquartered abroad that sell products in America. The only difference is that the United States would collect not all but only a fraction of their tax deficit. For example, if the Swiss food giant Nestlé has a tax deficit of $1 billion and makes 20 percent of its global sales in the United States, the I.R.S. could collect 20 percent of its tax deficit, in addition to any tax owed in the United States. The information necessary to collect this remedial tax already exists: Thanks to recent advances in international cooperation, the I.R.S. knows where Nestlé books its profits, how much tax it pays in each country and where it makes its sales.

Collecting part of the tax deficit of foreign companies would not violate any international treaty. This mechanism can be applied tomorrow by any country, unilaterally. It would put an end to international tax competition, because there would be no point any more for businesses to move production or paper profits to low-tax places. Although companies might choose to stop selling products in certain nations to avoid paying taxes, this would be unlikely to be a risk in the United States. No company can afford to snub the large American market.

These examples are powerful because they show, contrary to received wisdom, that the taxation of capital and globalization are perfectly compatible. The notion that external or technical constraints make tax justice idle fantasy does not withstand scrutiny. When it comes to the future of taxation, there is an infinity of possible futures ahead of us.

What Taxes Should Look Like

A proposal to return tax rates at the top to where they were in 1950.

(graphic at the link)

Are these ideas for greater economic justice realistic politically? It is easy to lose hope -- money in politics and self-serving ideologies are powerful foes. But although these problems are real, we should not despair. Before injustice triumphed, the United States was a beacon of tax justice. It was the democracy with the most steeply progressive system of taxation on the planet. In the 1930s, American policymakers invented -- and then for almost half a century applied -- top marginal income tax rates of close to 90 percent on the highest earners. Corporate profits were taxed at 50 percent, large estates at close to 80 percent.

The history of taxation is full of U-turns. Instead of elevating some supposedly invincible and natural constraints -- that are often invincible and natural only in terms of their own models -- economists should act more like plumbers, making the tax machinery work, fixing leaks. With good plumbing -- and if the growing political will to address the rise of inequality takes hold -- there is a bright future for tax justice.

(Emmanuel Saez and Gabriel Zucman are economists at the University of California, Berkeley, and the authors of "The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay," from which this essay is adapted.)

[Oct 07, 2019] The Rich Really Do Pay Lower Taxes Than You

Oct 07, 2019 | economistsview.typepad.com

Fred C. Dobbs , October 06, 2019 at 09:23 PM

The Rich Really Do Pay Lower Taxes Than You
https://www.nytimes.com/interactive/2019/10/06/opinion/income-tax-rate-wealthy.html
NYT - David Leonhardt - October 6

Almost a decade ago, Warren Buffett made a claim that would become famous. He said that he paid a lower tax rate than his secretary, thanks to the many loopholes and deductions that benefit the wealthy.

His claim sparked a debate about the fairness of the tax system. In the end, the expert consensus was that, whatever Buffett's specific situation, most wealthy Americans did not actually pay a lower tax rate than the middle class. "Is it the norm?" the fact-checking outfit Politifact asked. "No."

Time for an update: It's the norm now.

For the first time on record, the 400 wealthiest Americans last year paid a lower total tax rate -- spanning federal, state and local taxes -- than any other income group, according to newly released data.

That's a sharp change from the 1950s and 1960s, when the wealthy paid vastly higher tax rates than the middle class or poor.

Since then, taxes that hit the wealthiest the hardest -- like the estate tax and corporate tax -- have plummeted, while tax avoidance has become more common.

President Trump's 2017 tax cut, which was largely a handout to the rich, plays a role, too. It helped push the tax rate on the 400 wealthiest households below the rates for almost everyone else.

The overall tax rate on the richest 400 households last year was only 23 percent, meaning that their combined tax payments equaled less than one quarter of their total income. This overall rate was 70 percent in 1950 and 47 percent in 1980.

For middle-class and poor families, the picture is different. Federal income taxes have also declined modestly for these families, but they haven't benefited much if at all from the decline in the corporate tax or estate tax. And they now pay more in payroll taxes (which finance Medicare and Social Security) than in the past. Over all, their taxes have remained fairly flat.

The combined result is that over the last 75 years the United States tax system has become radically less progressive.

The data here come from the most important book on government policy that I've read in a long time -- called "The Triumph of Injustice," to be released next week. The authors are Emmanuel Saez and Gabriel Zucman, both professors at the University of California, Berkeley, who have done pathbreaking work on taxes. Saez has won the award that goes to the top academic economist under age 40, and Zucman was recently profiled on the cover of Bloomberg BusinessWeek magazine as "the wealth detective."

They have constructed a historical database that tracks the tax payments of households at different points along the income spectrum going back to 1913, when the federal income tax began. The story they tell is maddening -- and yet ultimately energizing.

"Many people have the view that nothing can be done," Zucman told me. "Our case is, 'No, that's wrong. Look at history.'" As they write in the book: "Societies can choose whatever level of tax progressivity they want." When the United States has raised tax rates on the wealthy and made rigorous efforts to collect those taxes, it has succeeded in doing so.

And it can succeed again.

Saez and Zucman portray the history of American taxes as a struggle between people who want to tax the rich and those who want to protect the fortunes of the rich. The story starts in the 17th century, when Northern colonies created more progressive tax systems than Europe had. Massachusetts even enacted a wealth tax, which covered financial holdings, land, ships, jewelry, livestock and more.

The Southern colonies, by contrast, were hostile to taxation. Plantation owners worried that taxes could undermine slavery by eroding the wealth of shareholders, as the historian Robin Einhorn has explained, and made sure to keep tax rates low and tax collection ineffective. (The Confederacy's hostility to taxes ultimately hampered its ability to raise money and fight the Civil War.)

By the middle of the 20th century, the high-tax advocates had prevailed. The United States had arguably the world's most progressive tax code, with a top income-tax rate of 91 percent and a corporate tax rate above 50 percent.

But the second half of the 20th century was mostly a victory for the low-tax side. Companies found ways to take more deductions and dodge taxes. Politicians cut every tax that fell heavily on the wealthy: high-end income taxes, investment taxes, the estate tax and the corporate tax. The justification for doing so was usually that the economy as a whole would benefit.

The justification turned out to be wrong. The wealthy, and only the wealthy, have done fantastically well over the last several decades. G.D.P. growth has been disappointing, and middle-class income growth even worse.

The American economy just doesn't function very well when tax rates on the rich are low and inequality is sky high. It was true in the lead-up to the Great Depression, and it's been true recently. Which means that raising high-end taxes isn't about punishing the rich (who, by the way, will still be rich). It's about creating an economy that works better for the vast majority of Americans.

In their book, Saez and Zucman sketch out a modern progressive tax code. The overall tax rate on the richest 1 percent would roughly double, to about 60 percent. The tax increases would bring in about $750 billion a year, or 4 percent of G.D.P., enough to pay for universal pre-K, an infrastructure program, medical research, clean energy and more. Those are the kinds of policies that do lift economic growth.

One crucial part of the agenda is a minimum global corporate tax of at least 25 percent. A company would have to pay the tax on its profits in the United States even if it set up headquarters in Ireland or Bermuda. Saez and Zucman also favor a wealth tax; Elizabeth Warren's version is based on their work. And they call for the creation of a Public Protection Bureau, to help the I.R.S. crack down on tax dodging.

I already know what some critics will say about these arguments -- that the rich will always figure out a way to avoid taxes. That's simply not the case. True, they will always manage to avoid some taxes. But history shows that serious attempts to collect more taxes usually succeed.

Ask yourself this: If efforts to tax the super-rich were really doomed to fail, why would so many of the super-rich be fighting so hard to defeat those efforts?

Fred C. Dobbs said in reply to Fred C. Dobbs... , October 06, 2019 at 09:30 PM
(There is a graph that dominates this op-ed
that will not display in iExplorer, but
will appear using Edge, at the link above.)
Fred C. Dobbs said in reply to Fred C. Dobbs... , October 06, 2019 at 09:50 PM
NYT: The data here come from the most important
book on government policy that I've read in a
long time -- called "The Triumph of Injustice,"
to be released next week. The authors are
Emmanuel Saez and Gabriel Zucman ...

https://wwnorton.com/books/9781324002727

[Oct 07, 2019] Milton Friedman said "deficits were delayed taxes" Is this true?

Oct 07, 2019 | economistsview.typepad.com

anne -> Fred C. Dobbs... , October 06, 2019 at 05:33 PM

Seriously, what am I missing in failing to find that debt or the issuing of Treasury securities increases inequality? I will suppose I am wrong, since I want to understand the matter, but absent an explanation I will conclude I am right and the effect on inequality is of no significance. Corporate debt is another matter and here I understand that this increases inequality, but Treasury debt?
ilsm -> anne... , October 06, 2019 at 05:43 PM
I think (trying not to dwell on why Biden is not being arraigned) it has to do with financialization vice manufacturing focus of US "growth".

If material 'wealth' grows through imports..... that creates a large outflow of USD. To make safe places to put newly printed USD the government borrows from both the foreign holders of USD and top 1% US citizens who don't enough pay taxes.

How can Joe six pack who has a large negative net worth and loses to foreign imports get in on accumulating T Bills and FX arbitrage?

Just thinking.

Shorter: Milton Friedman sold US a bill of goods when he said "deficits were delayed taxes" on PBS when my kids were toddlers.

[Oct 02, 2019] https://www.taxpolicycenter.org/briefing-book/what-tax-changes-did-affordable-care-act-make

Oct 02, 2019 | www.taxpolicycenter.org

Q. What tax changes did the Affordable Care Act make?

A. The Affordable Care Act made several changes to the tax code intended to increase health insurance coverage, reduce health care costs, and finance health care reform.

The Affordable Care Act (ACA) made several changes to the tax code intended to increase health insurance coverage, reduce health care costs, and finance health care reform.

To increase health insurance coverage, the ACA provided individuals and small employers with a tax credit to purchase insurance and imposed taxes on individuals with inadequate coverage and on employers who do not offer adequate coverage. To reduce health care costs and raise revenue for insurance expansion, the ACA imposed an excise tax on high-cost health plans. To raise additional revenue for reform, the ACA imposed excise taxes on health insurers, pharmaceutical companies, and manufacturers of medical devices; raised taxes on high-income families; and increased limits on the income tax deduction for medical expenses. Reply Wednesday, October 02, 2019 at 10:31 AM anne said in reply to anne... ACA tax provisions in effect in 2018 include the following:

A refundable tax credit for families to purchase health insurance through state and federal marketplaces.

A tax credit for small employers to purchase health insurance for their workers.

A tax on individuals without adequate health insurance coverage (the "individual mandate").

A tax on employers offering inadequate health insurance coverage (the "employer mandate").

Excise taxes on health insurance providers, pharmaceutical manufacturers and importers, and medical device manufacturers and importers.

An additional 0.9 percent Medicare tax on earnings and a 3.8 percent tax on net investment income (NII) for individuals with incomes exceeding $200,000 and couples with incomes exceeding $250,000.

Additionally, these ACA tax provisions are scheduled to take effect in the future:

An excise tax on employer-sponsored health benefits whose value exceeds specified thresholds (the "Cadillac tax") starting in 2022.

An additional limit on the medical expense deduction. Reply Wednesday, October 02, 2019 at 10:36 AM anne said in reply to anne... ACA Taxes and Credits for 2018

https://www.taxpolicycenter.org/sites/default/files/styles/original_optimized/public/4.8.8.png

[ This summary may be helpful to have. As far as I am aware, there is now no significant "public" criticism of Obamacare taxes. What criticism there is amounts to Republican political opposition to Obamacare which has had almost no voting resonance.

Democrats ran in support of Obamacare in the last congressional election, and this was considered a reason there is no Democratic control of the House of Representatives. Nonetheless, Republican political opposition to Obamacare continues. ] Reply Wednesday, October 02, 2019 at 10:49 AM anne said in reply to anne... Correcting:

Democrats ran in support of Obamacare in the last congressional election, and this was considered a prime reason there is [now[ Democratic control of the House of Representatives. Nonetheless, Republican political opposition to Obamacare continues even though the issue of protecting Obamacare evidently only helped Democrats in the latest national election. Reply Wednesday, October 02, 2019 at 03:00 PM anne said in reply to anne... https://www.nytimes.com/2019/09/25/health/employer-health-insurance-cost.html

September 25, 2019

Employer Health Insurance Is Increasingly Unaffordable, Study Finds
A relentless rise in premiums and deductibles is putting insurance out of reach for many workers, especially those with low incomes.
By Reed Abelson

Jessie McCormick had to quit her job to afford health care.

Ms. McCormick, 27, who has a heart condition, had an opportunity to move from part time to full time in her job at a small nonprofit in Washington. Working full time would qualify her for the firm's health plan.

But she calculated that her out-of-pocket costs would be at least $1,200 per month, about double the money she had left after paying her rent and utilities.

Instead, she quit her job last summer so her income would be low enough to enroll in Medicaid, which will cover all her medical expenses. "I'm trying to do some side jobs," she said.

Employers remain the main source of health insurance in the United States, covering about 153 million people. But premiums and deductibles are pushing employer-based coverage increasingly out of reach, according to a new analysis released Wednesday by the Kaiser Family Foundation, which conducts a survey of employers every year.

The average premium paid by the employer and the employee for a family plan now tops $20,000 a year, with the worker contributing about $6,000, according to the survey. More than a quarter of all covered workers and nearly half of those working for small businesses face an annual deductible of $2,000 or more.

The new data on employer coverage come as the Democratic presidential candidates debate sweeping reforms to diminish the role of private insurance in the American health system, including expanding the federal Medicare program to everyone or giving people the option to enroll in a government-run plan.

Many of the arguments for both systems center on expanding health insurance to more of the estimated 27 million people who lack it. But millions of people who already have coverage are deeply dissatisfied with the current system as well.

"For some reason, we like to focus on coverage when the issue for workers, people and the public generally is cost," said Drew Altman, the chief executive of the foundation. About 2,000 small and large businesses responded in detail to the survey.

Small employers in particular, and their workers, are struggling.

"Health insurance in the United States is incredibly prohibitive for small businesses," said Shalin Madan, the founder of a small investment advisory firm in Florida. He is not required to provide health insurance to his workers, because his business is too small and he outsources much of the work.

A policy for his own family, he said, runs about $2,000 a month ($24,000 per year), with a $13,000 deductible. "I'm out $37,000 before I see a return on investment, if you will," Mr. Madan said.... Reply Wednesday, October 02, 2019 at 10:58 AM EMichael said in reply to anne... I'd have to know how many family members and his county to give him credit for accurately quoting his costs.

I know a couple in Fl with two kids and their costs are not remotely close to his. And they receive no subsidy due to their income level. Reply Wednesday, October 02, 2019 at 11:18 AM anne said in reply to EMichael... I'd have to know how many family members and his county to give him credit for accurately quoting his costs....

[ The example makes no sense, but I did not realize that. I appreciate what I take as a necessary specific correction and caution about the article in all. There will be better articles. ] Reply Wednesday, October 02, 2019 at 11:44 AM anne said in reply to anne... A policy for his own family, he said, runs about $2,000 a month ($24,000 per year), with a $13,000 deductible. "I'm out $37,000 before I see a return on investment, if you will," Mr. Madan said....

[ Supposing we are considering a family of 4, this example does not make sense to me. The quoted cost is beyond any of which I am aware. The reporter needed to have checked this example but did not, and that means the article is problematic.

I appreciate this being called to my attention since I read the article, but neglectfully did not think through the example. ] Reply Wednesday, October 02, 2019 at 11:39 AM

[Sep 25, 2019] Lawrence Summers, MMT, and Helicopter money

Sep 25, 2019 | economistsview.typepad.com

im1dc , September 22, 2019 at 04:33 PM

Lawrence Summers, MMT, and Helicopter money

This is ALL complete Jabberwocky imo...

...but do see if you can make sense of anything written therein

https://www.bloomberg.com/news/articles/2019-09-22/a-long-despised-and-risky-economic-doctrine-is-now-a-hot-idea

"A Long-Despised and Risky Economic Doctrine Is Now a Hot Idea"

By Enda Curran and Ben Holland...September 22, 2019...1:00 AM EDT

> Next slump may see new central bank tools -- but less autonomy

> Helicopter money on horizon as Dalio, Fischer draw up plans

Paine -> Paine... , September 23, 2019 at 06:38 AM
The struggle between treasury control and central bank control is strategic not intra bureaucratic

The elected branches must directly face the consequences of adverse market outcomes

Soooooo

Those same branches must have the power to alter those market outcomes

kurt -> im1dc... , September 23, 2019 at 12:42 PM
Helicopter money makes complete sense when the Pols can be counted on to vote for low multiplier stimulus that is too small if it even exists. The Fed could just put $10k in everyone's bank account. It would lower the dollar and create a ton of demand for current goods rather than old paintings and cars.
JohnH -> kurt... , September 23, 2019 at 12:50 PM
LOL!!! Helicopter money makes complete sense when you can count on the Fed to give it to the banksters? I mean, what other distribution channel does the bankster-owned Fed have? Certainly not direct access to each of my bank accounts!
kurt -> kurt... , September 23, 2019 at 01:37 PM
Surprising nobody, my reply guy didn't read the article and also doesn't understand what helicopter money means.
JohnH -> kurt... , September 23, 2019 at 05:51 PM
Sure, sure, kurt. Where does the article spell out exactly how those $10K deposits will be made into everyone's bank account? Answer: it doesn't! kurt made it all up.

Sure, helicopter money may not be a bad idea, but the issue always boils down to implementation and distribution and you can be that it will be a dead letter the moment any such proposal lands on the desk of deficit hawks like Team Pelosi.

Lots of bright, desperate ideas have been proposed, but no one has a clue as to how it will happen. Its best chance for political success is for the money to be doled out to the usual suspects banksters and corporations.

Plp -> JohnH... , September 24, 2019 at 08:58 AM
Yes a socially acceptable distribution algorithm is needed

But once the system is designed and inplemented
why the FED why not the house

using the treasury


The house gets elected
Every two years

Of we need constraints
Build them into the algorithm itself

Not the discretionary node


The whole system should operate automatically unless the house intervenes

kurt -> Plp... , September 24, 2019 at 02:24 PM
Because doing what is right in a slump is nearly (read always) always politically impossible - especially since the emergence of the Right Wing psyops media.
kurt -> kurt... , September 24, 2019 at 02:28 PM
The 10k is from Brad Delong, not this article - but as a matter of reality, all discussions of "helicopter drop" central bank actions that I have ever read would result in either everyone getting the same amount - an amount that would be a huge marginal increase for poor people and not much for rich people - or for the recipients to be completely randomized. It doesn't work like fiscal to give it to the banks - which is exactly what happened with QE and negative real interest rates. Why? Because 1. bad animal spirits and 2. nothing to invest in without demand. This is pretty econ 201 level stuff, but you know some folks have an Ivy MBA so they must be much smarter than me with my BA and MA from state schools. Again - my reply guy proves he doesn't even understand the basics of what "helicopter drop" means and oddly has frequently lamented that the Fed didn't do it.....

[Sep 24, 2019] https://missingprofits.world/

Sep 24, 2019 | missingprofits.world


September, 2019

40% of multinational profits are shifted to tax havens each year
Researchers from the University of California, Berkeley and the University of Copenhagen estimate that close to 40% of multinational profits (more than $650 billion in 2016) are shifted to tax havens each year. This shifting reduces corporate income tax revenue by nearly $200 billion, or 10% of global corporate tax receipts.

Explore the map to see how much profit and tax revenue your country loses (or attracts) in this game for profits. The tax havens can be hard to find, but you can zoom in by pressing the full-screen button.

Click here for full screen

Non-tax havens (% of corporate tax revenue lost)

> 20%
> 8%
> 4%
< 4%
Tax havens

No data

About the research

Researchers from the University of California, Berkeley and the University of Copenhagen have produced a database showing where corporations book their profits globally. Exploiting these data, the authors develop a methodology to estimate the amount of profits shifted to tax havens by multinational companies and how much each country loses in profit and tax revenue from such shifting. Globally, multinational firms shifted more than $650 billion in profits to tax havens in 2016 and this shifting reduced global corporate tax receipts by close to 10%.

Multinational firms shift profits to tax havens to reduce their global tax bills. Take the example of Google: In 2017, Google Alphabet reported $23 billion in revenue in Bermuda, a small island in the Atlantic where the corporate income tax rate is zero. Globally, about $650 billion in profits are shifted to such tax havens by multinational from all countries.

You can explore the map to see which countries attract and lose profits in this shell game. By clicking on each country you can see the amount of profits shifted to tax havens and to which havens the profits were shifted. You can also see the implied loss of corporate income tax revenue. Some countries are marked in green; these are tax havens. For the tax havens we report how much profits they attract from high-tax countries and what the effective corporate income tax rate is.

The loss of profit is the highest for the (non-haven) European Union countries. U.S. multinationals shift comparatively more profits (about 60% of their foreign profits) than multinationals from other countries (40% for the world on average). The shareholders of U.S. multinationals thus appear to be the main winners from global profit shifting. Moreover, the governments of tax havens derive sizable benefits from this phenomenon: by taxing the large amount of paper profits they attract at low rates (less than 5%), they are able to generate more tax revenue, as a fraction of their national income, than the United States and non-haven European countries that have much higher tax rates.

Until recently, this research would not have been possible, because firms usually do not publicly disclose the countries in which their profits are booked, and national accounts data did not make it possible to study multinational corporations separately from other firms. But in recent years, the statistical institutes of most of the world's developed countries (including the key tax havens) have started releasing new macroeconomic data known as foreign affiliates statistics. These data allow to obtain a comprehensive view of where multinational companies book their profits, and in particular to estimate the amount of profit booked in tax havens globally. To further our understanding of this issue we need more and better data. In particular it would be desirable that all countries publish foreign affiliates statistics, and that these statistics be extended to always include information on taxes paid. Reply Monday, September 23, 2019 at 02:18 PM anne said in reply to anne... This map is a terrific tool, do explore. Every country is described in terms of tax revenue lost or the benefit of being a tax haven. For the United States the loss of tax revenue to tax havens is 17%. For Germany 29% (I had no idea).

... Reply Monday, September 23, 2019 at 02:24 PM point said in reply to anne... It may be had the USA not lowered its corporate tax rates toward zero the percentage lost could be higher.

Perhaps there would be a way to display the tax rates as well as the losses and gains. I presume the havens are even lower than the USA. Reply Monday, September 23, 2019 at 04:51 PM anne said in reply to point... It may be had the USA not lowered its corporate tax rates toward zero the percentage lost could be higher.

Perhaps there would be a way to display the tax rates as well as the losses and gains. I presume the havens are even lower than the USA.

[ Yes and yes, and I understand how to use the map now. ] Reply Monday, September 23, 2019 at 06:52 PM anne said in reply to anne... Correcting, yikes:

This map is a [terrific] tool, do explore. Reply Monday, September 23, 2019 at 06:51 PM anne said in reply to anne... Example, Netherlands collects 30% of its tax revenue as a tax haven which means collecting $90 billion yearly from abroad. (Do explore this map.) Reply Monday, September 23, 2019 at 02:33 PM anne said in reply to anne... United States loses $60.8 billion yearly in corporate taxes to tax havens or 17% of corporate taxes lost. Reply Monday, September 23, 2019 at 02:37 PM

[Sep 11, 2019] Almost 40% -- or some $15 trillion -- of the world's foreign direct investment is "phantom capital" designed to minimize the tax bills of multinational firms, according to a study published by the International Monetary Fund.

Sep 11, 2019 | www.moonofalabama.org

Sergei , Sep 11 2019 19:11 utc | 17

Almost 40% -- or some $15 trillion -- of the world's foreign direct investment is "phantom capital" designed to minimize the tax bills of multinational firms, according to a study published by the International Monetary Fund.

Such investments -- which are now equivalent to the combined GDP of China and Germany -- have surged about 10 percentage points in the past decade despite targeted global attempts to curb tax avoidance, an IMF and University of Copenhagen study found. The capital typically passes through empty corporate shells that have no real business activity.

"FDI is often an important driver for genuine international economic integration, stimulating growth and job creation and boosting productivity," the report said. But phantom capital is "financial and tax engineering" that "blurs traditional FDI statistics and makes it difficult to understand genuine economic integration."

Almost half of the world's phantom capital is hosted by Luxembourg and the Netherlands, according to the report, with just 10 economies holding more than 85% of such investments.

"Luxembourg, a country of 600,000 people, hosts as much FDI as the U.S. and much more than China," the report said. "FDI of this size hardly reflects brick-and-mortar investments in the minuscule Luxembourg economy," whose $4 trillion in FDI comes to $6.6 million a person.

"Unsurprisingly," the study found, an economy's exposure to phantom FDI increases with the corporate tax rate.

https://www.bloomberg.com/news/articles/2019-09-09/tax-dodgers-phantom-cash-makes-up-40-of-foreign-investment

[Sep 07, 2019] Top Wealth in the United States: New Estimates and Implications for Taxing the Rich

Sep 07, 2019 | economistsview.typepad.com

anne , September 05, 2019 at 02:10 PM

https://www.law.nyu.edu/sites/default/files/Top%20Wealth%20in%20the%20United%20States%20-%20Zwick.pdf

July 19, 2019

Top Wealth in the United States: New Estimates and Implications for Taxing the Rich
By Matthew Smith, Owen Zidar and Eric Zwick

Abstract

This paper uses administrative tax data to estimate top wealth in the United States. We build on the capitalization approach in Saez and Zucman (2016) while accounting for heterogeneity within asset classes when mapping income flows to wealth. Our approach reduces bias in wealth estimates because wealth and rates of return are correlated. Overall, wealth is very concentrated: the top 1% holds as much wealth as the bottom 90%. However, the "P90-99" class holds more wealth than either group after accounting for heterogeneity. Relative to a top 0.1% wealth share of more than 20% under equal returns, we estimate a top 0.1% wealth share of [15%] and find that the rise since 1980 in top wealth shares falls by [half]. Top portfolios depend less on fixed income and public equity, depend more on private equity and housing, and more closely match the composition reported in the SCF and estate tax returns. Our adjustments reduce mechanical revenue estimates from a wealth tax and top capital income shares in distributional national accounts, which depend on well-measured estimates of top wealth. Though the capitalization approach has advantages over other methods of estimating top wealth, we emphasize that considerable uncertainty remains inherent to the approach by showing the sensitivity of estimates to different assumptions.

[Aug 26, 2019] From Voodoo Economics to Evil-Eye Economics

Notable quotes:
"... Almost four decades ago then-candidate George H.W. Bush used the phrase "voodoo economic policy" to describe Ronald Reagan's claim that cutting taxes for the rich would pay for itself. He was more prescient than he could have imagined. ..."
"... For voodoo economics isn't just a doctrine based on magical thinking. It's the ultimate policy zombie, a belief that seemingly can't be killed by evidence. It has failed every time its proponents have tried to put it into practice, but it just keeps shambling along. In fact, at this point it has eaten the brains of every significant figure in the Republican Party. Even Susan Collins, the least right-wing G.O.P. senator (although that isn't saying much), insisted that the 2017 tax cut would actually reduce the deficit. ..."
"... During the 2016 campaign Donald Trump pretended to be different, claiming that he would actually raise taxes on the rich. Once in office, however, he immediately went full voodoo. In fact, he has taken magical thinking to a new level. ..."
"... My favorite until now came from Art Laffer, the original voodoo economist and recent recipient of the Presidential Medal of Freedom. Why did George W. Bush's tax-cutting presidency end not with a boom, but with the worst economic slump since the Great Depression? ..."
"... But Trump has gone one better. As it has become increasingly clear that the results of his tax cut were disappointing -- recent data revisions have marked down estimates of both G.D.P. and employment growth, to the point where it's hard to see more than a brief sugar high from $2 trillion in borrowing ..."
"... Officials have floated, then retracted, the idea of a cut in payroll taxes -- that is, a tax break for ordinary workers, rather than the corporations and wealthy individuals who mainly benefited from the 2017 tax cut. But such action seems unlikely, among other things because top administration officials denounced this policy idea when Obama proposed it. ..."
"... The truth is that Trump doesn't have a Plan B, and probably can't come up with one. On the other hand, he might not have to. Who needs competent policy when you're the chosen one and the king of Israel? ..."
Aug 26, 2019 | economistsview.typepad.com

anne , August 23, 2019 at 12:30 PM

https://www.nytimes.com/2019/08/22/opinion/trump-payroll-tax-cut.html

August 22, 2019

From Voodoo Economics to Evil-Eye Economics
Are Democrats hexing the Trump boom with bad thoughts?
By Paul Krugman

Almost four decades ago then-candidate George H.W. Bush used the phrase "voodoo economic policy" to describe Ronald Reagan's claim that cutting taxes for the rich would pay for itself. He was more prescient than he could have imagined.

For voodoo economics isn't just a doctrine based on magical thinking. It's the ultimate policy zombie, a belief that seemingly can't be killed by evidence. It has failed every time its proponents have tried to put it into practice, but it just keeps shambling along. In fact, at this point it has eaten the brains of every significant figure in the Republican Party. Even Susan Collins, the least right-wing G.O.P. senator (although that isn't saying much), insisted that the 2017 tax cut would actually reduce the deficit.

During the 2016 campaign Donald Trump pretended to be different, claiming that he would actually raise taxes on the rich. Once in office, however, he immediately went full voodoo. In fact, he has taken magical thinking to a new level.

True, whenever tax cuts fail to produce the predicted miracle, their defenders come up with bizarre explanations for their failure.

My favorite until now came from Art Laffer, the original voodoo economist and recent recipient of the Presidential Medal of Freedom. Why did George W. Bush's tax-cutting presidency end not with a boom, but with the worst economic slump since the Great Depression? According to Laffer, blame rests with Barack Obama, even though the recession began more than a year before Obama took office. You see, according to Laffer, everyone lost confidence upon realizing that Obama might win the 2008 election.

But Trump has gone one better. As it has become increasingly clear that the results of his tax cut were disappointing -- recent data revisions have marked down estimates of both G.D.P. and employment growth, to the point where it's hard to see more than a brief sugar high from $2 trillion in borrowing -- Trump has invented ever more creative ways to blame other people. In particular, he's now claiming that the promised boom hasn't arrived because his opponents are hexing the economy with bad thoughts: "The Democrats are trying to 'will' the Economy to be bad for purposes of the 2020 Election."

Can opposition politicians really cause a recession with negative thinking? This goes beyond voodoo economics; maybe we should call it evil-eye economics.

To be fair, the claim that Democrats are hexing his boom is a secondary theme in Trump's ranting. Mostly he has been blaming the Federal Reserve for its "crazy" interest rate hikes. And the truth is that last year's rate increases pretty clearly were a mistake.

But blaming the Fed for the tax cut's fizzle won't wash. For one thing, the Fed has actually raised rates less than in previous economic recoveries. Even more to the point, the Trump economic team was expecting Fed rate hikes when it made its extravagantly optimistic forecasts. Administration projections from a year ago envisioned 2019 interest rates substantially higher than what we're actually seeing.

Put it this way: The Trump tax cut was supposed to create a boom so powerful that it would not only withstand modest Fed rate hikes, but actually require such hikes to prevent inflationary overheating. You don't get to turn around and claim betrayal when the Fed does exactly what you expected it to do.

Aside from blaming everyone but himself, however, how will Trump deal with the failure of his economic promises? He has taken to demanding that the Fed roll the printing presses, slashing interest rates and buying bonds -- the actions it normally takes in the face of a serious recession -- even as he claims that the economy remains strong, and unemployment is in fact near a historic low.

As many people have noted, these are exactly the actions Republicans, including Trump, denounced as "currency debasement" when unemployment was far higher than it is today and the economy desperately needed a boost.

Since the Fed is unlikely to oblige, what else might Trump do? Officials have floated, then retracted, the idea of a cut in payroll taxes -- that is, a tax break for ordinary workers, rather than the corporations and wealthy individuals who mainly benefited from the 2017 tax cut. But such action seems unlikely, among other things because top administration officials denounced this policy idea when Obama proposed it.

Trump has also suggested using executive authority to reduce taxes on capital gains (which are overwhelmingly paid by the wealthy). This move would have the distinction of being both ineffectual and illegal.

What about calling off the trade war that has been depressing business investment? This seems unlikely, because protectionism is right up there with racism as a core Trump value. And merely postponing tariffs might not help, since it wouldn't resolve the uncertainty that may be the trade war's biggest cost.

The truth is that Trump doesn't have a Plan B, and probably can't come up with one. On the other hand, he might not have to. Who needs competent policy when you're the chosen one and the king of Israel?

Christopher H. -> anne... , August 23, 2019 at 12:46 PM
"But blaming the Fed for the tax cut's fizzle won't wash. For one thing, the Fed has actually raised rates less than in previous economic recoveries. Even more to the point, the Trump economic team was expecting Fed rate hikes when it made its extravagantly optimistic forecasts. "

Yes the Trump economic team is insane and clueless. But the Fed has been tightening since 2013 when Bernanke began tapering QE.

So now all good liberals are crying recession (which would hurt Trump in the election) but the Fed is blameless?

Monetary policy is ineffective. Then why don't we get rid of the Fed's vaunted independence? Then why does it matter if Trump tweets at Powell?

This isn't directed at Anne but at the general comment reader and Krugman admirer.

Plp -> Christopher H.... , August 24, 2019 at 05:45 AM
LARRY S
IS WAY AHEAD OF KRUGMAN

The paradigm that has governed macro policy since 1980 is dead. No more interest rate forex rate guided macro demand management

The FED is at best a servo mechanism to facilitate fiscal macro activism

[Aug 26, 2019] In an environment of secular stagnation in the developed economies, central bankers' ingenuity in loosening monetary policy is exactly what is not needed.

Notable quotes:
"... Europe and Japan are currently caught in what might be called a monetary black hole – a liquidity trap in which there is minimal scope for expansionary monetary policy ..."
"... "There are strong reasons to believe that the capacity of lower interest rates to stimulate the economy has been attenuated – or even gone into reverse." Good to see that some prominent economists are finally willing to say what I've been pointing out for the past five years. ..."
"... A much better idea for central banking, negotiate the seigniorage fee, up front, then let the central banker do its thing with no interference until the contract expires. Just admit, upfront, central bankers are a creation of government, serve government, let's at least do it twice as efficient as the boomers done it. Screw up half as often! Why not! ..."
Aug 26, 2019 | economistsview.typepad.com

anne , August 23, 2019 at 04:44 PM

https://www.project-syndicate.org/commentary/central-bankers-in-jackson-hole-should-admit-impotence-by-lawrence-h-summers-and-anna-stansbury-2-2019-08

August 23, 2019

Whither Central Banking?
In an environment of secular stagnation in the developed economies, central bankers' ingenuity in loosening monetary policy is exactly what is not needed. What is needed are admissions of impotence, in order to spur efforts by governments to promote demand through fiscal policies and other means.
By LAWRENCE H. SUMMERS and ANNA STANSBURY

CAMBRIDGE – The world's central bankers and the scholars who follow them are having their annual moment of reflection in Jackson Hole, Wyoming. But the theme of this year's meeting, "Challenges for Monetary Policy," may encourage an insular – and dangerous – complacency.

Simply put, tweaking inflation targets, communications strategies, or even balance sheets is not an adequate response to the challenges now confronting the major economies. Rather, ten years of below-target inflation throughout the developed world, with 30 more expected by the market, and the utter failure of the Bank of Japan's extensive efforts to raise inflation suggest that what was previously treated as axiomatic is in fact false: central banks cannot always set inflation rates through monetary policy.

Europe and Japan are currently caught in what might be called a monetary black hole – a liquidity trap in which there is minimal scope for expansionary monetary policy . The United States is one recession away from a similar fate, given that, as the figure below illustrates, there will not be nearly sufficient room to cut interest rates when the next downturn comes. And with ten-year rates in the range of 1.5% and forward real rates negative, the scope for quantitative easing and forward guidance to provide incremental stimulus is very limited – even assuming that these tools are effective (which we doubt).

These developments seem to lend further support to the concept of secular stagnation; indeed, the issue is much more profound than is generally appreciated. Relative to what was expected when one of us (Summers) sought to resurrect the concept in 2013, deficits and national debt levels are far higher, nominal and real interest rates are far lower, and yet nominal GDP growth has been far slower. This suggests some set of forces operating to reduce aggregate demand, whose effect has only been partly attenuated by fiscal policies.

Conventional policy discussions are rooted in the (by now old) New Keynesian tradition of viewing macroeconomic problems as a reflection of frictions that slow convergence to a classical market-clearing equilibrium. The idea is that the combination of low inflation, a declining neutral real interest rate, and an effective lower bound on nominal interest rates may preclude the restoration of full employment. According to this view, anything that can be done to reduce real interest rates is constructive, and with sufficient interest-rate flexibility, secular stagnation can be overcome. With the immediate problem being excessive real rates, looking first to central banks and monetary policies for a solution is natural.

We are increasingly skeptical that matters are so straightforward. The near-universal tendency among central bankers has been to interpret the coincidence of very low real interest rates and nonaccelerating inflation as evidence that the neutral real interest rate has declined and to use conventional monetary policy frameworks with an altered neutral real rate.

But more ominous explanations are possible. There are strong reasons to believe that the capacity of lower interest rates to stimulate the economy has been attenuated – or even gone into reverse.

The share of interest-sensitive durable-goods sectors in GDP has decreased. The importance of target saving effects has grown as interest rates have fallen, while the negative effect of reductions in interest rates on disposable income has increased as government debts have risen. Declining interest rates in the current environment undermine financial intermediaries' capital position and hence their lending capacity. As the economic cycle has globalized, the exchange-rate channel has become less important for monetary policy. With real interest rates negative, it is doubtful that the cost of capital is an important constraint on investment.

To take the most ominous case first, with interest-rate reductions having both positive and negative effects on demand, it may be that there is no real interest rate consistent with full resource utilization. Interest-rate reductions beyond a certain point may constrain rather than increase demand. In this case, not only will monetary policy be unable to achieve full employment, it will also be unable to increase inflation. If demand consistently falls short of capacity, the Phillips curve implies that inflation will tend to fall rather than rise.

Even if interest-rate cuts at all points proximately increase demand, there are substantial grounds for concern if this effect is weak. It may be that any short-run demand benefit is offset by the adverse effects of lower rates on subsequent performance. This could happen for macroeconomic or microeconomic reasons.

From a macro perspective, low interest rates promote leverage and asset bubbles by reducing borrowing costs and discount factors, and encouraging investors to reach for yield. Almost every account of the 2008 financial crisis assigns at least some role to the consequences of the very low interest rates that prevailed in the early 2000s. More broadly, students of bubbles, from the economic historian Charles Kindleberger onward, always emphasize the role of easy money and overly ample liquidity.

From a micro perspective, low rates undermine financial intermediaries' health by reducing their profitability, impede the efficient allocation of capital by enabling even the weakest firms to meet debt-service obligations, and may also inhibit competition by favoring incumbent firms. There is something unhealthy about an economy in which corporations can profitably borrow and invest even if the project in question pays a zero return.

These considerations suggest that reducing interest rates may not be merely insufficient, but actually counterproductive, as a response to secular stagnation.

This formulation of the secular stagnation view is closely related to the economist Thomas Palley's recent critique of "zero lower bound economics": negative interest rates may not remedy Keynesian unemployment. More generally, in moving toward the secular stagnation view, we have come to agree with the point long stressed by writers in the post-Keynesian (or, perhaps more accurately, original Keynesian) tradition: the role of particular frictions and rigidities in underpinning economic fluctuations should be de-emphasized relative to a more fundamental lack of aggregate demand.

If reducing rates will be insufficient or counterproductive, central bankers' ingenuity in loosening monetary policy in an environment of secular stagnation is exactly what is not needed. What is needed are admissions of impotence, in order to spur efforts by governments to promote demand through fiscal policies and other means.

Instead of more old New Keynesian economics, we hope, but do not expect, that this year's gathering in Jackson Hole will bring forth a new Old Keynesian economics.


Anna Stansbury is a PhD candidate in Economics at Harvard University.
Lawrence H. Summers is a former president of Harvard University, where he is currently University Professor.

JohnH -> anne... , August 23, 2019 at 05:13 PM
"There are strong reasons to believe that the capacity of lower interest rates to stimulate the economy has been attenuated – or even gone into reverse." Good to see that some prominent economists are finally willing to say what I've been pointing out for the past five years.
Joe -> JohnH... , August 23, 2019 at 09:31 PM
Part of the choir, you and many others. The idea that our accounting system stimulates by methods other than accurate accounting is perfectly nuts.

Then some economists fail to understand that the accounting system adapts when repricing, and adapting to reflect fundamentals is not stimulating.

We have Summers intimating that our four or five recessions since 1980 cost us long term, thus the idea of currency banker stimulating was never correct, it was always the central banker making bankers adapt to the needs of Treasury, basically following the one year Treasury rate.

And, soon another young kid will show up and claim she has solved the secret of central banking.

A much better idea for central banking, negotiate the seigniorage fee, up front, then let the central banker do its thing with no interference until the contract expires. Just admit, upfront, central bankers are a creation of government, serve government, let's at least do it twice as efficient as the boomers done it. Screw up half as often! Why not!

[Jul 18, 2019] I recently stumbled upon Charles Lindbergh Sr's articles of impeachment against the officers of the federal reserve and the federal reserve act itself. What amazes me whilst reading it is how much life then, mimics life today.

Jul 18, 2019 | www.moonofalabama.org

aye, myself & me , Jul 17 2019 18:49 utc | 47

@ james 39
basically, the prognosis isn't good.. none of the colonies are capable of speaking up to the usa regime, largely because they lack strong leadership and independence of thought in all this...

I agree with Summer Diaz at 26 and would say the folks most at fault here are the american sheeple. The boomers, their parents and grandparents are at fault for allowing the american dream to evaporate. We watched it occur before our very eyes, but were too self indulged to care. We have only ourselves to blame, nobody else.

I recently stumbled upon Charles Lindbergh Sr's articles of impeachment against the officers of the federal reserve and the federal reserve act itself. What amazes me whilst reading it is how much life then, mimics life today. Because of this circumstance our lives have been stifled, even with all this wondrous technology around us.

https://www.scribd.com/document/21176029/Charles-Lindbergh-Sr-Congressional-record-Feb-12-1917

Imho, most of our problems today emulate from both the formation of that despicable act and the failure to impeach and dispose of it four years later. Had it been we likely wouldn't be having this discussion on Iran, today.


chu teh , Jul 17 2019 23:50 utc | 74

@ 47 re Chas Lindbergh, Sr.
Yes, indeed!

Again I mention President Wilson only became Pres after a grand election rigging when Former Pres Theodore Roosevelt suddenly announced a 3rd party that split the Repub ticket between him and incumbent[!] Pres Taft, enabling Dem candidate Wilson to get a majority.

Congressman C A Lindbergh, Sr. warned over and over against passage of Fed Reserve Act, which finally passed Congress during Christmas holidays in 1913 and was immediately signed b Pres Wilson.

He wrote an amazingly clear booklet forecasting the harm that would happen if the Fed was established. And the harm happened.

I recommend any interested reader to read Lindbergh's 1913 "Banking. Currency and the Money Trust". It's freely available on the internet.

After Congress passed and Woodrow Wilson signed the Fed Res Act, Lindbergh, Sr. tried in 1916, without success, to impeach Fed Res director Paul Warburg, et al.

[His son CAS,Jr did the NY-to-Paris solo flight in 1927.

Uncle Jon , Jul 18 2019 0:17 utc | 78
@chu teh 74

Add to that amazing Lindbergh essay, the definitive work on the subject by E. G. Griffin, The Creature from Jekyll Island. Between the two, you will find out how the US of A was sold wholesale by a bunch of unscrupulous scoundrels and started a perpetual cycle of debt slavery.

[Jun 05, 2019] Walmart and taxes on rich

Jun 05, 2019 | www.nakedcapitalism.com

JohnnyGL , June 5, 2019 at 3:25 pm

"Most people that I have talked with about wages, say that not every job is worth $15."

Walmart's gross profit of $129bn screams otherwise.

https://www.macrotrends.net/stocks/charts/WMT/walmart/gross-profit

An increase of $5/hr x 30hrs/wk x 52wks/yr = $7,800 per employee. They've got 2.2M employees. Let's say 2M of those 2.2M are in dire need of a raise.

That's a bit over $15bn a year in cost to the company. $114bn in annual profit, instead of $129bn sounds like plenty to me. How about a little shared sacrifice?

I doubt it would actually require such a big hit, because an across the board hike in wages would probably partially boomerang back into revenues for Walmart as employees and their families/dependents had more to spend in Walmart's stores.

WheresOurTeddy , June 5, 2019 at 3:47 pm

Walmart: your taxes subsidize it even if you don't shop there.

The Waltons Greed Must End

Lost of Walmart worker stories posted today on Bernie's youtube channel.

He's a political knife fighter and the only one I want up against Mitch McConnell.

todde , June 5, 2019 at 4:19 pm

Reduce eliminate the payroll tax.

Everyone gets a raise and we less small businesses will go under.

todde , June 5, 2019 at 4:24 pm

once more, in English.

Reduce or eliminate the payroll tax.

Everyone who works will get a raise and less small businesses will go under.

Pat , June 5, 2019 at 4:41 pm

No. The payroll tax is the one tax I absolutely do not want reduced as those taxes are dedicated to Social Security and Medicare.

The raise should come from the companies that strategically and callously refuse to raise wages unless forced to. In point of fact the abuse of the independent contractor position AND the increased use of unpaid interns are good examples of how wide spread the idea is that you shouldn't actually pay the labor costs involved in your business.

Yes, I do get that some small businesses have problems with payroll that are not the result of the greed of the owners. But seriously using Wal-Mart's cheap ass wages to put forth a plan that supposedly helps workers while actually harming them (as Social Security is absolutely necessary for most workers to even consider retirement even if they are physically unable to work any longer shortchanging it is most definitely not worker friendly) and leaves WalMart with even higher obscenely high profits is well .despicable.

Pat , June 5, 2019 at 4:42 pm

Oh, and just for the record a lot of those small businesses would do better with a higher minimum wage as more people would have more disposable income to make use of those small businesses. Underpaid people don't shop or use services unless they absolutely have to

todde , June 5, 2019 at 5:38 pm

for the record: all of the small business would be better off if you cut the payroll tax as more people would have more money to spend. (and businesses too, as their tax burden would go down)

Massinissa , June 5, 2019 at 6:34 pm

Small businesses would be better off But Social Security and Medicare would be gutted?

No thanks. Besides, I doubt that alone would stop the trends of small businesses becoming more and more irrelevant against the forces of monopolization. A 'magic bullet' fix like this won't be enough even if it didn't have obvious downsides. Which it does.

Todde , June 5, 2019 at 6:42 pm

I never discussed gutting anything.

Taxes, they dont fund spending.

You maybe on the wrong site if you think they do.

flaesq , June 5, 2019 at 5:03 pm

But why fund SS and Medicare regressively/flat? The money winds up in the same bucket that ought to be offset by greater amounts of progressively-incurred income taxes.

If the bucket has to be filled (but I'm not sure it does – Doesn't MMT say to some extent it doesn't, particularly when we're in what's effectively a disinflationary environment) please let it be filled in a progressive way. We can start by inverting the cap gains preferences and advantaging earned income while restoring additional tiers until we get back to the 90% marginal rates that correlated with the post-war boom times.

