ataxingmatter

Obama proposes to exempt some IRS spending on enforcement from budget cap

 The 2011 debt ceiling compromise, known as the Budget Control Act, establishes automatic cuts in spending for various categories if no further deal is reached to overturn them. 

In many ways, it might be ideal to allow the Budget Control Act to come into play.  It would force significant reductions in the overall amount allocated to Defense, an area that has fed incessantly on revenues since Reagan's priority on militarization, coupled with Bush II's preemptive wars of choice in Afghanistan and Iraq. We need to cut military spending significantly, and it will not hurt the country's defense to do so.  (It may, however, crimp the high-flying styles of some military contractors.  About time, I'd say.)  Further, the Budget Control Act explicitly protects Social Security and Medicare, so those programs won't be curtailed in the process.  A good thing, again, since it is important for the nation to see that the fearmongering about Social Security as "insolvent" is just that. 

But there's at least one category of spending that an across-the-board cut makes little sense for--the spending necessary to collect tax from deadbeat/scofflaw or criminal taxpayers.  The IRS enforcement budget essentially is an investment in better tax compliance, and returns more dollars to the federal fisc than it takes out. 

Obama has recognized that, and seeks to exempt $277 million of the IRS enforcement spending from the Budget Control Act's cuts.  See the discussion here at OMB Watch (Vol. 13, No. 4, Feb. 22, 2012).

One of the main objectives of President Obama’s fiscal year (FY) 2013 budget request for the Internal Revenue Service (IRS) is to reduce the "tax gap," the difference between what taxpayers owe each year and what they actually pay. The president’s IRS budget request seeks funding increases for both taxpayer services and enforcement programs. Recognizing that a dollar spent on collecting revenue more than pays for itself, the Obama administration has proposed to exclude some IRS enforcement spending from the budget caps imposed by 2011's debt ceiling deal (known as the Budget Control Act). 

***

Among the enforcement programs the White House is recommending be increased to raise revenues are:

• An additional $