Pat , June 5, 2019 at 5:18 pm

In a world where the Waltons and the Bezos and the Kochs do not have the means of buying elected officials you might have a point. But we do not live in that world nor do we live in the world where MMT exists for more than the MIC and Corporate welfare.

Unless and until those two things change we cannot even consider eliminating the dedicated taxes for SS and Medicare. Even with them we are constantly faced with threats to their existence. Without them they wouldn't last past lunch.

jrs , June 5, 2019 at 5:28 pm

+1

there are other ways to cut businesses costs like healthcare costs, but don't cut payroll taxes now or anytime soon, we don't live in the kind of world where it could work at this point. And what's so horrible about businesses paying their fair share in taxes anyway? If they can't be profitable and do that, maybe they need to close up shop.

todde , June 5, 2019 at 5:50 pm

I ate a lot of cold cereal growing up when Reagan increased the payroll tax.

And my parent's house was mortgaged to the hilt at that same time.

but hey, if me being hungry and homeless is OK with you so a business doesn't get a tax break, so be it.

Massinissa , June 5, 2019 at 6:36 pm

You'd get food but other people would go hungry due to cuts in social security and medicare which payroll taxes fund

Its not a magic bullet.

Todde , June 5, 2019 at 6:44 pm

Taxes dont fund spending.

Taxes dont fund spending

Taxes dont fund spending

todde , June 5, 2019 at 5:35 pm

Either taxes do or they don't fund government programs.

Make up your minds as to which one it is.

todde , June 5, 2019 at 5:37 pm

if there was only some theory I could cite that would explain it.

A Money Theory.

A Modern Money Theory.

:-D

Oregoncharles , June 5, 2019 at 5:47 pm

In principle, I'm opposed to payroll taxes because they penalize hiring people. The chief exception, in my mind, is directly employment-related programs – like Social Security, but not Medicare so much. There is also a small unemployment tax, at least in Oregon.

A basic principle is to tax things you want less of, not things you want more of. A partial exception is income taxes or profit taxes, because they're supposed to be fairly neutral and not influence economic decisions. People are unlikely to want less income because it's taxed.

This is a long-running issue here, because proposals for state-level Medicare4All tend to rely on a payroll tax. Health is only very partly employment-related; we already have decent Workmen's Comp system (state operated). Either that or a sales tax, a certain deal killer in Oregon – the whole thing has to get past the voters. I advocate a dedicated surtax on the business and income taxes. Corporate taxes are much too low in Oregon.

He's right about small businesses, which I once had (now it's even smaller). Payroll taxes are a significant burden, in part just for the accountants. It's easier for large businesses to absorb, so gives them an advantage. Not good.

People on the left tend to see payroll taxes as a free lunch of sorts; they're actually quite costly.

Todde , June 5, 2019 at 6:54 pm

Amazing how the regressive tax seems to be the only one we cant cut.

No matter what your political affiliation.

Or even if you believe in MMT

jrs , June 5, 2019 at 7:06 pm

Because it's the one that allows people to claim they earned SS and Medicare, whether it's true or not, it's a powerful argument.

Employers want to get rid of it, well if it comes down to them or workers, I don't prioritize them. These same employers complain about raising the minimum wage. I prioritize workers, and whether they can survive the present and retirement (already iffy of course).

[Apr 05, 2019] A broader tax base that closes loopholes would raise more money than plans by Ocasio-Cortez and Warren by Natasha Sarin and Lawrence H. Summers

Apr 05, 2019 | larrysummers.com

March 28, 2019

Tax reform debates have been transformed in recent weeks by a shift in emphasis from revenue raising and progressivity to an emphasis on going after the rich for the sake of equality and justice. Bold proposals from Representative Alexandria Ocasio-Cortez of New York, for a 70 percent marginal tax rate on top earners, and from Senator Elizabeth Warren of Massachusetts -- a 2020 Democratic presidential candidate -- for a wealth tax on those worth more than $50 million have attracted widespread attention.

Warren's proposal aspires to raise roughly 1 percent of GDP ($2.75 trillion in the next decade). Ocasio-Cortez's proposal is estimated to generate around one-third of 1 percent ($720 billion in the next decade). By way of comparison, the Trump tax cuts will cost the federal government about $2 trillion over the next decade. We agree with Ocasio-Cortez and Warren that increases in tax revenue of at least this magnitude are necessary. We also agree that the way forward is by generating more revenue from the most affluent Americans. Indeed, it may well be necessary and appropriate to raise more than Warren's targeted 1 percent of GDP from those at the top.

Where we differ from Warren and Ocasio-Cortez is in our belief that the best way to begin raising additional revenue from highest income tax payers is with a traditional tax reform approach of base broadening and loophole closing, improved compliance, and closing of shelters. We show that these measures, along with partial repeal of the Trump tax cut, can raise far more than recent proposals. These measures will increase economic efficiency, make our tax system more fair, and are perhaps more politically feasible than a wealth tax or large hikes of top rates. It may be that measures beyond base-broadening are appropriate and desirable given the magnitude of the revenue challenge we face. But base-broadening is the right place to begin.

Below we outline proposals for broadening the tax base that meet a stringent test: These are measures that would be desirable even if we did not have revenue needs. They are progressive and attack those who have received special breaks for too long. And together, the revenue-raising potential of these measures exceeds that of the 70 percent top rate or the wealth tax. We believe this is where the progressive tax policy debate should begin.

Emphasis on compliance and auditing of the rich. In 2017, the IRS had only 9,510 auditors -- down from over 14,000 in 2010. The last time the IRS had fewer than 10,000 auditors was in the mid-1950s. Since 2010, the IRS budget has decreased by over 20 percent in real terms. The result is that individuals and corporations are shirking their responsibilities: The most recent estimate by the IRS suggests that taxpayers paid only around 82 percent of owed taxes, losing the IRS over $400 billion a year.

The Congressional Budget Office estimates that spending an additional $20 billion on enforcement in the next decade could bring in $55 billion in additional tax revenues. This excludes the indirect deterrent effects of greater enforcement, which the Treasury Department has estimated are three times higher. Outlays at this level would still leave the IRS operating with budgets in real terms that were nearly 10 percent below peak levels, which themselves were leaving large amounts of revenue on the table.

In addition to the level of investment in enforcement, there is the question of the allocation of enforcement resources. It has been estimated that an extra hour spent auditing someone who earns more than $1 million a year generates an extra $1,000 in revenue. And yet in 2017 the IRS audited only 4.4 percent of returns with income of $1 million or higher, less than half the audit rate a decade prior. Remarkably, recipients of the earned income tax credit, who never have incomes above $50,000, are twice as likely to be audited as those who make $500,000 annually.

No one can know exactly the potential for increased enforcement to raise revenue. Suppose instead of investing an extra $20 billion over the next decade, we invested $40 billion and focused on wealthy taxpayers, perhaps taking the audit rate for million-dollar earners up to 25 percent. Considering the direct benefits and the multiplier from deterrence, it is not unreasonable to suppose that over a decade $300 billion to $400 billion could be raised.

This revenue increase -- unlike a revenue increase from new taxes or higher rates -- will have favorable incentive effects. It will encourage people to participate in the above-ground economy. And what could be more of a step toward fairness than collecting from wealthy scofflaws?

Closing corporate tax shelters. All too often, corporations are able to make use of tax havens, differences in accounting treatment across jurisdictions, and other devices to reduce tax liabilities. Economist Kimberly Clausing estimates that profit-shifting to tax havens costs the United States more than $100 billion a year. Although the Trump tax plan sought to reduce the incentives for profit-shifting, various exemptions and design flaws mean that the new system does little to deter shifting revenues to tax havens. Fairly incremental changes will have a large impact: For example, a per-country corporate minimum tax rather than a global minimum tax will increase tax revenues by nearly $170 billion in a decade.

But there is much more to be done. A robust attack on tax shelters -- that included, for example, tariffs or penalties on tax havens as well as stricter penalties for lawyers and accountants who sign off on dubious shelters -- could raise twice the revenue attainable from a per-country minimum tax, or about 30 billion annually. It would also encourage the location of economic activity in the United States and discourage the vast intellectual ingenuity that currently goes into tax avoidance.

Closing individual tax shelters. Like the corporations they own, wealthy individuals make use of myriad loopholes in the tax code to shelter their personal income from taxation. Most high-income taxpayers pay a 3.8 percent tax that pays into entitlement programs like Social Security and Medicare. However, some avoid these payroll taxes by setting up pass-through businesses and re-characterizing large shares of their income as profits from business ownership, rather than wage income. The Obama administration's proposals to close payroll tax loopholes were estimated to generate $300 billion over a decade.

Another egregious loophole is 1031 exchanges, which allow real estate investors to sell property, take a profit, and defer paying taxes on those profits so long as they reinvest them in similar investments. There is no limit on the number of these exchanges that investors can make. Consequently, the wealthy use 1031 exchanges to build up long-term tax-deferred wealth that can eventually be passed down to their heirs without taxes ever being paid. Outright repeal of 1031 exchanges were estimated in 2014 to raise around $40 billion in a decade and would raise almost $50 billion today.

Another tool used to shelter individual income from taxation is carried interest. Income that flows to partners of investment funds is often treated as capital gains and taxed at lower rates than ordinary income. This creates a tax-planning opportunity for investors to convert ordinary income into long-term capital gains that receive much more generous tax treatment. President Trump repeatedly vowed that his signature tax cuts would eliminate the carried-interest loophole, saying it was unfair that the ultra-wealthy were "getting away with murder." However, in the face of significant lobbying pressure, the administration abandoned these plans. The Joint Committee on Taxation estimates that taxing carried profits as ordinary income would generate over $20 billion in a decade.

Other ways in which individuals can shelter income include misvaluing interests such as shares in investment partnerships when putting them in retirement accounts as well as schemes involving nonrecourse lending.

Closing tax shelters would level the playing field in favor of investments by companies that create jobs and to the detriment of various kinds of financial operators. This would raise employment and incomes as well as contributing to fairness.

Eliminating "stepped-up basis." Wealth tax advocates rightly point to an important gap in our current system. An entrepreneur starts a company that turns out to be highly successful. She pays herself only a small salary, and shares in the company do not pay dividends, so the company can invest in growth. The entrepreneur becomes very wealthy without ever having paid appreciable tax, as the income that made the wealth possible represents unrealized capital gains.

Unrealized capital gains explain how Warren Buffett can pay only a few million dollars in taxes in a year when his wealth goes up by billions. Astoundingly, no capital gains tax is ever collected on appreciation of capital assets if they are passed on to heirs. Specifically: When an investor buys a stock, the cost of that purchase is the tax basis. If the stock rises in value and is then sold, the investor pays taxes on the gains. If an investor dies and leaves stock to her heir, that cost basis is "stepped up" to its price at the time the stock is inherited. The gain in value during the investor's life is never taxed.

Implementing the Obama administration's proposals for constructive realization of capital gains at death would raise $250 billion in the next decade. This is a progressive change that would impact only the very wealthy: Ninety-nine percent of the revenue from ending stepped-up basis will be collected from the top 1 percent of filers.

Eliminating stepped-up basis will also make the economy function better and so would be desirable even if it did not raise revenue. The fact that capital gains passed on to children entirely escape taxation provides aging small-business owners or real estate owners a strong incentive not to sell them to those who could operate them better while they are alive. It also makes it much more expensive to realize capital gains and use the proceeds to make new investments than it would be if the capital gains tax was inescapable.

Capping tax deductions for the wealthy. Today, a homeowner in the top tax bracket (post-Trump tax cuts, 37 percent) who makes a $1,000 mortgage payment saves $370 on her tax bill. Under an Obama administration proposal to limit the value of itemized deductions to 28 percent for all earners, that same write-off would save this wealthy taxpayer just $280. Importantly, such a cap would raise tax burdens only for the rich: Those with marginal rates under the cap would still be able to claim the full value of their itemized deductions. The plan to cap top-earners' itemized deductions was estimated to raise nearly $650 billion in a decade. Recognizing that the Trump tax plan scaled back the mortgage interest deduction and state and local tax deductions, we estimate that additional limits on top-earner deductions could generate around $250 billion in a decade.

As with the elimination of stepped-up basis, the distributional case for capping tax deductions is strong. The mortgage interest deduction provides a tax advantage to homeowners; promoting homeownership is a worthy goal. But there is little rationale for subsidizing home ownership at higher rates for richer rather than poorer taxpayers.

End the 20 percent pass-through deduction. Perhaps the most notorious of the Trump tax changes, the pass-through deduction provides a 20 percent deduction for certain qualified business income. This exacerbated the tax code's existing bias in favor of noncorporate business income and so reduces economic efficiency. And the complex maze of eligibility is arbitrary, foolish, and a drain on government resources: The Joint Committee on Taxation estimates that this provision will reduce federal revenues by $430 billion in the next decade. Eliminating the pass-through deduction will reduce incentives for tax gaming and raise revenue primarily from taxpayers making more than $1 million annually.

Broaden the estate tax base. Prior to the Trump tax reform, only 5,000 Americans were liable for estate taxes. The recent changes more than halved that small share by doubling the estate tax exemption to $22.4 million per couple. The Joint Committee on Taxation estimates that this change costs around $85 billion, with the benefits accruing entirely to 3,200 of the wealthiest American households. Repealing the Trump administration's changes and applying estate taxes even more broadly -- for example, as the Obama administration proposed, by lowering the threshold to $7 million for couples -- would raise around $320 billion in a decade. The estate tax would still only impact 0.3 percent of decedents.

In addition to the question of the appropriate floor on estates, there is also ample room to attack the many loopholes that enable wealthy families to largely avoid paying taxes when transferring wealth to their progeny during their lifetimes. This happens through a mix of trust arrangements, intra-family loans, and dubious valuation practices to evade gift-tax liability. Strengthening the taxation of estates would raise revenue and be efficient, diverting resources from tax planning and increasing work incentives for the children of the wealthy. We are enthusiastic about proposals, notably by Lily Batchelder, that call for the conversion of the estate tax into an inheritance tax, to appropriately tax inherited privilege and discourage large concentrations of wealth.

Increasing the corporate tax rate to 25 percent. When corporations began lobbying efforts on corporate tax reform, their stated objective was a 25 percent corporate rate. Business leaders produced estimates showing how this 25 percent rate would have prevented foreign purchases of thousands of companies and shifted billions in corporate taxable income to the United States. The Trump tax cuts delivered more than the business community asked, slashing the corporate rate to 21 percent. The CBO estimates that a 1 percentage point increase in the corporate tax rate will generate $100 billion in the next decade. Based on this estimate, a 4 percentage point increase to 25 percent will generate an additional $400 billion in revenue.

Raising the corporate tax rate would not increase the tax burden on most new investment, because it would raise in equal measure the value of the depreciation deductions that corporations could take when they undertook investments. The principle losers from an increase in the rate would be those earning economic rents in the form of monopoly profits and those who had received enormous windfalls from the Trump tax cut.

Closing tax shelters used by the wealthy alone raises more revenue than Ocasio-Cortez's proposal. And together, the reforms we propose raise far more than a 70 percent top tax rate, and more too than Warren claims her wealth tax will generate. These base-broadening, efficiency-enhancing reforms are the best way to start raising revenue as progressively and efficiently as possible. To be sure, it may well be that wealth taxation or large increases in top rates are necessary to adequately fund government activities. But we advocate these approaches only after the revenue-raising potential of base-broadening is exhausted.

Tomorrow: The challenges in the rate hike and wealth tax proposals.

[Apr 02, 2019] The Incredible Shrinking Trump Boom by Paul Krugman

Notable quotes:
"... The Trumpist theory -- which was, I'm sorry to say, endorsed by conservative economists who should have known better -- was that there was a huge pile of money sitting outside the U.S. that companies would bring back and invest productively if given the incentive of lower tax rates. But that pile of money was an accounting fiction. And the tax cut didn't give corporations an incentive to build new factories and so on; all it did was induce them to shift their tax-avoidance strategies. ..."
"... As Brad Setser of the Council on Foreign Relations points out , a casual glance at the data seems to suggest that American companies earn a lot of their profits at their overseas subsidiaries. But a closer look shows that the bulk of these reported profits are in a handful of small countries with low or zero tax rates, like Bermuda, Luxembourg and Ireland. The companies obviously aren't earning huge profits in these tiny economies; they're just using accounting gimmicks to assign profits earned elsewhere to subsidiaries that may have a few factories, but sometimes consist of little more than a small office, or even just a post-office box. ..."
"... These basically phony profits then accumulate on the books of the overseas subsidiaries, rather than the home company. But this doesn't affect their ability to invest in America: if Apple wants to spend a billion dollars here, it can always borrow the money using the assets of its Irish subsidiary as collateral. In other words, U.S. taxes weren't having any significant effect in deterring real investment in the U.S. economy. ..."
"... So the theory supposedly behind the Trump tax cut has turned out to be a complete bust. Corporate accountants got to have some fun exploring new frontiers in tax avoidance; the rest of us just ended up saddled with an extra $2 trillion or so in debt. ..."
"... Now, I'm not deeply worried about that debt. Given low borrowing costs , the costs and risks of federal debt are far less than the usual suspects -- again, the same people who cheered on the Trump tax cut -- have claimed. But think of all the other things we could have done with $2 trillion -- all the infrastructure we could have built and repaired, all the people who could have been given essential health care. ..."
Apr 02, 2019 | www.nytimes.com

... ... ...

So far, Donald Trump has passed only one significant piece of legislation: the 2017 tax cut. It was, to be fair, a pretty big deal: corporations, the principal beneficiaries, have already saved more than $150 billion, and over the course of a decade the tax cut will probably increase the budget deficit by more than $2 trillion.

But the tax cut was supposed to do more than just give stockholders more money -- or at least that's what its proponents claimed. It was also supposed to lead to many years of high economic growth, 3 percent or more at an annual rate.

Independent observers were skeptical, to say the least. They conceded that the tax cut might lead to a brief sugar high, because that's what big deficits do. But any favorable effects on growth, they argued, would soon fade out. And they always insisted that it would take some time to assess the tax cut's actual effects.

Nonetheless, when the economy grew pretty fast in the second quarter of last year, Trump and his supporters cried vindication, and ridiculed the critics.

But a bit of time has passed since then. The chart shows the U.S. economy's growth rate by quarter since the beginning of 2018. The last number isn't official; but there are a number of independent observers, including both Federal Reserve banks and private financial institutions, who produce "nowcasts" that estimate growth based on early data. At this point all of these nowcasts show slowing growth, and most put the first quarter at around 1.5 percent.

So do the results so far look like the huge, sustained boom the Trump camp promised, or the brief sugar high predicted by the critics?

But Donald Trump is a special kind of leader. When things don't go his way, when events fail to turn out as he planned and promised, he always knows exactly what to do: Blame someone else . Sure enough, he's now asserting that we'd be having a yuge economic boom, 3 percent growth, all that, if only the Federal Reserve hadn't raised interest rates.

O. K., this is where you need to be able to hold two ideas in your head at the same time. Was the Fed wrong to raise rates? Probably yes. Does this account for the failure of the Trump tax cut? No.

The Fed was clearly overoptimistic about the economy's prospects, as it has pretty consistently been for the past decade. It's worth noting that throughout that whole period conservative critics of the Fed -- the same people now backing Trump -- attacked the institution for keeping interest rates too low, not too high. Still, it's now clear that the attempt to normalize monetary policy was premature.

But the Fed's premature rate hikes aren't why the Trump tax cut is failing. How do we know that? Because all those boasts about why the tax cut would work miracles were based on a specific story about what is holding the U.S. economy back. And that story was and is all wrong.

The Trumpist theory -- which was, I'm sorry to say, endorsed by conservative economists who should have known better -- was that there was a huge pile of money sitting outside the U.S. that companies would bring back and invest productively if given the incentive of lower tax rates. But that pile of money was an accounting fiction. And the tax cut didn't give corporations an incentive to build new factories and so on; all it did was induce them to shift their tax-avoidance strategies.

As Brad Setser of the Council on Foreign Relations points out , a casual glance at the data seems to suggest that American companies earn a lot of their profits at their overseas subsidiaries. But a closer look shows that the bulk of these reported profits are in a handful of small countries with low or zero tax rates, like Bermuda, Luxembourg and Ireland. The companies obviously aren't earning huge profits in these tiny economies; they're just using accounting gimmicks to assign profits earned elsewhere to subsidiaries that may have a few factories, but sometimes consist of little more than a small office, or even just a post-office box.

These basically phony profits then accumulate on the books of the overseas subsidiaries, rather than the home company. But this doesn't affect their ability to invest in America: if Apple wants to spend a billion dollars here, it can always borrow the money using the assets of its Irish subsidiary as collateral. In other words, U.S. taxes weren't having any significant effect in deterring real investment in the U.S. economy.

When Trump cut the tax rate, some companies "brought money home." But for the most part this had no economic significance. Here's how it works: Apple Ireland transfers some of its assets to Apple U.S.A. Officially, Apple Ireland has reduced its investment spending, while paying a dividend to U.S. investors. In reality, Apple as an entity has the same total profits and the same total assets it did before; it hasn't devoted a single additional dollar to purchases of equipment, R&D, or anything else for its U.S. operations.

Not surprisingly, then, the investment boom Trump economists promised has never materialized . Companies didn't use their tax breaks to invest more; mainly they used them to buy back their own stock. This in turn, put more money in the hands of investors, which gave the economy a temporary boost -- although for 2018 as a whole, one of the biggest drivers of faster growth was, believe it or not, higher government spending .

So the theory supposedly behind the Trump tax cut has turned out to be a complete bust. Corporate accountants got to have some fun exploring new frontiers in tax avoidance; the rest of us just ended up saddled with an extra $2 trillion or so in debt.

Now, I'm not deeply worried about that debt. Given low borrowing costs , the costs and risks of federal debt are far less than the usual suspects -- again, the same people who cheered on the Trump tax cut -- have claimed. But think of all the other things we could have done with $2 trillion -- all the infrastructure we could have built and repaired, all the people who could have been given essential health care.

What a colossal, corrupt waste.

Paul Krugman has been an Opinion columnist since 2000 and is also a Distinguished Professor at the City University of New York Graduate Center. He won the 2008 Nobel Memorial Prize in Economic Sciences for his work on international trade and economic geography. @ PaulKrugman


Grennan Green Bay April 2

The GOP has announced a comprehensive bipartisan effort to reform our tax code, promote fairness, and provide health coverage. APRIL FOOLS! The U.S. has put a tax evader in charge, who has in turn named Sen. Scott, the former CEO who steered the largest Medicare fraud in our history, to develop a health coverage plan. No, that's not April Fools, but reality.
Working Mama New York City April 1
I resent the Trump tax travesty being referred to as a "tax cut". For many middle class homeowners, it was anything but. Just the elimination of personal exemptions for my family of four cost us more in increased tax liability than the increase in the standard deduction. Then there were tens of thousands of dollars' worth of deductions that we didn't get to take under the new rules. Our tax liability went up by thousands.
Stephen Saint Louis, MO April 1
I have not had any fun as corporate tax accountant from Trump's giveaway to the rich. Firstly, the law was not planned out, so there is no guidance for any of the new laws. The IRS is scrambling just to get new instructions and forms out. I'd bet that the confusion is creating more opportunities to avoid taxes than there were before. Secondly, I get to deal with the whining of the beneficiaries of the tax cut. Somehow they aren't satisfied with paying 40% less. Corporations and the 1% have a criminally high sense of entitlement.
Bill NYC, NY April 1
Supply side economics was, is, and always will be, almost a complete lie. Put simply, if consumer spending doesn't increase, why would a company spend money to produce more products? It is demand, not supply, that drives economic growth. And it should not come as a surprise that government spending creates economic growth when so much of the economy is tied to government spending. If you cut government spending, as Republicans wish, other than the government employees suddenly out of work, there are all the private businesses that depend on government contracts that will be laying off workers. So the economy contracts, other businesses become pessimistic and the economy contracts even further. Where I disagree with Paul is that we need the Fed to raise interest rates before the next recession hits. The economy has been strong for a decade but when a recession comes around, we need the Fed's ability to reduce rates and encourage borrowing.
Barry Williams NY April 1
@Bill The effects of government spending (or lack thereof) should be obvious to the economics-challenged just by looking at what happened during Trump's government shutdown. Hint: it wasn't just bad for the people who were directly not being paid for their government jobs. And that was only a brief microcosm of the effect. What I don't get is why people thought this time would be different, when it has never worked as advertised before. Did they think Trump would make it work this time?
Martha Stephens Cincinnati April 1
Krugman shows little caring about common people -- taxes or otherwise. He wants people to have "healthcare," but what does he mean by that? He doesn't support Medicare for All he has said. He doesn't seem to know that it would be paid for by US, not the government -- along with our taxes, in the way that makes the most sense everywhere. We'd pay according to our incomes; if you had NO income, you'd still have healthcare, birth to grave. Especially in times of recession, let Krugman put that in his pipe and smoke it!

Medicare for All would not break the government; private insurance would still be allowed, but more and more people would like a universal plan with the low rates it would bring --as we get out from under the high prices we're paying for private health insurance, even the Medicare Advantage run by companies like Aetna. Mine costs nearly $400 a month!

Joe Maliga San Francisco April 1
Money, power and greed is what the whole Trump presidency is about. A few people are getting very rich. In the meantime, his base is fueled by diversionary red meat. I think every American should get a cut of the ill-gotten gains. A monthly check for enduring this presidency, and the stupid people who support him.
Dangoodbar Chicago April 1
There is one point in Professor Krugman's article that needs to be highlighted; "although for 2018 as a whole, one of the biggest drivers of faster growth was, believe it or not, higher government spending." Government spending, not tax cuts has fueled recoveries from recessions caused by their policies from Reagan to Bush Jr. That is, if you look at what happened when both Reagan and Bush Jr. first took office and began their policies those policies resulted in recessions. Both Reagan and Bush Jr. got out of those recessions by going on huge spending binges. The point being that well Republicans do cut taxes for the super rich and powerful, the disguise the fact that those policies do not benefit America by going on huge deficit spending binges that, to quote Lloyd Benson, "Create an illusion of prosperity". The fact that Republicans use large increases in deficit Government spending for all of their economic success is the most unreported fact in American politics.
R. Littlejohn Texas 10h ago
@Dangoodbar The military industrial complex must be doing well, great for shareholders.
Randy North Carolina April 1
I am not sure why I should put any stock in any of your opinions/predictions when you have been so colossally wrong (e.g. "the stock market will crash if Trump gets elected") so often. Nobel Laureate? You and Yasser Arafat - The Nobel Prize committee doesn't always get it right
music observer nj April 1
@Randy Well, let's compare Dr. Krugman to the GOP: 1)Since the 1970's, they have claimed that supply side economics ie cutting taxes, will 'float all boats', and since the 1980's the tax rate on the most well off has plummeted..and since then? The top .5% have seen huge gains, while the bottom 90% of Americans have seen their incomes and wealth fall. 2)The GOP under Obama said the budget deficits caused by government spending were going to cause hyperinflation and cause the dollar to become valueless, they screamed with the economic bailouts and so forth. Yet the world didn't end, and now the GOP just added 2 trillion to our debt, and saying "it is no big deal"..so who was right 3)Trump claimed the tax cut was going to make the economy sing, that it was going to grow at 5% a year and that ordinary people were going to see their decline in wages end.......fast forward 2 years, and wages have not grown faster than inflation, and despite a supposedly tight labor market, wages are still not growing...and the only people seeing increases in wealth and income are the top .5%, they saw a huge increase last year thanks to the corporate tax cut. So whose predictions were wrong?
R. Littlejohn Texas 9h ago
@music observer The working middle class has been shrinking since the supply side Reaganomics started and it has never stopped since. There is not much of the Great Society left, the Republicans are still cutting the benefits for Medicare and Medicaid and food stamps, Head Start disappeared too as far as I can tell. The Republican party is morally and intellectually bankrupt.
JPH USA April 1
Americans comment about tax or not tax. Free market. But there is absolutely no precise conscience of the numbers nor how the American economy works. Where the US corporations are domiciliated . In Europe ? We don't care. No comment. We cheat ? we don't care. No comment . Who are these people ?

[Mar 31, 2019] Defying Trump Promises, American Companies Still Playing Offshore Tax Games

This article is a death sentence for Trump. Now he he win only on pure demagogy, which might not work.
Notable quotes:
"... Still, an extra $700 billion flowing into the economy in a year is hardly chicken feed. So, has the money being used to create more jobs as Trump hoped? Hardly. The evidence suggests that majority of that cash has simply found its way into buybacks with minimal discernible impact on investments. It's probably not a coincidence that the generous tax cut has been followed by record buybacks, with companies repurchasing more than a trillion dollars-worth of their own shares last year. ..."
"... Ironically, Congress now wants to tame the monster it has helped create by reining in on buybacks. But with fears that a market top could be near, the timing would be wrong since buybacks provide a large source of demand for shares. ..."
"... "Congress failed to anticipate a major loophole" Huh? Its not a bug, its a feature. ..."
"... "With their enormous complexity and high-stakes, tax issues are the buffet that keeps Washington's swamp creatures fed," Public Citizen said in the conclusion of its report. " ..."
"... "But the success of the nation's largest corporations and wealthiest interests in shaping the current tax legislation to suit their interests shows that bankrolling the lobbyists' unending feast is a small bill to pay in the big scheme of things -- because it is a very big scheme, indeed." ..."
"... How would an open, globalised world work against the West and in favor of the East? The 1% would get better returns from investing their capital in the rapidly growing Asian economies than the mature economies of the West. Multi-national corporations could make higher profits in Asia due to the low cost of living that they had to cover in wages. ..."
"... Richard Koo explains: https://www.youtube.com/watch?v=AtwxhT8e7xQ Higher returns on capital are affecting their economies as they off-shore to places where they can pay lower wages for higher profits. ..."
"... Richard Koo asked American firms where they are expanding their capacity. They said it was in Mexico as it's cheaper and they can make more profit. Do the maths. To maximise profit you need to minimise labour costs, i.e. wages. Disposable income = wages – (taxes + the cost of living). The minimum wage leaves no disposable income. Minimum wage = taxes + the cost of living ..."
"... The American people should be screaming about the fact most of these corporations barely pay any taxes at all to keep this country running. But silence. Why is there such slavish loyalty to corporations by Americans when most aren't even employed by them? ..."
"... Well that is twice now that corporate America has repatriated hundreds of billions from overseas and each time, so far as I know, it was used for stock buybacks, executive bonuses, vanity projects, etc. Not for investment, not for research, not for up-skilling their workforce or expanding their operations but just playing Wall Street games. ..."
"... By my calculations, Jeff Bezos thus owes the US government $2,352,000,000 in taxes. I'm sure that a cheque from him would do just fine. ..."
Mar 31, 2019 | www.nakedcapitalism.com

Last year, drugmaker Abbvie Inc. told shareholders that its tax rate would fall to just 9 percent from 22 percent previously due to a change in the territorial system. Abbvie happens to be a grandmaster when it comes to shielding its profits in tax havens, routinely reporting zero profits in the US despite most of its research facilities being based in the country.

Pfizer, Boston Scientific Corp. ,Microsoft Inc. Synopsis and Expedia Group are all pros at the game, too.

This bunch, however, have nothing on Amazon Inc. The ecommerce giant not only managed to pay zero tax on its massive $11.2 billion corporate income for 2018, but was even able to claim $129 million in rebates thanks to loopholes in the new tax law. Video streaming company, Netflix Inc ., also managed to get away scot free despite posting a record profit of $858 million.

More Buybacks

Still, an extra $700 billion flowing into the economy in a year is hardly chicken feed. So, has the money being used to create more jobs as Trump hoped? Hardly. The evidence suggests that majority of that cash has simply found its way into buybacks with minimal discernible impact on investments. It's probably not a coincidence that the generous tax cut has been followed by record buybacks, with companies repurchasing more than a trillion dollars-worth of their own shares last year.

Ironically, Congress now wants to tame the monster it has helped create by reining in on buybacks. But with fears that a market top could be near, the timing would be wrong since buybacks provide a large source of demand for shares.


upstater , March 30, 2019 at 8:36 am

"Congress failed to anticipate a major loophole" Huh? Its not a bug, its a feature.

noonespecial , March 30, 2019 at 6:16 pm

NC readers may have seen/linked the following

In an article by Mehan R. Wislon in "The Hill" (12/01/17) one can read that:

"With their enormous complexity and high-stakes, tax issues are the buffet that keeps Washington's swamp creatures fed," Public Citizen said in the conclusion of its report. "

"But the success of the nation's largest corporations and wealthiest interests in shaping the current tax legislation to suit their interests shows that bankrolling the lobbyists' unending feast is a small bill to pay in the big scheme of things -- because it is a very big scheme, indeed."

The report:

https://www.citizen.org/sites/default/files/swamped-tax-lobbying-report.pdf

Sound of the Suburbs , March 30, 2019 at 9:28 am

American companies are trying to tell us they are demand driven and they won't invest in expansion until they can see the demand in the system to make it worth their while.

Sound of the Suburbs , March 30, 2019 at 9:59 am

How would an open, globalised world work against the West and in favor of the East? The 1% would get better returns from investing their capital in the rapidly growing Asian economies than the mature economies of the West. Multi-national corporations could make higher profits in Asia due to the low cost of living that they had to cover in wages.

(Employees get their money from wages, so the employer pays through wages.)

The West never did work out what was going on, but now the more developed Eastern economies are seeing the same thing and are looking into it.

Richard Koo explains: https://www.youtube.com/watch?v=AtwxhT8e7xQ Higher returns on capital are affecting their economies as they off-shore to places where they can pay lower wages for higher profits.

Richard Koo asked American firms where they are expanding their capacity. They said it was in Mexico as it's cheaper and they can make more profit. Do the maths. To maximise profit you need to minimise labour costs, i.e. wages. Disposable income = wages – (taxes + the cost of living). The minimum wage leaves no disposable income. Minimum wage = taxes + the cost of living

The cost of living = housing costs + healthcare costs + student loan costs + food + other costs of living

Employees get their money from wages and employers have to pay the US cost of living in wages unless they off-shore to somewhere cheaper, like Mexico.

The developed Eastern economies are now finding they are in same situation as the West has been for the last few decades and they are coming up with explanations and solutions, unlike our own experts.

John , March 30, 2019 at 10:02 am

The American people should be screaming about the fact most of these corporations barely pay any taxes at all to keep this country running. But silence. Why is there such slavish loyalty to corporations by Americans when most aren't even employed by them?

Synoia , March 30, 2019 at 1:39 pm

Why is there such slavish loyalty to corporations by Americans when most aren't even employed by them?

Who exhibits the "slavish loyalty?" Then you will know who benefits, and is paid the most, by these selfsame corporations.

The Rev Kev , March 30, 2019 at 10:23 am

Well that is twice now that corporate America has repatriated hundreds of billions from overseas and each time, so far as I know, it was used for stock buybacks, executive bonuses, vanity projects, etc. Not for investment, not for research, not for up-skilling their workforce or expanding their operations but just playing Wall Street games.

I would judge that before trying to go after all this money overseas, that it will be necessary to impose a working taxation system on corporate America first. To earn over $11.2 billion in tax but to not only not get taxed but to earn a rebate illustrates how broken the system is.

At the moment, the corporate tax rate is supposed to be 21% so perhaps they can bring out a tax on gross corporate income of 21% – but with no rebates or anything at all that can be taken from this amount. Just a flat out tax.

By my calculations, Jeff Bezos thus owes the US government $2,352,000,000 in taxes. I'm sure that a cheque from him would do just fine.

Janie , March 30, 2019 at 1:59 pm

"Duh" is fewer key strokes than "quelle surprise", but it's not as classy.

[Feb 12, 2019] Rubio One-Ups Sanders And Schumer With Plan To Curb Corporate Buybacks

Notable quotes:
"... To that end, the senator from Florida on Tuesday unveiled a proposal to limit corporate buybacks. Unlike a plan pitched by Bernie Sanders and Chuck Schumer earlier this month, Rubio's plan would seek to end preferential tax treatment of share buybacks, by decreeing that any money spent on buybacks would be considered - for tax purposes - a dividend paid to shareholders, even if individual investors didn't actually part with any stock. ..."
"... Any tax revenue generated by these changes could then be used to encourage more capital investment, Rubio said. As part of the proposal, Rubio would make a provision in the tax law that allows companies to deduct capital investment permanent (that provision is currently set to expire in 2022). ..."
"... But before lawmakers take their next steps toward regulating how and when companies should return excess capital to shareholders, they might want to take a look at a column recently published by WSJ's "Intelligent Investor" that expounds a concept called "the bladder theory." ..."
"... But the law most likely to govern here is the Law of Unintended Consequences. ..."
"... That companies bought back a record $1 trillion worth of stock last year while employers like GM slashed jobs and closed factories has stoked criticisms of the Trump tax cuts, but as the gulf between the rich and the poor grows ever more wide (a phenomenon for which we can thank the Federal Reserve and other large global central banks) it's worth wondering: facing a simmering backlash to one of the most persistent marginal bids in the market place, have investors already become too complacent about proposals like Rubio's? ..."
"... Worse, since they're largely funded by increased corporate debt (!) they amount to corporate strip-mining by senior management. This is disgraceful and dangerous. The debt will bust some corporations when the inevitable next downturn comes. ..."
"... This buyback cancer, which has grown rapidly because of corrupt SEC thinking and perverse tax incentives, requires urgent treatment. ..."
Feb 12, 2019 | www.zerohedge.com

For better or worse, Republican Senator and one-time presidential candidate Marco Rubio isn't about to let the Democrats own the fight to curtail one of the most flagrant examples of post-crisis corporate excess. And if he can carve out a niche for himself that might one day help him credibly pitch himself as a populist firebrand, much like the man who went on to claim the presidency after defeating him in the Republican primary, well, that sounds to us like a win-win.

To that end, the senator from Florida on Tuesday unveiled a proposal to limit corporate buybacks. Unlike a plan pitched by Bernie Sanders and Chuck Schumer earlier this month, Rubio's plan would seek to end preferential tax treatment of share buybacks, by decreeing that any money spent on buybacks would be considered - for tax purposes - a dividend paid to shareholders, even if individual investors didn't actually part with any stock.

According to CNBC , the plan calls for every shareholder to receive an imputed portion of the funds equivalent to the percentage of company stock they own, which, of course, isn't the same thing as directly handing capital to shareholders (it simply changes the tax rate that the company buying back the shares would pay).

Ultimately, Rubio hopes that these changes would discourage companies from buying back stock. Those companies that continued to buy back shares would help contribute to higher revenues by increasing the funds that can be taxed, while also raising the rate at which this money can be taxed. Any tax revenue generated by these changes could then be used to encourage more capital investment, Rubio said. As part of the proposal, Rubio would make a provision in the tax law that allows companies to deduct capital investment permanent (that provision is currently set to expire in 2022).

But before lawmakers take their next steps toward regulating how and when companies should return excess capital to shareholders, they might want to take a look at a column recently published by WSJ's "Intelligent Investor" that expounds a concept called "the bladder theory."

Overall, however, buybacks (and dividends) return excess capital to investors who are free to spend or reinvest it wherever it is most needed. By requiring companies to hang onto their capital instead of paying it out, Congress might - perhaps - encourage them to invest more in workers and communities.

But the law most likely to govern here is the Law of Unintended Consequences. The history of investment by corporate managers with oodles of cash on their hands isn't encouraging. Hugh Liedtke, the late chief executive of Pennzoil, reportedly liked to quip that he believed in "the bladder theory:" Companies should pay out as much cash as possible, so managers couldn't piss all the money away.

That companies bought back a record $1 trillion worth of stock last year while employers like GM slashed jobs and closed factories has stoked criticisms of the Trump tax cuts, but as the gulf between the rich and the poor grows ever more wide (a phenomenon for which we can thank the Federal Reserve and other large global central banks) it's worth wondering: facing a simmering backlash to one of the most persistent marginal bids in the market place, have investors already become too complacent about proposals like Rubio's?

We ask only because the Dow soared more than 350 points on Tuesday, suggesting that, even as Rubio added a bipartisan flavor to the nascent movement to curb buybacks, investors aren't taking these proposals too seriously - at least not yet.

Celotex
This still doesn't address the insider trading aspect of stock buybacks, with insiders front-running the buyback.

vladiki

No one's arguing that if a company's groaning with cash then buybacks make sense. But it's the other 95% of of them that are the problem. Compare the 20 year graphs of buybacks with corporate profits, corporate debt, corporate tax paid, corporate dividends paid.

They tell you what everyone in higher management knows - that they're a tax-free dividend mechanism pretending to be "capital rationalisation".

Worse, since they're largely funded by increased corporate debt (!) they amount to corporate strip-mining by senior management. This is disgraceful and dangerous. The debt will bust some corporations when the inevitable next downturn comes.

This buyback cancer, which has grown rapidly because of corrupt SEC thinking and perverse tax incentives, requires urgent treatment.

james diamond squid

Everyone is in on this ponzi. I'm expecting tax deductions for buying stocks/homes.

[Feb 12, 2019] Bill Gates suggests Ocasio-Cortez's tax plan a 'misfocus' by Brittany De Lea

Feb 12, 2019 | finance.yahoo.com

Microsoft co-founder Bill Gates does not think the way to increase U.S. tax revenue is through policies like raising the tax rate on the wealthy to 70 percent – as has been floated by some Democratic lawmakers like New York Rep. Alexandria Ocasio-Cortez.

During a podcast interview with The Verge , Gates responded to a question about whether raising the top rate to 70 percent in order to fund social programs – like infrastructure initiatives – appeals to him by saying government can be more effective in running social programs, but that's not the best way to raise revenue.

"You finally have some politicians who are so extreme that I'd say, 'No, that's even beyond,'" Gates said. "You do start to create tax dodging and disincentives, and an incentive to have the income show up in other countries and things."

Gates added that the country's richest people often don't pay the highest rate because their wealth doesn't always show up as income, it can be in the value of their stock, for example.

"So it's a misfocus," he added. "If you focus on that, you're missing the picture."

The billionaire businessman, however, does believe there are ways to make the current tax code more progressive. Some of those ways include more progressive policies regarding the estate tax, the tax on capital, or reforming FICA and Social Security taxes. Independent Vermont Sen. Bernie Sanders recently released a proposal to expand the estate tax to a rate of 77 percent for those passing on assets in excess of $1 billion.

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Bill Gates also called modern monetary theory (MMT) – which asserts that because the government controls its own currency, there is no need to worry about balancing the budget – "some crazy talk." Ocasio-Cortez recently indicated she was open to supporting MMT.

Gates is one of the richest people in the world. He has said, despite the fact that he has paid more in taxes than most, he should be paying more .

[Feb 07, 2019] The Global Con Hidden in Trump's Tax Reform Law, Revealed

Notable quotes:
"... Last night, President Trump reserved a few minutes of his State of the Union address to praise his tax reform law, which turned a year old last month. To promote its passage, Mr. Trump and his congressional allies promised Americans that drastically lowered corporate tax rates would bring home large sums of capital that had been stashed overseas and finance a surge of domestic investment. ..."
"... Why would any multinational corporation pay America's 21 percent tax rate when it could pay the new "global minimum" rate of 10.5 percent on profits shifted to tax havens, particularly when there are few restrictions on how money can be moved around a company and its foreign subsidiaries? ..."
"... For starters, the law's repatriation deal did prompt a brief surge in offshore profits returning to the United States. But the total sum returned so far is well below the trillions many proponents predicted, and a large chunk of the returned funds have been used for record-breaking stock buybacks, which don't help workers and generate little real economic activity. ..."
"... Bottom line: the Trump tax cut is a giveaway to corporations that doesn't promote investment here ..."
Feb 07, 2019 | economistsview.typepad.com

anne , February 06, 2019 at 04:05 PM

https://www.nytimes.com/2019/02/06/opinion/business-economics/trump-tax-reform-state-of-the-union-2019.html

February 6, 2019

The Global Con Hidden in Trump's Tax Reform Law, Revealed
Why would any multinational corporation pay the new 21 percent rate when it could use the new "global minimum" loophole to pay half of that?
By Brad Setser

Last night, President Trump reserved a few minutes of his State of the Union address to praise his tax reform law, which turned a year old last month. To promote its passage, Mr. Trump and his congressional allies promised Americans that drastically lowered corporate tax rates would bring home large sums of capital that had been stashed overseas and finance a surge of domestic investment.

"For too long, our tax code has incentivized companies to leave our country in search of lower tax rates," he said, pitching voters in the fall of 2017. "My administration rejects the offshoring model, and we have embraced a brand-new model. It's called the American model."

The White House argued they wanted a system that "encourages companies to stay in America, grow in America, spend in America, and hire in America." Yet the bill he signed into law includes a sweetheart deal that allows companies that shift their profits abroad to pay tax at a rate well below the already-reduced corporate income tax -- an incentive shift that completely contradicts his stated goal.

Why would any multinational corporation pay America's 21 percent tax rate when it could pay the new "global minimum" rate of 10.5 percent on profits shifted to tax havens, particularly when there are few restrictions on how money can be moved around a company and its foreign subsidiaries?

These wonky concerns were largely brushed aside amid the political brawl. But now that a full year has passed since the tax bill became law, we have hard numbers we can evaluate.

For starters, the law's repatriation deal did prompt a brief surge in offshore profits returning to the United States. But the total sum returned so far is well below the trillions many proponents predicted, and a large chunk of the returned funds have been used for record-breaking stock buybacks, which don't help workers and generate little real economic activity.

And despite Mr. Trump's proud rhetoric regarding tax reform during his State of the Union address, there is no wide pattern of companies bringing back jobs or profits from abroad. The global distribution of corporations' offshore profits -- our best measure of their tax avoidance gymnastics -- hasn't budged from the prevailing trend.

Well over half the profits that American companies report earning abroad are still booked in only a few low-tax nations -- places that, of course, are not actually home to the customers, workers and taxpayers facilitating most of their business. A multinational corporation can route its global sales through Ireland, pay royalties to its Dutch subsidiary and then funnel income to its Bermudian subsidiary -- taking advantage of Bermuda's corporate tax rate of zero.

Where American Profits Hide

[Graph]

No major technology company has jettisoned the finely tuned tax structures that allow a large share of its global profits to be booked offshore. Nor have major pharmaceutical companies stopped producing many of their most profitable drugs in Ireland. And Pepsi, to name just one major manufacturer, still makes the concentrate for its soda in Singapore, also a haven.

Eliminating the complex series of loopholes that encourage offshoring was a major talking point in the run-up to the 2017 tax bill, but most of them are still in place. The craftiest and largest corporations can still legally whittle down their effective tax rate into the single digits. (In fact, the new law encourages firms to move "tangible assets" -- like factories -- offshore).

Overall, the Tax Cuts and Jobs Act amounted to a technocratic sleight of hand -- a scheme set to shift an even greater share of the federal tax burden onto the shoulders of American families. According to the Treasury Department's tally for fiscal year 2018, corporate income tax receipts fell by 31 percent, an unprecedented year-over-year drop in a time of economic growth (presumably a time when profits and government revenue should rise in tandem).

These damning results, to be sure, don't make for a good defense of what came before the new law. In theory under the old system, American-based firms still owed the government a cut of their global profits. In practice, large firms could indefinitely defer paying this tax until the funds could be repatriated -- usually when granted a tax holiday by a friendly administration.

Over a generation, this political dance was paired with rules that made it relatively easy for firms to transfer their most prized intellectual property -- say, the rights to popular software or the particular mix of ingredients for a hot new drug -- to their offshore subsidiaries. Taken together, they created a tax nirvana of sorts for multinational corporations, particularly in intellectual-property-intensive industries like tech and pharmaceuticals. But it wasn't enough.

For their next trick, the companies worked with their political allies to favorably frame the 2017 tax debate. When he was the House speaker, Paul Ryan was fond of talking about $3 trillion in "trapped" profits abroad. But those profits weren't actually, physically, sitting in a few tax havens.

Dwarf Economies, Giant American Profits

[Graph]

They were largely invested in United States bank accounts, securities and bonds issued by the Treasury or other companies headquartered in the States. As Adam Looney -- a Brookings Institution fellow and former Treasury Department official -- has explained, companies that needed to finance a new domestic investment could simply issue a bond effectively backed by its offshore cash. (For instance, Apple could bring its "trapped" funds onshore by selling a bond to Pfizer's offshore account, or vice versa.)

Put plainly, they got the best of both worlds: Uncle Sam could tax only a small slice of their books while they traded with one another based on the size of the entire pie.

The scale of the tax shifting has become so immense that some economists believe curbing it could raise reported G.D.P. by well over a percentage point -- something Mr. Trump, who's been absorbed by opportunities to brag about the economy, should notionally welcome.

President Trump's economic advisers and the key architects of the bill on Capitol Hill must have known their reform wasn't going to end business incentives that hurt American workers. Honest reform would have meant closing corporate loopholes -- a move they originally promised to make.

Should the opportunity present itself, perhaps to the next president, there are a couple of viable options for a fundamental tax overhaul that wouldn't require reinstating the 35 percent corporate tax rate.

One of several possibilities is to return to a system of global taxation without the deferrals that enabled empty repatriations. That would mean profits sneakily booked tax-free in Bermuda would be taxed every year at 21 percent. Profits booked in Ireland -- or other low-tax nations -- would be taxed at the difference between Ireland's rate and America's rate.

It's an approach that would protect small and midsize American companies while cracking down on bad corporate actors with enough fancy accountants and lawyers to rig the game to their advantage. And it would be far better than the fake tax reform passed a year ago.

anne -> anne... , February 07, 2019 at 06:16 AM
https://twitter.com/paulkrugman/status/1093271623212457985

Paul Krugman‏ @paulkrugman

This is very good from the essential Brad Setser, our leading expert on international trade and money flows. Bottom line: the Trump tax cut is a giveaway to corporations that doesn't promote investment here 1/

https://www.nytimes.com/2019/02/06/opinion/business-economics/trump-tax-reform-state-of-the-union-2019.html

The Global Con Hidden in Trump's Tax Reform Law, Revealed

Why would any multinational corporation pay the new 21 percent rate when it could use the new "global minimum" loophole to pay half of that?

2:14 PM - 6 Feb 2019

@Brad_Setser also gets at something I've been trying to explain: corporate cash "overseas" isn't really a stash of money that can be brought home, it's an accounting fiction that lets them avoid taxes, with no real consequences for investment 2/

And this chart, showing the predominance of tax avoidance in overseas "investment", is a classic 3/

https://pbs.twimg.com/media/DywVXVvWsAAUvrh.jpg

[Feb 05, 2019] US kleptocrats multinationals rip off taxpayers by parking billions offshore – economist to RT

Nov 12, 2018 | www.rt.com

Tax havens are used as an instrument to increase the profitability of US multinationals at the expense of the public, according to investigative economist and lawyer James Henry. He told RT that there's a tiny group of the world's elite professionals, banks, law firms, and accounting firms that make a nice living from the global tax haven industry. Multinational companies, and their shareholders to some extent, have benefitted from the fact that they were able to park US profits offshore and avoid paying US corporate income tax.

"The rest of us who have to pay for the taxes that corporations are not paying, are seeing the race to the bottom, we're seeing many countries around the world slashing corporate taxes and putting more of the costs of the government on ordinary taxpayers," said Henry, a senior advisor at the Tax Justice Network.

He explained that America's wealthy kleptocrats, tax-dodgers, and particularly multinational companies have been massively parking money offshore. By 2017, US multinationals have "accumulated about $2.6 trillion offshore while they didn't have to pay the 35 percent US corporate tax," the economist said.

Henry points out that the Trump administration has slashed that tax to about 15 percent and now they have eight years to pay it while not even being required to repatriate the money hoarded offshore.

"The new tax bill was a disaster but it did benefit the major companies by allowing them to get their $2.6 trillion back home tax free," Henry said.

The senior fellow at Yale noted that bringing the tax rate back to less than five percent from the current fifteen, would mean "a $600 – 800 billion gift to the wealthiest companies on the planet." Ninety percent of corporate shares are owned by the top one percent, he said.

Tax havens are used as an instrument to increase the role of profitability of the US multinationals and the oil companies all use tax havens aggressively to reduce taxation, according to Henry.

In general, since the financial crisis the world has increased its debt levels to an unprecedented proportion. So, the countries tended to borrow to fill the gap. "It would go a long way over time toward chipping away from the massive debt burden that we have."

The US has actually become a safe haven of its own, Henry said, adding that there's no beneficial ownership reporting, no country by country reporting. "The US has some of the most aggressive enablers on the planet – accounting firms and law firms that are enabling this activity. A lot of multinationals that have been exploiting the tax haven system are US companies like Apple, Google, and Microsoft."

While historically the US has always been a proponent of a progressive taxation lately that's been lagging, he stressed.

For more stories on economy & finance visit RT's business section

Read more

[Feb 04, 2019] Cuomo Blames Trump Tax Plan for Reduced New York Tax Collections

Feb 04, 2019 | finance.yahoo.com

New York collected $2.3 billion less income-tax revenue than predicted for December and January, a development that Governor Andrew Cuomo blamed on wealthy residents leaving for second homes in Florida and other states that received more favorable treatment in the tax law enacted by President Donald Trump and the Republican Congress.

The shortfall will require a new look at the $175 billion budget Cuomo submitted to the legislature last month, he said. If the trend continues, the governor said it would affect spending on high-expense items such as health, education, infrastructure and a planned middle-class tax cut.

"There is no doubt that the budget we put forward is not supported by the revenue," the Democratic governor said during a news conference in Albany. "If even a small number of high-income taxpayers leave, it has a great effect on this tax base. You are relying on a very small number of people for the vast amount of your tax dollars."

While acknowledging that stock market volatility is among several factors that may have suppressed income-tax revenue in the past two months, the governor placed most of the blame on Trump and the Republican-dominated Congress of 2017, which enacted a tax plan limiting federal deductions on real estate and other local taxes.

Related: New York's Income-Tax Revenue Falls 'Abruptly' Under Forecast

"It was politically diabolical and also highly effective," Cuomo said. "And if your goal is to help Republican states and hurt Democratic states this is the way to do it."

[Jan 30, 2019] Angry Bear " The Two Percent Solution Warren and the Stochastic Jubilee by Peter Dorman

Jan 29, 2019 | angrybearblog.com
Wait long enough, and great ideas come back around, although not necessarily wearing the same garb.

Elizabeth Warren has just come out for a 2% wealth tax (above $50 million).* But this is simply an annualized version of my lump sum stochastic jubilee .

What's the advantage of redistributing the whole thing every 50 years (on average) vs a steady trickle? A periodic reset would interrupt long run processes of wealth inequality more fully than a tax, so long as the rate of return on financial assets is high enough to compensate for the extra annual pinch, which it most likely would be, since wealth holders would demand a higher rate of return. It would also be a lot more fun.

On the other hand, it would be more complicated to administer and might be resisted by force.

On balance, I'd go for the jubilee, but I'll take Warren's version as a close second.

*There's also an extra 1% on wealth in excess of $1 billion, but this is largely symbolic.


Denis Drew , January 29, 2019 11:55 am

Constitutional question about fed tax on wealth? ??? Apparently we can acquire pretty much the same 2% of wealth revenue from roughly the same people with an income tax surcharge of 20% on income above $50 million. Income tends to be pretty regularly 10% of wealth for this group. (graph provided)
https://www.motherjones.com/kevin-drum/2019/01/heres-how-to-enact-a-wealth-tax-that-the-supreme-court-wont-kill/

"In 1999, billionaire Donald Trump proposed a "one-time" net worth tax of 14.25 percent on people worth $10 million or more to help pay off the national debt. He claimed it would raise $5.7 trillion "
https://www.usatoday.com/story/opinion/2018/07/31/trump-1999-wealth-tax-lower-deficits-reduce-inequality-column/826224002/

SW , January 29, 2019 2:44 pm

Guess no one plays board games anymore. But there was a time when most people were familiar with the game Monopoly. And it is a pretty good teaching tool regarding end stage capitalism and extreme unequal distribution of wealth. At first the game is fun. Everyone has a grand time. But near the end of the game just a couple of people have all the property with hotels on everything. Every time you roll the dice, no matter where you land you have to pay one of those assholes. There is no escape and there is no doubt who is going to win. If you insist on keeping the game going you will have to spread the wealth around. Otherwise you will have to dump the whole board and start over.

Denis Drew , January 29, 2019 10:44 pm

SW,
Maybe we could program an every loop redistribution tax (maybe every so many times around) to keep the game going almost forever. Guaranteed to get Democratic presidential candidates' endorsement. :-O

likbez , January 30, 2019 2:01 am

Those are funny ideas, if we think about who controls the government.

As neoliberal oligarchs are the real winners of each Presidential election theoretically it might be logical to have Election tax: a "wealthy tax" after each Presidential election.

Say, 10% for those who continued to the winner, and 5% for those who contributed to the loser, and 2.5% for whose who did not make any election contributions :-)

But, of course, this is just a dream...

[Jan 29, 2019] Why Trump's $1.5 Trillion Tax Cut Hasn't Sparked Hiring or Investment

Notable quotes:
"... The Trump administration's $1.5 trillion in tax cuts appears to have not made any major impact on businesses' capital investment or hiring plans, according to a new survey. ..."
"... "A large majority of respondents, 84%, indicate that one year after its passage, the corporate tax reform has not caused their firms to change hiring or investment plans," NABE President Kevin Swift said in a release. "Fewer firms increased capital spending compared to the October survey responses, but the cutback appeared to be concentrated more in structures than in information and communication technology investments." ..."
"... The lower tax rates did have an impact in the goods-producing sector, NABE found, with 50% of respondents reporting increased investments at their companies, and 20% saying they redirected hiring and investments to the US from abroad. ..."
Jan 29, 2019 | finance.yahoo.com

The Trump administration's $1.5 trillion in tax cuts appears to have not made any major impact on businesses' capital investment or hiring plans, according to a new survey.

A quarterly poll from the National Association for Business Economics published Monday found that some companies reported accelerating investments because of lower corporate taxes, but a whopping 84% of respondents said they had not changed their plans. That's up slightly from 81% in the previous survey published in October, Reuters reports.

The White House had said the massive stimulus package, which cut the corporate tax rate to 21% from 35%, would boost business spending and job growth. The tax cuts that came into effect in January 2018 were the biggest overhaul of the U.S. tax code in more than 30 years.

"A large majority of respondents, 84%, indicate that one year after its passage, the corporate tax reform has not caused their firms to change hiring or investment plans," NABE President Kevin Swift said in a release. "Fewer firms increased capital spending compared to the October survey responses, but the cutback appeared to be concentrated more in structures than in information and communication technology investments."

The lower tax rates did have an impact in the goods-producing sector, NABE found, with 50% of respondents reporting increased investments at their companies, and 20% saying they redirected hiring and investments to the US from abroad.

An analysis of how S&P 500 firms were reacting to the tax cut by researchers at the University of Michigan found that 4% of the sample said in Q1 of 2018 they would pay some of their tax savings back to workers, and 22% mentioned in earnings conference calls they would increase investment because of the tax cuts.

Though for small businesses, a new survey from the National Federation of Independent Business released earlier this month found 61% of owners reported making capital investments, unchanged from last month but 5 points higher than in August. In December, 35% of small-business owners reported increasing employee compensation and 24% reported planned increases in the next few months.

[Jan 23, 2019] Another sign of collapse of neoliberal ideology: discussion of 70% tax rate on income over 10 million is no longer viewed as anathema

Jan 23, 2019 | finance.yahoo.com

Billionaire Michael Dell, chief executive officer of the eponymous technology giant, rejected a suggestion by U.S. Representative Alexandria Ocasio-Cortez of a 70-percent marginal tax rate on the wealthiest Americans.

"No, I'm not supportive of that," Dell said at a Davos panel on making digital globalization inclusive. "And I don't think it will help the growth of the U.S. economy. Name a country where that's worked."

She may not be in Davos, but the New York representative's influence is being felt on the slopes of the Swiss Alps. Three weeks after Ocasio-Cortez floated the idea in an interview on "60 Minutes" to raise the top marginal tax rate on Americans' income of more than $10 million to 70 percent, it was a hot topic at the gathering of the global financial and political elite.

... ... ...

"My wife and I set up a foundation about 20 years ago and we would've contributed quite a bit more than a 70 percent tax rate on my annual income," Dell said. "I feel much more comfortable with our ability as a private foundation to allocate those funds than I do giving them to the government."

Erik Brynjolfsson, a professor at the Massachusetts Institute of Technology who was on the panel with Dell, said such a rate worked in the U.S. after World War II. But other executives were opposed, including Salesforce.com Inc. Co-Chief Executive Officer Keith Block.

... ... ...

Billionaire investor Ray Dalio suggested that the idea may have legs in the run-up to the U.S. presidential election. Discussing the outlook for a slowing world economy Tuesday, Dalio said that next year will see "the beginning of thinking about politics and how that might affect economic policy beyond. Something like the talk of the 70 percent income tax, for example, will play a bigger role." He didn't mention Ocasio-Cortez by name.

Currently in the U.S., the top marginal tax rate is 37 percent, which takes effect on income of more than $510,300 for individuals and $612,350 for married couples, according to the Tax Foundation.

The fortunes of a dozen attendees at the World Economic Forum in 2009 have soared by a combined $175 billion, a Bloomberg analysis found. The same cannot be said for people on the other end of the social spectrum: A report from Oxfam on Monday revealed that the poorest half of the world saw their wealth fall by 11 percent last year.

[Jan 20, 2019] Explaining marginal taxes to a far-right former Governor

Jan 20, 2019 | economistsview.typepad.com

anne , January 17, 2019 at 05:12 AM

http://cepr.net/blogs/beat-the-press/washington-post-forgets-to-mention-scott-walker-misled-fifth-graders-about-taxes

January 16, 2019

Washington Post Forgets to Mention, Scott Walker Misled Fifth Graders About Taxes
By Dean Baker

The Washington Post had an article * about how Republicans and right-wingers have become obsessed with trying to attack Alexandria Ocasio-Cortez, the newly elected representative from Brooklyn. At one point it refers to former Wisconsin governor Scott Walker's attack on Ocasio-Cortez's position advocating a high marginal tax rate on high income individuals.

"Former Wisconsin governor Scott Walker, a Republican who was defeated in November, on Tuesday mocked Ocasio-Cortez for her tax proposal and suggested it was an elementary-school understanding of the issue. 'Even 5th graders get it,' he tweeted."

While the piece noted part of Ocasio-Cortez's response, that rich people are the one's with the money, it left out the more important part, Walker misled the fifth graders he refers to in his tweet. In his tweet, Walker confuses a marginal tax rate with an average tax rate

"Explaining tax rates before Reagan to 5th graders: 'Imagine if you did chores for your grandma and she gave you $10. When you got home, your parents took $7 from you.' The students said: 'That's not fair!' Even 5th graders get it."

Ocasio-Cortez correctly pointed out in her reply that the $10 the students earned for doing chores for their grandma would not be taxed because the 70 percent tax rate she proposes would only apply to incomes above $10 million.

"Explaining marginal taxes to a far-right former Governor:

"Imagine if you did chores for abuela & she gave you $10. When you got home, you got to keep it, because it's only $10.

"Then we taxed the billionaire in town because he's making tons of money underpaying the townspeople."

Ocasio-Cortez is right on this point and Walker is wrong. He either does not understand how our income tax system works or is deliberately lying to advance his agenda. Either way, the Post should have pointed out that Walker was wrong.

Many people are confused about the concept of a marginal tax rate (the higher tax rate only appears to the income above a cutoff). Opponents of high marginal taxes on the rich try to take advantage of this confusion in the way Scott Walker did with his class of fifth graders. It is the media's responsibility to try to inform people about how the tax system works and to expose politicians who misrepresent the issue.

* https://www.washingtonpost.com/powerpost/what-have-you-got-left-ocasio-cortez-taunts-gop-critics-obsessing-over-her/2019/01/15/a48b5832-1455-11e9-803c-4ef28312c8b9_story.html

RC AKA Darryl, Ron said in reply to anne... , January 17, 2019 at 05:49 AM
That's funny in a sad sort of way. Dean has his hands full. There is no explaining the stupidity of politicians, media, and ordinary people in the US these days.
Darrell in Phoenix said in reply to anne... , January 17, 2019 at 07:39 AM
The whole Laffer Curve is based on this lie.

100% tax, no economy, so no revenue.
0% tax, no revenue.

So, maximum revenue is somewhere between those.. and the 70% top rate is clearly above that.. so we have to lower the top rate.

Let's unwrap the lies.
1) At 100% top rate, there is no economy.
WRONG! Ignores brackets, marginal rates, deductions, effective rates... Even at 90% top rate, the rich were averaging 40% effective.

2) The goal of taxation is maximum revenue. NO!!! The tax code should be viewed as a tool to keep the right amount of money, actively circulating in the economy. As such, is not only about getting back out the money the government adds, but also about limiting how much the rich take out.

3) Even if we assumed there is some taxation rate that hurts the economy, there was no evidence presented to say we were above that point.


OF course, it is point #2 (limiting how much money the rich take from the economy) that the Laffer Curve was created to destroy. And destroy it did, which is why we've been going into debt at 3x the sustainable rate.

Julio -> Darrell in Phoenix... , January 18, 2019 at 10:21 AM
Very good take on this discussion.

I would add that there is plenty of historical evidence ("90% destroys all incentives!" "70% destroys all incentives!"..."39.5% destroys...") to conclude that the plutocrats believe that all taxation is theft.

Darrell in Phoenix said in reply to anne... , January 17, 2019 at 07:43 AM
People on the left need to realize that high top rates are NOT to take money from the rich. They will spend or invest in ways that lets them avoid taxes.

High top rates are needed to get the rich to spend and capital invest, to reverse the structural imbalances.

That spending and investing creates demand, jobs, wages, lifting the poor into the middle class.

The extra revenue comes from that growth in the middle class as the poor go from 0% effective rate to 10-15% effective rate.

kurt -> Darrell in Phoenix... , January 17, 2019 at 01:07 PM
Agree - but it also changes the incentives for corporations and CEOs. By taxing away huge windfalls for CEOs it allows corporations to set a max wage around 15-20M. This means instead of the 700M to 1B salaries of big corps going to one guy, they pay their mid managers more and their line staff more. It means they invest more in R&D. I agree with you - just an supporting argument.

[Jan 13, 2019] More Americans fleeing high-tax states

Jan 13, 2019 | finance.yahoo.com

Last year, these were the ten highest income tax states, according to TurboTax (*These rates do not include local taxes.):

[Jan 12, 2019] The Economics of Soaking the Rich by Paul Krugman

Notable quotes:
"... Follow The New York Times Opinion section on ..."
"... Twitter (@NYTopinion) ..."
"... , and sign up for the ..."
"... Opinion Today newsletter ..."
Jan 12, 2019 | www.nytimes.com

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 ever 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.):

Top tax rates and growth Credit Tax Policy Center, BEA
Image
Top tax rates and growth Credit Tax Policy Center, BEA

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.

Related Opinion | Maureen Dowd Boogie Down, Bronx Girl The fiery class of freshmen dance their way onto the House floor. But will they overstep? Jan. 5, 2019

Follow The New York Times Opinion section on Facebook , Twitter (@NYTopinion) and Instagram , and sign up for the Opinion Today newsletter .

Paul Krugman has been an Opinion columnist since 2000 and is also a Distinguished Professor at the City University of New York Graduate Center. He won the 2008 Nobel Memorial Prize in Economic Sciences for his work on international trade and economic geography. @ PaulKrugman

Howard Columbus, Ohio Jan. 7 Times Pick

Billy, if AOC's proposal is insane, than Dwight Eisenhower, President during a long period of economic expansion and prosperity, belonged not in the White House but in a mad house, given that the top income tax rate during his administration, 91%, exceeded even that suggested by AOC. I have lifelong friends in Denmark and have visited the country. All say they are happy with the high personal income tax rate, which was 55.8 % in 2018 . See https://tradingeconomics.com/denmark/personal-income-tax-rate . Interestingly, the main indicators of happiness find that Denmark is also the happiest country in the world ( https://www.frugalconfessions.com/miscellaneous/denmark-highest-tax-rate-and-happiest-people.php ).

MW OH Jan. 7 Times Pick

Whatever one makes of AOC's tax ideas (they're good) or PK's take on them, the frenzy that AOC has sparked is quite a sight to behold.

This is how people shape the conversation, and it's how the Dems can reclaim a share of the news media spotlight.

Conservatives have known this is how it works for a long time: it pays to have a few extremists willing to utter ideas from the fringe. The media will cover AOC because it's AOC saying things. Period. Over time, with persistence and if she and others like her have substance and discipline (still not certain), she will help move the window of opportunity to the left.

She will help normalize what until recently was regarded as 'zany lefty'. This clearly freaks out conservative operators and it will be one of AOC's biggest contributions. Her strength will be to make everyone talk about her and her ideas.

Her haters commenting here are proving the point. Finally, a Dem who knows to steer clear of the 51-point policy plan that oh-so-cleverly tweaks the tax code here and balances the wishes of everyone/no one and instead just make a bold ambitious claim. Good for her.

Mjxs Springfield, VA Jan. 7 Times Pick

In Manchester's "The Power and the Glory" he noted that in 1950, the CEO of Ford Motors lived in a relatively modest five-bedroom home in Detroit: "when the doorbell rang, he answered himself." So did the Vice President of the United States. Their children were drafted.

These men were no less smart, savvy, and entrepreneurial than today. They were comfortable, had homes in the Hamptons (not mansions) and still led the United States in the greatest economic expansion in history.

When did we begin to believe that mega-millions to CEOs will magically transform into wealth for all, or that it is a necessary inducement to work? A man who makes millions will reinvest in his country; a man who makes hundreds of millions will hide it offshore, Restore the marginal tax rate to the 1960 level. And restore the draft. It's America, dammit, and everybody pulls an oar.

Jason Seattle Jan. 7 Times Pick

I'm baffled by the rationale here. The liberals certainly understand that it's 2019 and people and capital are more mobile than they've ever been. I own a business - tax me at 73% and watch me take it to Canada, Ireland, or any other locale where I don't get "soaked".

Why is the answer from the left that we always need more money from someone? As if the "rich" have done something wrong. Why not take the existing bloated budget, apply some creativity and critical thinking (you know - the kind that happens in the private sector) and solve problems with the current tax rates.

Corwin New York Jan. 7 Times Pick

@Freda Pine When you're making over $10 million, you're not getting out of bed and clocking into the warehouse to earn your money. Your interest are diverse and generate money without your lifting a finger. There is no faucet of income to turn off, and even if you could, why would you? It's still a lot of extra income for the type of person who is interested in earning more money than they can possibly spend.

Freda Pine San Francisco Jan. 7 Times Pick

Economists are not physiologists. I will not get out of bed if I had to pay 70% tax on my income. Not even if my income was $300,000 annually. I might as well work less hard and earn $100,000 paying $20% tax. This tax worked in the past, but since a lot has changed in our society. We are far from Scandinavia and any effort to impose a move in it's direction is unproductive.

tommag1 Cary, NC Jan. 7 Times Pick

Ask most older white Americans what was the best time economically in this country and they will say the post WWII and the Eisenhower years. Then remind them of the top tax rates and the lack of deductions.

[Jan 12, 2019] We need to use the tax code to force the rich to spend or capital invest their income back into the economy

Jan 12, 2019 | economistsview.typepad.com

Darrell in Phoenix said in reply to anne... , January 08, 2019 at 04:24 PM

I think this is still the wrong tack, as it gets too close to the wrong headed Modern Money Theory where the ignorant think money can be dumped into the economy, in near infinite amounts, without regard for taxation, with no side-effects.

I think the better tack is to attack it as a cash-flow issue. The rich are taking money out of active circulation, and lending it back into the economy. This is why debt is exploding at an unsustainable rate.

We need to use the tax code to force the rich to spend or capital invest their income back into the economy.

Observations of the 1950-1960s tax code show that the rich didn't actually pay a higher effective rate. They used loopholes.

RIGHT!!! Those loopholes were created as the carrot to get the rich to spend or invest.

Don't phrase it as "We need to raise taxes to fund..." It smacks of "take from workers and give to lazy".

We need to phrase it as "We need to tax to force the rich to spend or invest."

The spending and investing increases total economic activity. The poor become middle class, going from paying little-to-no tax to paying 20-30% effective rates.

AND, it is that lifting of the poor into the middle class that creates the extra tax revenue to fund needed social and infrastructure spending.

mulp -> Darrell in Phoenix... , January 09, 2019 at 05:34 AM
You are on the right track.

The solution is to put the Federal government on GAAP bookkeeping. An income and expense ledger. And asset and liabilty ledger.

State and local government sorta do this, ie, they balance income and expense except for capital expense funded with bonds.

What is not done is the listing of all assets offset by debt, etc, and shareholder equity.

For NYC vs smallville KS, the liabilities of NYC would be tens of billions and svKS zero, but the assets of NYC multiples of liabilities vs a few thousand in asset value for that debt free small town.

Given Adam Smith, the assets of a government should include its people as they are the biggest wealth "of nations". The better educated, skilled, more productive, substantially derermined by investing in education, health, etc, the greater the asset value, the greater the wealth.

But just limiting debt to bonds tied to new assets, bonds for roads, schools, etc. Taxing the assets to pay off the bonds while taxing the people for current consumption is prudent.

Darrell in Phoenix said in reply to mulp ... , January 09, 2019 at 09:20 AM
Is it "track" or "tack"?

My take is:

Track refers to trains or roads, meaning one of limited options.

Tack is a sailing term used to describe how you get a sailboat to go upwind by not going directly in the direction you want, but rather at an angle.

I am concerned with the money supply.

Currently, 10% of GDP leaks out via structural imbalances, replaced by debt increasing at 3x the rate of population(1%ish) and inflation(2%ish).

The OP Krugman tacks the tack (or is it track, becasue of limited options?) that we should just keep doing that. He is saying we should ignore the massive deficits, and wealth transfer to the rich that the interest on that debt creates.

I believe this the wrong tack (or is it track?), instead thinking we should attack and reverse the trade imbalances such that the debt is no longer necessary.

You are still misunderstand the problem, viewing the macroeconomy through a microeconomic lens.

You want the federal government to start acting "responsible", ignoring the lessons of the 1800s that the rich would soon suck all the money out of the economy, creating a depression.

You get blood out of a turnip by first putting blood into a turnip.

You get money out of an economy (as the trade does $500+B a year and the rich are doing $1T+ a year) but first putting money in ($1.5T+ new debt a year).

You think we can stop putting blood into the turnip... I mean stop putting money into the economy, without first stopping the giant drain of blood... dang it... I mean money out of the economy.

In reality, there appear to be 2 options. 1) Keep putting money in and taking it out. 2) Stop taking it out so that we can stop putting it in.

Your option of "just stop putting money in, without first addressing the drains" is sure to lead to collapse.

[Jan 12, 2019] America s greatest myth is that people deserve what they get and get what they deserve. That is why progressive taxation and civic generosity is the only way to craft a truly civil society

Notable quotes:
"... This is an excellent analysis. Let's look at the issue from a non monetary stance. The prime mover here is not wealth, but power, political power. These ultra rich want to run the show. Think about that. ..."
"... If you have so much money that you can buy anything you want, what else is there to grasp beyond material possessions? Power. The low tax rates are intended to establish a wealth aristocracy, a type of moneyed royalty who control society. Coupled with that is the elimination of the estate tax. This allows the ultra rich to set up dynasties, like royal lines of succession, to have their legacies continue. It's like a stab at immortality. ..."
"... The only people who believe in Republican economic doctrine are people who are paid to believe and people who are paid don't care whether the doctrine is accurate. George H.W. called it from the start. Voodoo economics defies basic arithmetic. How 40 years worth of voters forgot common sense is beyond me. ..."
"... Paul, the United States has conducted a continual experiment in radical inequality ever since Reagan entered the White House. This experiment has largely continued regardless of whether a Democrat or Republican has sat in the Oval Office. IMHO, the results are in - and they demonstrate that America is not a happier country when CEOs make roughly 300 times amount of their lowest paid employees, and when the ultra rich can easily shift the money that they're not paying in taxes to federal and state governments into off-shore havens or emerging market economies. ..."
"... The graph is telling. I don't recall rich people in the late 50s and early 60s as being destitute because of tax rates; they seemed to do just fine. But now Jeff Bezos earns roughly $6,000,000 per hour, while Amazon warehouse workers start at $11 per hour. Is Bezos's personal marginal product really worth 545,455% more than his warehouse employees? ..."
"... The lies of Republican economics, or greed is good, has led us to the brink of plutocracy and oligarch ..."
"... "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. This sums up the GOP. They've created their own alternate reality where facts and history do not exist. ..."
"... President Reagan was at least honest. He dropped the high income tax rates by about a factor of 2 and then made all income sources equal, e. g., no special low tax rates for capital gains. The rich accepted the new, low tax rates on income, and then worked feverishly to regain their perks, including preferential treatment of capital gains. ..."
Jan 12, 2019 | myaccount.nytimes.com

Barking Doggerel America Jan. 5

I have long been humored by the absurd idea that the wealth accumulated by "entrepreneurs" and businessmen is hard earned. I made a pretty decent living and, while experiencing some added stress with more responsibility, I worked less hard as I became more successful.

Sure, I had experience and judgment that helped, but mostly I won the game that is played in most businesses and organizations.

Being white helps a lot. Being male helps a whole bunch. Knowing certain social conventions and being reasonably well educated was useful. The very wealthy folks I have known, and there have been many, have more leisure time, more freedom to manage their own personal affairs and less stress from being at the mercy of others.

And the very wealthy I've known are not smarter, more creative or virtuous than the folks who work for them or for other wealthy executives. It's all a complex social sorting based primarily on several kinds of privilege combined with aggression in many cases.

America's greatest myth is that people deserve what they get and get what they deserve. That is why progressive taxation and civic generosity is the only way to craft a truly civil society.

Ron Cohen Waltham, MA Jan. 5

When top rates were high, 70-80 percent, executive salaries were lower, much lower. Why? Companies saw that if they raised executive salaries they would simply be shoveling most of that extra money to the government. They thought they had better uses for it, such as capital investment and better pay for workers. This is yet another way, an indirect way, in which low top rates encourage economic inequality, the bane of our society, today.

SJP Europe Jan. 5

If high taxes on the rich really were a problem, how is it possible then that the economies of Scandinavia and Europe are doing so well? I'd also like to add that the best way to add revenue to the government, is to fund the IRS: it busts cheaters, and it enforces compliance of those who may be tempted to cheat. When, after the Panama and UBS leaks, a few big cases of tax fraud were brought to justice in Europe (some well-known VIPs even went to prison), there suddenly was a wave of rich people voluntarily declaring hidden assists and gladly paying penalties, for fear of being busted in another set of leaks, sent to prison and/or be publicly shamed.

hammond San Francisco Jan. 5

Although I agree with Mr. Krugman's argument and I'm a big fan of AOC and the other fresh young voices in the House, I think the graph presented in the middle of this article is misleading. While it's true that we had tremendous growth during a period of very high taxes, one should not draw the conclusion that the high taxes promoted vigorous growth. That period of high taxes occurred when the US manufacturing sector was supercharged by the war effort, and Japan and Europe lay in ruins. It's entirely possible that growth might have been even stronger with lower tax rates. That said, as a wealthy person I fundamentally agree that paying higher taxes will not affect my personal economics in any materially meaningful way. Sure, some wealthy people might leave the US for cheaper lands; people whose principal goal in life is to have the highest score in the video game of finance. Most of the rest of us will continue to enjoy living in this country, and likely take advantage of an improved infrastructure, a more educated workforce, clean air and water, and pristine wilderness areas.

Socrates Downtown Verona. NJ Jan. 5

To anyone who thinks that the Republican Party knows a thing about economics or business: you're delusional. Republicans know a tremendous amount about greed, theft and selfishness. Arthur Laffer is the idiotic tax-cut patron saint economist of the Grand Old Phonies who helped Ronnie Reagan raid the US Treasury for the uber-wealthy.

George W Bush re-implemented Laffer-economics and drove the nation into a Depression.

Trump and the GOP are in the process of driving America over another bankrupting 0.1% welfare tax-cut cliff -- remember it took Bush-Cheney a good seven years to do it.

And guess who recently helped drive Kansas bankrupt with tax cuts for the rich ?

GOP tax-cut saint Arthur Laffer. He helped former Kansas Gov. Sam Brownback (R) pass tax cuts through the Kansas legislature. In August 2012, Laffer promised a crowd at a small business forum in Kansas that the cuts would produce "enormous prosperity," adding that they'll "make a big difference in a decade." They did make a big difference.

Kansas employment and the Kansas state economy both grew slower than the national rates, and the drastic decline in tax revenue coming into the state's treasury blew a gigantic hole in its budget.

Kansas reversed the destructive tax cuts in order save Kansas. The lesson is plain and simple and happens over and over again. Republicans are economic wrecking balls hellbent on destroying society for corrupt billionaires. D to go forward. R for nationally-assisted suicide.

Plennie Wingo Weinfelden, Switzerland Jan. 5

These top rates almost never apply to the rich anyway who almost always are paying the capital gains rate rather than that on ordinary income. It is much like the rates on corporations -- they never pay anything near that amount. Only those working for wages pay top dollar. A huge scandal.

Rima Regas Southern California Jan. 5

@OCA is going to show these resentful old white patriarch and their female enablers what well-adjusted women are like and what self-respect does not only for ones soul, but in righting the wrongs for a new generation of Americans. It's about time, too! @OCA has vision, imagination, compassion, and self-love. We're being robbed by a bunch of entitled two-bit crooks.

It'll take raising corporate taxes to Clinton levels or higher, not only to recover from Trump, the Bush recession and the then middle aged workers who never got back on track, but also to prepare for the new automated economy in the next 20 years.

We need more Ocadio-Cortezes in office and I look forward to electing a progressive majority in 2020. --- Things Trump Did While You Weren't Looking [2019] https://wp.me/p2KJ3H-3h2

Mjxs Springfield, VA Jan. 7 Times Pick

In Manchester's "The Power and the Glory" he noted that in 1950, the CEO of Ford Motors lived in a relatively modest five-bedroom home in Detroit: "when the doorbell rang, he answered himself." So did the Vice President of the United States. Their children were drafted. These men were no less smart, savvy, and entrepreneurial than today. They were comfortable, had homes in the Hamptons (not mansions) and still led the United States in the greatest economic expansion in history. When did we begin to believe that mega-millions to CEOs will magically transform into wealth for all, or that it is a necessary inducement to work?

A man who makes millions will reinvest in his country; a man who makes hundreds of millions will hide it offshore, Restore the marginal tax rate to the 1960 level. And restore the draft. It's America, dammit, and everybody pulls an oar.

Red Sox, '04, '07, '13, '18, Boston Jan. 5

Well, this is refreshing. The tax rate, once 90% of rich people's income, now sits at 150% from where it once as, during America's halcyon days of growth and incentive. In other words, the rich were put to work for the rest of us. And why not? But it took a healthy dive, from 70% to less than half that under Reagan (trickle-down, anyone?). The graph is most revealing in that growth rate dropped like a stone (under Reagan) as did the corresponding top tax rate. Coincidence? Hardly. So Alexandria Ocasio-Cortez comes along and has the idea that the wealthy will never (all things considered equal) lack for money. So, the Right's question is this: "why should the rich work for the poor?" The answer is that they live in the same world that we do, and the labor and the tax rate for the less-than-rich allow the rich to utilize the same benefits the rest of us do. It's been a Republican meme, and will, I fear, always be one, but the cry of "Socialism" and "wealth re-distribution" are as potent on the right as anything racist or nationalist or xenophobic that Trump or McConnell or Ryan or anyone of their ilk could dream up. Simply put, Republicans do not consider those without wealth worth the trouble, the time, the patience, or the courtesy of invested citizenship. Instead, they re-direct their anger towards voting rights and unfunded schools and unlimited political donations. They now own the Supreme Court, the executive and half of Congress. I wish Ms. Ocasio-Cortez well.

Zejee Bronx Jan. 5

Eisenhower's tax rates on the rich were higher. Americans prospered.

NR New York Jan. 5

My spouse and I have a very nice life, probably in the top four-tenths of the one percent in terms of assets (primarily illiquid) and somewhat wealthy with a combined mid-six-figure annual salary income. I gave away 25 percent of my salary this year because I was so disgusted by the impact of the Trump tax bill. I will probably do the same in 2019. Some of the money I gave did not go to nonprofits, but directly to very hard-working people whose incomes do not cover housing, food, health care, transportation, and utilities. Basics. For God's sake, Republicans, get with the program, And Democrats, you too. My spouse and I, even though we live in a high-tax state, should be paying more taxes. Our systems rot from the inside out. I see it in both parties, and I see it at the local, state, and federal level. And this greed is unique to one group. I see it in privileged whites and I also see it in minorities.

Bruce Rozenblit Kansas City, MO Jan. 5

This is an excellent analysis. Let's look at the issue from a non monetary stance. The prime mover here is not wealth, but power, political power. These ultra rich want to run the show. Think about that.

If you have so much money that you can buy anything you want, what else is there to grasp beyond material possessions? Power. The low tax rates are intended to establish a wealth aristocracy, a type of moneyed royalty who control society. Coupled with that is the elimination of the estate tax. This allows the ultra rich to set up dynasties, like royal lines of succession, to have their legacies continue. It's like a stab at immortality.

To top off the entire royalty thing, much of their wealth was most likely generated from tax breaks, tax giveaways, tax shelters and the like. Odds are that a substantial portion of their wealth was never taxed to begin with and with the loss of the estate tax, they get to will it to their heirs tax free. This wealth aristocracy is the prime mover of Republican politics. Everything they do from judges to legislation is targeted to bolstering this wealth aristocracy. The real tragedy here is they convinced the coal miners and factory workers that doing this is a great idea.

Antoine Taos, NM Jan. 5

This needed to be said and you said it well. The nonexistent link between higher taxes and lower growth has to be exposed. Tax policy based on that falsehood only serves to make the wealthy wealthier. It also serves to create a class of offsprings who are also extremely wealth without having worked for a nickel of that wealth. This can't be good economic or social policy.

MAS MA Jan. 5

@WPLMMT That is not what she is proposing. The 70% is the marginal tax rate, applied only to the very highest portion of incomes, like over 10 million. Do just a little research before criticizing.

Steel Magnolia Atlanta Jan. 6

I do not understand the donor class -- those in the top tenth of the top one percent who give millions to GOP congresspeople in expectation of massive tax cuts. According to CBS reporting they pull in an average annual income of $35 million and belong to a cohort of billionaires whose combined net worth approximates that of the rest of us put together. They have everything they need, everything they could ever want. Yet very little of their income goes back into the economy to "trickle down."

Typically the majority goes to investment, often offshored for tax advantage. And big tax-deductible blocks go to "charities" like the Heritage Foundation which stocks the courts with partisan judges who mould the law in their favor or like conservative publications or think tanks which help mould public opinion in their favor. They spend millions to get their tax cuts, to mould the courts and public opinion, for the best accountants and tax lawyers money can buy. All to maximize incomes so large the marginal utility of additional millions is, well, marginal.

And all to keep absolutely as little as possible from going to public health, public education, public security, any public use whatsoever. It is not so much that more is never enough. The bigger question is why they spend so much to avoid contributing money of so little marginal value to them to the commonweal. Whatever happened to noblesse oblige? To "For to whom much is given, much is required"?

Andy Salt Lake City, Utah Jan. 5

I didn't know Nobel prize winning economists needed to defend Ocasio-Cortez. I used to teach marginal utility and marginal product to kids fresh out of high school. You don't need a doctorate to understand the fundamental mechanics of economic theory. The only people who believe in Republican economic doctrine are people who are paid to believe and people who are paid don't care whether the doctrine is accurate. George H.W. called it from the start. Voodoo economics defies basic arithmetic. How 40 years worth of voters forgot common sense is beyond me.

Matthew Carnicelli Brooklyn, NY Jan. 5

Paul, the United States has conducted a continual experiment in radical inequality ever since Reagan entered the White House. This experiment has largely continued regardless of whether a Democrat or Republican has sat in the Oval Office. IMHO, the results are in - and they demonstrate that America is not a happier country when CEOs make roughly 300 times amount of their lowest paid employees, and when the ultra rich can easily shift the money that they're not paying in taxes to federal and state governments into off-shore havens or emerging market economies.

I submit that our exploding budget deficit is a testament to how this policy has failed fiscally - and that our loss of national comity is a testament to how this policy has failed politically. It's time for a new experiment, an experiment in bubble-up economics - an economics for the rest of us, a capitalism with a human face, a mixed economy where individual effort is rewarded, but within which no one who truly tries to keep up is left behind.

Marc Boston,MA Jan. 6

Judging from many of the comments posted here what is needed to improve tax policy in the US is education. If so many of us can't follow the simple analysis Professor Krugman offers how will we ever get past the bogus claims and do the right thing?

jrinsc South Carolina Jan. 5

The graph is telling. I don't recall rich people in the late 50s and early 60s as being destitute because of tax rates; they seemed to do just fine. But now Jeff Bezos earns roughly $6,000,000 per hour, while Amazon warehouse workers start at $11 per hour. Is Bezos's personal marginal product really worth 545,455% more than his warehouse employees?

And what is his ACTUAL tax rate, given all the many deduction open to the super wealthy that someone making $11 per hour doesn't have available? The great irony of the graph is that MAGA hearkens back to post WWII America, a time when the richest among us had a 90% tax rate and far fewer deductions, and unions helped lower to middle class workers get livable wages and a pension.

hammond San Francisco Jan. 5

@Kenneth Johnson How many wealthy people left the US in the 50's and 60's, when the tax rate was so high? It's a reasonable hypothesis: most wealthy people will leave the US if the tax rate goes too high. But what actual evidence is there to support it? I'm a very wealthy person, have constantly voted to increase my tax rate, live in the one of the highest taxed states in the union, and I have no plans to leave. Like the professor wrote, paying more taxes will not affect my material life in the least. So why would I leave?

MW OH Jan. 7 Times Pick

Whatever one makes of AOC's tax ideas (they're good) or PK's take on them, the frenzy that AOC has sparked is quite a sight to behold. This is how people shape the conversation, and it's how the Dems can reclaim a share of the news media spotlight. Conservatives have known this is how it works for a long time: it pays to have a few extremists willing to utter ideas from the fringe. The media will cover AOC because it's AOC saying things. Period. Over time, with persistence and if she and others like her have substance and discipline (still not certain), she will help move the window of opportunity to the left. She will help normalize what until recently was regarded as 'zany lefty'. This clearly freaks out conservative operators and it will be one of AOC's biggest contributions. Her strength will be to make everyone talk about her and her ideas. Her haters commenting here are proving the point. Finally, a Dem who knows to steer clear of the 51-point policy plan that oh-so-cleverly tweaks the tax code here and balances the wishes of everyone/no one and instead just make a bold ambitious claim. Good for her.

priceofcivilization Houston Jan. 6

The most important thing is to make clear that this rate is for a new bracket. It only applies to people who make more than $10 million dollars a year, and only applies to the income over the first $10 million. Once that is understood, most people would support a top rate of 73 percent, or even Eisenhower's 90 percent. We need a transformation to common sense, ethics, and the public good. The lies of Republican economics, or greed is good, has led us to the brink of plutocracy and oligarchy...

tommag1 Cary, NC Jan. 7 Times Pick

Ask most older white Americans what was the best time economically in this country and they will say the post WWII and the Eisenhower years. Then remind them of the top tax rates and the lack of deductions.

Anthony Flack New Zealand Jan. 6

@Gwe - I don't believe that people with the competency to run a company are so rare, and their skills so exceptional, that you need to pay them millions of dollars to have any hope of attracting one of these management unicorns. I think they definitely would LIKE people to believe that. But there are plenty of examples of incompetent CEOs doing a terrible job, and they still get paid millions.

Prometheus Caucasus Mountains Jan. 6

There is also an economic theory out there, I can't remember its name, but I call it the Ferrari theory. It goes like this: these men/women..."Masters of the Universe" are so smart, so talented at generating $$, so in love with $$ that taxing them too little is like driving a Ferrari at very low RPM; Ferraris are optimal and made for high RPMs. Well, this applies to some people too. If you have some employees that are workhorses, you work them; you do NOT lessen the proportion of their work, you increase it because they can do it. If these rich people are so smart, so talented and so in love with $$, the society needs to optimize their tax output for the betterment of society. They'll only work harder to make more money. The Tax code today pampers them like they are incompetent and is the central cause of inequality never seen before in history. N.B., Atlas is not going to Shrug

Bascom Hill Bay Area Jan. 5

When George Romney was a CEO in Detroit, his $compensation was about 80X the median income. (Today's CEOs are at 300X) And his tax rate, as shown when he ran for president, was about 40%. Wasn't Mitt's tax rate under 15% when he released his tax records.

Howard Columbus, Ohio Jan. 7 Times Pick

Billy, if AOC's proposal is insane, than Dwight Eisenhower, President during a long period of economic expansion and prosperity, belonged not in the White House but in a mad house, given that the top income tax rate during his administration, 91%, exceeded even that suggested by AOC. I have lifelong friends in Denmark and have visited the country. All say they are happy with the high personal income tax rate, which was 55.8 % in 2018 . See https://tradingeconomics.com/denmark/personal-income-tax-rate . Interestingly, the main indicators of happiness find that Denmark is also the happiest country in the world ( https://www.frugalconfessions.com/miscellaneous/denmark-highest-tax-rate-and-happiest-people.php ).

romanette Decatur, Ga Jan. 7

@Jason So take your lemonade stand to Canada, see if they're willing to pay $4 a cup. You're here because the market is here and, in some cases, because the employees you need are here. So suck it up and contribute your fair share. Current tax rates are a complete sham, fiscal stimulus at the top of the business cycle, benefiting only the rich. This is when we need to be reducing debt and saving for the lean times.

Pat NYC Jan. 5

"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. This sums up the GOP. They've created their own alternate reality where facts and history do not exist. I hope AOC does very well for her district and the country. We need fact based leadership and in that regard she already outshines dump and co.

Corwin New York Jan. 7 Times Pick

@Freda Pine When you're making over $10 million, you're not getting out of bed and clocking into the warehouse to earn your money. Your interest are diverse and generate money without your lifting a finger. There is no faucet of income to turn off, and even if you could, why would you? It's still a lot of extra income for the type of person who is interested in earning more money than they can possibly spend.

Michael Evans-Layng, PhD San Diego Jan. 5

I appreciate your comment and the reminder that correlation is not causation. I'm puzzled as to why it's not a "pick." Anyway, I saw the graph differently. Not so much that high taxes on the wealthiest promote growth as that high taxes do not prevent growth, which is the Republican cant. That is, high taxes on the wealthy and solid economic performance can coexist just fine, thankyouverymuch. I also appreciated your first-hand validation of Dr. Krugman's point about marginal utility.

revelever Atlanta Jan. 6

@Geoffrey I don't think people necessarily deserve what they get. Progressive taxation is an attempt to compensate for imbalances in distribution of wealth, not an attempt to steal from the wealthy. Who is to say what is fair you ask? That is what democracy is for. A civil society can't tolerate the gigantic pay imbalances we see today. It's gotten out of control, it's messing with the cohesion that we need to survive, and something has to be done. If not taxation, what.

Will. NYCNYC Jan. 5

@Ron Cohen The most insightful comment so far. And one that none other than Mitt Romney's father, George Romney, would agree whole heartedly.

Dap Pasadena, CA Jan. 5

President Reagan was at least honest. He dropped the high income tax rates by about a factor of 2 and then made all income sources equal, e. g., no special low tax rates for capital gains. The rich accepted the new, low tax rates on income, and then worked feverishly to regain their perks, including preferential treatment of capital gains. They have had their cakes and have been eating them too. Not exactly fair.

Thomas Zaslavsky Binghamton, N.Y. Jan. 5

@Gwe Your opinion, in my opinion (!), has a few faults. The good CEO types don't grow on trees. That's one reason so many CEO's are not good. But they get paid lavishly all the same. You are talking only about the achievement, academic and economic, of the ones who are making a lot of money. How about the ones with equal achievement that doesn't result in a lot of money? Why do they deserve less? I suggest that one reason is that they aren't the ones deciding on the flow of money. When someone joins that crowd, they are likely to be well taken care of. A high marginal tax rate won't push anyone down severely. It will stop some of the self-indulgence of people who believe they are entitled to self-indulgence at the expense of 95-99% of the people. They will have to readjust their standards, and it won't be a disaster.

Suresh Karathinnai DC Jan. 6

Dr. Krugman, you are being - dare I say it - a little Disingenuous - here. You make it sound like the criticisms of AOC are based only on her dancing video and her views on the top marginal rates. That is not the case. Her dancing is of course personal business and it is is silly on the right to go after this. And her views on the top rates could perhaps be justified as you have done. But she has displayed appalling ignorance of economics and even worse evidence of innumeracy. First she said that the unemployment rate was low because many people work a second and third job. Surely, you will be first person to acknowledge that this is blather? This may forgivable if it came from an English or History major. Ms. Dowd informs us that AOC is an econ major. And then there was the nonsense about the 21 trillion dollar mistake that the Pentagon made which will be enough to pay for healthcare for all and a host of other programs. This is worse than ignorance of economics. It is evidence of poor reasoning and innumeracy (all that she needed to do was to look at the size of US GDP to know that 21 trillion dollar income release from an accounting error is a ridiculous idea). She displays the tendency to speak first and think later.

Would you accept this level of ignorance and innumeracy in Mr. Ryan or President Bush or Mr. Gingrich? She has the right instincts for the most part. But it is not OK to play the "our ignoramus is fine, but theirs is a wingnut" game.

common sense advocate CT Jan. 6

I'd like to call out the video for a moment - in a country where a full half of college students don't graduate from college on time - and in a country plagued by opioid abuse - and in a country where #metoo was started because of harassment and sexual violence - and in a country with a president elected by people who deny gender and racial equality - watching a bunch of clean cut, lighthearted, happy, talented young women and men dancing was a breath of cool, fresh air.

[Jan 12, 2019] The Trump Tax Cut: Even Worse Than You've Heard

Jan 01, 2019 | economistsview.typepad.com

https://www.nytimes.com/2019/01/01/opinion/the-trump-tax-cut-even-worse-than-youve-heard.html

January 1, 2019

The Trump Tax Cut: Even Worse Than You've Heard
Skeptical reporting has still been too favorable.
By Paul Krugman

The 2017 tax cut has received pretty bad press, and rightly so. Its proponents made big promises about soaring investment and wages, and also assured everyone that it would pay for itself; none of that has happened.

Yet coverage actually hasn't been negative enough. The story you mostly read runs something like this: The tax cut has caused corporations to bring some money home, but they've used it for stock buybacks rather than to raise wages, and the boost to growth has been modest. That doesn't sound great, but it's still better than the reality: No money has, in fact, been brought home, and the tax cut has probably reduced national income. Indeed, at least 90 percent of Americans will end up poorer thanks to that cut.

Let me explain each point in turn.

First, when people say that U.S. corporations have "brought money home" they're referring to dividends overseas subsidiaries have paid to their parent corporations. These did indeed surge briefly in 2018, as the tax law made it advantageous to transfer some assets from the books of those subsidiaries to the home companies; these transactions also showed up as a reduction in the measured stake of the parents in the subsidiaries, i.e., as negative direct investment (Figure 1).

Figure 1 *

But these transactions are simply rearrangements of companies' books for tax purposes; they don't necessarily correspond to anything real. Suppose that Multinational Megacorp USA decides to have its subsidiary, Multinational Mega Ireland, transfer some assets to the home company. This will produce the kind of simultaneous and opposite movement in dividends and direct investment you see in Figure 1. But the company's overall balance sheet – which always included the assets of MM Ireland – hasn't changed at all. No real resources have been transferred; MM USA has neither gained nor lost the ability to invest here.

If you want to know whether investable funds are really being transferred to the U.S., you need to look at the overall balance on financial account – or, what should be the same (and is more accurately measured), the inverse of the balance on current account. Figure 2 shows that balance as a share of GDP – and as you can see, basically nothing has happened.

Figure 2

So the tax cut induced some accounting maneuvers, but did nothing to promote capital flows to America.

The tax cut did, however, have one important international effect: We're now paying more money to foreigners.

Bear in mind that the one clear, overwhelming result of the tax cut is a big break for corporations: Federal tax receipts on corporate income have plunged (Figure 3).

Figure 3

The key point to realize is that in today's globalized corporate system, a lot of any country's corporate sector, our own very much included, is actually owned by foreigners, either directly because corporations here are foreign subsidiaries, or indirectly because foreigners own American stocks. Indeed, roughly a third of U.S. corporate profits basically flow to foreign nationals – which means that a third of the tax cut flowed abroad, rather than staying at home. This probably outweighs any positive effect on GDP growth. So the tax cut probably made America poorer, not richer.

And it certainly made most Americans poorer. While 2/3 of the corporate tax cut may have gone to U.S. residents, 84 percent ** of stocks are held by the wealthiest 10 percent of the population. Everyone else will see hardly any benefit.

Meanwhile, since the tax cut isn't paying for itself, it will eventually have to be paid for some other way – either by raising other taxes, or by cutting spending on programs people value. The cost of these hikes or cuts will be much less concentrated on the top 10 percent than the benefit of the original tax cut. So it's a near-certainty that the vast majority of Americans will be worse off thanks to Trump's only major legislative success.

As I said, even the mainly negative reporting doesn't convey how bad a deal this whole thing is turning out to be.

* https://static01.nyt.com/images/2019/01/01/opinion/190101krugman1/190101krugman1-jumbo.png

** https://www.nytimes.com/2018/02/08/business/economy/stocks-economy.html Reply Monday, January 07, 2019 at 02:31 PM

anne -> anne... , January 07, 2019 at 02:42 PM

https://www.nytimes.com/2019/01/01/opinion/the-trump-tax-cut-even-worse-than-youve-heard.html

January 1, 2019

The Trump Tax Cut: Even Worse Than You've Heard
Skeptical reporting has still been too favorable.
By Paul Krugman

Figure 1

https://static01.nyt.com/images/2019/01/01/opinion/190101krugman1/190101krugman1-jumbo.png

Figure 2

https://fred.stlouisfed.org/graph/?g=mxpc

January 30, 2019

- Balance on Current Account as a share of Gross Domestic Product, 2000-2018

Figure 3

https://fred.stlouisfed.org/graph/?g=mxpl

January 30, 2019

Federal Government Tax Receipts from Corporate Income, 2012-2018

https://fred.stlouisfed.org/graph/?g=mxpq

January 30, 2019

Federal Government Tax Receipts from Corporate Income, 2012-2018

(Indexed to 2012)

[Jul 06, 2018] Tax cut as recapitalization

Jul 06, 2018 | www.nytimes.com

Yankelnevich Denver July 1

The reduction in corporate taxes from 440 billion to 280 billion is a staggering reduction in tax liability. Corporations tend to be very rational actors. They want to maximize the value of their firms and long term shareholder wealth. Corporate leaders, given this windfall, which should be 1.6 trillion or more over the next ten years can

1. return the wealth to shareholders who then can make their own decisions about the money

2. invest in personnel, capital equipment or other factors related to production. A sales organization may want to increase the sales force, a research organization might want to hire new researchers or they might invest in software or other information technologies to increase productivity.

3. build their balance sheets for various strategic purposes

4. borrow money with the new capital formation from the tax reduction, i.e. combine equity with new debt or recapitalize their institutions for strategic reasons and or shareholder liquidity.

5. They can grow their companies through strategic acquisitions enabled by the new money.

6. They can grow organically using the new capital to penetrate new markets and or develop new products.

7. Potential benefits overall are stronger corporations and fewer weak companies. Everyone should have seen the tax cut as incremental recapitalization. Len Charlap Princeton, NJ July 1

Here's the problem withe your argument Y. I agree that adding money to the privare sector is good for the economy IF IT IS DONE RIGHT, What history has shown over and over when you give money to corporation 1, happens, not all the other wished for possibilities. Since the shareholders tend to be much wealthier than the general population, what you have done INCREASES inequlaity.

Forget about fairness, inequality is BAD for the economy. Money going to the Rich is less useful than money going to the non-rich. Economists would say it has lower velocity The Rich spend a lower percentage of their money. What's a guy or gal who already has so many houses he can't remember how many & an elevator for his horse gonna spend his money on? The answer is he is going to use it to speculate.There is a correlation between inequality & financial speculation. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1661746 Speculation is bad for the economy. That money has a very low velocity. AND it increases risk which we have seen in 2008 ain't a good thing.

Reply 5 Recommend

general, will take years to show results. Hence, economic science needs to wait years or even decades to fully evaluate the effects.

[Jul 06, 2018] Most economic claims by the hardcore neoliberals from Republican Party appear to be simply boneheaded assertions

Notable quotes:
"... Recent SCOTUS decisions affecting organised labour will disenfranchise the worker even more. Anti union fervor might claim a short term battle, but the long term war of trade attrition will likely be lost as US companies lose their competitive edge by declaring employees liabilities rather than allies. Ludicrous. ..."
Jul 06, 2018 | www.nytimes.com

Clark Landrum Near the swamp. July 2

Most economic claims by the Republicans appear to be simply boneheaded assertions. They would have us believe that tax savings for the wealthy trickle down to the less affluent. Now they claim that the enormous slashing of government income caused by their tax cut for the wealthy is leading to a significant decrease in the federal deficit. Apparently about a third of the electorate are dumb enough to buy into their nonsense.

Observer Ca July 2

The trump tariffs are looking like the nixon tariffs of 1971. All trump, like Nixon in 1971, cares about is the mid term election and next presidential election, and the votes of 'the constituency of uneducated people' , as Nixon referred to them. Like Nixon, trump has total contempt for the law and ethics. Nixon's tariffs and china visit produced his re-election in 1972, stagnation for a decade, and a loss of many millions of US jobs that we never recovered from.

In 1970, before Nixon's China visit, Americans could get a decent job with a high school education. After the flood of Chinese masters and PhD students that followed, encouraged by Nixon and republican presidents since, and their dumb free but unfair market policies which made their ultra wealthy donors unimaginably wealthy combined with Chinese protectionism to this day-and stealing of US technology and property, currency manipulation, the neglect of US students who pay very high fees and much more, many tens of millions of US jobs migrated to china.

The same charlatans- the GOP and trump are manipulating uneducated white and rural voters, who are going to pay the heaviest price for letting themselves be misled.

Marcus Brant Canada July 2

Trump works on the premise that MAGA is a desperately needed, long overdue, patriotic race to save America from God only knows what. Harley Davidson, that most American of companies, has proven the validity of this morose mantra. Like other corporations, HD has benefitted from Trump's tax cuts while shedding American jobs: it purchased back tons of its stock then closed a plant in Kansas.
Then, following European tariffs being slapped on it, HD outsources jobs to Europe to avoid them. What temerity!

To Trump, this is a vile act of disloyalty. He had championed Harley's cause, only to see it abandon him. What he fails to comprehend is that very few corporations entirely buy into MAGA, only his, apparently economically ignorant, base embrace it. Companies enjoy it where it suits them, ignore or evade it when it doesn't. Corporations have too much power for Trump to curb. The only thing he can do is threaten to punish them through the imposition of punitive domestic taxes. That probably won't sit at all well with American workers, outpriced in their own backyard. Essentially, Trump et al, through intransigence and ineptitude, have backed themselves into a corner.

Recent SCOTUS decisions affecting organised labour will disenfranchise the worker even more. Anti union fervor might claim a short term battle, but the long term war of trade attrition will likely be lost as US companies lose their competitive edge by declaring employees liabilities rather than allies. Ludicrous.

BarryW Baltimore July 2

Economic propaganda has its place in promoting a healthy economy. However, it only goes so far. Real wages will ultimately trump (no pun) a healthy consumer out -look. Trump propaganda is a different breed all together. It promotes one thing only, a good out - look on Trump himself. Adoration for a job well done, regardless of how "potemkin" it is, feeds the beast. Economist, a notably disagreeable lot, do agree on at least two theories:

(1) Presidents actually have little effect on the economy and;

(2) the policies that they do implement reach the desired effect at least one and one half of a presidential term. Trumps tax plan, in the short term, is as effective as a penny dropped in the ocean.

In the long term, it will blow up the deficit and require major cuts in major governmental programs, such as Medicare and social security. Major targets for destruction by Ryan republicans. Trumps deregulatory platform is a "poor man's" economic policy. The long term cost of deregulation is unpredictable and therefore, frightening. High concentrations of lead in our ground water. Atmospheric poison. Toxic run off rears its ugly head.

Once eradicated illness and health concerns inundate a heavily overburdened healthcare system. All the while, the Trump propaganda machine churns out lies of triumph and facades of growth, worthy of the "Potemkin" villages.

[Jan 09, 2018] There has been talk of higher interest rates for 10 yrs.

Jan 09, 2018 | peakoilbarrel.com

Watcher x Ignored says: 01/05/2018 at 3:02 pm

There has been talk of higher interest rates for 10 yrs.

The US debt is $20 Trillion. 1% rise in rates would be $200 billion that must be serviced. US deficit this year will be almost 500B. 1% rise would be about 50% of the deficit. 2% doubles it.

Seems easier to just not let them rise.

[Jan 01, 2018] shocktherapy

Jan 01, 2018 | www.zerohedge.com

Government nee Dec 31, 2017 10:19 AM

Trump's "tax cuts" are going to accelerate the deficit spending trend that Obama (and Bush before him) initiated. The Fed's machinations over the last 100+ years are utterly irrelevant because all of them are in fact driven by Congress. The Fed is a creature that operates at the behest of Congress, as a creation of Congress, and every single dollar it has "printed" it has "printed" because Congress spent money it did not have.

In other words, Congress ran a deficit.

The Fed has its share of detractors and I'm among them. But those who refuse to place responsibility where it belongs are fraud-running jackasses, and while I'm happy to try to educate folks those who refuse to learn and cling to that which is trivially disproved mathematically wind up on my "ignore" list.

The bottom line: It is Congress, which is elected by you, that has destroyed the purchasing power of the currency and enabled all of the fraud and force in our economy today.

Karl Denninger

Trump has now publicly acknowledged that McCabe violated several federal laws, not the least of which is the Hatch Act. Yet he now proposes to allow McCabe to retire next year, keeping his federal pension and benefits.

Not only that but Congress has that evidence now too -- but note that the House Judiciary Committee is not issuing a single word about the fact that such actions are violations of several federal laws.

What Trump should do is have Sessions immediately indict him - after firing McCabe for cause, which terminates his right to any sort of federal pension or benefit. If McCabe wants to sue for his pension let him, because that will force into the public record all of the evidence on exactly what he did as he will have to defend the claim that his firing "for cause" wasn't actually for cause.

Good luck with that.

But Trump isn't going to do that. Instead he's going to let McCabe walk off with your money America. Money he will steal from you for the rest of his life after having taken actions that, the President has good reason to believe, were felony violations of the law and abuses of his office, effectively using the FBI as a political weapon in a Presidential contest.

Karl Denninger

[Dec 26, 2017] Angry Bear " Why Would Anybody Invest When Capacity Utilization is This Low

Images removed.
Dec 26, 2017 | angrybearblog.com

A central selling point of the tax bill is that it will encourage investment. But that assumes that high tax rates were the primary reason why business wasn't investing. Instead, the data says business investment is weak because the U.S. has a ton of spare capacity.

First, let's look total capacity utilization: It has peaked at lower levels in each of the last three expansions.

Let's break the data down into durable and non-durable CU:

Both categories of production have ample spare capacity, with non-durable production having greater capacity.

Finally, let's look at crude, intermediate and final stages of production: All three have plenty of spare capacity to bring online if needed.

So, will we see a huge wave of investment as a result of the changed tax bill? The data says no.

rjs , December 22, 2017 11:59 am

adding capacity hasn't been about need for years companies have been adding plant and equipment that they didn't need for years because of incentives included in the code, such as the investment tax credit and accelerated depreciation, so it's really hard to say when that will stop..

spencer , December 22, 2017 1:30 pm

Rather than using the Fed estimate of capacity maybe it would be better to use a trend line for capacity utilization and compare that to reported capacity utilization. I think that would give a more realistic measure of economic slack as the trend line shows a long run trend of slower capacity growth.

Lyle , December 22, 2017 11:46 pm

The main investment might be made to automate things, replacing expensive human workers with cheaper automatic workers who don't need benefits and an HR department.

[Dec 22, 2017] David Stockman estimates that front-loaded tax cuts will produce a federal deficit of about $1.3 trillion in fiscal year 2019

Dec 22, 2017 | www.nakedcapitalism.com

Jim Haygood , December 21, 2017 at 11:16 am

David Stockman estimates that front-loaded tax cuts will produce a federal deficit of about $1.3 trillion in fiscal year 2019. In effect, fiscal stimulus is being cranked from 3 to 6 percent of GDP.

Gunning the economy could help reduce R party losses in the 2018 midterm elections. But it's very poor timing for the 2020 presidential election. By then, with rate hikes biting and stimulus easing, the economy is likely to take a tumble at the worst possible time for re-electing the incumbent.

But given the regal out-of-touchness of elitist Dems, coupled with their jaw-dropping incompetence, they should still be able to seize defeat from the jaws of victory.

Other JL , December 21, 2017 at 12:04 pm

My biggest complaint with this argument is that it's far from clear the tax bill is gunning the economy. It looks much more like looting, in terms of where the gains go.

Doubling the standard deduction might have a big effect on a number of cash-constrained households. It won't do much for the 47%, and of course it expires. I don't know how much effect it will have in aggregate though.

L , December 21, 2017 at 12:14 pm

I agree with you on the looting. What I expect that the Republicans are counting on is:

1) The base (the people most immediately screwed by this) will still vote with them because of tribalism and a few symbolic bonuses from a grateful AT&T.
2) The middle-class will be carried through the mid-terms by the immediate cuts and some measure of gullibility.
3) The stock owners will enjoy the sugar high as buybacks kick off speculation, and thus be more predisposed to it.
4) The donor cash will cushion the blow of any real blowback and the Dems will fumble the fight over extending the "temporary" cuts so that the Repubs can look like middle class saviors.
5) Even if all that fails they get cushy jobs as consultants.

timbers , December 21, 2017 at 12:16 pm

Disagree that it gins the economy because the distribution of the tax cuts looks more like a QE program than what tax cuts were when they cut taxes for working people.

The tax cuts go to those who hoard money and take it out of circulation – the rich and corporations. They aren't going to spend more, they will save more or do stock buy backs.

Thus the velocity of money will decline further.

So where is the gin coming from because I'm not seeing it.

Jim Haygood , December 21, 2017 at 12:50 pm

Tax cuts are one part of fiscal stimulus. But so is increased direct spending. Stockman elaborates:

We expect FY 2019 outlays to rise by upwards of $200 billion from CBO's most recent baseline projection. That would include $75 billion for defense, $65 billion for disaster aid, $25 billion for increased of domestic appropriations above the sequester cap, $20 billion for the ObamaCare subsidies and another $15 billion for interest on higher spending and lower revenues.

Those kinds of spending increases are now virtually certain, and will take total FY 2019 outlays to around $4.575 trillion -- nearly 20% more than the $3.85 trillion spent during FY 2016 during the run-up to the presidential election.

https://tinyurl.com/ydhybn6x

If such radically ramped-up spending fails to gin the economy, then we will be obliged to question (as some do) whether fiscal stimulus actually works at all.

I don't really know what to tell you boo boo
I mean I try (you know I try)

-- Aventura, Yo quisiera amarla

timbers , December 21, 2017 at 8:57 pm

I was referring to the tax cut, but you are right about the spending side and wrong too IMO.

Disagree that this "increase" in spending – which is party a decrease of a decrease – is even light years close to "radical" as you say.

The Defense spending is the least stimulate type of fiscal spending, Obamacare goes mostly to rich gigantic corporations, disaster relief is transitory, and the interest goes to investors.

So spending increases of a small very non radical nature that go largely to rich gigantic corporations.

Ok I'm seeing some gin. But I'm still not seeing much gin.

Synoia , December 21, 2017 at 12:22 pm

Never attribute behavior to incompetence when it can be attributed to greed.

Michael Fiorillo , December 21, 2017 at 1:29 pm

Or class warfare

[Dec 18, 2017] The GOP Tax Bill Disses the Working Class by Linda Beale

Schumpeter famously said that taxes are the "thunder of world history." So what kind of history are the Republicans about to make?
Dec 18, 2017 | angrybearblog.com

Here's something about the GOP House and the GOP Senate: they each passed tax bills (supposed to come out in a "conference" agreement sometime today) that diss the United States' working class taxpayers. White or black, Christian or Jew or other, citizen by birth or naturalized citizen–workers are treated as an inferior "taker" class and owners are treated as a superior "maker" class–the same old GOP class warfare that has been evidenced in Republican-driven tax legislation for decades. That shows in the provisions that have been discussed quite a bit already, even though there is no official distributional analysis and even though the Treasury Department put out a one-pager claiming to provide an analysis showing huge economic growth would eliminate any deficits (based on both the tax "reform" legislation and promised cost-cutting "reforms" to Medicare and Social Security):

When the health care mandate removal is combined with the other provisions, "On net, the poor would actually lose out in all years once this effect is taken into account." Dylan Matthews, The Republican tax bill that could actually become law, explained , Vox.com (Dec. 14, 2017). The following Tax Policy Center graph from the Vox article (using the Urban-Brookings Microsimulation Model) shows that by 2027 the top 0.1% end up doing much better (average tax cut for the top 0.1 percent is $221,550 a year). The bottom 20% do worse while the middle–the second and third quintiles–have a very insignificant plus (average tax cut of the third quintile is $490). Within the third or middle quintile, more than 62% of taxpayers that earn between $54,700 and $93,200 would see their taxes go up, "[b]ut only about 0.1% of the very richest one-thousandth of Americans would see a tax hike." Id.

Early gains–though small, intended perhaps to benefit the GOP in earlier votes -- don't last because the individual cuts aren't permanent. A change to chained CPI for indexing brackets amounts to a tax increase on individuals, while the permanent corporate tax cuts mean rich and very rich do well while middle and upper-middle lose out.

Lyle, December 17, 2017 6:10 pm

Note that ending the mandate just means more folks will wager on their health. All that wished to sign up could have. (and still can where medicaid was expanded).

And the rest of us will pay their emergency room bills, as well.

Since it is now voluntary to count the lower amount of subsidies as a cut seems a strange way of counting, but of course figures don't lie but liars do figure.

[Dec 09, 2017] Germany experts study if Trump tax reforms will violate the German/US friendship treaty from the 1950s -- a hostile act, providing an unfair advantage for American companies

Dec 09, 2017 | www.zerohedge.com

uhland62 , Dec 8, 2017 11:01 PM

Don't panic. Sit back, take a deep breath , and wait out the new developments.

Even though they have only a caretaker government now in Berlin, they have commissioned experts to assess if and where the beautiful Trump tax reforms will violate the German/US friendship treaty from the 1950s. Not a lot is known at the moment but the reduction in corporate tax could be seen as a hostile act, providing an unfair advantage for American companies. And then there is the end of tax deductability for parts bought in Europe. One would have to look at the text of that friendship treaty but it looks all very probable.

What will happen then? Europe will have to say that they must sell their parts, to China or Russia. Sanctions? You cannot blanket us with hostile acts, someone will say. Maybe you should take a hike from Ramstein, if this is how you value our friendship. Sounds all very drastic but has been a longtime coming.

[Dec 09, 2017] America's Broken System by J. Bradford DeLong

Dec 09, 2017 | www.project-syndicate.org

Dec 7, 2017 J. Bradford DeLong

The tax-reform bill that US Republicans are attempting to implement is economically indefensible and blatantly unfair. But the US has a much deeper problem: the Anglo-Saxon model of representative government is in serious trouble, and nobody seems to know how to fix it.

BERKELEY – The tax bill that US Republicans have doggedly pushed through Congress is not as big a deal as many are portraying it to be. It is medium-size news. The big news – the much more weighty and ominous news – lies elsewhere.

Of course, medium-size is not nothing. If the tax bill does clear its final hurdle – a conference committee must reconcile the Senate-approved bill with that of the House of Representatives – and become law, it will complicate the tax system considerably, as it opens many loopholes. It won't have any impact on economic growth – positive or negative – but it would have an impact on the government's finances, causing revenues to decline by the equivalent of about 1% of national income.

The missing resources would most likely be transferred to the top 1% of earners, raising their share of total income from 22% to 23%. The top 0.01% would probably gain the most, with their share of income rising from 5.1% to 5.5%. In this sense, the tax plan would be another brick – not a huge brick, but a medium-size brick – in the increasingly impregnable fortress of American plutocracy.

But the bill may well not become law at all. Consider the Republicans' efforts earlier this year to repeal and replace the Affordable Care Act ("Obamacare") – an effort that, it now seems clear, was pure Dingbat Kabuki.

The Republicans didn't actually want to take responsibility for changing the health-care financing system, much less strip their own constituents of health care. But the party's propaganda arm had worked so hard to convince its base that Obamacare represented a clear and present danger to the country that its leaders had to act as if they were making a serious effort to fulfill their promise to repeal and replace it.

So a majority of Republicans in the House of Representatives voted for the bill, expecting, with reasonable confidence, that it would be blocked in the 100-member Senate, where fewer than 40 of the 52 Republicans actually wanted it to pass. Had any of the three Republican senators who voted against the bill – John McCain of Arizona, Susan Collins of Maine, or Lisa Murkowski of Alaska – made a different choice, there were probably about five more who would have stepped in to nix it.

The same thing may be happening with the tax reform. It depends on whether at least three of the ten Republican senators who have raised objections are serious, or are playing a different game of Dingbat Kabuki: seeking to trick their constituents into thinking that they went the extra mile to try to help them, and are not puppets of Senate Majority Leader Mitch McConnell.

But, regardless of whether the tax bill survives the reconciliation process and becomes law, the big news won't change: the Anglo-Saxon model of representative government is in serious trouble. And there is no solution in sight.

For some 400 years, the Anglo-Saxon governance model – exemplified by the republican semi-principality of the Netherlands, the constitutional monarchy of the United Kingdom, and the constitutional republic of the United States of America – was widely regarded as having hit the sweet spot of liberty, security, and prosperity. The greater the divergence from that model, historical experience seemed to confirm, the higher the likelihood of repression, insecurity, and poverty. So countries were frequently and strongly advised to emulate those institutions.

Nobody would dare offer that same advice today. The UK, having been thrown into devastating austerity by Conservative and Liberal leaders after the global economic crisis, is now being led by the Conservatives toward a messy and damaging Brexit. And, in the US, the election of President Donald Trump heralded the age of "alternative facts" and "governance by tweet," overseen by an erratic and ignorant leader who is clearly in over his head.

When Trump was first elected, some argued that it did not have to be a disaster. After all, the optimists pointed out, President Ronald Reagan had been more a "chief of state" than a "chief executive," as had George W. Bush.

As divisive as Chief of State Trump would be, according to this view, he wouldn't derail policy, because electing a Republican president is more like electing the Republican Party establishment. And that bench was very deep and very competent, despite its weakening in recent years.

The optimists were wrong. After nearly a year in control of both houses of Congress and the White House, the Republicans haven't achieved any of their four policy goals: repeal and replacement of Obamacare, infrastructure development, trade-policy reform, or even tax reform. This points to a broken system of politics and governance, one that Americans seem to have no idea how to fix.

The US remains the world's preeminent superpower. But doubts are intensifying over whether it's still up to the job. In this context, the Republicans' tax reform, however economically indefensible and blatantly unfair it is, is far from America's biggest concern.

[Dec 08, 2017] Republican 'Deficit Hawks'

Notable quotes:
"... The Demopublican War Party: United to shovel more money into the maw of the oligarch class while stealing dollars, services, and servitude from the working class. Reverse Robin Hood/Reverse Socialism in full effect. ..."
"... Currently, we have $20T debt but the U.S. govt is borrowing at short term rates in order to get this amazingly low debt service. ..."
"... Does anyone else believe that this is the game the U.S. govt is playing? If it is then I wonder what the consequences are in keeping short term interest rates at artificially low levels in perpetuity. ..."
"... I'll start taking the "deficit hawks" seriously when they start talking Defense procurement reform. Until then, its just "balance the budget on the backs of widows and orphans". ..."
"... For those who are fortunate enough not to live in these Benighted States: have pity upon us, especially those of us who done our best to fight against this horror show. Democraps are either just as bad or worse bc of their duplicity. The GOP is, at least, totally loud and proud of who they are, and no more dog whistles for them. ..."
"... poll end of October 2017 shows widespread fed up with government policies and war https://www.charleskochinstitute.org/news/cki-real-clear-politics-foreign-policy-poll/ ..."
"... It is impressive how the Democrats do nothing, but nothing at all against the catastrophic tax 'reform', instead - me too! ..."
"... I am still waiting on my Reagan trickle down. Reagan and fellow thieves stole social security funds to make their deficit look lower. Those funds have not been paid back....approximately $3,000,000,000,000. Now the dead beats are planning on slipping out of town. ..."
"... We should go back to the 1960 tax structure , the one in place after eight years of Eisenhower, so it should get plenty of Republican support, yes? ..."
"... You are already seeing the consequences of artificially low short term rates. Negative yielding sovereign European debt - meaning you pay to lend to some European governments. ..."
"... People don't understand what money is our how it is and can be created. They imagine it is like gold and limited in supply so that government can spend only from a finite supply which they must obtain by taxes or loans that require interest to be paid. This fable is about as true as Santa Clause and the Tooth Fairy. Money has no value but as an instrument of exchange. It can be created by government to pay for benefit of a nation. Instead we allow private bankers to create money via loans (no printing press needed its just a line item on a spread sheet on their computers which shows up in the borrowers account) The privately owned central bank system limits or increases the supply by various means in a cyclical manner which leads to boom and bust cycles in the economy. The rich get richer after each bust cycle since they have cash to acquire assets available at depressed prices ..."
"... There's no reason why with the current state of technology so much money is needed to campaign for office. Almost as if the MSM is conditioning us to believe it necessary. There's no reason some one can't run a campaign using social media, YouTube and video conferencing instead of advertising (on same MSM) travelling long distances to campaign rallies and broadcast advertising. Microdonations and volunteering assistance can take care of the rest. If there is a will, there's a way to run an outsider as a candidate. The recent death of Anderson reminded me of his difficulties running, but he ran at a time when none of these technologies existed. ..."
"... Churning out extra dosh works when it is part of a larger plan to increase productivity by encouraging people outta pointless 'shit industry' service jobs into either outright production like manufacturing or primary industry, or infrastructure investment like railways, roads, bridges & renewable energy projects. Just pumping fresh new bills into health n education will be great for those who work in these sectors, but is unlikely to create much flow on to the rest of the population. ..."
Dec 08, 2017 | www.moonofalabama.org

The Republican way of governing.

Ryan: Tax cuts have to be deficit neutral to conform with reconciliation - Sep 28 2017

House Speaker Paul Ryan (R-Wis.) on Thursday said the tax cuts included in the tax reform package Republican lawmakers crafted in conjunction with the Trump Administration have to be deficit neutral so as to conform with budget reconciliation rules.

GOP tax plan unlikely to swell deficit: Speaker Ryan tells Reuters - October 25, 2017

The U.S. Republican tax cut plan that President Donald Trump wants passed by the end of the year is unlikely to trigger a big deficit expansion because it will spur more investment and job growth, House of Representatives Speaker Paul Ryan told Reuters in an interview on Wednesday.

Ryan: I'm a deficit hawk and 'a growth advocate' - Nov 5 2017

"Paul Ryan deficit hawk is also a growth advocate. Paul Ryan deficit hawk also knows that you have to have a faster growing economy, more jobs, bigger take-home pay, that means higher tax revenues ," Ryan told Chris Wallace on "Fox News Sunday."

Ryan Dismisses Deficit Concerns to Chase a Political Win on Taxes - Nov 27 2017

The tax overhaul legislation that Ryan shepherded through the House -- the Senate takes up its version this week -- would add at least $1 trillion to budget deficits over the next decade, even when accounting for economic growth, according to independent tax analysts.

CBO: Senate tax plan would increase deficit by $1.4T over 10 years - Nov 27 2017

The Senate GOP's tax plan would increase the deficit by $1.4 trillion over the next 10 years, the Congressional Budget Office estimates.

Ryan pledges 'entitlement reform' in 2018 - Dec 6 2017

House Speaker Paul Ryan (R-Wis.) on Wednesday said House Republicans will aim to cut spending on Medicare, Medicaid and welfare programs next year as a way to trim the federal deficit .

"We're going to have to get back next year at entitlement reform, which is how you tackle the debt and the deficit ," Ryan said during an interview on Ross Kaminsky's talk radio show.

And no. The Democrats aren't any better. Look at the trillions Obama handed to Wall Street. That wasn't even a tax cut, it was a give-away. Obamacare is a sham, willfully constructed in way that makes sure it can't survive. The Democrats only pretend to care for the people. As soon as they again have a majority and fake intent for pro-social reforms the Repubs will again whine about the deficit and the Democrats will be happy to fold.

WorldBLee , Dec 7, 2017 2:37:31 PM | 3
The Demopublican War Party: United to shovel more money into the maw of the oligarch class while stealing dollars, services, and servitude from the working class. Reverse Robin Hood/Reverse Socialism in full effect.
NemesisCalling , Dec 7, 2017 2:37:55 PM | 4
Indeed. Two faces, same coin. The msm desperately wants to keep the relevant the age-old rope-a-dope of the Demotards vs. Rethuglicans 2K17! Jesus, ever-loving-Christ, though, you fuck with social security and Medicare and you bring on the wrath of AARP's membership.

Release the BLUE-HAIRS!

Can't wait, but that is another struggle for another day. In the mean time, I notice that even the mention of Paul Ryan elicits a shudder. Such a slime.

Christian Chuba , Dec 7, 2017 3:57:35 PM | 5
The annual debt service on $20T Debt

It [was] a remarkably low $240B as of 2016. Does this mean that the Fed can just keep short term rates low or even reduce them, vis-a-vis the Japanese model, and allow U.S. govt debt to grow to arbitrarily high levels?

Currently, we have $20T debt but the U.S. govt is borrowing at short term rates in order to get this amazingly low debt service. Now let's suppose over the next 50yrs our national debt grows to a ridiculous $100T, if the fed puts short term rates at 0.1% then our annual debt service will still be at the same levels or less.

Does anyone else believe that this is the game the U.S. govt is playing? If it is then I wonder what the consequences are in keeping short term interest rates at artificially low levels in perpetuity.

Antithesis , Dec 7, 2017 4:05:18 PM | 6
Here's to the evolving True Political Awakening . Move beyond the two-faced monkeys; the 2-faced division-makers; the 2 lying parties. Move beyond them into yourself, your own mind and thoughts, owned by no-one; a critical and independent thinker who seeks the truth.
DMC , Dec 7, 2017 4:07:07 PM | 7
I'll start taking the "deficit hawks" seriously when they start talking Defense procurement reform. Until then, its just "balance the budget on the backs of widows and orphans".
Whyawannaknow1 , Dec 7, 2017 4:18:08 PM | 8
There was a large mound formed recently over the grave of former Republican senator from WI Bob Lafollette Sr., this protrusion was caused by his rapidly spinning corpse.
RUKidding , Dec 7, 2017 4:18:32 PM | 9
For those who are fortunate enough not to live in these Benighted States: have pity upon us, especially those of us who done our best to fight against this horror show. Democraps are either just as bad or worse bc of their duplicity. The GOP is, at least, totally loud and proud of who they are, and no more dog whistles for them.

The Democrats, all while the GOP Tax SCAM was being shoved down our gobs, wasted all of their time and "emotions" on a witch hunt to toss Al Franken outta the Senate. Franken is not my favorite Senator by a long shot, but this is yet another chapter of the Democraps ACORNing their own purportedly in the name of "taking the moral high ground." My Aunt Fanny.

Complicit, greedy, conniving, venal, deplorable bastards the whole d*mn lot with the possible exception of Bernie Sanders (no great shakes but the pick of the litter).

Ugh. Don't get me started on all of those dual Israeli/USA citizens in riddling our Congress. They are ALL in favor of this Jerusalem travesty with Schmuck Schumer leading the charge. That's not about Trump... or not much about Trump. I place blame on worthless scum like Schumer.

This is why people voted for Trump: they could see the worthlessness of both parties. Of course, voting for Trump was a complete Mug's game, as for sure, the way things have turned out was a foregone conclusion.

We are so screwed.

Sid2 , Dec 7, 2017 4:25:30 PM | 10
poll end of October 2017 shows widespread fed up with government policies and war https://www.charleskochinstitute.org/news/cki-real-clear-politics-foreign-policy-poll/
Pnyx , Dec 7, 2017 5:01:53 PM | 13
Agree 200 % B. It is impressive how the Democrats do nothing, but nothing at all against the catastrophic tax 'reform', instead - me too!
ger , Dec 7, 2017 5:06:38 PM | 14
I am still waiting on my Reagan trickle down. Reagan and fellow thieves stole social security funds to make their deficit look lower. Those funds have not been paid back....approximately $3,000,000,000,000. Now the dead beats are planning on slipping out of town.
nonsense factory , Dec 7, 2017 5:18:09 PM | 15
We should go back to the 1960 tax structure , the one in place after eight years of Eisenhower, so it should get plenty of Republican support, yes?

top rate on regular income: 91%
top rate on capital gains: 25%
top rate on corporate tax: 52%

The top income tax tier back then was $400,000 - adjusted for inflation to 2017 dollars, that's about $10 million. So anyone with an income of $10 million would still get a take-home pay of $1 million a year. Seems like the right thing to do, doesn't it?

jo6pac , Dec 7, 2017 5:49:00 PM | 16
Good one b, the demodogs will stoop their feet point figures so they can raise lots of $$$$$$$$$$$$$ to pay their friends the consultants and lose more seats. It's what they do best.

https://shadowproof.com/2017/12/01/history-suggests-democrats-unlikely-to-repeal-unpopular-tax-bill-if-it-passes/

If they did get power back they won't be giving anything back to us on Main Street for they have the same puppet masters as the repugs.

Debsisdead , Dec 7, 2017 7:10:03 PM | 17
I've almost given up. It's not just amerika; lookit Australia this week where the citizens are being distracted by a same sex marriage beatup which should have been settled in 5 minutes years ago - meanwhile the last vestiges of Australia's ability to survive as a sovereign state are being flogged off to anyone with a fat wedge in their kick.

Aotearoa isn't much better the 'new' government which was elected primarily because the citizens were appalled to discover that for about the first time in 150 years, compatriots - compatriots with jobs in 'the gig economy' were homeless in huge numbers, has just announced that the previous government's housing policy was a total mess, and that fixing the problem will be difficult -really Jacinda we never woulda guessed, I guess what yer really trying to say is nothing is gonna change.

The englanders are in even worse trouble with their brexit mess, the political elite is choosing to ignore a recent Northern Ireland poll which revealed that most people in the north would rather hook up with Ireland than stay with an non EU UK, so the pols there are arguing over semantics about the difference between "regulatory alignment" and "regulatory equivalence" as it applies to Ulster while the pound is sinking so fast it is about to establish equivalence with the euro by xmas.

No one is paying attention to what is really happening as in between giving us the lowdown on which 2nd rate mummer was rude to a 3rd rate thespian and advertorials about the best chronometer (who even wears a watch in 2017?) for that man in your life, the media simply doesn't have the time much less the will to tell the citizens how quickly their lives are about to go down the gurgler.

The only salient issue is - will the shit hit the fan before the laws are in place to silence, lock up and butcher dissenters, or will there be a brief period where we hit the barricades and have a moment of glory before humanity gets to enjoy serfdom Mk2?

ab initio , Dec 7, 2017 7:48:17 PM | 18
b, have you really taken a look at federal government spending? What is the ratio of spending by the German government between social programs and discretionary spending for defense, agriculture subsidies, infrastructure, etc?

The majority of federal government spending is non-discretionary social entitlement spending with the biggest being health care spending. Just Medicare & Medicaid is a third of all federal government spending. Then you have to add health care spending for federal government employees and members of Congress, Tricare and VA. With health care costs growing at 9% each and every year as it has for the past 30 years, medical related expenditures as a share of total federal government spending will continue to rise.

Deficits will continue to grow as these entitlement programs grow automatically as eligibility grows. Even if all defense expenditures were zeroed out, the federal government would still run a deficit.

ab initio , Dec 7, 2017 8:04:06 PM | 19
Christian Chuba @5

You are already seeing the consequences of artificially low short term rates. Negative yielding sovereign European debt - meaning you pay to lend to some European governments.

European junk bonds with 10 year duration yielding less than 10 yr US Treasury bond. Loss making, junk rated European companies raising even more intermediate term debt at 0.001%. Corporations borrowing to buy back stock. The Swiss National Bank creating money out of thin air and owning $85 billion of US equity in major US companies like Apple & Google. The Bank of Japan owning a third of all Japanese government bonds outstanding and the Top 10 holder of the companies in the Nikkei 100 index. Financial speculation off the charts across the globe.

Pft , Dec 7, 2017 8:24:12 PM | 20
People don't understand what money is our how it is and can be created. They imagine it is like gold and limited in supply so that government can spend only from a finite supply which they must obtain by taxes or loans that require interest to be paid. This fable is about as true as Santa Clause and the Tooth Fairy. Money has no value but as an instrument of exchange. It can be created by government to pay for benefit of a nation. Instead we allow private bankers to create money via loans (no printing press needed its just a line item on a spread sheet on their computers which shows up in the borrowers account) The privately owned central bank system limits or increases the supply by various means in a cyclical manner which leads to boom and bust cycles in the economy. The rich get richer after each bust cycle since they have cash to acquire assets available at depressed prices

As for the debt owed by the US the privately owned Fed will ensure the government can borrow whatever is needed for interest payments since they can create an infinite supply of money by acquiring junk and calling them assets. Out pal OPEC (Saudis) keeps Petro dollar (USD ) in demand and exchange rates are set within agreed upon limits by the worlds central banks under the BIS, with input from various shadowy groups like Bilderbergers, trilaterals and CFR. And if all else fails, an attack on the USD will result in the military option being used

To remain in power corrupt governments rely on a citizen base that is uneducated or misinformed, busy surviving to pay taxes and daily expenses, is dependent on government and in debt and is well entertained. They must also be divided by religion, race, social, gender, age and party (secular religion) and given a common external enemy to fear.

The system is working to perfection. Neoliberal economics is the icing on the cake and is the gift that keeps on giving to the chosen ones.

Check out the pdf on money creation by the Bank of England

666 Fifth Av , Dec 7, 2017 8:33:36 PM | 21

There's no reason why with the current state of technology so much money is needed to campaign for office. Almost as if the MSM is conditioning us to believe it necessary. There's no reason some one can't run a campaign using social media, YouTube and video conferencing instead of advertising (on same MSM) travelling long distances to campaign rallies and broadcast advertising. Microdonations and volunteering assistance can take care of the rest. If there is a will, there's a way to run an outsider as a candidate. The recent death of Anderson reminded me of his difficulties running, but he ran at a time when none of these technologies existed.

I think people are just too lazy to make the effort. Most elections people are just too lazy to even vote.

Debsisdead , Dec 7, 2017 9:05:18 PM | 22
@Pft | Dec 7, 2017 8:24:12 PM | 20

While I agree that money can just be created there is a limit to that particularly when low constraints on consumable supplies run parallel to established shortfalls on finite goods such as houses, land, food etc. Inflation runs rampant and we weak humans distract ourselves with cheap baubles instead of creating useful shit and putting a roof over the heads of our children - "waddaya want for xmas kid, a freehold shithole or a new VR headset?" "I'll take the vive Dad".

Churning out extra dosh works when it is part of a larger plan to increase productivity by encouraging people outta pointless 'shit industry' service jobs into either outright production like manufacturing or primary industry, or infrastructure investment like railways, roads, bridges & renewable energy projects. Just pumping fresh new bills into health n education will be great for those who work in these sectors, but is unlikely to create much flow on to the rest of the population.

[Dec 03, 2017] The zero-sum game details of the tax bill

Notable quotes:
"... On a net basis, in fact, fully 97% of the $1.412 trillion revenue loss in the Senate Committee bill over the next decade is attributable to the $1.369 trillion cost of cutting the corporate rate from 35% to 20% (and repeal of the related AMT). All the rest of the massive bill is just a monumental zero-sum pot stirring operation ..."
"... Whereas if the US spent the same 1 to 2 percent on defense (meaning its own territory) that normal countries do, individual tax cuts could be cut back to the Reagan-era maximum of 28 percent, permanently. Alternately, individual taxation could remain the same and everyone could have health care and maybe free college too. ..."
"... These choices are unavailable because the unauditable Defense Dept and spook agencies have made themselves politically untouchable. This is the real scandal of the tax bill. ..."
Dec 03, 2017 | www.nakedcapitalism.com

MyLessThanPrimeBeef , December 2, 2017 at 1:40 pm

On a net basis, in fact, fully 97% of the $1.412 trillion revenue loss in the Senate Committee bill over the next decade is attributable to the $1.369 trillion cost of cutting the corporate rate from 35% to 20% (and repeal of the related AMT). All the rest of the massive bill is just a monumental zero-sum pot stirring operation

The zero-sum game details:

1. eliminating state and local deductions
2. higher personal deductions
3. doubling child tax credit
4. tax credit for private education
5. new income brackets and rates

And the huge 35%-to-20% (or whatever) corporate tax reduction.

According to MMT, this perversion of that theory (and pervert MMT will always be practiced) should put money into the system. The 'government can spend as much as it wants, deficits don't matter,' is 1) not sufficient to ensure a desirable outcome and 2) can be abused to lead to many undesirable results. As for the zero-sum game, it's zero-sum, so some of us 99% will benefit and the rest will suffer. Some may enjoy higher personal deductions, child tax credit or a lower rate in a new tax bracket.

Jim Haygood , December 2, 2017 at 4:16 pm

Whereas if the US spent the same 1 to 2 percent on defense (meaning its own territory) that normal countries do, individual tax cuts could be cut back to the Reagan-era maximum of 28 percent, permanently. Alternately, individual taxation could remain the same and everyone could have health care and maybe free college too.

These choices are unavailable because the unauditable Defense Dept and spook agencies have made themselves politically untouchable. This is the real scandal of the tax bill.

A Republican party unable to deliver individual tax cuts after harping relentlessly on the theme for a decade is revealed as a fraud, a laughingstock and a failure on its own terms.

[Dec 03, 2017] Taxing corporations by Robert Waldmann

Notable quotes:
"... If the goal is to prevent excessive compensation of top layers of executives, it is probably non-constructive to treat tax issues in isolation from the general problem of neoliberalism with its powerful mechanisms of redistribution of the wealth up. ..."
Dec 03, 2017 | angrybearblog.com

I will ease the pain from this early morning (when GOP senate slashed corporate taxes) by escaping into fantasy, I mean theory, but I repeat myself.

A key theoretical argument about taxing profits (due to Diamond and Mirrlees I think) is that the tax can be very very high if firms maximize profits, because maximizing 0.5X is just the same problem as maximizing X. This is a tax on pure profits (profits minus capital times the cost of capital) .

The practical implication is that we should figure out what corporations maximize and apply a high flat tax rate on it, because maximizing 0.1X is the same problem as maximizing X.

Theory then goes crazy and assume that firms maximize shareholder value equal to the present discounted stream of dividends. If so, we should tax dividends. This is roughly similar to the new law in which investment is treated as an expense, so profits minus investment is taxed.

There are lots of problems (aside from the fact that only in shareholders' dreams do manager maximize shareholder value). We would have to tax stock buybacks too (just another way to get money to shareholders). Taxing dividends but not interest paid encourages high leverage (for example through leveraged buyouts). Here again a tax on buying and retiring shares would be useful (not politically possible but useful). A really heavy tax on dividends would make initial public offerings unattractive -- I think a subsidy for new share issue would be nice (reallly politically impossible).
But the idea is just tax money going to shareholders and it is based on the assumption that getting money to shareholders is the whole point and maximizing 0.01X is the same problem as maximizing X.

The assumption is crazy.

I think top management of corporations maximizes compensation of top management subject to a limit that, if they go too far, it will be very profitable to take over the coporation and fire them. This means that, if the aim is to generate compensation for top management, we should tax compensation of top management. Highly. I am quite sure that if the tax were 99% it would raise a lot of money (provided all compensation could be detected). They *will* pay themselves no matter how much it costs the shareholders.

Now this strikes me as a pretty good idea. I think top management has to be defined as those with the top total compensation not any title (otherwise the CEO will call himself his secretaries secretary). Now this does encourage taking corporations private. But really, CEO compensation is obscene and is just begging to be taxed.

likbez , December 3, 2017 1:03 am

If the goal is to prevent excessive compensation of top layers of executives, it is probably non-constructive to treat tax issues in isolation from the general problem of neoliberalism with its powerful mechanisms of redistribution of the wealth up.

My impression is that due to the complexity of the USA laws and the army of well paid corporate lawyers (including tax lawyers) it is just a matter of time when any new tax system will be perverted.

For example, when there is a high tax on executive compensation, nothing prevents a corporation to donate money to charity, and then this charity can hire corporate officers (or their relatives) to the board. Various form of "trusts" or "loans" also can be played with.

You need some general mechanism of suppression of the power of the financial oligarchy. An institutional framework, like the New Deal capitalism, has been. Tax laws are an important part of such a framework, but by themselves, they are not enough.

[Nov 30, 2017] Yellen's exit may prompt the Fed to pare its balance sheet sooner rather than later, Goldman says by Javier E. David

Notable quotes:
"... With the Federal Reserve facing a Herculean conundrum in unwinding its crisis-era monetary policy - and a likely leadership transition on the horizon - Goldman Sachs (GS) suggested on Saturday the central bank could move early to reduce the vast sums of government and mortgage-backed securities (MBS) it holds on its books. ..."
"... "This could be important for balance sheet policy because many Republican-leaning economists have criticized quantitative easing (QE) and have expressed a preference for rapid balance sheet rundown, perhaps even through asset sales," wrote Daan Struyven, a Goldman economist. ..."
"... A potential fire sale of Treasurys and mortgage-backed securities by the Fed "could have significantly more adverse effects on financial conditions than gradual runoff, and the mere risk of such an outcome might set up another 'taper tantrum,' " Struyven added. ..."
"... Some market observers have long argued that the Fed has distorted financial conditions with QE, and the central bank faces a huge task trying to pare down its bloated balance sheet. ..."
Mar 19, 2017 | finance.yahoo.com

CNBC

Yellen's exit may prompt the Fed to pare its balance sheet sooner rather than later, Goldman says

Yuri Gripas | Reuters

It's often said that good things come to those who wait - but a bloated $4.5 trillion balance sheet might be a notable exception to that rule.

With the Federal Reserve facing a Herculean conundrum in unwinding its crisis-era monetary policy - and a likely leadership transition on the horizon - Goldman Sachs (GS) suggested on Saturday the central bank could move early to reduce the vast sums of government and mortgage-backed securities (MBS) it holds on its books.

In a research note to clients, the bank pointed to the likelihood that President Donald Trump may "reshape the leadership" of the Federal Open Market Committee (FOMC), the Fed's powerful policy-making body, as the terms of Fed Chair Janet Yellen and Vice Chair Stanley Fischer expire in early 2018.

"This could be important for balance sheet policy because many Republican-leaning economists have criticized quantitative easing (QE) and have expressed a preference for rapid balance sheet rundown, perhaps even through asset sales," wrote Daan Struyven, a Goldman economist.

If the new appointments-especially the new chair-are thought to favor aggressive balance sheet normalization, perhaps even including asset sales, and if all decisions are left up to the incoming team, financial markets might experience heightened uncertainty during the transition."

Goldman suggested there was a "strong 'risk management' case for an announcement of very gradual balance sheet runoff later this year," because of the political risk associated with new leadership at the Fed.

"Our forecast is that the discussion around reinvestment continues for most of this year and the plan is formally announced in December 2017," Struyven said. "At that meeting, we expect the committee to hold the funds rate steady after hiking in both June and September. We expect the quarterly hikes to resume in March 2018."

The economist harked back to 2013's "taper tantrum," in which markets reacted the Fed's suggestions of tighter monetary policy by sending bond yields surging and stocks reeling - albeit temporarily.

A potential fire sale of Treasurys and mortgage-backed securities by the Fed "could have significantly more adverse effects on financial conditions than gradual runoff, and the mere risk of such an outcome might set up another 'taper tantrum,' " Struyven added.

'The uncertainty is substantial'

As the central bank begins a campaign to tighten benchmark interest rates - making a quarter-point hike just last week - it's renewed a debate over how to unwind the Fed's massive bond buying program.

Some market observers have long argued that the Fed has distorted financial conditions with QE, and the central bank faces a huge task trying to pare down its bloated balance sheet.

"The bigger the Fed's credit footprint, the more it interferes with the efficient employment and pricing of credit," wrote George Selgin, a senior fellow and director of the Center for Monetary and Financial Alternatives at the libertarian-leaning Cato Institute, in a blog post last month.

"By directing a large share of savings to purchases of longer-term MBS and Treasury securities, for example, the Fed has artificially raised both the prices of those securities, and the importance of the housing market and the federal government relative to the rest of the U.S. economy," Selgin wrote. "It has also dramatically increased its portfolio's duration gap and, by so doing, the risk that it will suffer losses should it sell assets before they mature."

On Friday, Minneapolis Federal Reserve Bank President Neel Kashkari, the lone dissenter against the U.S. central bank's decision last week to raise interest rates, the U.S. economy is still falling short on employment and inflation.

Kashkari, an alumnus of both Goldman Sachs and the U.S. Treasury who oversaw the government's Temporary Asset Relief Program (TARP) during the financial crisis, believes the Fed should wait on raising interest rates until it publishes a detailed plan for how and when it will reduce its $4.5 trillion balance sheet.

Goldman set forth two scenarios under which the Fed could begin trimming its balance sheet. Under an "early start, passive runoff" scenario, the bank said the Fed "gradually tapers reinvestment in December 2017 over 10 months but does not sell assets."

Conversely, under a "late start, active sales" scenario, Goldman said the Fed could cease reinvesting in bonds in July 2018 "without tapering and actively sells $40bn of assets per month."

Under the latter, the Fed could shrink its balance sheet by about $250 billion per quarter starting in the second half of next year, "with similar contributions from maturing assets and active sales," the bank added.

However, neither scenario is without its risks, Goldman's economist wrote: "While our baseline estimate suggests relatively little tightening from balance sheet rundown, the uncertainty is substantial. The 2013 'taper tantrum' also provides a reminder that the impact of balance sheet policy on financial conditions is uncertain and could be larger than our baseline estimate."

JF -> Anachronism ... Reply Monday, March 20, 2017 at 07:39 AM

Every time the Fed deals with the financial asset trading marketplaces the private parties wish to make a profit, no wonder Goldman is shilling to get the more valuable Fed holdings 'sold' to these parties.

No article on reserves or Fed asset holdings is legitimate unless it also discusses the use of administrative offset with Treasury (whether the bonds are mature and as a result, redeemable at that time, or not, they could all be offset with Treasury now).

The Fed has a lot it can do with the assets they bought with newly created money, but subsidizing the money center banks once again ought to be low on the list (moral hazard rewarded again?). The asset-handling plans should be pursued only after Treasury coordination talks are settled and according to well discussed, publicly known plans.

It is not clear to me who the public should trust here, so open public programming should be expected and press involvement sought after by the Fed. Look at the magnitudes here, no one should be looking the other way on this.

RGC -> JF... March 20, 2017 at 07:55 AM

1. The Fed does QE, buying bonds and MBS and thus raising asset prices.

2. Bond traders sell.

3. The Fed raises interest rates, thus lowering bond prices.

4. The Fed reduces QE, selling bonds and MBS and thus lowering prices.

5. Bond traders buy.

6. The Fed reverses course and lowers interest rates, thus raising bond prices.

7. Bond traders sell.

The Fed trades with public money, the bond traders trade with private money.

JF -> RGC... March 20, 2017 at 09:30 AM

RGC what is your point except to note that private interests sweep monies out of private positions in order to create the cash to buy the bond being offered by the Fed should they sell some. It is a way to sweep excess monies out of the economic system, though that is not a completed end-game unless the Fed destroys the money or it is remitted to Treasury where it covers other claims for payment (reducing the need to borrow anew) turnstiling the monies back into the economy.

It is simpler with regard to Treasury to have both sides agree to osset their position.

But offsets means that Treasury offers none or fewer bonds for sale to outsude interests, including China and other govts or within the banks or elsewhere.

Is the Fed ready to do all of these approaches, and is it coordinated with the oublic's govt via Treasury agreement?

The Fed has instruments with 8 percent coupons, I just don't like the idea of them selling these to the banking segment, at a price that allows them to profit, with little risk, especially when you consider that they were the ones who caused the financial crisis in the first place.

It will be interesting to see what the Feds do, what they do with the cash they get, and what Treasury and the Trump Administration does as more cash remittances come in (and why was this not done to help the Obama Admin look good fiscally before?).

RGC -> to JF... March 20, 2017 at 10:06 AM

I was trying to demonstrate the synergy between Wall Street and the Fed.

You can look at the Fed as an economy-regulating institution, but you can also look at it as a pipeline from public wealth to private wealth.

[Oct 27, 2017] Income tax rates go down on the upper incomes and businesses in a big way. State income taxes go down on the middle and working classes in a small way. Sales tax, local property taxes, county user fees/assessments go up for everyone including the poor, to cover the ensuing state budget shortfall.

Oct 27, 2017 | www.nakedcapitalism.com

allan , October 27, 2017 at 2:48 pm

GDP 36,000

President Donald Trump's top economist is doubling down on claims that corporate tax cuts would spark economic growth and boost incomes.

Kevin Hassett is chairman of the White House Council of Economic Advisers. Hassett says the plan to slash the corporate tax rate from 35 percent to 20 percent could increase the size of the U.S. economy by $700 billion to $1.2 trillion over a decade.

Actually, it doesn't matter what fantasies Hassett spins.
They have the votes, and their donors won't take no for an answer.

Kokuanani , October 27, 2017 at 4:22 pm

The repulsive Ed Gillespie is the Republican candidate for governor in VA. [Election is in about 10 days.] His non-stop tv ads include one in which he claims he'll lower taxes and that this will create "57,000 new jobs in VA."

We need to kill this whole "tax cuts -- > jobs" myth with fire.

flora , October 27, 2017 at 7:12 pm

Been there, done that.

Income tax rates go down on the upper incomes and businesses in a big way. State income taxes go down on the middle and working classes in a small way.
Sales tax, local property taxes, county user fees/assessments go up for everyone including the poor, to cover the ensuing state budget shortfall.
The upper 20% income/large businesses spend less a percentage of their income on purchases /fees and property taxes than the bottom 80%. Top 20% see net decrease in combines state/local tax/fees as a percentage of income. Bottom 80% see a net increase in combines local/state taxes/fees as a percentage of income.
That still isn't enough to fill the budget hole, so state services and state funding to k-12 education gets cut.
Talk about a bait and switch.
What a deal.

flora , October 27, 2017 at 7:32 pm

adding: the increased sales tax/user fees/ property taxes won't be enough to fill the budget hole. That's when the real fun starts. Then the no-tax-ever crowd will start talking about selling off the public state properties to fill the budget hole created by tax cuts. Sell off state-own govt buildings and rent them back (from their crony friends). Sell off water treatment plants, or turnpikes, or state govt -owned medical facilities, or prisons.
The "cut taxes and riches will follow" pitch is a con. The ultimate end seems to be privatizing as much state property as possible. That will cost 80-90% of the state's taxpayers far more over the long run than the current state income tax structure.
There's a sucker born every minute. There were plenty of suckers in my state, until they saw how they were getting fleeced and finally wised up. Education is expensive.

[Oct 11, 2017] Suppression of the Wealth Tax An Historical Error

Oct 11, 2017 | economistsview.typepad.com

Thomas Piketty:

Suppression of the wealth tax: an historical error, by Thomas Piketty : Let it be said at once: the suppression of the wealth tax (Impôt sur la Fortune or ISF) constitutes a serious moral, economic and historical mistake. This decision reveals a profound misunderstanding of the challenges to inequality posed by globalization.
Let's go back for a moment. During the first globalization period between 1870 and 1914, a strong international movement gradually took shape which sought to promote a new type of redistribution and taxation. Based on a progressive taxation system on income, wealth and inheritance, this new model was aimed at a better distribution of productivity gains and the structural reduction of the concentration of property and economic power. It was successfully implemented in the period 1920 to 1970, partly as a result of the pressure of dramatic historical events, but equally thanks to a lengthy intellectual and political process.
We may perhaps today be witnessing the premises of a similar movement. Confronted with the rise in inequality, awareness is gaining momentum. ...

Posted by Mark Thoma on Tuesday, October 10, 2017 at 10:30 AM in Economics , Income Distribution , Taxes | Permalink Comments (5)

[Oct 04, 2017] The Trump-Goldman Sachs Tax Cut for the Rich by Jack Rasmus

Notable quotes:
"... The Trump Plan is actually the product of the former Goldman-Sachs investment bankers who have been in charge of Trump's economic policy since he came into office. Steve Mnuchin, the Treasury Secretary, and Gary Cohn, director of Trump's economic council, are the two authors of the Trump tax cuts. They put it together. They are also both former top executives of the global shadow bank called Goldman Sachs. ..."
"... Given that economic policy under Trump is being driven by bankers, it's not surprising that the CEO of the biggest US banks, Morgan Stanley, admitted just a few months ago that a reduction of the corporate nominal income tax rate from the current 35% nominal rate to a new nominal rate of 20% will provide the bank an immediate windfall gain of 15%-20% in earnings. ..."
"... Big multinational companies like Apple, i.e. virtually all the big tech companies, big Pharma corporations, banks and oil companies, pay no more than 12-13% effective tax rates today -- not the 35% nominal rate. ..."
"... Tech, big Pharma, banks and oil companies are the big violators of offshore cash hoarding/tax avoidance schemes. Microsoft's effective global tax rate last year was only 12%. IBM's even less, at 10%. The giant drug company, Pfizer paid 18% and the oil company, Chevron 14%. One of the largest US companies in the world, General Electric, paid only 1%. When their nominal rate is reduced to 20% under the Trump plan, they'll pay even less, likely in the single digits, if that. ..."
"... Tax cutting for business classes and the 1% has always been a fundamental element of Neoliberal economic policy ever since the Reagan years (and actually late Jimmy Carter period). Major tax cut legislation occurred in 1981, 1986, and 1997-98 under Clinton. George W. Bush then cut taxes by $3.4 trillion in 2001-04, 80% of which went to the wealthiest households and businesses. He cut taxes another $180 billion in 2008. Obama cut another $300 billion in his 2009 so-called recovery program. When that faltered, it was another $800 billion at year end 2010. He then extended the Bush tax cuts that were scheduled to expire in 2011 two more years. That costs $450 billion each year. And in 2013, cutting a deal with Republicans called the 'fiscal cliff' settlement, he extended the Bush tax cuts of the prior decade for another ten years. That cost a further $5 trillion. Now Trump wants even more. He promised $5 trillion in tax cuts during his election campaign. So the current proposal is only half of what he has in mind perhaps. ..."
"... Neoliberal tax cutting in the US has also been characterized by the 'tax cut shell game'. The shell game is played several ways. ..."
"... To cover the shell game, an overlay of ideology covers up what's going on. There's the false argument that 'tax cuts create jobs', for which there's no empirical evidence. There's the claim US multinational corporations pay a double tax compared to their competitors, when in fact they effectively pay less. There's the lie that if corporate taxes are cut they will automatically invest the savings, when in fact what they do is invest offshore, divert the savings to stock and bond and other financial markets, boost their dividend and stock buybacks, or stuff the savings in their offshore subsidiaries to avoid paying taxes. ..."
"... All these neoliberal false claims, arguments, and outright lies continue today to justify the Trump-Goldman Sachs tax plan -- which is just the latest iteration of neoliberal tax policy and tax offensive in the US. The consequences of the Trump plan, if it is passed, will be the same as the previous tax giveaways to the 1% and their companies: it will redistribute income massively from the middle and working classes to the rich. Income inequality will continue to worsen dramatically. ..."
"... Nothing will change so long as the Corporate Party of America is allowed to continue its neoliberal tax giveaways, its tax cutting 'shell games', and is allowed to continue to foment its ideological cover up. ..."
Oct 04, 2017 | www.counterpunch.org

Contradicting Trump, the independent Tax Policy Center has estimated in just the first year half of the $2 trillion plus Trump cuts will go to the wealthiest 1% households that annually earn more than $730,000. That's an immediate income windfall to the wealthiest 1% households of 8.5%, according to the Tax Policy Center. But that's only in the first of ten years the cuts will be in effect. It gets worse over time.

According to the Tax Policy Center, "Taxpayers in the top one percent (incomes above $730,000), would receive about 50 percent of the total tax benefit [in 2018]". However, "By 2027, the top one percent would get 80 percent of the plan's tax cuts while the share for middle-income households would drop to about five percent." By the last year of the cuts, 2027, on average the wealthiest 1% household would realize $207,000, and the even wealthier 0.1% would realize an income gain of $1,022,000.

When confronted with these facts on national TV this past Sunday, Trump's Treasury Secretary, Steve Mnuchin, quickly backtracked and admitted he could not guarantee every middle class family would see a tax cut. Right. That's because 15-17 million (12%) of US taxpaying households in the US will face a tax hike in the first year of the cuts. In the tenth and last year, "one in four middle class families would end up with higher taxes".

The US Economic 'Troika'

The Trump Plan is actually the product of the former Goldman-Sachs investment bankers who have been in charge of Trump's economic policy since he came into office. Steve Mnuchin, the Treasury Secretary, and Gary Cohn, director of Trump's economic council, are the two authors of the Trump tax cuts. They put it together. They are also both former top executives of the global shadow bank called Goldman Sachs. Together with the other key office determining US economic policy, the US central bank, held by yet another ex-Goldman Sachs senior exec, Bill Dudley, president of the New York Federal Reserve bank, the Goldman-Sachs trio of Mnuchin-Cohn-Dudley constitute what might be called the 'US Troika' for domestic economic policy.
The Trump tax proposal is therefore really a big bankers tax plan -- authored by bankers, in the interest of bankers and financial investors (like Trump himself), and overwhelmingly favoring the wealthiest 1%.

Given that economic policy under Trump is being driven by bankers, it's not surprising that the CEO of the biggest US banks, Morgan Stanley, admitted just a few months ago that a reduction of the corporate nominal income tax rate from the current 35% nominal rate to a new nominal rate of 20% will provide the bank an immediate windfall gain of 15%-20% in earnings. And that's just the nominal corporate rate cut proposed by Trump. With loopholes, it's no doubt more.

The Trump-Troika's Triple Tax-Cut Trifecta for the 1%

The Trump Troika has indicated it hopes to package up and deliver the trillions of $ to their 1% friends by Christmas 2017. Their gift will consist of three major tax cuts for the rich and their businesses. A Trump-Troika Tax Cut 'Trifecta' of $ trillions.

1.The Corporate Tax Cuts

The first of the three main elements is a big cut in the corporate income tax nominal rate, from current 35% to 20%. In addition, there's the elimination of what is called the 'territorial tax' system, which is just a fancy phrase for ending the fiction of the foreign profits tax. Currently, US multinational corporations hoard a minimum of $2.6 trillion of profits offshore and refuse to pay US taxes on those profits. In other words, Congress and presidents for decades have refused to enforce the foreign profits tax. Now that fiction will be ended by officially eliminating taxes on their profits. They'll only pay taxes on US profits, which will create an even greater incentive for them to shift operations and profits to their offshore subsidiaries. But there's more for the big corporations.

The Trump plan also simultaneously proposes what it calls a 'repatriation tax cut'. If the big tech, pharma, banks, and energy companies bring back some of their reported $2.6 trillion (an official number which is actually more than that), Congress will require they pay only a 10% tax rate -- not the current 35% rate or even Trump's proposed 20%–on that repatriated profits. No doubt the repatriation will be tied to some kind of agreement to invest the money in the US economy. That's how they'll sell it to the American public. But that shell game was played before, in 2004-05, under George W. Bush. The same 'repatriation' deal was then legislated, to return the $700 billion then stuffed away in corporate offshore subsidiaries. About half the $700 billion was brought back, but US corporations did not invest it in jobs in the US as they were supposed to. They used the repatriated profits to buy up their competitors (mergers and acquisitions), to pay out dividends to stockholders, and to buy back their stock to drive equity prices and the stock market to new heights in 2005-07. The current Trump 'territorial tax repeal/repatriation' boondoggle will turn out just the same as it did in 2005.

2. Non-Incorporate Business Tax Cuts

The second big business class tax windfall in the Trump-Goldman Sachs tax giveaway for the rich is the proposal to reduce the top nominal tax rate for non-corporate businesses, like proprietorships and partnerships, whose business income (aka profits) is treated like personal income. This is called the 'pass through business income' provision.

That's a Trump tax cut for unincorporated businesses -- like doctors, law firms, real estate investment partnerships, etc. 40% of non-corporate income is currently taxed at 39.6% (the top personal income tax rate). Trump proposes to reduce that nominal rate to 25%. So non-incorporate businesses too will get an immediately 14.6% cut, nearly matching the 15% rate cut for corporate businesses.

In the case of both corporate and non-corporate companies we're talking about 'nominal' tax rate cuts of 14.6% and 15%. The 'effective' tax rate is what they actually pay in taxes -- i.e. after loopholes, after their high paid tax lawyers take a whack at their tax bill, after they cleverly divert their income to their offshore subsidiaries and refuse to pay the foreign profits tax, and after they stuff away whatever they can in offshore tax havens in the Cayman Islands, Switzerland, and a dozen other island nations worldwide.

For example, Apple Corporation alone is hoarding $260 billion in cash at present -- 95% of which it keeps offshore to avoid paying Uncle Sam taxes. Big multinational companies like Apple, i.e. virtually all the big tech companies, big Pharma corporations, banks and oil companies, pay no more than 12-13% effective tax rates today -- not the 35% nominal rate.

Tech, big Pharma, banks and oil companies are the big violators of offshore cash hoarding/tax avoidance schemes. Microsoft's effective global tax rate last year was only 12%. IBM's even less, at 10%. The giant drug company, Pfizer paid 18% and the oil company, Chevron 14%. One of the largest US companies in the world, General Electric, paid only 1%. When their nominal rate is reduced to 20% under the Trump plan, they'll pay even less, likely in the single digits, if that.

Corporations and non-corporate businesses are the institutional conduit for passing income to their capitalist owners and managers. The Trump corporate and business taxes means companies immediately get to keep at least 15% more of their income for themselves -- and more in 'effective' rate terms. That means they get to distribute to their executives and big stockholders and partners even more than they have in recent years. And in recent years that has been no small sum. For example, just corporate dividend payouts and stock buybacks have totaled more than $1 trillion on average for six years since 2010! A total of more than $6 trillion.

But all that's only the business tax cut side of the Trump plan. There's a third major tax cut component of the Trump plan -- i.e. major cuts in the Personal Income Tax that accrue overwhelmingly to the richest 1% households.

3. Personal Income Tax Cuts for the 1%

There are multiple measures in the Trump-Troika proposal that benefits the 1% in the form of personal income tax reductions. Corporations and businesses get to keep more income from the business tax cuts, to pass on to their shareholders, investors, and senior managers. The latter then get to keep more of what's passed through and distributed to them as a result of the personal income tax cuts.

The first personal tax cut boondoggle for the 1% wealthiest households is the Trump proposal to reduce the 'tax income brackets' from seven to three. The new brackets would be 35%, 25%, and 12%.

Whenever brackets are reduced, the wealthiest always benefit. The current top bracket, affecting households with a minimum of $418,000 annual income, would be reduced from the current 39.6% to 35%. In the next bracket, those with incomes of 191,000 to 418,000 would see their tax rate (nominal again) cut from 28% to 25%. However, the 25% third bracket would apply to annual incomes as low as $38,000. That's the middle and working class. So households with $38,000 annual incomes would pay the same rate as those with more than $400,000. Tax cuts for the middle class, did Trump say? Only tax rate reductions beginning with those with $191,000 incomes and the real cuts for those over $418,000!

But the cuts in the nominal tax rate for the top 1% to 5% households are only part of the personal income tax windfall for the rich under the Trump plan. The really big tax cuts for the 1% come in the form of the repeal of the Inheritance Tax and the Alternative Minimum Tax, as well as Trump's allowing the 'carried interest' tax loophole for financial speculators like hedge fund managers and private equity CEOs to continue.

The current Inheritance Tax applies only to those with estates of $11 million or more, about 0.2 of all the taxpaying households. So its repeal is clearly a windfall for the super rich. The Alternative Minimum Tax is designed to ensure the super rich pay something, after they manipulate the tax loopholes, shelter their income offshore in tax havens, or simply engage in tax fraud by various other means. Now that's gone as well under the Trump plan. 'Carried interest', a loophole, allows big finance speculators, like hedge fund managers, to avoid paying the corporate tax rate altogether, and pay a maximum of 20% on their hundreds of millions and sometimes billions of dollars of income every year.
Who Pays?

As previously noted, folks with $91,000 a year annual income get no tax rate cuts. They still will pay the 25%. And since that is what's called 'earned' (wage and salary) income, they don't get the loopholes to manipulate, like those with 'capital incomes' (dividends, capital gains, rents, interest, etc.). What they get is called deductions. But under the Trump plan, the deductions for state and local taxes, for state sales taxes, and apparently for excess medical costs will all disappear. The cost of that to middle and working class households is estimated at $1 trillion over the decade.

Trump claims the standard deduction will be doubled, and that will benefit the middle class. But estimates reveal that a middle class family with two kids will see their standard deduction reduced from $28,900 to $24,000. But I guess that's just 'Trump math'.

The general US taxpayer will also pay for the trillions of dollars that will be redistributed to the 1% and their companies. It's estimated the federal government deficit will increase by $2.4 trillion over the decade as a result of the Trump plan. Republicans in Congress have railed over the deficits and federal debt, now at $20 trillion, for years. But they are conspicuously quiet now about adding $2.4 trillion more -- so long as it the result of tax giveaways to themselves, their 1% friends, and their rich corporate election campaign contributors.

And both wings of the Corporate Party of America -- aka Republicans and Democrats -- never mention the economic fact that since 2001, 60% of US federal government deficits, and therefore the US debt of $20 trillion, are attributable to tax cuts by George W. Bush and Barack Obama: more than $3.5 trillion under Bush and more than $7 trillion under Obama. (The remaining $10 trillion of the US debt due to war and defense spending, price gouging by the medical industry and big pharma driving up government costs for Medicare, Medicaid, and other government insurance, bailouts of the big banks in 2008-09, and interest payments on the debt).

The 35-Year Neoliberal Tax Offensive

Tax cutting for business classes and the 1% has always been a fundamental element of Neoliberal economic policy ever since the Reagan years (and actually late Jimmy Carter period). Major tax cut legislation occurred in 1981, 1986, and 1997-98 under Clinton. George W. Bush then cut taxes by $3.4 trillion in 2001-04, 80% of which went to the wealthiest households and businesses. He cut taxes another $180 billion in 2008. Obama cut another $300 billion in his 2009 so-called recovery program. When that faltered, it was another $800 billion at year end 2010. He then extended the Bush tax cuts that were scheduled to expire in 2011 two more years. That costs $450 billion each year. And in 2013, cutting a deal with Republicans called the 'fiscal cliff' settlement, he extended the Bush tax cuts of the prior decade for another ten years. That cost a further $5 trillion. Now Trump wants even more. He promised $5 trillion in tax cuts during his election campaign. So the current proposal is only half of what he has in mind perhaps.

Neoliberal tax cutting in the US has also been characterized by the 'tax cut shell game'. The shell game is played several ways.

In the course of major tax cut legislation, the elites and their lobbyists alternate their focus on cutting rates and on correcting tax loopholes. They raise rates but expand loopholes. When the public becomes aware of the outrageous loopholes, they then eliminate some loopholes but simultaneously reduce the tax rates on the rich. When the public complains of too low tax rates for the rich, they raise the rates but quietly expand the loopholes. They play this shell game so the outcome is always a net gain for corporations and the rich.

Since Reagan and the advent of neoliberal tax policy, the corporate income tax share of total US government revenues has fallen from more than 20% to single digits well below 10%. Conversely, the payroll tax has doubled from 22% to more than 40%. A similar shift within the personal income tax, steadily around 40% of government revenues, has also occurred. The wealthy pay less a share of the total and the middle class pays more. Along the way, token concessions to the very low end of working poor are introduced, to give the appearance of fairness. But the middle class, the $38 to $91,000 nearly 100 million taxpaying households foot the bill for both the 1% and the bottom. This pattern was set in motion under Reagan. His proposed $752 billion in tax cuts in 1981-82 were adjusted in 1986, but the net outcome was more for the rich and their corporations. That pattern has continued under Clinton, Bush, Obama and now proposed under Trump.

To cover the shell game, an overlay of ideology covers up what's going on. There's the false argument that 'tax cuts create jobs', for which there's no empirical evidence. There's the claim US multinational corporations pay a double tax compared to their competitors, when in fact they effectively pay less. There's the lie that if corporate taxes are cut they will automatically invest the savings, when in fact what they do is invest offshore, divert the savings to stock and bond and other financial markets, boost their dividend and stock buybacks, or stuff the savings in their offshore subsidiaries to avoid paying taxes.

All these neoliberal false claims, arguments, and outright lies continue today to justify the Trump-Goldman Sachs tax plan -- which is just the latest iteration of neoliberal tax policy and tax offensive in the US. The consequences of the Trump plan, if it is passed, will be the same as the previous tax giveaways to the 1% and their companies: it will redistribute income massively from the middle and working classes to the rich. Income inequality will continue to worsen dramatically. US multinational corporations will begin again to divert profits, and investment, offshore; profits brought back untaxed will result in mergers and acquisitions, dividend payouts, and financial markets investment. No real jobs will be created in the US. The wealthy will continue to pump their savings into financial asset markets, causing further bubbles in stocks, exchange traded funds, bonds, derivatives and the like. The US economy will continue to slow and become more unstable financially. And there will be another financial crash and great recession -- or worse. Only this time, the vast majority of US households -- i.e. the middle and working classes -- will be even worse off and more unable to weather the next economic storm.

Nothing will change so long as the Corporate Party of America is allowed to continue its neoliberal tax giveaways, its tax cutting 'shell games', and is allowed to continue to foment its ideological cover up. More articles by: Jack Rasmus

Jack Rasmus is the author of ' Systemic Fragility in the Global Economy ', Clarity Press, 2015. He blogs at jackrasmus.com . His website is www.kyklosproductions.com and twitter handle, @drjackrasmus.

[May 01, 2017] Bush Already Tried Trumps Proposed Corporate Tax Holiday and It Was a Total Failure by Zaid Jilani

Notable quotes:
"... But judging from the last time it was tried, most of the cash Donald Trump would allow megacorporations to bring home from overseas at a bargain-basement tax rate would end up being used by corporate executives to inflate the prices of their stocks, thereby enriching themselves and their biggest investors - and doing little to employ Americans and grow the real economy. ..."
"... From 2004 to 2005, the Bush administration and Congress tried a one-time tax repatriation holiday, cutting the rate to 5.25 percent. ..."
"... So what did the companies use the money for? The report found that two things increased dramatically after repatriation: executive compensation and stock buybacks. ..."
Apr 27, 2017 | theintercept.com
As part of its radical but still mostly undefined tax plan, the Trump administration proposed a tax holiday for corporate earnings stored overseas. Reporters have been hearing on background that the tax rate would be slashed from 35 percent to 10 percent.

But judging from the last time it was tried, most of the cash Donald Trump would allow megacorporations to bring home from overseas at a bargain-basement tax rate would end up being used by corporate executives to inflate the prices of their stocks, thereby enriching themselves and their biggest investors - and doing little to employ Americans and grow the real economy.

From 2004 to 2005, the Bush administration and Congress tried a one-time tax repatriation holiday, cutting the rate to 5.25 percent.

A Senate study in 2011 found that corporations brought $312 billion they had stashed overseas back to the United States, avoiding $3.3 billion in taxes as a result of the repatriation rate. But the top 15 companies that took advantage of the holiday actually reduced their total U.S. employment by 20,931 jobs.

Meanwhile, the report surveyed studies of all 840 corporations that took advantage of repatriation and concluded that there was "no evidence that repatriated funds increased overall U.S. employment."

So what did the companies use the money for? The report found that two things increased dramatically after repatriation: executive compensation and stock buybacks.

[Apr 30, 2017] Trump's Tax Plan Leaves the Swamp Untouched The American Conservative

Notable quotes:
"... Charles Hugh Smith is the owner/writer of the oftwominds.com blog and has written 11 books on our economy and society, including ..."
"... There's another systemic source of unfairness in the tax code: the gap between the high rates on earned income (wages and salaries) and the much lower rates on unearned income-what we might characterize as income generated by capital rather than labor: rents, capital gains, and so on. ..."
"... This more or less summarizes the state of taxation in America. Working for a living is for suckers. ..."
"... "Capital investments are at risk of a loss as well as a gain." ..."
Apr 30, 2017 | www.theamericanconservative.com
President Trump's tax plan gives those of us with long memories a strong sense of déjà vu. We've seen this play before, and the ending is inevitably modest: a few of the pieces of a horrendously complex, unfair tax system are moved around, victory is declared, and the creatures of the Swamp-those self-serving elites that benefit from the complex, unfair monstrosity-continue raking in their billions of dollars in fees while the rest of us are burdened with billions of dollars in tax-preparation costs.

The opening act of this tax-reform play always starts with a claim that by golly, this time we're really going to simplify the tax code. Trump's plan calls for reducing the number of tax brackets and eliminating all deductions other than those for charity and mortgage interest; by way of compensation, the standard deduction will be doubled.

Such changes make for catchy headlines, but the reality is the tax code will still run to thousands of pages. The Tax Foundation explains the three layers of compliance complexity:

Simple changes like reducing the number of tax brackets skirt the core problem with the U.S. tax system: the entire tax code is little more than a clearinghouse of political bribes paid for with tax breaks and a complexity thicket that requires the services of legions of accountants, tax attorneys, software coders, and specialists in tax-avoidance strategies.

This clearinghouse and complexity thicket are intrinsically unfair, as insiders and the super-wealthy can avoid taxes via political influence and offshore tax havens. This systemic unfairness erodes the social contract's key compact: that the playing field will be kept more or less level for all participants.

But the U.S. tax system is anything but level. The Institute on Taxation and Economic Policy (ITEP) recently published an analysis of the corporate taxes paid by Fortune 500 companies over the past eight years. Consistently profitable companies paid a federal tax rate of around 21 percent, considerably lower than the nominal corporate tax rate of 35 percent. But 18 profitable companies paid no federal taxes over the eight years, and about 50 corporations paid rates of 10 percent or less.

Immensely profitable corporations such as Apple have mastered the offshore tax-avoidance game. Others persuade (impolite term: bribe) members of Congress to include obscure tax breaks tailored to them in legislation.

So the most successful at gaming the system pay near-zero rates (saving tens of billions of dollars) while the chumps pay the top rate.

There's another systemic source of unfairness in the tax code: the gap between the high rates on earned income (wages and salaries) and the much lower rates on unearned income-what we might characterize as income generated by capital rather than labor: rents, capital gains, and so on.

If you manage to earn $500,000 in wages, most of that income is taxed at 33 percent, and the income above $415,000 is taxed at 39.6 percent. (Trump's tax proposal calls for a top rate of 35 percent.) Meanwhile, the top rate for long-term capital gains is 20 percent. Over time, that 15-point difference adds up.

In effect, the rich get richer because most of the lower-tax-rate unearned income flows to them.

The concentration of unearned-income-producing wealth in the U.S. is remarkable. In 2016 the Congressional Budget Office (CBO) reported that the top 10 percent of U.S. households held 76 percent of all private wealth. The bulk of the sources of unearned income are owned by the top 10 percent: stocks, bonds, trust funds, business equity, and non-home real estate.

Unearned income also avoids the 15.3 percent Social Security and Medicare payroll taxes (half paid by employers, half by employees). Self-employed taxpayers pay the entire 15.3 percent, and so all their earned income above $37,650 is taxed at a rate of 40.3 percent or higher: 25 percent federal income tax and the 15.3 percent payroll taxes. That 40 percent is double the top tax rate on unearned income.

Those with earnings above $118,500 no longer pay the Social Security tax. According to the U.S. Census Bureau , 80 percent of all households earn less than $117,000 a year, so the vast majority of wage earners pay the full payroll tax rate on all earnings.

So while the top income tiers famously pay most of the federal income taxes (the top 1 percent pony up about 37 percent of the total), the highly progressive income taxes are slightly less than half of all federal tax revenues, while highly regressive payroll taxes make up roughly a third of federal tax receipts.

In this larger context, how much impact will Trump's signature tax cuts on the corporate rate (from 35 percent to 15 percent) or on the top earned-income rate have on the inequities of the tax system?

A lower corporate tax rate that was applied more uniformly would certainly reduce the necessity of costly tax avoidance schemes-but the current Swamp enables some companies to pay near-zero, which is a lot less than 15 percent.

As for the modest reduction in the top earned-income bracket: as we've seen, the bulk of the taxes paid by the bottom 80 percent are payroll taxes on earned income, and the unearned income flowing to the wealthiest 10 percent is taxed at a much lower rate than the combined payroll-income tax burden on wage earners.

This systemic unfairness of the status quo is one reason why Trump was elected: the protected few (to use Peggy Noonan's phrase) are benefiting at the expense of the unprotected many. The only meaningful tax reforms-the elimination of loopholes, offshore tax havens, and the congressional privilege of rewarding cronies with obscure tax breaks buried in legislation; radical simplification of the code and a realignment of the asymmetry between the taxes paid on earned income and unearned income-are a political impossibility, as the protected elites have a stranglehold on the machinery of governance.

That said, it would have been refreshing if Trump's team had called for a massive house-cleaning of a wildly unjust tax code, and a draining of the particularly fetid tax-avoidance swamp.

Charles Hugh Smith is the owner/writer of the oftwominds.com blog and has written 11 books on our economy and society, including A Radically Beneficial World: Automation, Technology & Creating Jobs for All .

  • Gregory , says: April 27, 2017 at 10:52 pm
    Good to see Charles having a voice here at TAC.

    There's another systemic source of unfairness in the tax code: the gap between the high rates on earned income (wages and salaries) and the much lower rates on unearned income-what we might characterize as income generated by capital rather than labor: rents, capital gains, and so on.

    This more or less summarizes the state of taxation in America. Working for a living is for suckers.

    ADC Wonk , says: April 27, 2017 at 11:47 pm
    Sigh . . . same old Trump. After flip-flopping on NAFTA, NATO, Chinese currency, etc., and hiring more top level-appointees from Goldman-Sachs than any other President . . . are we surprised by what they all hurriedly produced because they want something done by the 100th day?
    Kurt Gayle , says: April 28, 2017 at 9:03 am
    Thank you, Charles Hugh Smith, for writing the plain truth about the President's tax plan.

    The tax plan is a bitter pill for those of us who are Trump supporters.

    But we need to keep focusing on what is true. And the truth is that the creatures of The Swamp are still very much in control of an unfair tax system.

    Johann , says: April 28, 2017 at 9:07 am
    I agree with much of the article, but disagree with the objection to the capital gains tax rate. Capital investments are at risk of a loss as well as a gain. If the taxes are raised on capital gains, the risk/reward calculations will result in fewer investments. And another thing. Its totally dishonest for the government to tax capital gains on long term holdings of real estate or any other very long term investment without taking inflation into account. Think about it. If you own a home for let say 40 years, when its sold, almost all of the sales price is profit, since what you paid 40 years ago is almost nothing in today's prices. Raising the capital gains tax rate will hurt a lot more than just rich people.
    SDS , says: April 28, 2017 at 9:32 am
    It would have been refreshing; but it appears
    P.T. BARNUM was right, again

    Mr. Trump apparently had no intention of fulfilling any of the lofty promises he made in campaigning; as he doesn't in his own business dealings .

    WE were just too desperate to recognize what was right in front of us ..

    SAD!

    Sean Nuttall , says: April 28, 2017 at 9:56 am
    Amen. However, to think that Trump cares one iota for working people is pure self delusion.
    Elsie Gilmore , says: April 28, 2017 at 10:24 am
    It is good to see that there are actually some real conservatives left in this country. I hope next year's elections reflect the current discontent and the need for more public servants to be elected and fewer politicians.
    icarusr , says: April 28, 2017 at 10:38 am
    "This systemic unfairness of the status quo is one reason why Trump was elected: the protected few (to use Peggy Noonan's phrase) are benefiting at the expense of the unprotected many."

    Stuff and nonsense. The party that nominated Trump is one of the key reasons for the "systemic unfairness". Whatever Trump was elected for, this was not it.

    The real question is why does anyone think that Trump meant it when he said he wanted to "drain the swamp" – whatever that means – or that what he might have meant about it (and it is questionable he had any real notion beyond the slogan) is what his supporters thought he meant. What we are seeing from poll after poll is that his supporters CHANGE their positions depending whether Trump holds them; Trump was not elected as an embodiment of an idea, any idea, or a policy, any policy; Trumpism is about the pose of the man, nothing more and nothing less. If he comes up with a tax plan that dumps all of the tax burden on the very voters that elected him, they will find a way to rationalise this just as surely as they would support him if he shot a man in the middle of Fifth Ave.

    Trump might not know much; he knows his marks supremely well.

    Paul De Palma , says: April 28, 2017 at 10:57 am
    This is the clearest short piece I've ever read on Trump's tax proposal and the current system. Thanks.
    grumpy realist , says: April 28, 2017 at 11:53 am
    Bravo for this article. We're getting crony capitalism and gaming of the system by rent-seekers on both left and right. Where is a political party that is going to actually stand for those of us who don't have power and aren't trust fund babies?
    Kevin , says: April 28, 2017 at 11:53 am
    "Think about it. If you own a home for let say 40 years, when its sold, almost all of the sales price is profit, since what you paid 40 years ago is almost nothing in today's prices. Raising the capital gains tax rate will hurt a lot more than just rich people.

    "

    For house sales, the first half million are excluded from capital gains taxes. Median house price in the US is 200K. There is no problem here whatsoever. This objection to capital taxes is from the same bag of tricks as "estate taxes kill grandpa's family farm!." They don't unless that family farm is the basis of an agro-industrial empire.

    One Man , says: April 28, 2017 at 12:19 pm
    Johann, the first $500,000 of profit on a sale of residence is tax-free for married couples, I believe. Someone can correct me if I'm wrong.
    Edward , says: April 28, 2017 at 12:22 pm
    "There's another systemic source of unfairness in the tax code: the gap between the high rates on earned income (wages and salaries) and the much lower rates on unearned income-what we might characterize as income generated by capital rather than labor: rents, capital gains, and so on".
    No wonder the rate of return on capital has exceeded the rate of growth of GDP since the 1980s (a major cause of inequality).
    Student , says: April 28, 2017 at 2:42 pm
    It is not just house prices that inflate. Financial assets do also. Taxing them on the
    nominal gains at ordinary rates, without correcting for inflation, is grossly unfair,as in many cases would mean taxes owed on losses.

    But the author also fails to observe that the
    tax plan provides special treatment for partnerships, those self employed, and for
    private companies. For these, the top rate is 15%, essentially dividing people into
    wage slaves and the privileged, undertaxed elite.

    Mnuchin assured that the egregious carried interest loophole would be closed. Great.
    Except it will be eliminated by reducing the
    taxation of these monies to 15%.

    This plan, like the RINOcare bill pushed by
    Speaker Ryan, is an example of either lax
    thinking, or of perhaps of swamp behavior.

    Johann , says: April 28, 2017 at 3:37 pm
    Thank you those that corrected me on the exemption of capital gains on houses. My experience has been with farmland. I was not aware of the exemption for house sales.
    George Marshall , says: April 28, 2017 at 3:48 pm
    Of course, it always depends on whose ox is being gored, but eliminating almost all deductions in return for an increase in the standard deduction, helps me not at all. I usually itemize and last year had: medical, charity, mortgage interest, state income tax, and real estate tax deductions. I expect my taxes to go up under this proposal, unless the details of which there aren't any, are very different. So much for tax relief for the middle class.
    philadelphialawyer , says: April 28, 2017 at 3:52 pm
    icarusr:

    "The party that nominated Trump is one of the key reasons for the 'systemic unfairness.'"

    Yeah, it is great to see the author here calling for what amounts to the Democratic view of progressive taxation. Basically, what Mr. Smith proposes tracks HRC's tax plan issue by issue.

    https://www.hillaryclinton.com/briefing/factsheets/2016/01/12/investing-in-america-by-restoring-basic-fairness-to-our-tax-code/

    JonF , says: April 28, 2017 at 4:09 pm
    Re: Taxing them on the
    nominal gains at ordinary rates, without correcting for inflation

    Other than indexing the tax brackets (which applies to all income) we tax wages on inflationary gains too. The government's bills also increase due to inflation so why shouldn't its revenue?

    Ken T , says: April 28, 2017 at 5:24 pm
    "Capital investments are at risk of a loss as well as a gain."

    I always have to laugh whenever someone trots out this old chestnut. So what? If there is a loss, then there is no taxable gain. And any loss on one investment is subtracted from any other investment gains. And the degree of "risk" in any investment is balanced off by the expected "return" if it does pay off as expected – the greater the risk, the bigger the return. So the risk factor has already been accounted for. The bottom line is, income is income – no matter where it came from.

    Laualie , says: April 28, 2017 at 5:55 pm
    I have to wonder about the comment made that increased taxes on capital gains will over-stifle investment. An increase will likely have an impact but up to a certain point, it will be less than the current cost to revenue/economy. The question is what point will an increase be too much – and push away those investment dollars to the next best option. Is there something magic about 15% or is there still room above that point?
  • [Apr 30, 2017] Neoliberal economists are against inheritance tax

    Apr 30, 2017 | economistsview.typepad.com

    djb, April 27, 2017 at 05:07 AM

    cochrane

    A VAT (value added tax) with no other tax - no income, corporate, estate, etc. etc. etc. - is pretty much the economists' ideal.

    oh really

    a value added tax is a regressive tax, I don't care how you dress it up

    if you add the complexity of getting partial refunds for the first 10,000 or 20000 or 40000 it remains a regressive tax overall

    if you have to have an overly simplified tax the only fair tax would be a wealth tax

    even a flat wealth tax would work

    reason -> djb... , April 27, 2017 at 05:16 AM
    I sort of wonder why he is against estate taxes (although I prefer to rename them inheritance taxes). I think they are IN GENERAL a good thing. Or does he think relatives are always better managers?
    reason , April 27, 2017 at 05:08 AM
    Normally,
    I steer a wide course around anything from John Cochrane. But I found the idea in this interesting.

    http://johnhcochrane.blogspot.de/2017/04/a-progressive-vat.html

    Of course like the ideas behind progressive consumption taxes in general, I regard them as requiring company taxes, land taxes and inheritance taxes for balance. Growing inequality of wealth is a long term threat that should not be ignored.

    reason , April 27, 2017 at 05:12 AM
    Yes but:
    http://equitablegrowth.org/equitablog/value-added/the-student-loan-crisis-is-fueled-by-a-weak-labor-market/

    It doesn't seem healthy to have a system that only functions well if other conditions are favorable. Given uncertainty in general, anything saddling young people with debts that they may not be able to repay is a bad thing, not just for those young people, but for the whole society. Society should be looking to decrease economic security, not increase it.

    [Apr 30, 2017] Can Tax Cuts Spur Growth?

    Apr 30, 2017 | economistsview.typepad.com
    anne , April 27, 2017 at 05:02 AM
    http://cepr.net/blogs/beat-the-press/can-tax-cuts-spur-growth-46-254

    April 26, 2017

    Can Tax Cuts Spur Growth?: #46,254

    Yes, it's Groundhog Day. Republicans are once again claiming that tax cuts will spur enough economic growth to pay for themselves. Well, old-timers like myself remember Round I and Round II when we tried this grand experiment. It didn't work.

    Round I was under President Reagan when he put in big tax cuts at the start of the presidency. These tax cuts were supposed to lead to a growth surge which would cover the costs of the tax cuts. Not quite, the deficit soared and the debt to GDP ratio went from 25.5 percent of GDP at the end of 1980 to 39.8 percent of GDP at the end of 1988. (It rose further to 46.6 percent of GDP by the end of the first President Bush's term.)

    Round II were the tax cuts put in place by George W. Bush. At the start of the Bush II administration the ratio of debt to GDP was 33.6 percent. It rose to 39.3 percent by the end of 2008.

    In addition to these two big lab experiments with the national economy, we also have a large body of economic research on the issue. This research is well summarized in a study * done by the Congressional Budget Office (CBO) back in 2005 when it was headed by Douglas Holtz-Eakin, a Republican economist who had served as the head of George W. Bush's Council of Economic Advisers.

    I commented ** on this study a few years back:

    "In a model that examined the effects of a 10% reduction in all federal individual income tax rates, the economy was slightly larger in the first five years after the tax cut and slightly smaller in the five years that followed. In this case, using dynamic scoring showed the tax cut costing more revenue than in the methodology the CBO currently uses.

    "The CBO did find that dynamic scoring of the tax cut could have some positive effects if coupled with other policies. In one set of models, policymakers assumed that taxes were raised after 10 years. This led the government to raise more tax revenue in the first 10 years because people knew that they would be taxed more later, so they worked more."

    In short, Holtz-Eakin considered the extent to which tax cuts could plausibly be said to boost growth and found that they had very limit impact on the deficit. The one partial exception, in which growth offset around 30 percent of the revenue lost, was in a story where people expected taxes to rise in the future. In this case, people worked and saved more in the low tax period with the idea that they would work and save less in the higher tax period in the future.

    That is not a story of increasing growth, but rather moving it forward. I doubt that any of the Republicans pushing tax cuts wants to tell people that they better work more now because we will tax you more in the future. But that is the logic of the scenario where growth recaptures at least some of the lost revenue.

    Having said all this, let me add my usual point. The debt to GDP ratio tells us almost nothing. We should be far more interested in the ratio of debt service to GDP (now near a post war low of 1.8 percent).

    Also, if we are concerned about future obligations we are creating for our children we must look at patent and copyright monopolies. These are in effect privately imposed taxes that the government allows private companies to charge as incentive for innovation and creative work. The size of these patent rents in pharmaceuticals alone is approaching $400 billion. This is more than 2 percent of GDP and more than 10 percent of all federal revenue. In other words, it is a huge burden that honest people cannot ignore.

    * https://www.cbo.gov/sites/default/files/109th-congress-2005-2006/reports/12-01-10percenttaxcut.pdf

    ** http://cepr.net/publications/op-eds-columns/what-congress-isnt-seeing-when-the-government-spends

    -- Dean Baker

    anne -> anne... , April 27, 2017 at 05:03 AM
    https://fred.stlouisfed.org/graph/?g=dvmc

    January 30, 2017

    Federal Government Debt as a share of Gross Domestic Product, 1981-1988


    https://fred.stlouisfed.org/graph/?g=dvmn

    January 30, 2017

    Federal Government Debt as a share of Gross Domestic Product, 1989-1992


    https://fred.stlouisfed.org/graph/?g=dvml

    January 30, 2017

    Federal Government Debt as a share of Gross Domestic Product, 2001-2008

    anne -> anne... , April 27, 2017 at 05:12 AM
    https://fred.stlouisfed.org/graph/?g=dvmX

    January 15, 2017

    Federal Government Debt as a share of Gross Domestic Product and Federal Government Interest Payments as a share of Gross Domestic Product, 1980-2016


    https://fred.stlouisfed.org/graph/?g=dvny

    January 15, 2017

    Federal Government Interest Payments as a share of Gross Domestic Product, 1980-2016

    anne -> anne... , April 27, 2017 at 05:14 AM
    http://cepr.net/publications/op-eds-columns/what-congress-isnt-seeing-when-the-government-spends

    January 14, 2015

    What Congress isn't Seeing When the Government Spends
    By Dean Baker

    The U.S. House of Representatives recently adopted a new rule that requires lawmakers to take long-term macroeconomic effects into consideration when deciding how to vote on tax and spending bills. In theory, this could show that tax cuts, particularly for billionaires, boosts the U.S. economy, since expectations of paying fewer taxes would encourage people to work a little harder, leading to more growth that would help offset revenues lost from tax cuts.

    There is some truth to the logic behind this type of forecasting - what policymakers call 'dynamic scoring.' But this approach put forth by the House has little to do with the way the economy actually works. True, lower tax rates do give workers somewhat more incentive to work and save, but serious analysis shows that the impacts of this incentive is small. This was the conclusion that the U.S. Congressional Budget Office reached in 2005 when it examined this issue under economist Douglas Holtz-Eakin. In a model that examined the effects of a 10% reduction in all federal individual income tax rates, the economy was slightly larger in the first five years after the tax cut and slightly smaller in the five years that followed. In this case, using dynamic scoring showed the tax cut costing more revenue than in the methodology the CBO currently uses.

    The CBO did find that dynamic scoring of the tax cut could have some positive effects if coupled with other policies. In one set of models, policymakers assumed that taxes were raised after 10 years. This led the government to raise more tax revenue in the first 10 years because people knew that they would be taxed more later, so they worked more. The House rule, however, does not factor in that taxes could rise in the future.

    In the other set of models, the CBO assumed that government spending was cut by enough in 10 years to make up for the revenue shortfall. This also showed more growth because CBO models assume that cutting government spending will always lead to more growth. The way its models are structured, the less money is spent by the government, the more money will be available for private investment, which will lead to more productivity and growth.

    This raises a far more serious problem. In the scenario just described, the CBO assumes government spending has zero impacts on productivity, meaning that if the government shut down all the schools tomorrow and stopped any spending to maintain or improve America's highways, airports and other infrastructure, the economy would still keep growing. The model assumes no productivity loss from having illiterate workers or dysfunctional roads and airports. It will only show gains, as some portion of the money saved is shifted into private investments.

    To better reflect economic reality, the CBO should incorporate the productivity effects of public investment in it's models. There has been much work done over the years on the productivity of different forms of public investment such as infrastructure, education, and research and development spending. If the CBO incorporated this productivity impact into its economic projections they would provide better predictions of the economic and budgetary impact of policy.

    It would also be reasonable to include honest dynamic scoring of tax policy that includes future tax increases rather than the current House rule, which just includes tax cuts. But as the CBO analysis under Holtz-Eakin showed, this will lead to the opposite outcome desired by right-wing Republicans. It certainly does not make sense to require the CBO to use phony numbers to justify tax cuts for rich people, which appears to be the direction in which the Republican-controlled House is going right now.

    [Apr 30, 2017] Instead of Taxes, Make Corporations Give the Government Stock

    Apr 27, 2017 | economistsview.typepad.com
    anne, April 27, 2017 at 04:55 AM
    http://cepr.net/blogs/beat-the-press/actuallu-curbing-tax-avoidance-by-companies-shifting-profits-overseas-is-not-hard

    April 27, 2017

    Actually Curbing Tax Avoidance by Companies Shifting Profits Overseas Is Not Hard

    The New York Times had an article * discussing various efforts to deal with companies shifting profits overseas to avoid paying the corporate income tax.The piece implies that we don't know how to ensure that companies pay taxes on foreign profits.

    Actually, it is not hard to design a system where companies cannot avoid paying taxes on their foreign profits. If corporations were required to turn over an amount of non-voting shares ** equal to the targeted tax rate (e.g. if we want taxes to be equal to 25 percent of profits, then the non-voting shares should be equal to 25 percent of the total), then it would be almost impossible for companies to escape their tax liability.

    Under this system, the non-voting shares would be treated the same way as voting shares in terms of payouts. If a company paid a $2 dividend on its voting shares, then the government's shares would also get a $2 dividend. If it bought back 10 percent of its shares at $100 a share, it will also buy back 10 percent of the government's shares at $100 a share.

    Under this system there is basically no way for a company to avoid its tax obligations unless it also rips off its own shareholders. In this case, it would be outright fraud and the shareholders would have a large interest in cracking down on its top management.

    It understandable that those who don't want corporations to pay income taxes would be opposed to this sort of non-voting shares system, but it is wrong to say that we don't know how to collect the corporate income tax.

    * https://www.nytimes.com/2017/04/26/business/economy/trump-tax-plan-repatriation.html

    ** http://cepr.net/publications/op-eds-columns/instead-of-taxes-make-corporations-give-the-government-stock

    -- Dean Baker

    anne -> anne... , April 27, 2017 at 04:55 AM
    http://cepr.net/publications/op-eds-columns/instead-of-taxes-make-corporations-give-the-government-stock

    April 10, 2017

    Instead of Taxes, Make Corporations Give the Government Stock
    By Dean Baker - Los Angeles Times

    President Trump and Congress will soon take up the job of reforming the tax code, with particular attention to corporate taxes. Since a substantial portion of the corporate income tax is paid by wealthy shareholders, many of us are concerned that "reform" actually means reducing the tax burden for the 1% - and leaving a larger burden for the rest of us.

    But the need for true reform is real. Although the corporate tax rate is 35%, companies generally pay around 23%. Giant loopholes save companies money, deprive the government of money, and create money for people in the tax avoidance industry.

    Exotic schemes to game the system are constantly in the news.

    Take, for example, the corporate inversion strategy, in which a U.S. company arranges to be taken over by a foreign company in order to eliminate its liability on overseas profits. These takeovers generate large fees for the accountants and lawyers who engineer the process without improving the broader economy.

    "Dead peasant" insurance policies, made famous by the documentarian Michael Moore, are another example. In that scheme, huge companies like Wal-Mart take out insurance policies on the lives of front line workers, such as checkout clerks, to smooth out their profit flows and reduce their tax liability. If a worker dies, the company gets the payout, not the individual or his family. Someone undoubtedly got very rich dreaming up dead peasant policies but, again, this financial innovation does not contribute to economic growth.

    Perhaps the greatest scheme of all is the private equity industry, which loads firms with debt. Because the interest on that debt is tax deductible, private equity firms can make large profits even if they've done nothing to improve a company's performance. Incidentally, many of the richest people in the country made their fortune in private equity, including folks like Mitt Romney, Pete Peterson, and many other prominent billionaires or near-billionaires.

    If the tax reformers are serious, and I hope they are, here's one simple way to largely eliminate the gaming opportunities that have made these people rich.

    Instead of traditional taxes, the government could require corporations to turn over a portion of their stock, say 25%, in the form of non-voting shares. The government would benefit from any dividends or share buybacks but would have no voice in running the company.

    This system would eliminate almost all opportunities for gaming since a company would not be able to deny the government its share of profits unless it also withheld profits from its other shareholders. And we would not call that "tax avoidance" but outright theft – the sort of thing that gets people sent to jail.

    Many companies might actually embrace this system. They would save a huge amount of money on accounting and bookkeeping, and they wouldn't have to take the tax code into consideration when they decided their accounting procedures for long-term investments. They could simply do what makes the most sense for them....

    pgl -> anne... , April 27, 2017 at 05:47 AM
    "it is not hard to design a system where companies cannot avoid paying taxes on their foreign profits. If corporations were required to turn over an amount of non-voting shares ** equal to the targeted tax rate (e.g. if we want taxes to be equal to 25 percent of profits, then the non-voting shares should be equal to 25 percent of the total), then it would be almost impossible for companies to escape their tax liability."

    Dean Baker has made this proposal before. When he did - I said it was a good idea. I've seen a couple of folks questioning this but their questioning of it was the usual misunderstanding if not misrepresentation.

    BenIsNotYoda -> pgl... , April 27, 2017 at 12:16 PM
    That's right. THe government should become a shareholder and then can share in the capital gains when the company does buybacks. They can then use these "on paper" gains to pay for roads "on paper" and pay for healthcare and our army "on paper"

    way to go pgl. Now it is clear you are a junk bond salesman. financial engineering is how we will move this country forward. sarcasm...

    It is clear to me that the centrist democrats like pgl have joined the financial engineering crowd.

    Anyone? anyone?

    Julio -> anne... , April 27, 2017 at 08:06 AM
    Can someone here explain this proposal? I don't understand how this works. We already know that a company makes a profit overseas, and we could tax it instead of deferring those taxes until they repatriate the profit.

    How would paying the tax in stock instead of cash make any difference?

    anne -> Julio ... , April 27, 2017 at 08:18 AM
    We already know that a company makes a profit overseas, and we could tax it instead of deferring those taxes until they repatriate the profit.

    How would paying the tax in stock instead of cash make any difference?

    [ The value of corporate stock is determined by corporate earnings. Whether corporate earnings are domestic and after tax or overseas, whether earnings are distributed or retained make no difference. An increase in overseas earnings then, will increase the value of corporate stock. ]

    Julio -> anne... , April 27, 2017 at 10:47 AM
    OK, I think I understand it now: a corporation would be directly owned by the government; the proportion of ownership would be equal to the desired tax rate.

    But the increase in value does not put cash in the government's pocket. Does the government borrow against the shares? sell them?

    Or, more likely, hang on to the shares and use deficit financing.

    The idea that "this is a simple way to collect all taxes" seems far fetched to me.

    Peter K. -> Julio ... , April 27, 2017 at 09:11 AM
    "We already know that a company makes a profit overseas, and we could tax it instead of deferring those taxes until they repatriate the profit."

    They report profits overseas so they can't be taxed. That's what transfer-pricing is about.

    Julio -> Peter K.... , April 27, 2017 at 10:38 AM
    "Can't" be taxed? That's the part I don't understand. If they can hide their profits, then Baker's proposal will not work either. But if you know their profits, why can't you tax them?

    Right now it seems we know what the profits are, but they don't get taxed until repatriated -- why? Transfer pricing exploits this loophole, but why can't we just close it?

    And, to my original question, how does Baker's proposal make any difference?

    (Inversions are a different thing: after the inversion, it is no longer a US corp, so we can't tax their overseas profits and I don't know if/how we tax any of their US profits.)

    pgl -> Peter K.... , April 27, 2017 at 11:02 AM
    The repatriation tax is not the same thing as transfer pricing. I thought everyone knew that but I guess not you. I'd explain the difference but then you would get all mad and have to piss on some dead man's grave as usual.
    anne -> anne... , April 27, 2017 at 11:00 AM
    http://www.nytimes.com/2016/01/13/opinion/a-progressive-way-to-replace-corporate-taxes.html

    January 12, 2016

    A Progressive Way to Replace Corporate Taxes
    By DEAN BAKER

    Washington - JUST about every American chief executive has the same dream: to get out from under the corporate income tax. For many, that means lobbying Congress to change the tax code. But for a growing number, it also involves increasingly creative - and successful - tricks to avoid their liability.

    The latest fad is inversion. Over the last few years, some of the country's largest companies have arranged to be taken over by smaller companies, conveniently headquartered in the Bahamas or some other tax haven. A company then has to pay tax only in the tax haven; it escapes American corporate income taxes altogether. Pfizer, the huge pharmaceutical company, is currently attempting to go this route, being taken over by a much smaller company with headquarters in low-tax Ireland.

    While it's hard not to admire the ingenuity of these tax-avoidance schemes, their success is a big problem for federal revenues. Though the United States has the highest statutory corporate income tax in the developed world, write-offs and loopholes have eroded the government's take for decades. Corporate income taxes were just 1.9 percent of gross domestic product in 2014. That is down from an average of 2.6 percent in the 1970s, even though profits are near a postwar high as a share of national income.

    The Obama administration is looking into ways to crack down on inversions, but it's a losing battle. Other tricks will be found. Which leaves us with two paths forward. If we get less money from corporations, we have to make up the shortfall from other sources of revenue, almost all of which will be more regressive than the corporate income tax. Or we can come up with a radically new approach to corporate taxation....

    [Apr 28, 2017] Niccolò Machiavelli could hardly have done better himself

    Apr 28, 2017 | economistsview.typepad.com
    reason

    , April 28, 2017 at 02:07 AM
    Larry Summers bit:

    https://www.washingtonpost.com/news/wonk/wp/2017/04/27/larry-summers-trump-is-undermining-his-own-treasury-secretary/#pq=Amqmri

    mmm.. It is a bit hard to feel sorry for "Munchin". But I don't know what the surprise is - in Trump's cabinet everybody undermines everybody else. It is absolutely par for the course. Hasn't he noticed?

    The reason is obvious. Trump hasn't a clue what he is doing, and he likes to play one advisor off against another. In order to protect themselves they do likewise.

    RC AKA Darryl, Ron -> reason ... , April 28, 2017 at 04:24 AM
    Niccolò Machiavelli could hardly have done better himself.
    paine -> reason ... , April 28, 2017 at 05:54 AM
    These tax jubilees are
    a GOP specialty

    Their donor class always wins

    paine -> paine... , April 28, 2017 at 06:01 AM
    Final Class tax burden shares
    are hard
    to calculate most tax cuts are
    guided by immediate shock effects
    not long run system wide adjustments to the tax change shock

    Bottom line next years tax bill
    not long run social Welfare

    paine -> paine... , April 28, 2017 at 06:03 AM
    All tax changes are short run in the long run
    live for tomorrow not the next generation
    paine -> paine... , April 28, 2017 at 06:08 AM
    A massive ten trillion dollar
    one time levy on the super rich modeled
    On the trump tax
    the donald himself
    proposed back in 1999
    paine -> paine... , April 28, 2017 at 06:10 AM
    A one time claw back
    from the fraudster class
    behind the infamous
    trickle down heist
    pgl -> paine... , April 28, 2017 at 06:23 AM
    $10 trillion! Love it. That would pay for a lot of infrastructure investment which in NYC is needed now.
    paine -> pgl... , April 28, 2017 at 06:49 AM
    Exactly. So

    Green the production system

    pgl -> paine... , April 28, 2017 at 06:22 AM
    Their donor class gets most of its income from capital income. Which is why they really love gutting taxation on capital. Better for the Hampton crowd to tax labor income or impose sales taxes. Only little people pay taxes in their world.
    RC AKA Darryl, Ron -> paine... , April 28, 2017 at 06:33 AM
    "These tax jubilees are
    a GOP specialty

    Their donor class always wins"

    [Yep, but tax breaks are a twofer, very effective dividends for the donor class while still popular among the weebles as long as we gets a little out of them too. Democrats are too noble (cough, cough) to ever raise taxes on corporations and the wealthy while cutting taxes below the median income or so.]

    Peter K. -> RC AKA Darryl, Ron... , April 28, 2017 at 06:44 AM
    Yes it's interesting and sad that Clinton/Obama were never able raise taxes back up to their pre-Reagan levels.
    paine -> Peter K.... , April 28, 2017 at 06:55 AM
    Clinton cut cap gains taxes
    pgl -> paine... , April 28, 2017 at 07:37 AM
    Of course he was referring to the marginal rate on income taxes. Thanks for reminding us that overall taxation is a lot more than that.
    RC AKA Darryl, Ron -> Peter K.... , April 28, 2017 at 07:01 AM
    Yep. You could even say that it sucks. I wonder what that will cost me?
    paine -> RC AKA Darryl, Ron... , April 28, 2017 at 06:54 AM
    Yes a tax burden class shift
    of biblical proportions
    RC AKA Darryl, Ron -> paine... , April 28, 2017 at 07:00 AM
    Yes sir.

    [Apr 28, 2017] A Modest Tax Proposal

    Apr 28, 2017 | www.nakedcapitalism.com
    allan , April 26, 2017 at 2:57 pm

    A Modest Tax Proposal [NYT, annotated]:

    The Trump administration would double the standard deduction, essentially eliminating taxes on the first $24,000 of a couple's earnings. It also called for the elimination of most itemized tax deductions [drop dead, NY, CA and IL] but would leave in place the popular deductions for mortgage interest and charitable contributions. The estate tax and the alternative minimum tax, which Mr. Trump has railed against for years [because, as David Cay Johnston showed using DJT's 2005 return, it does what it's supposed to do], would be repealed under his plan.

    The plan would include a special one-time tax [just kidding – GWB did the same thing, with predictable results that did not include a jobs boom] to entice companies to repatriate cash that they are parking overseas.

    Mr. Trump also signaled support for changes to the tax code that would help families with child-care costs. His plan also would end the 3.8 percent tax on investment income [ka-ching!] that was imposed by the Affordable Care Act.

    Beyond cutting the tax rate to 15 percent for large corporations, which now pay a rate of 35 percent, Mr. Trump also wants that rate for a broad range of firms known as pass-through entities - including hedge funds, real estate concerns like Mr. Trump's and large partnerships [i.e., working stiffs] - that currently pay taxes at individual rates, which top off at 39.6 percent.

    Acknowledging concerns that such a move could potentially be used as a tax shelter, Mr. Mnuchin insisted on Wednesday that the administration's plan would not be used as a loophole to allow people to pay less tax than they should be paying. [And you can take Mr. Mnuchin's word to the bank. Just ask the customers victims of OneWest.]

    The concern would be that lawyers, doctors, consultants or other wealthy people in partnerships could structure much of their personal income as business income, effectively reducing their tax rate from 39.6 percent to 15 percent. [As could anybody else – just ask your employer to fire you and hire you back as a Chapter S corporation.]

    Vatch , April 26, 2017 at 3:28 pm

    The concern would be that lawyers, doctors, consultants or other wealthy people in partnerships could structure much of their personal income as business income, effectively reducing their tax rate from 39.6 percent to 15 percent.

    I'm confused. I thought that S corporations did not pay income taxes (they do pay FICA taxes for employees, etc.), because they pass through all profits to the individuals, trusts, or charities that own the corporation. The individuals then pay regular income tax at the individual tax rate, not the corporate rate. Have I misunderstood how this works?

    MyLessThanPrimeBeef , April 26, 2017 at 3:40 pm

    You can't spend business income like you can with your personal income.

    A bit tricky if you want to buy a fur coat, say.

    Carla , April 26, 2017 at 5:40 pm

    "double the standard deduction, essentially eliminating taxes on the first $24,000 of a couple's earnings."

    Now, if the first $24,000 of earnings were exempted from FICA, with those "earning" over $200,000 paying double FICA on everything over $24,000 just to keep Social Security well-funded and healthy, you might actually be talking about a stimulus for the economy. [I put "earning" in quotes because very, very few people could actually EARN more than $200 grand in a year.]

    But I doubt that's what Mnuchin and company have in mind.

    [Apr 27, 2017] Actually Curbing Tax Avoidance by Companies Shifting Profits Overseas Is Not Hard

    Apr 27, 2017 | economistsview.typepad.com
    anne

    , April 27, 2017 at 04:55 AM
    http://cepr.net/blogs/beat-the-press/actuallu-curbing-tax-avoidance-by-companies-shifting-profits-overseas-is-not-hard

    April 27, 2017

    Actually Curbing Tax Avoidance by Companies Shifting Profits Overseas Is Not Hard

    The New York Times had an article * discussing various efforts to deal with companies shifting profits overseas to avoid paying the corporate income tax.The piece implies that we don't know how to ensure that companies pay taxes on foreign profits.

    Actually, it is not hard to design a system where companies cannot avoid paying taxes on their foreign profits. If corporations were required to turn over an amount of non-voting shares ** equal to the targeted tax rate (e.g. if we want taxes to be equal to 25 percent of profits, then the non-voting shares should be equal to 25 percent of the total), then it would be almost impossible for companies to escape their tax liability.

    Under this system, the non-voting shares would be treated the same way as voting shares in terms of payouts. If a company paid a $2 dividend on its voting shares, then the government's shares would also get a $2 dividend. If it bought back 10 percent of its shares at $100 a share, it will also buy back 10 percent of the government's shares at $100 a share.

    Under this system there is basically no way for a company to avoid its tax obligations unless it also rips off its own shareholders. In this case, it would be outright fraud and the shareholders would have a large interest in cracking down on its top management.

    It understandable that those who don't want corporations to pay income taxes would be opposed to this sort of non-voting shares system, but it is wrong to say that we don't know how to collect the corporate income tax.

    * https://www.nytimes.com/2017/04/26/business/economy/trump-tax-plan-repatriation.html

    ** http://cepr.net/publications/op-eds-columns/instead-of-taxes-make-corporations-give-the-government-stock

    -- Dean Baker

    anne -> anne... , April 27, 2017 at 04:55 AM
    http://cepr.net/publications/op-eds-columns/instead-of-taxes-make-corporations-give-the-government-stock

    April 10, 2017

    Instead of Taxes, Make Corporations Give the Government Stock
    By Dean Baker - Los Angeles Times

    President Trump and Congress will soon take up the job of reforming the tax code, with particular attention to corporate taxes. Since a substantial portion of the corporate income tax is paid by wealthy shareholders, many of us are concerned that "reform" actually means reducing the tax burden for the 1% - and leaving a larger burden for the rest of us.

    But the need for true reform is real. Although the corporate tax rate is 35%, companies generally pay around 23%. Giant loopholes save companies money, deprive the government of money, and create money for people in the tax avoidance industry.

    Exotic schemes to game the system are constantly in the news.

    Take, for example, the corporate inversion strategy, in which a U.S. company arranges to be taken over by a foreign company in order to eliminate its liability on overseas profits. These takeovers generate large fees for the accountants and lawyers who engineer the process without improving the broader economy.

    "Dead peasant" insurance policies, made famous by the documentarian Michael Moore, are another example. In that scheme, huge companies like Wal-Mart take out insurance policies on the lives of front line workers, such as checkout clerks, to smooth out their profit flows and reduce their tax liability. If a worker dies, the company gets the payout, not the individual or his family. Someone undoubtedly got very rich dreaming up dead peasant policies but, again, this financial innovation does not contribute to economic growth.

    Perhaps the greatest scheme of all is the private equity industry, which loads firms with debt. Because the interest on that debt is tax deductible, private equity firms can make large profits even if they've done nothing to improve a company's performance. Incidentally, many of the richest people in the country made their fortune in private equity, including folks like Mitt Romney, Pete Peterson, and many other prominent billionaires or near-billionaires.

    If the tax reformers are serious, and I hope they are, here's one simple way to largely eliminate the gaming opportunities that have made these people rich.

    Instead of traditional taxes, the government could require corporations to turn over a portion of their stock, say 25%, in the form of non-voting shares. The government would benefit from any dividends or share buybacks but would have no voice in running the company.

    This system would eliminate almost all opportunities for gaming since a company would not be able to deny the government its share of profits unless it also withheld profits from its other shareholders. And we would not call that "tax avoidance" but outright theft – the sort of thing that gets people sent to jail.

    Many companies might actually embrace this system. They would save a huge amount of money on accounting and bookkeeping, and they wouldn't have to take the tax code into consideration when they decided their accounting procedures for long-term investments. They could simply do what makes the most sense for them....

    pgl -> anne... , April 27, 2017 at 05:47 AM
    "it is not hard to design a system where companies cannot avoid paying taxes on their foreign profits. If corporations were required to turn over an amount of non-voting shares ** equal to the targeted tax rate (e.g. if we want taxes to be equal to 25 percent of profits, then the non-voting shares should be equal to 25 percent of the total), then it would be almost impossible for companies to escape their tax liability."

    Dean Baker has made this proposal before. When he did - I said it was a good idea. I've seen a couple of folks questioning this but their questioning of it was the usual misunderstanding if not misrepresentation.

    [Apr 09, 2017] Fiscal stimulus to offset a recession vs the part caused by the recession. His point was simply the extent of fiscal stimulus during the Great Depression was a lot less than the rise in the actual deficit

    Apr 09, 2017 | economistsview.typepad.com
    pgl

    , April 08, 2017 at 10:08 AM
    It is time to bring up the excellent 1954 paper by E. Cary Brown and relate it to a couple of discussions here today:

    https://www.jstor.org/stable/1811908?seq=1#page_scan_tab_contents

    His paper provided a means for separating increases in the deficit into the part that represents fiscal stimulus to offset a recession v. the part caused by the recession. His point was simply the extent of fiscal stimulus during the Great Depression was a lot less than the rise in the actual deficit.

    Pinkybum earlier wrote:

    "Debt as a percentage of GDP has doubled since 2009 so that has provided some relief."

    Yes – we did have some stimulus in 2009 but not as much as reflected by the size of the deficit. But let's not pick on him but cite something Max Sawicky wrote (in an otherwise great piece):
    "Now here we are, in 2017, after the Obama Administration has brought the deficit down from $1.5 trillion in Fiscal Year 2009 to $621 billion in FY2016"

    Max is rightfully complaining about the 2011 shift to fiscal austerity. But he is very aware of Brown's paper and its logic. Some of this decline in the deficit came from an economy that had actually grown somewhat.

    Fiscal stimulus (austerity) is not well captured by simply looking at the rise (fall) in the deficit. Brown's paper was written 62 years ago. Some folks need to finally read it.

    Pinkybum -> pgl... , April 08, 2017 at 10:28 AM
    My point wasn't to say that the debt increased therefore everything was OK. You also can't just look at the nominal deficit and know what is going on. Back in Obama's first term unemployment was sky high and that is the reason we needed to run deficits. How high should the deficits be? Enough to employ all the people who want to be employed and that is true regardless of whether there is a recession.

    Why do we need to run deficits to keep people employed? The answer must lie in the distribution of earnings which go to rich who have a lower propensity to spend and therefore the economy activity is too low to support full employment.

    That's my two cents now I will go and read the paper.

    Pinkybum -> Pinkybum... , April 08, 2017 at 10:29 AM
    Paywall - dammit!
    anne -> Pinkybum... , April 08, 2017 at 10:45 AM
    https://campus.fsu.edu/bbcswebdav/users/jcalhoun/Courses/Growth_of_American_Economy/Chapter_Supplemental_Readings/Chapter_23/Brown-Fiscal_Policy_in_the_Thirties.pdf

    December, 1956

    Fiscal Policy in the 'Thirties: A Reappraisal
    By E. Cary Brown

    [Apr 09, 2017] Consumption taxes are highly regressive

    Apr 09, 2017 | economistsview.typepad.com
    pgl -> Peter K.... , April 08, 2017 at 10:11 AM
    "What really matters in all of this is how many dollars you are scraping from poor, middle class, and rich people. Consumption taxes scrape more dollars from people who consume more and it is the rich who consume more.

    According to the 2015 Consumer Expenditure Survey, the richest income quintile consumes an average of $110,424 while the poorest income quintile consumes an average of just $24,355. A 10 percent consumption tax would thus draw $2,435 from the poorest quintile and $11,042 from the richest quintile. Which is to say that such a tax draws 4.5 times as much money from the rich as the poor."

    This is an incredibly bad metric. If the rich have incomes that an 10 times more than the poor, then this statistic shows how regressive the tax is - not how progressive it is.

    You do highlight some really dumb discussions.

    Chris Lowery said in reply to Peter K.... , April 08, 2017 at 09:00 PM
    Peter using the numbers from the 2015 CES cited by Bruenig, and his prototypical 10% flat consumption tax, the average person in the top quintile would pay roughly $11,042, or roughly 6.2% of their pre-tax income, while the average person in the bottom quintile would pay $2,435, or roughly 22.3% of their pre-tax income. Presumably that person in the bottom quintile is also the recipient of substantial non-cash income, enabling them to consume more than their earnings. Nonetheless, anyway you slice it, a flat consumption tax as in Bruenig's overly simplistic example seems to be obviously very regressive.
    yuan -> pgl... , April 08, 2017 at 10:43 AM
    "What really matters in all of this is how many dollars you are scraping from poor, middle class, and rich people."

    Sounds like a good argument for a flat tax. The CATO institute would approve.

    Peter K. -> pgl... , April 08, 2017 at 10:43 AM
    " If the rich have incomes that an 10 times more than the poor, then this statistic shows how regressive the tax is - not how progressive it is."

    If the money is being funneled back to the poor and the middle class it shows how much more money the tax is collecting.

    libezkova -> pgl... , April 08, 2017 at 03:22 PM
    May be if you refund them up to a certain income for household (so that low income folk are exempt) and introduce Veblen goods tax they are not that bad.

    [Apr 09, 2017] Why Consumption Taxes are Fine

    Apr 09, 2017 | economistsview.typepad.com
    Peter K. , April 08, 2017 at 08:45 AM
    http://mattbruenig.com/2017/04/05/why-consumption-taxes-are-fine/

    Why Consumption Taxes are Fine

    by Matt Bruenig
    Posted on April 5, 2017

    In my last post, I said that it would be good if the US imposed a consumption tax such as the value-added tax (VAT). Critics generally say that these kinds of taxes are bad because they are "regressive." While it is true that they are regressive under the way that word is generally used, that entire way of thinking about taxes is confused and muddled (as I've discussed previously in the case of the Nordics).

    The standard response to those who raise the regressivity objection is to say that it just depends on how the proceeds of the consumption tax are spent. This is true, but only because it is true of all taxes. Even progressive taxes are only good if the proceeds are spent well. You could spend them on bad things and even in ways that make inequality worse.

    The bigger problem with the regressivity objection, in my view, is that dividing taxes paid by income seems to obscure the more important point. What really matters in all of this is how many dollars you are scraping from poor, middle class, and rich people. Consumption taxes scrape more dollars from people who consume more and it is the rich who consume more.

    According to the 2015 Consumer Expenditure Survey, the richest income quintile consumes an average of $110,424 while the poorest income quintile consumes an average of just $24,355.

    A 10 percent consumption tax would thus draw $2,435 from the poorest quintile and $11,042 from the richest quintile. Which is to say that such a tax draws 4.5 times as much money from the rich as the poor.

    Whether the money drawn from the consumption tax ultimately reduces inequality does depend on how it is spent, but it is not like it needs to be spent in an especially "progressive" way, i.e. in a way that is heavily targeted towards the poor. Even if you spent this money in a way that benefited all quintiles equally, you'd still see a pretty significant net swing.

    Of course, this graph features a rather simplistic analysis as it assumes consumption does not change at all in response to the tax and benefit reforms. But even if the precise figures would be somewhat different in a real life implementation, the basic pattern of the graph above would still hold.

    None of this is to say that a consumption tax is better than other taxes. The US has plenty of room to increase its tax level by upping income taxes, and so that's a natural place to look. But to say consumption taxes are bad generally is pretty clearly mistaken.

    pgl -> Peter K.... , April 08, 2017 at 10:11 AM
    "What really matters in all of this is how many dollars you are scraping from poor, middle class, and rich people. Consumption taxes scrape more dollars from people who consume more and it is the rich who consume more.
    According to the 2015 Consumer Expenditure Survey, the richest income quintile consumes an average of $110,424 while the poorest income quintile consumes an average of just $24,355. A 10 percent consumption tax would thus draw $2,435 from the poorest quintile and $11,042 from the richest quintile. Which is to say that such a tax draws 4.5 times as much money from the rich as the poor."

    This is an incredibly bad metric. If the rich have incomes that an 10 times more than the poor, then this statistic shows how regressive the tax is - not how progressive it is.

    You do highlight some really dumb discussions.

    libezkova -> pgl... , April 08, 2017 at 03:22 PM
    May if you refund them up to certain income for household (so that low income folk are exempt) and introduce Veblen goods tax they are not that bad.

    [Apr 09, 2017] Pass the Popcorn for Republican Tax Reform

    Apr 09, 2017 | economistsview.typepad.com
    Peter K. , April 08, 2017 at 08:44 AM
    http://democracyjournal.org/briefing-book/pass-the-popcorn-for-republican-tax-reform/

    Pass the Popcorn for Republican Tax Reform

    On the fallacy of Trump's so-called "border adjustment tax," and the Republican civil war it might spark.

    BY MAX B. SAWICKY FROM APRIL 7, 2017

    The history of the world used to be the history of class struggle. Now the history of the world seems to be the back-and-forth over the taxation of the 1 percent. Over the decades, federal income tax rates have changed less for the vast middle class than they have for the rich. In the fabulous 1950s, the top marginal rate in the personal income tax was 91 percent. Now it's just under 40 percent. Meanwhile, the contribution of corporate income taxes to federal revenue has gone down while that of the payroll tax has gone up. And I needn't have to remind you that the share of pre-tax income claimed by the rich has skyrocketed.

    This has been a bipartisan exercise, but for the Republican Congress, the work of lubricating the lubricated is still not done. Under the Clinton Administration, budget deficits were fought at great political cost and eliminated by the end of the 1990s. This amounted to a swell gift to the incoming Republican Administration after the (s)election of 2000: namely, an opportunity to cut taxes and jump the deficit right back up. Which of course they did.

    Now here we are, in 2017, after the Obama Administration has brought the deficit down from $1.5 trillion in Fiscal Year 2009 to $621 billion in FY2016, again at great political cost. You don't have to think very hard to guess what the Republican majority in Congress is up to next. But there is still one problem.

    The Republican Congress came in on the coattails of a different kind of Republican. While Donald Trump has been surrendering his populist commitments like clockwork, he appears to still be of a mind to do something about trade, an issue which might have been his strongest political card in the primaries and general election. He has undone Obama's Trans-Pacific Partnership, the infamous TPP, but he is half-stepping on killing the North American Free Trade Agreement. Moreover, replacing a single omnibus trade deal like the TPP with a plethora of individual deals, one country at a time, will be a gargantuan, time-consuming task, of which the results will likely be a long way into the future. What's left? Taxes. And the President has decided that he wants to tax imports.

    The leading vehicle for Trump's efforts to advantage U.S. manufacturing is the so-called "border adjustment tax," known to wonks as the "Destination-Based Cash Flow Tax" (DBCFT). Since there seem to be no plans to invade Mexico yet, it is not the border that would be adjusted, just the taxation of imports and exports.

    Less remarked about the DBCFT is that it repeals-and-replaces the U.S. corporate income tax. More specifically, it eliminates the tax on most corporate income and, supposedly, recovers the revenue by taxing imports. Yet the effective tax rate on capital (dividends, interest, rent, capital gains) is reduced to zero. It is truly the populism of fools.

    The fun part is that to minimize the increase of federal deficits, after Trump's months of ranting about the national debt, the DBCFT makes itself affordable by goring the ox of firms in the business of selling imported goods. This includes all the big retailers such as Walmart and Target, but also industries that import raw materials for further processing. Among the latter is the petrochemical sector. What this means is that the DBCFT is setting off a civil war among conservative tax-cutters.

    The sides line up roughly in the same way they did for health care. The border tax was hatched in the House under the tutelage of House Speaker Paul Ryan. The White House, especially trade militants like Steven Bannon and Peter Navarro, is on board. On the other side is a parade of astro-turfy opposition groups and allied corporate interests, including the formidable Koch network. Sound familiar? This was the same gang that killed Ryan's replacement for Obamacare. So we have reason to think we may already know how this will end.

    A relatively accessible discussion of the DBCFT by Alan Auerbach and friends can be found at the Center for American Progress. Auerbach describes it compactly (and misleadingly, see below) as "a tax on consumption from sources other than wages and salaries." This description may actually appeal to some liberals. Like the original Hall-Rabushka flat tax, it's actually an elegant idea. It simplifies the taxation of corporations and it might reduce tax avoidance. It could raise a great deal of money if the tax rate is kept close to the current one.

    On the minus side, it makes the distribution of the tax burden less progressive, and under Republican authorship it is unlikely to raise any net revenue. If history is any guide, we can count on the contrary. Oh, and the DBCFT is probably illegal under existing trade agreements.

    But, more than that, Auerbach's claim that the tax only falls on consumption by recipients of capital income (dividends, interest, rent, capital gains) is misleading or wrong for four reasons:

    The notion that wages escape taxation rests on the counterfactual wherein wages are part of the firm's tax base, as under a value-added tax (VAT). But the actual counterfactual in force is the U.S. corporate income tax (CIT), which does not include wages in the tax base. Compared to the CIT, there is in fact a shift in tax burden to wages used for the consumption of imports.

    At the time the new tax takes effect, those who have savings based on wages do in fact bear the tax insofar as they purchase imported goods, or goods that require imported materials for manufacture. Only until they are all literally dead will it be true that, in Auerbach's sense (but see #1), only non-wage income is taxed when it is used for consumption.

    Those with non-wage income who are not necessarily rich recipients of capital income, such as food stamp beneficiaries, also bear the burden of the tax on imports.

    So too do workers bear the burden of the tax who reap above "normal" returns to investments based on their wages.

    In summary, Paul Ryan's tax cut vehicle is a target-rich environment for critics, many of whom will be found in his own caucus. Nor can he expect much relief from his Democratic counterparts.

    Make that with butter but no salt, thanks.

    pgl -> Peter K.... , April 08, 2017 at 08:44 AM
    Max Sawicky is excellent as always. You should read this paragraph over and over until it finally gets through:

    'Less remarked about the DBCFT is that it repeals-and-replaces the U.S. corporate income tax. More specifically, it eliminates the tax on most corporate income and, supposedly, recovers the revenue by taxing imports. Yet the effective tax rate on capital (dividends, interest, rent, capital gains) is reduced to zero. It is truly the populism of fools.'

    [Apr 08, 2017] Tax reform looks like a bust

    Apr 08, 2017 | economistsview.typepad.com
    Peter K. , April 07, 2017 at 06:48 AM
    "Tax reform looks like a bust"

    It's because they're trying to raise taxes with the DBCTF/BAT to somewhat offset the tax cuts for the rich and corporations. Glibertarians and the Freedom Caucus want nothing but tax cuts and to drown the baby. Plus the BAT would raise taxes on importers like Walmart and the Koch brothers who have been fighting it.

    If you just read PGL the Facile you wouldn't understand any of this, just "the Republicans are proposing tax reform so you should oppose it" like you're a dumb trained monkey.

    This will probably upset Darryl and PGL the Facile:

    http://mattbruenig.com/2017/04/05/why-consumption-taxes-are-fine/

    Why Consumption Taxes are Fine

    Author Matt Bruenig
    Posted on April 5, 2017

    In my last post, I said that it would be good if the US imposed a consumption tax such as the value-added tax (VAT). Critics generally say that these kinds of taxes are bad because they are "regressive." While it is true that they are regressive under the way that word is generally used, that entire way of thinking about taxes is confused and muddled (as I've discussed previously in the case of the Nordics).

    The standard response to those who raise the regressivity objection is to say that it just depends on how the proceeds of the consumption tax are spent. This is true, but only because it is true of all taxes. Even progressive taxes are only good if the proceeds are spent well. You could spend them on bad things and even in ways that make inequality worse.

    The bigger problem with the regressivity objection, in my view, is that dividing taxes paid by income seems to obscure the more important point. What really matters in all of this is how many dollars you are scraping from poor, middle class, and rich people. Consumption taxes scrape more dollars from people who consume more and it is the rich who consume more.

    According to the 2015 Consumer Expenditure Survey, the richest income quintile consumes an average of $110,424 while the poorest income quintile consumes an average of just $24,355.

    A 10 percent consumption tax would thus draw $2,435 from the poorest quintile and $11,042 from the richest quintile. Which is to say that such a tax draws 4.5 times as much money from the rich as the poor.

    Whether the money drawn from the consumption tax ultimately reduces inequality does depend on how it is spent, but it is not like it needs to be spent in an especially "progressive" way, i.e. in a way that is heavily targeted towards the poor. Even if you spent this money in a way that benefited all quintiles equally, you'd still see a pretty significant net swing.

    Of course, this graph features a rather simplistic analysis as it assumes consumption does not change at all in response to the tax and benefit reforms. But even if the precise figures would be somewhat different in a real life implementation, the basic pattern of the graph above would still hold.

    None of this is to say that a consumption tax is better than other taxes. The US has plenty of room to increase its tax level by upping income taxes, and so that's a natural place to look. But to say consumption taxes are bad generally is pretty clearly mistaken.

    Peter K. -> Peter K.... , April 07, 2017 at 06:51 AM
    The smarter glibertarians like Dan Mitchell understand this which is why they oppose the DBCFT and why it will fare about as well as the Republicans' health care reform.

    That's the basic point of Krugmans' column which is correct. Republicans' policies aren't that popular. Lucky for them the Democrats put up bad candidates like Hillary Clinton to run against them. Lucky for them center-left economists like Krugman shill for Hillary and attack their own side with their dishonest campaign against Sanders.

    pgl -> Peter K.... , April 07, 2017 at 07:32 AM
    Dan Mitchell and you agree on one thing - you are both supporting the end of the corporate profits tax. Oh - you don't get the point that that is what DBCFT does? Go figure!
    Peter K. -> pgl... , April 07, 2017 at 09:14 AM
    I don't support the end of the corporate profits tax. I don't support the DBCFT. I supported Bernie Sanders who advocated higher taxes than Hillary, your gal. You attacked Sanders and his supporters unfairly, calling them Bernie Bros and "unrealistic."

    PGL the Facile, all he does is lie.

    pgl -> Peter K.... , April 07, 2017 at 09:31 AM
    For the 20 millionth time - I never attacked Senator Sanders. And for someone who does not support Ryan's little fraud - you spend a lot of time hyping it. Of course your hype is even dumber than his hype.
    Peter K. -> pgl... , April 07, 2017 at 09:25 AM
    Dan Mitchell the glibertarian points out how in Europe the VAT kept going up and up funding a larger and larger welfare state. That's why the Glibs oppose the Ryan plan, kind of like how the Freedom Caucus opposed Ryan's Obamacare Lite.

    If you just read PGL the Facile, you wouldn't understand these intricacies.

    pgl -> Peter K.... , April 07, 2017 at 09:44 AM
    Europe has VAT and a corporate profits tax. This DBCFT you tout so much would have VAT and a zero profits tax rate.

    What part of this simple scenario do you not get? Oh wait - you get none of it.

    BenIsNotYoda -> pgl... , April 07, 2017 at 11:49 AM
    What is the corporate tax good for? If corporations don't pay taxes (zero tax rate), extra earnings will just flow through to the owners as dividends that they will pay tax on. Explain how having an additional layer of taxes to get basically the same amount is good?

    I would think not taxing the means of production would be better for jobs. If they pass the whole thing on to the owners, it will get taxed there (just like partnerships and individual ownership firms)

    pgl -> BenIsNotYoda... , April 07, 2017 at 12:29 PM
    "If corporations don't pay taxes (zero tax rate), extra earnings will just flow through to the owners as dividends that they will pay tax on."

    Seriously? I see you don't get how it easy it is for owners of capital to dodge these taxes with our Swiss cheese tax code. Now if we taxed all income as it accrues at the same rate that we tax labor income - progressives might drop the call for corporate taxes. You think Paul Ryan will go along with my proposal?

    BenIsNotYoda -> pgl... , April 07, 2017 at 12:39 PM
    " I see you don't get how it easy it is for owners of capital to dodge these taxes with our Swiss cheese tax code."

    This is a serious question pgl. Somehow I do not see how owners of capital - aka owners of shares - individuals, pension funds etc are ANY MORE ABLE TO DODGE taxes than the companies themselves.

    Simplify the tax code, get rid of loopholes. Make capital gains and income the same rate. Get rid of special treatment of everything including interest paid on housing. Get rid of the entire corporate tax code and replace sales taxes with VAT. Sounds very logical to me.

    [Apr 07, 2017] The 80s were a decade of decline, but so was the 00s, except the 00s started from a lower base so fewer people were impoverished in the 80s, with working class made lower middle class. The 00s made lower middle class into working poor.

    Apr 07, 2017 | economistsview.typepad.com

    pgl said in reply to kurt... Thursday, April 06, 2017 at 09:44 AM

    The 1982 recession was the largest one we had since the Great Depression. Resulting in a boom? That is almost as dumb as that PeterK rant above.

    mulp said in reply to pgl... Thursday, April 06, 2017 at 10:08 AM

    Until the Great Recession that the Bush-Cheney job killing tax cuts created since 2001.....

    I bought a house in 1980, paying an initial rate of 19+% on a variable rate mortgage, but the economy was better from 1980 to 1983 than it was from 2000 to 2003.

    Granted, job killing falling energy prices made the economy get worse through the 80s, making Texas and neighboring States suffer economic decline for the working class, compounded by the declines for older professions from tax cut driven cuts in investment.

    But the 21st century has been the 80s on steroids, except in 1980, the real value median wealth was much higher than in 2000. In 1980, people still paid off their mortgages and had a mortgage burning party. Thanks to the free lunch economics ushered in by Reagan, in 2000 people had lavish cash out refi parties to celebrate their new 30 year mortgage that is larger than the price they paid for the home 20 years earlier.

    (I had lots of coworkers, engineers with incomes circa $100K telling me I should refi instead of paying off my 14 year old 30 year mortgage in the run up to 2000 to go shopping, go on a cruise, expand my house, invest in the stock market to get rich. I was kicking myself for failing to sell my stocks in 1986 and paying lots in capital gains taxes to pay cash for my current house I bought that year instead of borrowing 70% of the cost. By 1987, my stocks and my house were priced 30% less than in 1986. Oddly, objectively, both were more valuable - ie my housing costs, ie spending, was lower, and the corporation was generating more free cash and making more investments in cutting edge tech.)

    The 80s were a decade of decline, but so was the 00s, except the 00s started from a lower base so fewer people were impoverished in the 80s, with working class made lower middle class. The 00s made lower middle class into working poor.

    At least in the 80s, most people believed you created wealth by building stuff by paying workers. Republicans believed that. By the 00s, the dominant believe was wealth is created by not paying workers so assets become scarcer and inflate in price. Look at the horrible outcome in places thousands of houses were built compared to California where real estate prices simply inflated during the 00s. As soon as all those new houses failed to inflate in price as fast as California houses inflated in price, the housing market cratered and it is still dragging down those regions. California hardly hiccuped.

    We have the contrast of the tight credit 1930 to 1980 vs the easier and easier credit since 1980. The former forced Congress and State government to force money be spent paying workers, by making those with money worse off it they failed to pay workers by taking their money and paying workers.

    The latter has rewarded not paying workers by providing easy credit to promote bidding up and buying existing assets and then thwarting those trying to build new assets that will drive down the assets you own to prices below your debt.

    Think about the incentives for real estate agents in the greater Detroit area since 1980. They steer people looking for housing away from the low priced, high value Detroit houses, to low value, high priced housing in the suburbs that require borrowing lots more money. This has driven down prices in Detroit making lending to Detroit home buyers extremely risky, but the inflating prices of lower value housing in the suburbs making lending seem safer.

    Without easy credit since 1980, people looking for housing would have been forced to buy in Detroit because it was what they could afford. Housing prices would not have inflated in the 80s or 00s to then crash. Billions would not have been borrowed building infrastructure with debt that today needs investment, yet a lot of the debt from Federal funding by debt is still existing.

    pgl said in reply to kurt... Thursday, April 06, 2017 at 10:12 AM

    I see what you are referring to - this caption under the picture of St. Reagan:

    'Ronald Reagan signing the Tax Reform Act of 1986, the second of two tax cuts during his administration. The reductions were widely, perhaps optimistically, credited with spurring growth.'

    You are right about that the 1981 tax cut. As far as the 1986 tax reform act - it was revenue neutral. Tax cuts for the rich and big tax increases for the middle class. Whoever wrote that caption did a great disservice to the actual story.

    Peter K. said in reply to pgl...

    Bush Jr. did tax cuts with Alan Greenspan's blessing, and it didn't spur growth. Greenspan did give us a housing bubble though.

    [Mar 23, 2017] Understanding the Republicans' corporate tax reform

    Mar 23, 2017 | economistsview.typepad.com
    RC AKA Darryl, Ron : March 22, 2017 at 04:28 AM , 2017 at 04:28 AM
    [Maybe Brookings also needs to be taken with a grain of salt, but this is the best article on the DBCFT that I have found so far.]


    https://www.brookings.edu/opinions/understanding-the-republicans-corporate-tax-reform/

    Understanding the Republicans' corporate tax reform

    William G. Gale·

    Tuesday, January 10, 2017

    Republicans in the House are proposing sweeping corporate tax reform. Their proposals would effectively repeal the corporate income tax, currently levied at a 35 percent rate, and replace it with a new "destination-based cash-flow tax (DBCFT)" at a 20 percent rate for corporations and 25 percent for unincorporated businesses. The new tax would be border-adjustable – taxing imports and exempting exports.

    The DBCFT has a lot to offer and it deserves a serious look. But right now, the overall proposal is very poorly understood. Here are 11 things to know:


    1.The truly radical part is the proposal to effectively abolish the corporate income tax. The United States would become the only advanced country without a corporate income tax, making it a very attractive location for international investors.


    2.The DBCFT is essentially a value-added tax (VAT), but with a deduction for wages. Every advanced country except the U.S. has a VAT alongside a corporate income tax. The U.S. would in effect be replacing the corporate income tax with a modified VAT. A VAT taxes consumption, not income – it has the same effects as a national retail sales tax, but works better administratively.


    3.Unlike the corporate income tax, the DBCFT would not distort investment or financing choices. Instead, it would eliminate taxes on the returns to investment and would treat debt and equity equally. It would also eliminate all transfer-pricing issues and incentives to shift profits and profitable activities offshore.


    4.However, precisely because the DBCFT does not have the negative incentive effects of the corporate income tax, there is no good reason to reduce the tax rate to 25/20 percent. Indeed, the tax rate should be equal to the top rate on individual income, so as to reduce incentives to reclassify wage income as business income.

    5.Border adjustment of a VAT is not some wild, radical idea. It is a natural and logical part of the tax. All advanced countries with VATs employ border adjustments. In order to focus the tax on domestic consumption, the VAT should exempt exports – which are consumed abroad – and tax imports – which are consumed here. Again, exactly like a retail sales tax.

    6.Many economists – but very few non-economists – believe that the international trade effects of border adjustments will be small. In this view, taxing all imports and exempting all exports will raise the value of the dollar relative to other currencies. To a first approximation, this will leave the level of imports and exports the same under the DBCFT as they would have been without the tax. Border adjustments alone should not be expected to change the trade balance. For all of the reasons, there should be no expectation that the domestic price level will change.


    7.The deduction for wages makes the DBCFT progressive, relative to a VAT. It only taxes consumption financed out of holdings of capital, whereas a VAT burdens all consumption. The new tax would also plausibly be more progressive than the current corporate income tax, because it would not discourage domestic investment. The investment disincentives in the current corporate tax reduce capital per worker and hence reduce wages.


    8.One potentially thorny issue is that the DBCFT may create negative net tax liability for some very big, very profitable exporters. The DBCFT will only work as intended if those exporters get full rebates, even if that means Treasury has to write them a check. This is likely to create a serious "optics" problem, given that many people think that big, profitable corporations should be required to pay taxes. Likewise, the DBCFT will raise tax payments for importers. These are all perception issues, however; the border adjustment won't affect the after-tax profitability of either exporters or importers, because of the exchange rate adjustment.


    9.A second issue is that border adjustment and the resulting exchange rate appreciation will reduce the value of American investments overseas.


    10.Another downside is that the World Trade Organization (WTO) allows border adjustments for VATs but not for income taxes. The wage deduction makes the DBCFT look like an income tax (wages are deductible, for example, under the corporate income tax). Many experts believe this would make the DBCFT, as currently proposed, incompatiblewith WTO rules. If that were the case, either: a new deduction or credit for wages could be created elsewhere in the tax system; the wage deduction could be dropped, making the DBCFT revert to a VAT (which would make it more regressive); or the border adjustment could be dropped, which would reintroduce incentives for firms to shift profits and productive activities abroad.


    11.A final concern is that the corporate reform proposals described above, even when coupled with some specified corporate tax revenue-raisers, would reduce federal tax revenue by about $900 billion over the next 10 years on a static basis. Revenues would fall by somewhat less if the changes were dynamically scored, but the proposals would still represent a very large tax cut and would raise the public debt.

    Rough estimates suggest that setting the DBCFT rate at around 30 percent for all businesses would eliminate the revenue shortfall. This would still leave it lower than the current corporate rate or the top individual tax rate, and suggests that an even higher DBFCT rate, coupled with a reduction in the top individual income tax rate, could equate the top individual and business rates and still be revenue-neutral and probably fairly close to distributionally-neutral.

    The corporate tax is ripe for reform. The DBFCT is an excellent way to kick-start the needed discussion.


    *

    [You might say that all of my concerns are wrapped up in item number 10. IOW, the DBCFT is number ten GI, number 10.]

    RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , March 22, 2017 at 06:16 AM
    [Here is more about the concerns over thing number 10 that you should know about DBCFT from the Brookings article above. Bottom line is that the stuff that makes DBCFT desirable for the wage class majority are exactly those things that have been hyped up in selling the bill to the electorate only to be later discarded as non-conforming to WTO rules. This is a classic bait and switch aimed at boosting corporate profits. It may nonetheless shrink the trade deficit over time, but working class people will not see any of it. The gains will go to the owners of the robots that were financed by the DBCFT.

    The article linked below and highlighted by excerpts comes from a conservative source, which somewhat surprisingly saw fit to be honest about its consequences including the eventual job killing changes required to enact the DBCFT into law.]

    https://www.forbes.com/sites/danielmitchell/2017/01/03/concerns-about-theborder-adjustable-tax-plan-from-the-house-gop-part-i/#456ee19b38df

    Concerns About The 'Border Adjustable' Tax Plan From The House GOP, Part I


    ...Concern #2: Is the DBCFT compliant with WTO obligations?

    The United States is part of the World Trade Organization (WTO) and we have ratified various agreements designed to liberalize world trade. This is great for the global economy, but it might not be good news for the Better Way plan because WTO rules only allow border adjustability for indirect taxes like a credit-invoice value-added tax. The DBCFT, by contrast, is a version of a corporate income tax, which is a direct tax.

    The column by Charles Lane explains one of the specific problems.

    "Trading partners could also challenge the GOP plan as a discriminatory subsidy at the World Trade Organization. That's because it includes a deduction for wages paid by U.S.-located firms, importers and exporters alike - a break that would obviously not be available to competitors abroad.

    Advocates argue that the DBCFT is a consumption-base tax, like a VAT. And since credit-invoice VATs are border adjustable, they assert their plan also should get the same treatment. But the WTO rules say that only "indirect" taxes are eligible for border adjustability. The New York Times reports that the WTO therefore would almost surely reject the plan.

    "Michael Graetz, a tax expert at the Columbia Law School, said he doubted that argument would prevail in Geneva. "W.T.O. lawyers do not take the view that things that look the same economically are acceptable," Mr. Graetz said.

    A story in the Wall Street Journal considers the potential for an adverse ruling from the World Trade Organization.

    " Even though it's economically similar to, and probably better than, the value-added taxes (VATs) many other countries use, it may be illegal under World Trade Organization rules. An international clash over taxes is something the world can ill afford when protectionist sentiment is already running high. ...The controversy is over whether border adjustability discriminates against trade partners. ...the WTO operates not according to economics but trade treaties, which generally treat tax exemptions on exports as illegal unless they are consumption taxes, such as the VAT. ...the U.S. has lost similar disputes before. In 1971 it introduced a tax break for exporters that, despite several revamps, the WTO ruled illegal in 2002.

    And a Washington Post editorial is similarly concerned.

    " Republicans are going to have to figure out how to make such a huge de facto shift in the U.S. tax treatment of imports compliant with international trade law. In its current iteration, the proposal would allow corporations to deduct the costs of wages paid within this country - a nice reward for hiring Americans and paying them well, which for complex reasons could be construed as a discriminatory subsidy under existing World Trade Organization doctrine.


    Concern #3: Is the DBCFT a stepping stone to a VAT?

    If the plan is adopted, it will be challenged. And if it is challenged, it presumably will be rejected by the WTO. At that point, we would be in uncharted territory.

    Would that force the folks in Washington to entirely rewrite the tax system? Would they be more surgical and just repeal border adjustability? Would they ignore the WTO, which would give other nations the right to impose tariffs on American exports?

    One worrisome option is that they might simply turn the DBCFT into a subtraction-method value-added tax (VAT) by tweaking the law so that employers no longer could deduct expenses for labor compensation. This change would be seen as more likely to get approval from the WTO since credit-invoice VATs are border adjustable...


    [Since this criticism is written by a conservative then some of his concerns regarding the DBCFT that you can read at the link provided above make the DBCFT more attractive to liberal elites. My concerns are more for the wage class majority though.]


    JF -> RC AKA Darryl, Ron... , March 22, 2017 at 07:46 AM
    Let us make sure we see the forest and not get trapped in the trees looking at their roots.

    The goal is to shift the design of the public's revenue system to one where the public finance contributions are shifted away from income and profits and wealth and on to the act of consumption where all of us live.

    Are societies, and its economic aspect, about living and consuming? Should we burden this more and more so those with already lightly felt burdens can control even more (of economics and control of society)?

    Amazing to think that this is the 21st Century.

    RC AKA Darryl, Ron -> JF... , March 22, 2017 at 08:20 AM
    "The goal is to shift the design of the public's revenue system to one where the public finance contributions are shifted away from income and profits and wealth and on to the act of consumption where all of us live..."

    [That would be your goal buddy, not mine. My goal is to reduce the concentration of wealth and power that subordinates democracy to corporate profits while simultaneously making work and its commensurate rewards available to the broad wage class majority. Corporatists think that they are just collecting the spoils of war, but they forget who actually fights the wars.]

    RC AKA Darryl, Ron -> JF... , March 22, 2017 at 08:25 AM
    After a second read of your reply I believe that you are actually agreeing with me that the DBCFT is a regressive sales tax. Clearly that is what Republicans want. Everyone's take here at EV was that it is a regressive sales tax. So then we took a second look at it to see if it will create more jobs than it costs and it will not.

    [Mar 17, 2017] Low taxes, stratspheric salaries. Welcome to neoliberlism...

    Mar 17, 2017 | economistsview.typepad.com

    im1dc : March 17, 2017 at 02:45 PM

    Interesting factoid from the CBO today

    Those Americans earning below 450% of federal poverty level pay an average of 31% Federal Taxes

    Donald Trump paid 25% in 2005 and thinks he paid a lot

    This is THE problem in America today, the deadbeat rich who refuse to pay their fair share in Federal taxes and force working Americans to pay more

    https://www.cbo.gov/publication/52472

    "How Taxes and Transfers Affect the Work Incentives of People With Low and Moderate Income"

    Last month, Members of Congress asked CBO a number of questions about how federal taxes and benefits affect people's incentive to work. This blog post provides additional information on that topic.

    Posted by Shannon Mok...March 17, 2017

    "What Marginal Tax Rates Do Low- and Moderate-Income Workers Face?"

    In a 2015 report, CBO found that low- and moderate-income workers-those with income below 450 percent of federal poverty guidelines (commonly known as the federal poverty level, or FPL)-would face, on average, a marginal tax rate of 31 percent in 2016..."

    [Mar 14, 2017] I believe that most people who want lower taxes, at least in the US, are totally unaware that without high taxes the systems of social security, free education, modern infrastructure etc. would collapse. They have been told by Republican politicians for over forty years that the government is full of waste, fraud, and abuse

    Mar 14, 2017 | economistsview.typepad.com
    George H. Blackford : March 12, 2017 at 11:40 PM
    Re • 20th century tools cannot address 21st century inequality - Branko Milanovic :

    "The main reason may be a much more skeptical view of the role of government and of tax-and-transfer policies that is now shared by the middle classes in many countries compared to their predecessors half a century ago. This is not saying that people just want lower taxation or are unaware that without high taxes the systems of social security, free education, modern infrastructure etc. would collapse. But it is saying that the electorate is more skeptical about the gains to be achieved from additional increases in taxes imposed on current income and that such increases are unlikely to be voted in."

    I think he is mistaken about this. I believe that most people who want lower taxes, at least in the US, are totally "unaware that without high taxes the systems of social security, free education, modern infrastructure etc. would collapse." They have been told by Republican politicians for over forty years that the government is full of waste, fraud, and abuse and that this is why our taxes are so high without being contradicted by Democratic politicians to the point that the vast majority of the population believe that this is where the problem lies rather than in the fact government services have to be paid for and we don't collect enough taxes to pay for them.

    Why should anyone believe otherwise in a world in which the need to pay taxes to sustain vital government services is never acknowledged in the debate over waste, fraud, and abuse in providing those services? See: http://www.rweconomics.com/Deficit.htm

    [Mar 11, 2017] Two of the biggest tax cuts in Republican proposals to repeal the Affordable Care Act would deliver roughly $157 billion over the coming decade to those with incomes of $1 million or more, according to a congressional analysis

    Notable quotes:
    "... People making $200,000 to $999,999 a year would also get sizable tax cuts. In total, the two provisions would cut taxes by about $274 billion during the coming decade, virtually all of it for people making at least $200,000, according to a separate assessment by the committee. ..."
    "... "Repeal-and-replace is a gigantic transfer of wealth from the lowest-income Americans to the highest-income Americas," said Edward D. Kleinbard, a professor at the University of Southern California law school and former chief of staff for the Joint Committee on Taxation. ..."
    "... Tax economists point out that even tax cuts for the wealthy can have indirect benefits for others. For example, the additional cash can prompt extra spending and extra hiring. ..."
    "... That said, "most of the benefit of getting rid of those two taxes would go to wealthy people," said Joel Slemrod, a professor at the University of Michigan Ross School of Business and former senior staff economist for President Ronald Reagan's Council of Economic Advisers. "It's not significant for me to add a caveat." ..."
    "... One of the taxes targeted in the repeal bill is a 3.8 percent tax on investment income, like capital gains. The other is a 0.9 percent surcharge on the Medicare taxes imposed on high-income earners - individuals making more than $200,000 a year and married couples filing joint returns who earn more than $250,000 a year. That brings the Medicare tax levied on that income up to 3.8 percent as well. ..."
    Mar 11, 2017 | economistsview.typepad.com
    Fred C. Dobbs : March 11, 2017 at 08:11 AM
    Wealthy Would Get Billions in Tax Cuts Under Obamacare Repeal Plan (link won't post)
    NYT - JESSE DRUCKER - MARCH 10, 2017

    Two of the biggest tax cuts in Republican proposals to repeal the Affordable Care Act would deliver roughly $157 billion over the coming decade to those with incomes of $1 million or more, according to a congressional analysis.

    The assessment was made by the Joint Committee on Taxation, a nonpartisan panel that provides research on tax issues.

    It is not unusual for tax cuts to benefit mostly the wealthiest, but still save some money for a majority of Americans. But the benefits of these reductions would be aimed squarely at the top.

    The provisions would repeal two tax increases on high earners enacted in 2010 to help pay for the Affordable Care Act: an increase in capital gains taxes and other investment-related income, and a surcharge on Medicare taxes.

    People making $200,000 to $999,999 a year would also get sizable tax cuts. In total, the two provisions would cut taxes by about $274 billion during the coming decade, virtually all of it for people making at least $200,000, according to a separate assessment by the committee.

    "Repeal-and-replace is a gigantic transfer of wealth from the lowest-income Americans to the highest-income Americas," said Edward D. Kleinbard, a professor at the University of Southern California law school and former chief of staff for the Joint Committee on Taxation.

    Tax economists point out that even tax cuts for the wealthy can have indirect benefits for others. For example, the additional cash can prompt extra spending and extra hiring.

    That said, "most of the benefit of getting rid of those two taxes would go to wealthy people," said Joel Slemrod, a professor at the University of Michigan Ross School of Business and former senior staff economist for President Ronald Reagan's Council of Economic Advisers. "It's not significant for me to add a caveat."

    One of the taxes targeted in the repeal bill is a 3.8 percent tax on investment income, like capital gains. The other is a 0.9 percent surcharge on the Medicare taxes imposed on high-income earners - individuals making more than $200,000 a year and married couples filing joint returns who earn more than $250,000 a year. That brings the Medicare tax levied on that income up to 3.8 percent as well.

    The tax repeal would solely benefit wealthy Americans because the taxes were imposed only on the wealthiest. The increases were passed in 2010, when capital gains rates were near historical lows. During the George W. Bush administration, Congress cut the rates to 15 percent from 20 percent. With the 3.8 percent tax imposed by the Affordable Care Act, the top capital gains rate stands at 23.8 percent for the wealthiest Americans. That still makes the rate lower it was for most of the 1970s, 1980s and 1990s. ...

    anne -> Fred C. Dobbs... , March 11, 2017 at 08:15 AM
    https://www.nytimes.com/2017/03/10/business/tax-cuts-affordable-care-act-repeal.html

    March 10, 2017

    Wealthy Would Get Billions in Tax Cuts Under Obamacare Repeal Plan
    By JESSE DRUCKER

    [Mar 10, 2017] Revisiting the paradox of capital - Boz, Cubeddu, Obstfeld

    Mar 10, 2017 | economistsview.typepad.com
    mulp : March 09, 2017 at 12:08 PM , 2017 at 12:08 PM
    Revisiting the paradox of capital - Boz, Cubeddu, Obstfeld

    They ignore the role of taxes in increasing savings.

    The best way to increase savings is to tax worker income and "save" it for them in infrastructure that repays their "savings" with interest over time. And taxes plus tax dodges and loopholes cause consumers to contribute savings that are invested in factories and innovation capital that both pays workers to work building capital so taxes are dodged, plus drives down returns to capital resulting in workers getting most of the revenue from product and service sales.

    China is an example of an economy in transition which has workers getting jobs from government mandates to build capital that produce exports to pay for increased imports of mostly raw materials, without providing the safety net to eliminate the fear of returning to the poverty of farming. The fear drives savings which is not destructive in the early stage because it helps fund massive capital investment in China, but eventually the amount of capital accrues to such a high quantity that returns on capital pay savers nothing, and no one wants to pay for more capital that will only go bankrupt. The only solution is for Chinese workers to pay Chinese workers for consumption. Factory economy workers must stop consuming like hand to mouth farmers, or else the economy will collapse and throw them back into hand to mouth farm economy conditions. As Keynes pointed out in his argument for government forcing savings going into building capital with labor, mass thrift drives the thrifty into poverty.

    The economic charts, one in particular, shows the impact of Clinton tax hikes and Bush tax cuts.

    [Mar 09, 2017] https://nyti.ms/2m5NMFK

    Mar 09, 2017 | nyti.ms

    NYT - PATRICIA COHEN - MARCH 9, 2017

    Complaining that the United States has one of the world's highest corporate tax levels, President Trump and congressional Republicans have repeatedly vowed to shrink it.

    Yet if the level is so high, why have so many companies' income tax bills added up to zero?

    That's what a new analysis of 258 profitable Fortune 500 companies that earned more than $3.8 trillion in profits showed.

    (The 35 Percent Corporate Tax Myth
    http://www.itep.org/corporatestudy/ )

    Although the top corporate rate is 35 percent, hardly any company actually pays that. The report, by the Institute on Taxation and Economic Policy, a left-leaning research group in Washington, found that 100 of them - nearly 40 percent - paid no 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. The institute used the companies' own regulatory filings to compute their tax rates.

    The 100 companies that paid no taxes in at least one year in the last decade.

    (data at the link)

    How does a billion-dollar company pay no taxes?

    Companies take advantage of an array of tax loopholes and aggressive strategies that enable them to legally avoid paying what they owe. The institute's report cites these examples:

    Multinational corporations like Apple, Microsoft, Abbott Laboratories and Coca-Cola have ways of booking profits overseas, out of the reach of the Internal Revenue Service. (Those companies were not among the 258 whose rates were calculated by the institute, which said it could not verify the breakdown of their profits between the United States and other countries.)

    Citing evidence in the report, Senator Bernie Sanders, the Vermont independent, and Senator Brian Schatz, Democrat of Hawaii, introduced a bill on Thursday to eliminate tax loopholes that encourage companies to shift activities offshore. "The truth is that we have a rigged tax code that has essentially legalized tax dodging for large corporations," Senator Sanders said. "Offshore tax haven abuse has become so absurd that one five-story office building in the Cayman Islands is now the 'home' to more than 18,000 corporations."

    Others, like American Electric Power, Con Ed and Comcast, qualified for accelerated depreciation, enabling them to write off most of the cost of equipment and machinery before it wore out.

    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.

    Individual industries have successfully lobbied for specific tax breaks that function as subsidies: for instance, drilling for gas and oil, building Nascar racetracks or railroad tracks, roasting coffee, undertaking certain kinds of research, producing ethanol or making movies (which saved the Walt Disney Company $1.48 billion over eight years, the report says).

    Why do some industries make out better than others?
    Continue reading the main story

    (chart at the link)

    Most of the 18 companies that managed to pay no total income tax between 2008 and 2015 were in the energy sector.

    Companies listed are among 258 whose rates were calculated by the institute. It omitted companies for which it could not verify the allocation of profits between the United States and other countries.

    These industry-specific subsidies mean that the goodies were not evenly distributed. Utilities logged an effective tax rate of just 3.1 percent over the eight-year period. Industrial machinery, telecommunications and oil, gas and pipeline companies paid roughly 11.5 percent. Internet services paid 15.6 percent. In just two sectors - health care and retail - companies paid more than 30 percent of their profits in federal income tax.

    "One of the things that jumps out pretty starkly is there's a real gap between the tax rates paid by different industries," said Matthew Gardner, a senior fellow at the institute and a co-author of the study. "When the biggest companies aren't paying their fair share, that means the rest of us are left to pick up the slack. It means small business and middle-income families are paying more."

    But Tara DiJulio, a spokeswoman for General Electric, called the report "deeply flawed and misleading."

    "G.E. is one of the largest payers of corporate income taxes," she said. "Over the last decade, G.E. paid $32.9 billion in cash income taxes worldwide, including in the U.S., and pays more than $1 billion annually in other U.S. state, local and federal taxes."

    She added: "The tax code is complex and outdated, which is exactly why tax reform must happen this year. G.E. has long been advocating to simplify and modernize the tax system - even if it means we pay more in taxes."

    Tax reformers have long argued that the nominal 35 percent federal rate on corporate profits more often than not functions like a strike-through price - an artificially inflated number that sounds high but rarely applies. Thanks to a variety of loopholes and tax-dodging methods, those 258 corporations paid an average rate of 21.2 percent. (Other studies, including a new one by the Congressional Budget Office that compares corporate income tax rates in various countries, have found that average and effective rates in the United States are lower than the nominal rate.)

    Who are the biggest beneficiaries?

    Companies with the biggest tax subsidies over the eight years, the institute's report said, included:

    ■ AT&T ($38.1 billion)
    ■ Wells Fargo ($31.4 billion)
    ■ JPMorgan Chase ($22.2 billion)
    ■ Verizon ($21.1 billion)
    ■ IBM ($17.8 billion)
    ■ General Electric ($15.4 billion)
    ■ Exxon Mobil ($12.9 billion)
    ■ Boeing ($11.9 billion)
    ■ Procter & Gamble ($8.5 billion)
    ■ Twenty-First Century Fox ($7.6 billion)
    ■ Time Warner ($6.7 billion)
    ■ Goldman Sachs ($5.5 billion) ...
    Reply Thursday, March 09, 2017 at 02:06 PM

    [Mar 07, 2017] The border adjustments would strongly discourage the shifting of profits and activities offshore and eliminate incentives for corporate inversions.

    Notable quotes:
    "... corporate inversions is a gigantic canard. The easy way to do this is to eliminate the repatriation tax (another GOP goal) and to beef up transfer pricing enforcement. ..."
    Mar 07, 2017 | economistsview.typepad.com
    pgl : March 07, 2017 at 01:41 AM

    Auerbach goes US centric: "This reform should appeal broadly, to Democrats and Republicans alike. The border adjustments would strongly discourage the shifting of profits and activities offshore and eliminate incentives for corporate inversions."

    (1) it would make the US a tax haven as it effectively eliminates the corporate profits tax replacing it with a sales tax - a long time Republican goal. Shifting of profits would still occur but the transfer pricing manipulation games would be at the expense of Canada, Mexico, China, Japan, and Europe.

    (2) corporate inversions is a gigantic canard. The easy way to do this is to eliminate the repatriation tax (another GOP goal) and to beef up transfer pricing enforcement.

    There is a reason why many progressive groups oppose this overly complex canard. We have not given up on taxing the profits of the multinationals. Auerbach's tax is being pushed by Paul Ryan as his goal to never tax corporate profits. Alas, Paul Ryan cannot be honest about this goal so he sends out Auerbach to muddle the discussion.

    Lee A. Arnold -> pgl... , March 07, 2017 at 04:14 AM
    The border-adjusted tax seems like a clever way to manipulate forex in the short-term, but I question the underlying premise that the U.S. is such an important producer & consumer that the rest of the world will be forced to play the game.

    It seems to me that a lot of countries, looking at President Turnip's nixing of the multilateral deals, and his insistence that separate countries must now go mano-a-mano with him on a new TV show, "The Trade Apprentice", are far more likely to suppress the nausea and say, "Forget it."

    The Chinese should welcome the U.S. border adjustment as another advertisement that it is better for these countries to change the channel -- to join into a new global trade pact without the U.S. Less instability, less nuttiness, less crass behavior, and also, China is poised to become a world technology leader.

    At that moment, monies that Auerbach & Devereux are hoping will be repatriated to the U.S. may decide to stay in offshore accounts instead, looking to invest for a better short-term ROI in a country that is dealing with the Chinese pact.

    Peter K. -> Lee A. Arnold ... , March 07, 2017 at 06:45 AM
    "but I question the underlying premise that the U.S. is such an important producer & consumer that the rest of the world will be forced to play the game."

    You may be right but right now the U.S. has a trade deficit so it buys more from other nations. These nations need the U.S.'s consumer market.

    With the BAT, corporations like Apple and drug companies couldn't play tax avoidance games and so would return production to the U.S. This would boost U.S. manufacturing employment.

    If the Fed didn't tighten too quickly this would boost wages and living standards.

    Corporations would lose out on labor and regulation arbitration with poorer nations like China which they accomplish by outsourcing.

    This is why Ryan's plan probably won't pass. Also importers like the Koch brothers and Walmart don't trust that a rising dollar would negate the competitive effect of the import tax.

    pgl -> Peter K.... , March 07, 2017 at 06:50 AM
    "corporations like Apple and drug companies couldn't play tax avoidance games and so would return production to the U.S."

    Neither statement is true. DBCFT would make tax avoidance easier. And Apple would still assemble goods in China. BTW - many drug companies outsource their production.

    Peter K. -> pgl... , March 07, 2017 at 06:57 AM
    Both statements are true.

    As both Krugman and Dean Baker say, it would make tax avoidance games impossible for those selling products in the U.S.

    Goods imported from China would be taxed.

    PGL trying to muddle the issues again.

    pgl -> Peter K.... , March 07, 2017 at 07:04 AM
    Would the Destination Based Cash Flow Tax make U.S. companies more competitive and if so – why? It is not the effective repeal of the corporate profits tax that would do the trick as PeterK turned supply-sider is now asserting. No – it is the implicit labor subsidy.

    But wait – let's hear from the architect of this proposal himself:

    https://www.americanactionforum.org/research/14344/

    "On the other hand, border adjustments lack some other apparent benefits that have been attributed to them. In particular, border adjustments, in themselves, should not influence international trade, either by discouraging imports or encouraging exports. The belief that they do have these influences on international trade has proved to be something of a mixed blessing, not only generating support for their adoption but also leading critics to conclude that they violate generally accepted norms of international taxation."

    He argues that the exchange rate would so appreciate as to exactly offset the labor subsidy. Of course PeterK yesterday tried to tell us that a dollar appreciate would boost Boeing's exports. But what would you expect from a supply-sider?

    Peter K. -> pgl... , March 07, 2017 at 07:13 AM
    "Of course PeterK yesterday tried to tell us that a dollar appreciate would boost Boeing's exports. But what would you expect from a supply-sider? "

    More gaslighting. I didn't say that and I'm not a supply sider.

    PGL can't debate the merits based on facts so he resorts to lies.

    I'm just referring to what Krugman, Dean Baker, Jared Bernstein and others have written.

    The economists believe a rising dollar would offset the effects of the import tax and export subsidies. The Koch brothers and Walmart aren't so sure.

    PGL goes on and on about how tax reform would be a boon to Boeing.

    If Boeing enjoyed a boon would it become less competitive? Is that what PGL is arguing?

    pgl -> Peter K.... , March 07, 2017 at 07:35 AM
    I guess there was a different PeterK who suggested repealing the corporate profits tax would lead to an export boom just yesterday. You are all over the map clueless as to what any of this is about. As usual.

    But I love this:

    "PGL goes on and on about how tax reform would be a boon to Boeing."

    DBCFT is not exactly tax reform. It would eliminate Boeing's tax bill entirely. Do you even have a clue what they pay in Federal taxes now? Didn't think so.

    pgl -> Peter K.... , March 07, 2017 at 07:06 AM
    "Goods imported from China would be taxed."

    One could design a tariff or a sales tax to tax apparel imports. Is that what you are endorsing? Cool but then you have turned into Paul Ryan.

    As far as making tax avoidance impossible - even Auerbach admits this is grossly false.

    [Mar 07, 2017] New head of some of the best progressives covering tax issues

    Mar 07, 2017 | economistsview.typepad.com
    pgl : March 06, 2017 at 12:57 PM , 2017 at 12:57 PM
    New head of some of the best progressives covering tax issues. Recently I put over at Econospeak an excellent discussion of the Destination Based Cash Flow Tax where ITEP and CTJ provides well thought out criticisms (shhh - don't tell PeterK as he will just get angry):

    ITEP and CTJ Boards Announce Alan Essig as New Executive Director

    Robert McIntyre, CTJ's long-time executive director, will retire and former ITEP executive director Matthew Gardner will be a senior fellow

    The Institute on Taxation and Economic Policy Board of Directors and the Citizens for Tax Justice Board of Directors are pleased to announce that Alan Essig has been named the next executive director of both organizations. Robert McIntyre, director of CTJ, will retire effective March 31, and Matthew Gardner, former executive director of ITEP, has assumed the position of senior fellow. Mr. Essig will begin his new role on April 3, 2017.

    This transition comes after a national search and an organizational review designed to consolidate, advance and strengthen both organizations.

    "ITEP and CTJ have been leading voices for progressive tax policy on both the state and national levels for decades, and I am honored to be the next executive director," Mr. Essig said. "A fair and adequate tax system is the cornerstone of a just society and has defined the work of these organizations. I am excited to be leading a team of extraordinary professionals who are working to assure that elected officials, the media, and the public have access to the accurate, timely, and accessible information that is necessary to promote an equitable tax system."

    pgl -> pgl... , -1
    My tribute to these progressives also addressed the weakness of the Dean Baker BMW "classic example":

    http://econospeak.blogspot.com/2017/02/bmw-transfer-pricing-and-trump-trade.html

    [Mar 07, 2017] The American corporate tax system is broken.

    Mar 07, 2017 | economistsview.typepad.com
    Peter K. : March 06, 2017 at 01:57 PM , 2017 at 01:57 PM
    Krugman in today's column:

    "Then there's corporate tax reform - an issue where the plan being advanced by Paul Ryan, the House speaker, is actually not too bad, at least in principle. Even some Democratic-leaning economists support a shift to a "destination-based cash flow tax,"* which is best thought of as a sales tax plus a payroll subsidy. (Trust me.**)

    But Mr. Ryan has failed spectacularly to make his case either to colleagues or to powerful interest groups. Why? As best I can tell, it's because he himself doesn't understand the point of the reform.

    The case for the cash flow tax is quite technical; among other things, it would remove the incentives the current tax system creates for corporations to load up on debt and to engage in certain kinds of tax avoidance. But that's not the kind of thing Republicans talk about - if anything, they're in favor of tax avoidance, hence the Trump proposal to slash funding for the I.R.S.

    No, in G.O.P. world, tax ideas always have to be presented as ways to remove the shackles from oppressed job creators. So Mr. Ryan has framed his proposal, basically falsely, as a measure to make American industry more competitive, focusing on the "border tax adjustment" which is part of the sales-tax component of the reform.

    This misrepresentation seems, however, to be backfiring: it sounds like a Trumpist tariff, and has both conservatives and retailers like WalMart up in arms.

    ...

    They may give up on anything resembling a principled tax reform, and just throw a few trillion dollars at rich people instead.

    But whatever the eventual outcome, what we're witnessing is what happens when a party that gave up hard thinking in favor of empty sloganeering ends up in charge of actual policy. And it's not a pretty sight."

    Peter K. : , March 06, 2017 at 02:07 PM
    https://www.nytimes.com/2017/03/06/opinion/the-case-for-a-border-adjusted-tax.html

    The Case for a Border-Adjusted Tax

    By ALAN AUERBACH and MICHAEL DEVEREUX

    MARCH 6, 2017

    The American corporate tax system is broken. Faced with one of the highest tax rates in the world, many multinational corporations in the United States move their operations and reported profits offshore or undertake "inversions" to relinquish their American tax nationality. Elaborate regulatory and enforcement measures have been unable to stop this. Vilifying companies for their behavior hasn't worked, either.

    Fortunately, bipartisan support for corporate tax reform has been growing in Washington. In place of the old system, Republicans in the House of Representatives have proposed adopting a tax - the destination-based cash-flow tax - that would be levied on the domestic cash flows of all businesses operating or selling here. (Your domestic cash flow is your revenues in the United States minus the wages, salaries and purchases you pay for in the United States.) This would mean introducing "border adjustments" to the current system - exempting exports from tax, but taxing imports.

    This reform should appeal broadly, to Democrats and Republicans alike. The border adjustments would strongly discourage the shifting of profits and activities offshore and eliminate incentives for corporate inversions. (The proposal would also eliminate incentives for companies to borrow excessively and strengthen the tax benefits for investing in plants and equipment.) But there remains much misplaced criticism of the reform and its potential, and much misunderstanding about who the winners and losers will be if it is adopted.

    Some critics, including President Trump at one time, have claimed that the new system would be too complicated. On the contrary, the tax would be much simpler than our current arrangement. By basing a company's tax liability exclusively on its domestic cash flows, the new system would replace the much more complex calculation of a company's income that takes place now, which must also account for offshore and cross-border transactions. And because the tax would eliminate incentives for companies to shift operations and profits offshore, it could dispose of the raft of complex tax and regulatory measures developed over the years to discourage such tactics.

    Other critics, particularly those on the political left, have expressed concern that the tax isn't progressive enough. But it promises to be more progressive than the current United States corporate tax system: Its burdens would fall squarely on the owners of corporate capital rather than - as happens to some extent now - on American workers, whose wages suffer from the flight of productive investment capital to lower-tax countries.

    Importers have also criticized the tax, arguing that the border adjustments would lead to a major redistribution of income away from sectors of the economy based on import shares and toward those based on export shares. This is the biggest misconception about the tax. In truth, importing industries should expect on the whole to experience a shift in the composition of their costs rather than an overall increase in their costs. The reason is that under the new tax system, the dollar should appreciate relative to the currencies of our trading partners (in response to the changing incentives for American firms to export and import). A stronger dollar would make imports cheaper, offsetting the increase in taxes paid.

    Of course, corporate tax reform would result in winners and losers. But the gains and losses would derive mostly from the increased profitability of American operations and the lost opportunities to avoid paying United States taxes.

    Free-market critics of the tax have suggested that border adjustments are tariffs and would thus erect trade barriers. This is also untrue. The border adjustments would merely shift taxation from where products are made to where they are sold. This, again, would encourage companies to locate their productive activities and profits in the United States. (Countries around the world use such border adjustments every day as components of value-added taxes that are collected at the location of purchases rather than production.)

    For the United States corporate tax to be a viable source of revenue, it must be reinvented. Intense tax competition for profits, production and jobs, in the form of other countries' sharply declining corporate tax rates and a host of favorable tax provisions, has been little hindered by international efforts to slow the process.

    The United States faces a choice: to mark time as our competitive position worsens, to join this race to the bottom or to take forceful action that replaces our corporate tax system with one that aligns with the national interest. Our decision should be clear. We need to adjust to new ideas like a destination-based cash-flow tax. In the end, the short-run economic adjustments required would be a small price to pay for an enduring, fair and rational tax system.

    ----------------------

    Alan Auerbach is a professor of economics and law at the University of California, Berkeley. Michael Devereux is a professor at Oxford University's Said Business School.

    [Feb 27, 2017] Under the 1913 law, income up to $20,000 was taxed at 1% with a $3,000 personal exemption. The average wage was only $1,296, which means only high earners were taxed at all. That is a big difference from today.

    Feb 27, 2017 | economistsview.typepad.com
    JF said in reply to pgl... February 24, 2017 at 11:45 AM

    , 2017 at 11:45 AM
    Yes, profits are a form of income, but at that point they indirectly touch wealth accumulation and sharing, and before that they fuel wages for managers of capital and have historically been a measure that influence the price of stock, an indirect touch on wealth accumulation. We know what has happened to basic wages/salaries, no reason to expect they would get to share in the gains of further tax cuts, so let us face it, as you note, huge drops in the tax rate on profits will directly benefit wealth and high income people (though not because they would have earned it other than by lobbying).

    So ok, harmonize rates with OECD, but offset revenue losses on the personal income tax side so at least some of the upward redistribution is in that proscribed tax base (which does not tax wealth, per the Pollack decision of the Court).

    Know you know this, hope other readers get this too.

    RC AKA Darryl, Ron said in reply to pgl... , February 24, 2017 at 10:00 AM
    In 1913 the personal exemption was $3K for singles and $4K for married couples and the tax rate was just 1% for the first $20K of income. The highest bracket was $500K with a 7% income tax rate. We started off on the correct foot anyway.

    https://www.irs.gov/uac/soi-tax-stats-historical-table-23

    DrDick -> RC AKA Darryl, Ron... , February 24, 2017 at 11:47 AM
    Under the 1913 law, income up to $20,000 was taxed at 1% with a $3,000 personal exemption. The average wage was only $1,296, which means only high earners were taxed at all. That is a big difference from today.

    https://en.wikipedia.org/wiki/Revenue_Act_of_1913

    RC AKA Darryl, Ron said in reply to DrDick... , February 24, 2017 at 12:34 PM
    True. "We started off on the correct foot" was in no way meant to imply that we were on our feet at all today. Back then what you and I make today in relative terms would have put us in the 1% tax bracket and people making $20 million or more today would have been taxed in the top bracket which was taxed at a rate seven times higher than ours.

    [Feb 27, 2017] If profits are not income then somebody should explain to me why all of business, finance, analysts, and almost all of institutional and private society are obsessed, sometimes to a pathological degree, with increasing them

    Feb 27, 2017 | economistsview.typepad.com
    cm -> Peter K.... February 25, 2017 at 12:19 AM , 2017 at 12:19 AM
    If profits are not income then somebody should explain to me why all of business, finance, analysts, and almost all of institutional and private society are obsessed, sometimes to a pathological degree, with increasing them.

    [Feb 26, 2017] http://www.eschatonblog.com/2017/02/your-moment-of-zen.html

    Feb 26, 2017 | www.eschatonblog.com

    Hillary's former communications director says all of those crowds protesting Trump don't want a $15 min. wage, it's all about identity. Reply Friday, February 24, 2017 at 06:30 AM RC AKA Darryl, Ron said in reply to Peter K.... [The comments there are a riot:]


    thebewilderness • 12 days ago


    What possible use could those people have for $15 an hour wage?
    Reply Friday, February 24, 2017 at 07:07 AM Chris G said in reply to RC AKA Darryl, Ron... $15 an hour? You know they'd just blow it on cheap hookers, oxy, and Thunderbird... Reply Friday, February 24, 2017 at 08:12 AM RC AKA Darryl, Ron said in reply to Chris G ... :<)

    Actually that is more like me back in my mid-twenties after Viet Nam and two divorces. Reply Friday, February 24, 2017 at 09:23 AM RC AKA Darryl, Ron said in reply to Peter K.... I agree.

    There are two separate issues, bad pay AND bad jobs in the service economy. Corporatism and the service economy have other ways of sucking than just poor pay. Applebaum gets to "the work is physically demanding and emotionally draining," but then working in coal mines and factories was not exactly uplifting either. So, Applebaum's omissions regarding the minimum wage and the destruction of unions was grievous and wrong. However, corporatism and its assumptions were enough for me to rejoice in being retired, in no small part because my pension income after reductions in work related expenses has kept parity with my former work income. For those less fortunate then mortality may still be the only escape.

    I had both good pay and a good job under very strange conditions, working as a state paid worker managed by outsourcer Northrop Grumman reporting in turn to the two best supervisory managers that the program had just for as long as those two lasted. I was a lucky dog right down to the end. My wife has good pay and a series of terrible bosses at a firm with operations confused and disrupted by serial mergers, but her job might seem like a very good job taken abstractly without consideration to the firm, coworkers, and bosses.

    Working for a bad boss and low pay with a bunch of back-stabbers would be the worst. So, job quality is a deep matrix, where bosses, firms, coworkers and even the work itself come into play as well as pay. Still though to have life outside of work with a roof over your head and decent food to eat then there is nothing that beats good pay. Reply Friday, February 24, 2017 at 06:53 AM Peter K. said in reply to RC AKA Darryl, Ron... "I was a lucky dog right down to the end."

    From your online personality, you seem to me to be smart, wise and a hard worker. Employers would be lucky to have you. So it wasn't all luck.

    These conservative, corporate workaholics work very hard and see no luck in their success. Or if they do see luck it's with the philosophy, better me than some other poor sucker. Dog eat dog. But I'm not telling you anything you don't already know.
    Reply Friday, February 24, 2017 at 09:22 AM RC AKA Darryl, Ron said in reply to Peter K.... Yep, but I was never smart or wise enough to get that yes man thing down pat. I was lucky that was not my undoing. Where the wisdom paid off was getting into a line of work that was critical to financial objectives and that required more cross discipline expertise than was readily found in one person (particularly one younger person), in effect to be indispensable. But I'm not telling you anything you don't already know.

    I was also lucky to have worked in environments where my coworkers were decent people rather than backstabbers with just two exceptions, one guy at F&M Band for three months in 1978 and one guy at the VA state Department of Computer Services (forerunner to Virginia Information Technologies Agency) for four years, the latter counter-intuitively a period in which my bosses were better than usual. My last boss, the easiest going that I ever had despite being a Northrop Grumman hire rather than legacy state, retired just a few weeks before I was laid off.

    A lot can go wrong in life that can be life altering or career altering. Just getting home alive from Viet Nam was a good break even though my first wife left me two weeks later. One must both live and stay out of jail to have any chance at all and some of that is always luck for most young men sewing their wild oats. Reply Friday, February 24, 2017 at 09:48 AM RC AKA Darryl, Ron said in reply to RC AKA Darryl, Ron... F&M BANK - Band was just wishful thinking. Reply Friday, February 24, 2017 at 09:50 AM cm said in reply to Peter K.... The luck part was to obtain a position where his merits translated to good pay and good working conditions. Without luck, no amount of preparation will amount to much.

    A lot of meritorious people have to take positions below their intellectual potential or below what their college/academic degree suggests - less they would get if they were more "lucky".

    Conversely, a lot of people get into positions either above their level of preparation, or where somebody else would have been a better fit. But once the position is taken we won't know.
    Reply Saturday, February 25, 2017 at 12:09 AM ken melvin said in reply to RC AKA Darryl, Ron... No fan of Gates, but the taxing of labor to support capitalism was always a scam. Yes, tax robots, tax the means of production, tax profits, ... Reply Friday, February 24, 2017 at 07:04 AM RC AKA Darryl, Ron said in reply to ken melvin... The first US income tax was temporary to pay for the Civil War. The permanent income tax started in 1913 was implemented to replace Federal government tax income from tariffs that were lost due to the free trade movement. Capital gains tax rates have always been too low. Reply Friday, February 24, 2017 at 07:12 AM Peter K. said in reply to RC AKA Darryl, Ron... What I've found confusing is how sometime a tax on corporate taxes is referred to as an income tax. Reply Friday, February 24, 2017 at 09:24 AM pgl said in reply to Peter K.... "a tax on corporate taxes".

    No such thing. It is a tax in corporate profits. Profits are a form of income. Reply Friday, February 24, 2017 at 09:37 AM Peter K. said in reply to pgl... "Profits are a form of income."

    Income for a legal identity, the corporation, not for a person.

    Do you think corporations should be given legal personhood? Reply Friday, February 24, 2017 at 09:48 AM pgl said in reply to Peter K.... No. But the shareholders of a corporation are people. And the current tax code already gives them way too many deferral benefits. End those benefits and we would not need this corporate profits tax. Every progressive knows this. Well everyone but you. Reply Friday, February 24, 2017 at 09:52 AM Peter K. said in reply to pgl... " Every progressive knows this. Well everyone but you."

    Shove it up your a$$.

    "They say don't feed trolls so I guess I shouldn't feed you and your constant need for attention." Reply Friday, February 24, 2017 at 10:06 AM Peter K. said in reply to pgl... "No. But the shareholders of a corporation are people. "

    No kidding, but we were talking about a corporate tax being called an income tax. We weren't talking about a shareholder tax you dumbass.

    The corporation makes the profits, not the shareholders.

    Shareholder's "income" - they work so hard for it! - is taxed by the capital gains tax. Reply Friday, February 24, 2017 at 10:09 AM

    [Feb 26, 2017] Under the 1913 law, income up to $20,000 was taxed at 1% with a $3,000 personal exemption. The average wage was only $1,296, which means only high earners were taxed at

    Feb 26, 2017 | economistsview.typepad.com
    JF -> pgl... February 24, 2017 at 11:45 AM , 2017 at 11:45 AM
    Yes, profits are a form of income, but at that point they indirectly touch wealth accumulation and sharing, and before that they fuel wages for managers of capital and have historically been a measure that influence the price of stock, an indirect touch on wealth accumulation. We know what has happened to basic wages/salaries, no reason to expect they would get to share in the gains of further tax cuts, so let us face it, as you note, huge drops in the tax rate on profits will directly benefit wealth and high income people (though not because they would have earned it other than by lobbying).

    So ok, harmonize rates with OECD, but offset revenue losses on the personal income tax side so at least some of the upward redistribution is in that proscribed tax base (which does not tax wealth, per the Pollack decision of the Court).

    Know you know this, hope other readers get this too.

    RC AKA Darryl, Ron -> pgl... , February 24, 2017 at 10:00 AM
    In 1913 the personal exemption was $3K for singles and $4K for married couples and the tax rate was just 1% for the first $20K of income. The highest bracket was $500K with a 7% income tax rate. We started off on the correct foot anyway.

    https://www.irs.gov/uac/soi-tax-stats-historical-table-23

    DrDick -> RC AKA Darryl, Ron... , February 24, 2017 at 11:47 AM
    Under the 1913 law, income up to $20,000 was taxed at 1% with a $3,000 personal exemption. The average wage was only $1,296, which means only high earners were taxed at all. That is a big difference from today.

    https://en.wikipedia.org/wiki/Revenue_Act_of_1913

    RC AKA Darryl, Ron -> DrDick... , February 24, 2017 at 12:34 PM
    True. "We started off on the correct foot" was in no way meant to imply that we were on our feet at all today. Back then what you and I make today in relative terms would have put us in the 1% tax bracket and people making $20 million or more today would have been taxed in the top bracket which was taxed at a rate seven times higher than ours.

    [Feb 21, 2017] Fool me once again

    Feb 21, 2017 | angrybearblog.com
    From the Roosevelt Institute comes this graphic on the overall reality of macro policies:

    The Republicans' underlying assumption-that corporations invest more and create more jobs only when they are relieved of burdensome tax rates-is false. American businesses already enjoy a historically low cost of capital, and they have more than enough cash on hand to invest, raise wages, and create jobs. Corporations are choosing to make dividend payments and stock buybacks instead of investing because they face a lack of competitive pressure-itself the result of power and wealth shifting toward rich shareholders. Another tax cut for the rich will only make the problem worse.

    [Feb 19, 2017] http://prospect.org/article/republic-central-banker

    Feb 19, 2017 | prospect.org

    Republic of the Central Banker

    J. BRADFORD DELONG OCTOBER 23, 2008
    In the middle of our market economy sits an island of central planning, the Federal Reserve. No president or Congress dares challenge the power of its chairman, Ben Bernanke.

    Ben Bernanke is the closest thing to a central economic planner the United States has ever had. He bestrides our narrow economic world like a colossus. Unelected (he was appointed by President George W. Bush and confirmed by an overwhelming majority in the Senate) and unaccountable (unless the Congress decides that it wishes to amend the Federal Reserve Act and take the blame for whatever else goes wrong with the economy), he is responsible only to his conscience -- and his open-market committee of himself, the other six governors of the Federal Reserve Board, and the 12 presidents of the regional Federal Reserve banks.

    The fate of the economy in the next administration depends far less on the president than on this moral-philosopher-prince to whose judgment we have entrusted a remarkable share of control over our destiny.

    How did an ivory-tower academic whose specialty is the details of the Great Depression get to this position? What does he do all day? How did so much power come to rest in a single institution, a single individual? The current system is the product of a century and a half of evolution in the role of a central bank, on both sides of the Atlantic, through a series of accidents and crises. For a generation, the idea of social democracy -- with government ownership, control, and regulation of at least the "commanding heights" of the economy -- has been in retreat. But in the middle of this market economy is an immense island of central planning: the Federal Reserve. In normal times, the Fed -- not the market -- decides what the short-term interest rate is. The interest rate is perhaps the key price in the economy. It is the price at which we trade wealth in the present for wealth in the future.

    When the interest rate is low, our focus is on the future: Businesses and consumers borrow and invest. When the interest rate is high, our focus is on the present because distant-future promises of cash are not worth very much in today's dollars. You might think that if there were ever a decision we would leave to the market and the aggregated preferences of millions of individuals, it would be the terms on which we trade present comfort off for future wealth. But we don't. We leave that decision to the discretion of the philosopher-prince Bernanke and his committee. And in extraordinary moments like the September Wall Street crisis, when the flow of funds through financial markets dries up, we leave the decisions of which banks to nationalize, which to close down, which to forcibly merge, and which to rescue and on what terms to our financial overlords in the Eccles Building on the National Mall.

    ***
    Ben Shalom Bernanke is perhaps more aware of the complex history that placed him in this role than any of his predecessors were. The eldest child of a schoolteacher and of a druggist and part-time theater manager, he was born in Georgia and brought up in South Carolina before heading off to Harvard in 1971. "What was it like being a southerner at Harvard in the 1970s?" is reported to have been the thing that George W. Bush was most interested in when he first interviewed Bernanke for a slot as one of the Federal Reserve's seven governors. Bernanke then went straight on to graduate school at the Massachusetts Institute of Technology and earned his Ph.D. in 1979, a student of Stanley Fischer's during a near-decade when it seemed like all the excellent young macroeconomists were students of Stanley Fischer's. His first job was as a Stanford Business School professor, where he became a star. After six years at Stanford and a year at New York University, Ben Bernanke settled at Princeton. His last six years at Princeton, 1996–2002, he was an extraordinarily successful economics department chair.

    "I always thought I would be an academic lifer," Ben Bernanke said at a conference in 2005. "The sum of my political experience consisted of two terms on the local school board, six grueling years during which my fellow board members and I were trashed alternately by angry parents and angry taxpayers." In spite of this lack of experience, the consensus was and is that he is one of the very best people for his job. "[The choice of Ben Bernanke] as the next Fed Chairman is a very good one: he is extremely bright ... a first rate expert in macroeconomics and monetary policy ... he has a broad and sophisticated -- if somehow controversial -- understanding of international macroeconomic issues. ... While being a Republican, he is not a partisan hack or too closely associated with the White House. ... He is a wise and pragmatic policy maker" -- so said Nouriel Roubini, perhaps the fiercest critic of recent Federal Reserve policy, when Bernanke was nominated nearly three years ago.

    When Bernanke was appointed, the concerns about what he would bring to the position were threefold: Would he be too much of an inflationist -- too willing to "drop money out of helicopters" to keep the economy going at a high-pressure pace when recession threatened? Would he be too rigid -- likely to confine the Federal Reserve to an "inflation targeting" straitjacket? Would his belief that America's large trade deficit sprang from a "global savings glut" rather than U.S. policy mistakes lead him to neglect the problems created by those global imbalances? None of these have proved relevant to understanding his tenure so far. Instead, the most relevant thing has been his long interest in the Great Depression and his judgment that the Federal Reserve erred catastrophically in the Depression not just by failing to stem the decline in those bank deposits necessary to fuel consumer spending but also by allowing banks to fail. In so doing, the Fed destroyed the organization and knowledge base that made banks trusted intermediaries between the myriads of savers with no knowledge of business prospects and the thousands of businesses with no direct ability to draw on individual savers' resources. Avoiding the mistakes made during the Great Depression is Bernanke's highest priority. "As an official representative of the Federal Reserve," he said at the 90th birthday party for Milton Friedman, who in a 1963 book co-authored with Anna J. Schwartz argues that the Federal Reserve's monetary policy was to blame for the Depression, "I would like to say to Milton and Anna, You're right, we did it. We're very sorry. But thanks to you, we won't do it again."

    In 2002 he left Princeton for Washington, where he was one of the Fed's governors for three years, then one of Bush's White House economists for a year, and then named chair of the Federal Reserve on Feb. 1, 2006.

    ***
    Now go further back in history to 1844, and pick up the story that leads to Bernanke's current power and eminence. The place is London. The occasion is the debate in Britain's House of Commons over the terms on which the charter of the Bank of England -- the government's bank -- is to be renewed. The British government was then the largest economic institution the world had ever seen, and Britain, the fastest-growing economy ever seen: It was the age of the original Industrial Revolution, with the first large-scale automated factories, the first steamships, the first net of railroads, and the first time that any national economy had developed the chronic disease that we call the industrial business cycle.

    Before the 19th century the causes of times of economic distress were obvious: war, famine, or disease, or a state bankruptcy -- a government that decided that it was simply not going to pay its debts. You could see what was going wrong and what had caused it.

    The industrial business cycle was different -- and mysterious. Factories would be shut but not because of a lack of raw materials or of workers who wanted the jobs or of people who needed the products. Construction workers would be idle but not because the country had enough railroads or buildings or ports. People would be much poorer than they had been a couple of years before but not because an invading army had burned their cities or a plague of locusts had eaten their crops.

    What seemed to be happening was that the flow of funds of individuals' savings into banks and then out to companies that wanted to expand or maintain operations somehow dried up. Sometimes the flow of money into the banks dried up first, and so the interest rate the banks had to pay to attract funds and deposits rose. As a result, the interest on the loans the banks had made was suddenly less than the interest they had to pay out on deposits. The banks then ran short of cash, couldn't pay their obligations, and crashed. This further dried up the flow of funds from savers: Why deposit your money in a bank that might crash next week? Sometimes the confidence of entrepreneurs in expanding their enterprises flagged and faltered, and the value that they paid each other for shares of ownership of factories and railroads and office buildings fell. Then they could no longer sell shares in their properties to pay back the banks from which they had borrowed -- and the banks ran short of cash, couldn't pay their obligations, and crashed. This too dried up the flow of funds from savers. Before the Industrial Revolution, these things didn't happen. Ever since, they have happened roughly every five years, at varying levels of severity.

    In reaction to these first contractions, the Bank of England developed a custom: In a panic, crash, or depression, when smaller banks were running short of cash, the Bank of England would print some up and lend it out to the other banks. Nobody thought that Bank of England notes were bad because nobody thought the Bank of England would crash: the British Empire would never let it fail. So the Bank of England lent to smaller banks that could not meet their obligations, expecting repayment only after the crisis had passed. This lending would keep smaller banks from crashing, lower interest rates, and raise asset prices. Indeed, the crises did pass. Savers reappeared, and the interest rates banks had to pay to attract deposits fell. Entrepreneurs returned from their rest cures, recovered their confidence, and asset prices rose again. And the Bank of England got repaid -- or at least got repaid enough of the time to keep the system going.

    All of this was illegal. The notes the Bank of England printed were supposed to be backed by gold in its vaults. The 1844 parliamentary debate was about whether the Bank of England's charter should be amended to make legal what the bank was already doing. Prime Minister Robert Peel said no: If the Bank of England had the legal power to print extra notes to rescue banks in a crisis, he said, then the banks would get into more crises, taking more risks because they knew that the Bank of England would rescue them. But, Peel said, if the governor of the Bank of England decided, in a panic, to rescue banks or lend them money to prevent the panic from snowballing into a crisis and then into a depression -- then the government would not prosecute its bank for violating its own charter. As Charles Kindleberger puts it in his book Manias, Panics, and Crashes, the principle was that the central bank should always show up when it was really needed, but beforehand, and in normal times, its appearance should always be in doubt.

    As the 19th century passed, the Bank of England began to exercise its power to set the key price in the economy. There had always been a "bank rate" -- a rate at which other banks could borrow from the Bank of England. At the start, the Bank of England would periodically adjust the "bank rate" to follow the general price in the free money market in normal times, but it found that the other banks were waiting for it before they would change their own lending rates. By the end of the 19th century, the short-term interest rate in Britain was an administered rather than a market price all the time -- not just in the panics when the Bank of England lent money in emergency-rescue operations.

    The United States in the 19th century did without a central bank and had the world's severest panics and deepest depressions -- in 1857, 1873, 1884, 1893, 1896, and 1907. In 1907, the financier J.P. Morgan said "enough" and constituted himself as a pick-up central bank because nobody doubted that his and his partners' fortunes were so large that their credit was good. In 1913 Congress created the Federal Reserve. The Federal Reserve did not acquit itself well during the Great Depression: Milton Friedman and Anna J. Schwartz always blamed that on the untimely death in 1928 -- just before the crash -- of the Fed's leader, New York Federal Reserve Bank President Benjamin Strong, and the lack of competent replacements. Other central banks also did not acquit themselves well during the Great Depression: They all seem to have decided that maintaining the gold standard was more important than rescuing banks, which is why we no longer have a gold standard.

    After World War II, the Federal Reserve found its footing. Eight times a year, and in emergencies, the Federal Open Market Committee met to assess the levels of the federal funds rate and the Federal Reserve discount rate -- the American equivalents of Britain's "bank rate." The Reserve set its interest rates with an eye, first, to maintaining price stability (because inflation makes all other tasks much more difficult); second, to minimizing the danger of a future financial crisis; and, third, to keeping the economy's level of growth as high and unemployment as low as possible given the other two objectives.

    In the first decades after World War II, the Federal Reserve came under heavy political pressure: Members of Congress would denounce the Fed for keeping interest rates too low and thus triggering inflation; other members of Congress would denounce the Federal Reserve for keeping interest rates too high and thus creating high unemployment and low real wages; presidents prodded the Reserve to lower interest rates to produce an economic boom at re-election times. But the 1970s taught members of Congress that criticizing the Federal Reserve is likely to backfire: If it takes your advice, you cannot then blame it for what has gone wrong in the economy. The 1980s taught presidents and their staffs that getting into a fight with the Fed is likely to shake business confidence and risk either higher inflation or higher unemployment or both. The memory of the 1970s and the 1980s created a culture inside the Federal Reserve of resistance to political pressure. Many in the Fed believe that the root cause of our only post–World War II depression, in 1982, had been caused by then Federal Reserve Chair Arthur Burns' willingness to bow to pressure from his political patron Richard Nixon to create a booming economy for Nixon's re-election campaign in 1972.

    The last even semiserious political effort to pressure the Federal Reserve came in 1991, when George H.W. Bush's White House delayed Alan Greenspan's reappointment as chair and threatened to find a replacement if Greenspan and his committee did not lower interest rates far and fast enough to suit the White House -- what then–White House counsel C. Boyden Gray told me were "counterproductive and pointless games." Since Paul Volcker's appointment as chair in 1979, the Reserve has been effectively independent from the rest of the government. And whenever it makes a decision, the word comes down to all executive-branch officials to stay on message, as we were told when I worked at the Treasury in the 1990s:

    "Our role at the Treasury Department is to support the independent regulators. ... The Treasury Department supports the actions taken by the Federal Reserve Bank of New York and the Federal Reserve. We believe the actions taken were necessary and appropriate."

    All this evolved not by design but by accident. The Bank of England did not start out thinking its job was to rescue the banking sector in crisis; it just found there was a crisis and thought it could do some good. Robert Peel did not set out to create a central bank, but prosecuting the Bank of England for charter violations seemed a mistake at the time. The Bank of England did not set out to supplant the market and turn the interest rate into a centrally planned and administered price, but monetary management in extraordinary times led to monetary management in unusual and then in ordinary times. The 1913 U.S. Congress did not set out to turn Ben Bernanke into a philosopher-prince, but the absence of an American central bank was blamed for the dire panics and depressions that struck between the Civil War and World War I. And post–World War II presidents and congresses did not set out to cede all effective powers of national macroeconomic management to the philosopher-princes of the Federal Reserve; it just seemed like the least-bad idea at the time.

    But just because central banking is independent of politics does not mean that politics is independent of central banking. "You may not be interested in the dialectic," Leon Trotsky once said, "but the dialectic is interested in you." That we now have independent central banks run by technocratic philosopher-princes like Ben Bernanke, and that we have these central banks because elected legislators and executive politicians do not want to challenge their authority or change their charters, has powerful implications for the freedom of action and choices that presidents and elected governments can make. Let me give three examples:

    At the start of the Clinton administration in 1993, Alan Greenspan as Federal Reserve chair was firmly and genuinely convinced that the federal budget deficit, at its level at the time, was inflationary. Deficits raise debt. One of the things governments do to get from under the burden of a high national debt is inflate the currency. Greenspan was firmly convinced that if he wanted to maintain price stability -- and he wanted to maintain price stability -- then he had to offset the upward pressure on inflation coming from expectations that someday the government would start printing money to ease its debt. To offset inflation, he raised interest rates and so created a supply imbalance in the labor market: You can't have durable inflation without rising wages, and you can't have rising wages with an excess supply of workers looking for jobs in the labor market.

    Thus, the debate about the economic policy of the Clinton administration carried out in the fall and winter of 1992–1993 -- how to find the proper balance among middle-class tax cuts, public-investment expenditure increases, upper-class tax increases, and deficit reduction -- was brought to a sharp and immediate halt by the Federal Reserve. Because Alan Greenspan was committed to keeping inflation low, any Clinton administration economic policy of benign neglect applied to the deficit would be very likely to produce a substantial recession. Greenspan, of course, said that he was not an unelected technocrat imposing his policy preferences on the elected president but merely an informant about the reality of the bond market -- which generated James Carville's crack about how he wanted to be reincarnated: "I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter, but now I want to come back as the bond market. You can intimidate everybody."

    A similar process had the opposite effect between 1995 and 2000. Greenspan's belief -- over the objections of many if not most of the members of his committee -- in the "new economy" of the Internet revolution led the Fed chair to reduce interest rates below what standard Federal Reserve reactions found appropriate for the late-1990s levels of inflation and unemployment. This action generated the high-productivity, high-employment boom of the late 1990s that then turned into the dot-com bubble.

    The current financial crisis has its roots in Greenspan's decision to keep interest rates very low in 2002 and 2003 to head off the danger of a deflation-induced double-dip recession, and his subsequent decision that the costs of cleaning up after a housing bubble were likely to be less than the costs of the high unemployment that would be generated by a preemptive attempt to pop a housing-speculation bubble. Two years ago, I would have said that Greenspan's judgment here was correct. Six months ago, I would have said that his judgment was probably correct. Today -- in the middle of the largest nationalizations in history -- I can no longer state that Greenspan made the right calls with respect to the level of interest rates and the housing bubble in the 2000s.

    In all three of these episodes, the president and the Congress -- neither of them wishing to erode confidence by a public disagreement with the Federal Reserve -- had about as much power to set or influence policy as the Queen of England does in Britain: They had the power to talk to the decider -- Greenspan then and Bernanke today -- and nothing more.

    The great financial crisis of 2007–2008 does not weaken but strengthen the Federal Reserve's independence in the short and medium run, no matter how one apportions blame among the Fed, the SEC, other regulatory agencies, and the overpaid princes of Wall Street. A strong economy is in the president's policy interest: policy initiatives, especially expensive policy initiatives, cannot be enacted and implemented when the economy is weak. And a strong economy is in the president's and the current Congress' political interest: Weak economies lead to re-election defeats. The policy and political dangers of challenges to the Reserve's authority, independent status, and leading role are thus now unusually high and likely to remain unusually high for the duration of the current financial crisis and for a year or two thereafter. The next administration will find itself advising, warning, privately admonishing, and publicly partnering with an independent Federal Reserve that will see itself as rightfully and legitimately taking the leading role in economic policy.

    Cicero said that the problem with his political ally Cato was that he thought they lived in the Republic of Plato while they really lived in the Sewer of Romulus. It is either our curse or our blessing that we live in the Republic of the Central Banker.
    Reply Saturday, February 18, 2017 at 11:08 AM

    [Feb 19, 2017] the current corporate tax code is a mechanism for transferring money from the rest of us to the likes of Mitt Romney and Peter Peterson.

    Feb 19, 2017 | economistsview.typepad.com
    anne -> anne... February 18, 2017 at 06:42 AM , 2017 at 06:42 AM
    http://cepr.net/blogs/beat-the-press/neil-irwin-warns-of-financial-crisis-from-corporate-tax-reform

    February 11, 2017

    Neil Irwin Warns of Financial Crisis from Corporate Tax Reform

    This is really getting over the top. Republicans in Congress are debating an overhaul of the corporate income tax which would eliminate many of the opportunities for gaming the current tax code. To my mind this is great news, because the tax gaming industry is where many of the richest people in the country, like private equity fund partners, make their money.

    This means that the current corporate tax code is a mechanism for transferring money from the rest of us to the likes of Mitt Romney and Peter Peterson. It's understandable that these people would be very upset by a plan to end their tax gaming windfalls, but why is Neil Irwin at the New York Times so upset?

    The story he pushes is that border adjustability rules in the proposed reform would create enormous disruptions in the economy because it would lead to a sharp rise in the value of the dollar. Irwin tosses around a hypothetical 25 percent increase in the value of the dollar which he warns:

    "could shift trillions of dollars of wealth from Americans to foreigners; set off an emerging markets financial crisis; wreak havoc in global oil markets; and cause sustained harm to the American higher education and tourism industries (including, as it happens, luxury hotels with President Trump's name on them)."

    Okay, this is more than a little bit silly.

    Let's start with the 25 percent number. The idea is that the dollar would rise enough to leave our trade balance more or less unaffected even though we have imposed the tax on all imports and refunded it on all exports. So if we were talking about a tax rate of 25 percent on both, this sort of increase in the value of the dollar would leave the price of U.S. imports unchanged to people in the United States and the price of U.S. exports unchanged for people living in other countries.

    The first problem with this story is that we're not talking about a 25 percent tax, the number most often floated is 20 percent. Furthermore, the amount rebated on exports would be a small fraction of this number since the tax is not assessed on wages, interest or dividend payments, or profits that are reinvested. This likely means that the tax would be in the range of 1 to 2 percent of the final price of the product.

    If we assume that the dollar fully adjusts to leave our trade balance unchanged and we split the difference between a 2 percent fall in the price of our exports and a 20 percent increase in the price of imports, we are looking at an 11 percent rise in the value of the dollar. If we assume that the adjustment is less than 100 percent, say something like 75-80 percent, then we would be looking at a rise in the value of the dollar of 9.0 percent.

    If this sort of increase in the value of the dollar would lead to a financial crisis in emerging markets, then we should be seeing one now, because the dollar has risen by roughly that amount against the currencies of our trading partners since last spring. If there has been a crisis the NYT has neglected to cover it.

    Movements of this size happen all the time. They certainly can cause problems, but the financial system generally deals with it.

    The global oil markets comment is especially annoying because it repeats the ridiculous line about it being important that oil is priced in dollars. It isn't. The pricing in dollars is simply a convention. It is like we were writing the price of oil up on a chalkboard. We need a unit in which to measure the price. It could be euros, it could be yen, it could be bushels of wheat. Due to the dominance of the U.S. economy, the tradition has been to use dollars.

    As a practical matter, oil is traded in whatever currency is convenient for the trading partners. Most often this is dollars, but it can be other currencies if the two parties choose. Also, if the price of the dollar rises against other currencies, then the dollar price of oil will typically fall. The exception will be in situations where companies have signed long-term contracts specified in dollars. In this case, the buyer will take a hit and the lender will get a windfall.

    In this context, a 9 percent rise in the value of the dollar matters, but nowhere near as much as the sixty percent drop in the price of oil between 2014 and 2016 or even the 25 percent increase in the price of oil between the summer of 2016 and end of the year.

    As far as the impact of the 9 percent rise in the value of the dollar on U.S. higher education, well life is tough. The same is true for our tourism industry (including the U.S. based Trump hotels -- the foreign ones benefit). They can console themselves with the fact that the hit is smaller than what they just endured over the last eight months.

    The basic story here is that this tax reform offers the opportunity to eliminate a major channel through which income is transferred from the rest of us to the very rich. We will have to see the real life legislation to pass judgement. But anyone who doesn't work for the private equity boys and the rest of the tax shelter industry should be happy to see Republicans in Congress considering something along these lines. It should not be shot down for bogus reasons.

    * https://www.nytimes.com/2017/02/10/upshot/a-tax-overhaul-would-be-great-in-theory-heres-why-its-so-hard-in-practice.html

    -- Dean Baker

    [Feb 19, 2017] The Major Potential Impact of a Corporate Tax Overhaul

    Feb 19, 2017 | economistsview.typepad.com
    Fred C. Dobbs -> anne... February 18, 2017 at 09:42 AM , 2017 at 09:42 AM
    (Déjà vu from this board on February 12.)

    The Major Potential Impact of a Corporate Tax
    Overhaul https://nyti.ms/2jOlTE9 via @UpshotNYT
    NYT - Neil Irwin - January 7, 2017

    The United States system for taxing businesses is a mess. If there's one thing nearly everyone can agree upon, it is that.

    The current corporate income tax manages the weird trick of both taxing companies at a higher statutory rate than other advanced countries while collecting less money, as a percentage of the overall economy, than most of them. It is infinitely complicated and it gives companies incentives to borrow too much money and move operations to countries with lower tax rates.

    Now, the moment for trying to fix all of that appears to have arrived. With the House, Senate and presidency all soon to be in Republican hands and with all agreeing that a major tax bill is a top priority, some kind of change appears likely to happen. And it may turn out to be a very big deal, particularly if a tax plan that House Republicans proposed last summer becomes the core of new legislation.

    Among Washington's lobbying shops and policy analysis crowd, it's known as a "destination-based cash flow tax with border adjustment." It's easier to think of it as the most substantial reworking of how businesses are taxed since the corporate income tax was introduced a century ago. And it could, if enacted, have big effects not just in the tax departments of major corporations but in global financial markets and the aisles of your local Walmart.

    This possible revamping of the corporate tax code is less politically polarizing than the debates sure to unfold in the months ahead over health care, or even over individual income taxes. But the consequences for business - and for the long-term trajectory of the economy - are huge.

    The basic idea behind a D.B.C.F.T. (to use the abbreviation that has taken hold in a particularly nerdy corner of Twitter) is this: Right now companies are taxed based on their income generated in the United States. But there are countless tricks that corporate accountants can play to reduce the income companies report and to reduce their tax burden, and those tricks distort the economy.

    Two prime examples are transferring intellectual property to overseas holding companies and engaging in corporate inversions that move a company's legal headquarters to a country with lower taxes. Moreover, because interest payments on debt are tax-deductible, the current system makes it appealing to take on as much debt as possible, even though that can increase the risk of bankruptcy when a downturn comes along.

    The House Republicans' approach, instead of taxing the easy-to-manipulate corporate income, goes after a firm's domestic cash flow: money that comes in from sales within the United States borders minus money that goes out to pay employees and buy supplies and so forth. There's no incentive to play games with overseas companies that exist only to exploit tax differences or to relocate production to countries with lower taxes because you'll be taxed on things you sell in the United States, regardless.

    "With an income tax, one of the key issues is 'how do you measure income,' " said Alan Auerbach, an economist at the University of California, Berkeley, who is a leading advocate of the idea. "But with cash flow you just follow the money."

    And the tax, Mr. Auerbach argues, could spur business investment while not encouraging companies to rely on debt. It allows companies to enjoy the tax savings of capital investments immediately rather than depreciating them over time. And it doesn't give favorable treatment to debt, as opposed to equity.

    That alone would amount to a major shift in the tax system. Congressional staff members, the incoming administration and armies of lobbyists will spend countless hours hammering out the details of any such proposal: how it might be phased in, and how to treat financial services, and much more.

    Some of the most complex, and politically problematic, elements of the plan revolve around its treatment of international trade, which creates winners and losers. And some of those potential losers are powerful.

    Consider what border adjustment means: When an American company exports goods under this new tax system, it would not pay any taxes on its international sales, while its imports would be taxed. So a company that spent $80 making something that it sold overseas for $100 would pay no tax on its earnings. A company that imported goods worth $80 from abroad and them sold them domestically for $100 would pay tax on the full $100.

    At first glance this looks as if it would boost exports and reduce the trade deficit. Indeed, it might prove politically promising for advocates of the strategy to pitch the plan as one that would do this.

    Many economists think it won't work that way, however. That's because as soon as a cash-flow-based tax with border adjustment looks likely to become law, the value of the dollar should rise in currency markets. And that stronger dollar could eliminate the apparent pro-export, anti-import effects of the tax. The dollar could rise by, say, 20 to 25 percent, and the trade balance could remain about where it started.

    Essentially, moving to this system means betting on a "textbook economic theory," as analysts at Evercore ISI put it, becoming a reality even though the effect hasn't been tested in practice.

    If the dollar doesn't strengthen as expected, for example, import-dependent industries, especially those with lean profit margins, could face disaster. That helps explain why some of the stiffest opposition to this tax overhaul is coming from the retail industry. Essentially, economists are telling them "trust us, our models say the currency will adjust and it will all come out in the wash," but if the models are wrong, for companies like Walmart, Target and many others that sell large volumes of imported goods, their viability could be threatened.

    If the models turn out to be right, there is a different set of risks. The United States dollar is the linchpin of the global financial system, and a large move in its value triggered by changes in domestic tax policy could have unforeseen effects.

    Many companies worldwide, especially banks and especially in emerging markets, have debt denominated in dollars, which would become more of a burden after a new dollar appreciation. A big dollar rise would also effectively shift trillions in wealth from American investments overseas toward global investors with assets in the United States.

    As Jared Bernstein of the Center on Budget and Policy Priorities has noted (*), we don't really know what the distributional consequences of this tax overhaul would be. It could increase the costs of imported goods that the poor spend a disproportionate portion of their income on, like clothing and gasoline. That would be bad news for poorer Americans even as it makes the overall economy more efficient.

    There's still a lot of work to be done to understand the far-reaching consequences of the D.B.C.F.T. (also, work to be done to find a catchier name). But there's a broader point about the nature of any major policy reform. The benefits of a reworked corporate tax code would emerge slowly; these disruptions and costs could arrive almost instantly.

    No matter the outcome, 2017 will be a fascinating year in which core components of the tax system - with long-lasting economic consequences - will be up for grabs.

    * My take on the Republicans' new, interesting corporate tax plan https://wpo.st/m-8b2
    Jared Bernstein - December 30

    A lot of folks - okay, four people, but that's a lot for this sort of thing - have asked me what I think of this new tax idea Republicans are pushing to replace the current corporate tax: a destination based, border-adjusted tax on cash flow. (Let's call it a BAT - border-adjustment tax - as does the CNNMoney team in this useful explainer (*); it even has a hashtag: #DBCFT.) Sounds tricky, but the basics are straightforward, and have more appeal than you might think. But there are also legitimate concerns, not the least of which is that the BAT is one potentially good part of a really damaging tax package. ...

    ... the main problem with the BAT is that it's part of a big, highly regressive tax plan that ultimately delivers virtually all of its benefits to the top 1 percent while stiffing the Treasury, on net, of much needed revenue. As I've written in many places, both this plan and President-elect Donald Trump's plan are nothing more than the latest entries in the failed trickle-down tax cut experiment. Their ultimate goals to further enrich the wealthy, shrink government and force large deficits could well put social insurance programs on the chopping block.

    If so, the BAT, for all its potentially useful attributes, is a swing and a miss.

    * Trump's tariffs or tax reform: Which will Congress pick?
    http://cnnmon.ie/2iEdcMP via @CNNMoney - Dec 28

    pgl -> Fred C. Dobbs... , February 18, 2017 at 01:29 PM
    "Right now companies are taxed based on their income generated in the United States. But there are countless tricks that corporate accountants can play to reduce the income companies report and to reduce their tax burden, and those tricks distort the economy. Two prime examples are transferring intellectual property to overseas holding companies and engaging in corporate inversions that move a company's legal headquarters to a country with lower taxes."

    DBCFT would make this form of tax evasion even easier. Solution? Don't think so.

    pgl -> anne... , February 18, 2017 at 09:56 AM
    A spike in inflation is their criticism? There are all sorts of real issues with respect to the proposed tax change. A little expected inflation is not really one of them. And even if expected inflation went up a bit - I would argue that would be a good thing as real interest rates are still too high for my taste.
    Peter K. -> pgl... , February 18, 2017 at 10:23 AM
    That's all you got? LOL
    pgl -> Peter K.... , February 18, 2017 at 01:30 PM
    As you know, I have said a lot more. But then it is all over your pea brain so you get all angry. Boring.

    [Feb 12, 2017] Bill Gale of the Brookings Institution made this remarkable endorsement of the destination-based border-adjustment tax -- It essentially makes the government a shareholder in every corporation in America. The government shares all the losses, and it shares all the profits

    Feb 12, 2017 | economistsview.typepad.com
    Peter K. -> pgl... February 11, 2017 at 06:52 PM

    , 2017 at 06:52 PM

    http://www.nationalreview.com/corner/444689/liberals-love-border-adjusted-tax

    Liberals Can't Wait for Republicans to Adopt the Border-Adjusted Tax

    by VERONIQUE DE RUGY February 7, 2017 4:25 PM

    I have already expressed some of my objections with the border-adjusted tax included in the otherwise very good House Republican's Tax Blueprint. But I think it is important to revisit the utter enthusiasm of liberals at the prospect of a Republican Congress implementing a Destination Based Cash Flow Tax (DBCFT).

    Exhibit number 1: This article in the U.S. edition of The Independent called "Deluded Republicans are accidentally pushing for progressive corporation tax reform." It reads:

    "Indeed, we find ourselves in the paradoxical situation where a reform being presented by deluded right-wing American politicians as a way of sticking it to cheating foreigners actually represents the world's best chance for lancing the boil of rampant tax evasion by multinational companies. . . .

    But the great advantage of this reform is that it would eliminate the incentive for multinational firms to dodge their US corporate taxes through accounting tricks, such as registering profits at subsidiaries abroad and relocating their corporate headquarters to tax havens.

    No matter where they based their headquarters, multinationals would be liable for a hefty US tax bill if they sold plenty of products and services in America."

    This is correct. No matter how high the rate goes (as I we will see below under a Democratic Congress and White House, it could go high), companies will have nowhere to go and will lose their escape valves, i.e., they will be stuck with "a hefty US tax bill." That's what tax harmonization does. Dan Mitchell has a good speech here about how the DBCFT undermines tax competition.

    According to the author, the best part of the tax plan is that other governments will copy it and the bad system will be imposed everywhere. Tax competition gives you a virtuous cycle of countries adopting better and cheaper tax systems to compete with other countries. Under a destination-based border-adjustment regime, you instead get tax harmonization and a vicious cycle that spreads a bad system everywhere. He concludes:

    "Back to the paradox. Republicans care little about the iniquities of tax havens. They want firms to pay more in corporation tax in the same way that Donald Trump wants judges in Washington to influence immigration policy. And they seem terribly confused about the reform they are championing and about what it would entail, not least the progressive outcomes.

    Yet, for all that, what they have ended up pushing is the right thing, not just for the US but the world. Treason or not, we should wish them good speed on this one."

    Exhibit number 2: At a recent Tax Foundation event on the issue, Bill Gale of the Brookings Institution made this remarkable endorsement of the destination-based border-adjustment tax. He said (at the 43:40 mark): "It essentially makes the government a shareholder in every corporation in America. The government shares all the losses, and it shares all the profits."

    You can tell from the video that Douglas Holtz-Eakin is obviously uncomfortable with his comments. He even says something to the effect of "are you trying to kill it?"

    But then it gets better. Gale then reiterated his call for a much higher rate than the Republican plan's 20 percent. And as he said at the 45:33 mark, "If something is non-distortionary, you should tax the hell out of it." That has the merit of being honest and transparent.

    Now, never mind that a very likely less than perfect adjustment of our currency will actually create plenty of distortions in the form of, among other things, higher prices for consumers. And never mind that the adjustment of the currency itself will be painful and destroy a whole lot of wealth. But he is right that if there is no escape valve, then lawmakers are likely to try to tax the hell out of it.

    As I wrote last week:

    "When you think about it, it is not surprising that many, not all, liberals like the new tax idea."

    Republicans in Congress should think about this carefully.

    [Feb 12, 2017] Classicals vs Neoclassicals views on Tax and Rent

    Feb 12, 2017 | economistsview.typepad.com
    RGC : Reply Sunday, February 12, 2017 at 08:08 AM , February 12, 2017 at 08:08 AM
    Classicals or Neoclassicals - who you got?

    ...................
    Classicals vs Neoclassicals: Tax and Rent

    Posted on 8 January 2011

    At the university I attended, a few of the academics were strongly influenced by Classical Political Economy, especially that of Smith and Ricardo. Prior to my student days, one of them had published a paper in the Cambridge Journal of Economics entitled "On the origins of the term 'neoclassical'" (no free link available), which is quite well known in heterodox circles. In it, he argued that the 'classical' in the term 'neoclassical' is a misnomer and that neoclassical and classical economics actually have little in common, despite attempts by neoclassicals to claim Smith, in particular, as their forefather.

    The classical-influenced economists at my university happened to belong to the Sraffian School. This school attempts to synthesize Classical value and distribution with Keynesian output and employment determination, and is also known for its key role and victory in the Cambridge Capital Controversy. The school is named after Piero Sraffa, whose interpretation of Classical Political Economy, particularly Ricardo's work, has been highly influential.

    Sraffians are not the only modern-day economists influenced by Smith and Ricardo. Another prominent example is Michael Hudson. In a recent interview (h/t to Tom Hickey), Hudson discusses one big difference between the Classical economists and the neoclassicals: their analysis of taxation as applied to economic rent.

    Hudson touches on a number of noteworthy points during the interview. He draws attention to a historical correspondence that would probably surprise many, between high top tax rates and strong economic growth, and observes that the top rates were high in the period prior to WWII. Importantly, the focus of taxation in Classical Political Economy, which Hudson argues influenced US government policy in the late 1800s and much of the first half of the 1900s, was on confiscating economic rents. These rents include income that derives from ownership of assets that appreciate in value merely because of the growth in national income and/or improved public infrastructure, and not due to any participation in the production process (they arise especially in the real estate and financial sectors).

    It is not mentioned in the interview, but profit, of course, is also income that derives from the mere ownership of assets – the means of production. However, the classical economists were engaged in a class war with rentiers, not capitalists. It was Marx who drew this reasoning out to its logical conclusion, and this probably goes a long way to explaining why neoclassical theory, rather than being a continuation of classical economics (as was often claimed once it was established), was an escape into a different conceptualization of a capitalist economy that sought to reframe the distribution of income as the result of marginal contributions (an attempt that failed and was the chief target and theoretical casualty of the Cambridge Capital Controversy). Even so, there does remain a significant distinction between profit, which relates to assets employed in the production process, and economic rents. For this reason, Marx also distinguished between these two categories of income and spent a great deal of space in volume 3 of Capital analyzing the various forms of surplus value, including different types of rent.

    Hudson goes on to stress that the taxation imposed in the late 1800s and first half of the 1900s was highly progressive. Initially only the top 1 percent of income earners were required to submit tax returns. The purpose of this was to keep taxes on wages and profit low to promote price competitiveness against lower wage countries. This can be contrasted with neo-liberal policies of today which seem to be designed almost with the opposite intent: to tax wage and profit income (and also consumption) but provide loopholes or tax breaks for the recipients of economic rents.

    Above all, Hudson distinguishes between what the classical economists meant by the term "free market" and what that term has come to mean in the neo-liberal period. Hudson emphasizes that, for the classical economists, "free market" meant a market unencumbered by rent-based claims on income that would draw economic activity away from income production and toward speculation. The aim of the classical economists was to incentivize production. This is a very different notion than the neo-liberal one of labor-market "deregulation" (meaning regulation in favor of employers over employees), which is really just code for union smashing and an attack on real wages, or the neo-liberal deregulation of financial markets, which is a euphemism for enabling financial parasitism.

    Hudson makes another observation in passing. The observation is not central to his argument in the interview, but is relevant to current debates over deficits and public debt, and consistent with MMT. He notes that immediately prior to the commencement of the only extended period of high capitalist growth (WWII until the late 1960s), the US population was not in debt, and in fact had pent up savings from the war that it was waiting to spend.

    By little or no debt, Hudson clarifies that he means little or no private debt. There was, of course, a large public debt – larger as a percentage of GDP than the current US government "debt". This public debt did not matter, in spite of the familiar opposition to deficits and public debt, the echoes of which can be heard today, simply because the budget deficit shrinks endogenously once private-sector activity and income growth resume. This is precisely what happened in the immediate postwar period.

    Today, with the US government the monopoly issuer of its own flexible exchange-rate fiat currency, public "debt" is – or rather should be – even less of an issue. Unlike in the immediate postwar period, the government is not subject to the constraints of Bretton Woods or a similar commodity-backed money system. It is free to utilize its fiscal capacity to the extent necessary to restore full employment.

    Government "debt" is nothing other than the accumulated net financial wealth of the non-government. Once the non-government is ready to spend, income growth will deliver stronger revenues, reducing the deficit. But the private sector needs to have its debt under control before it will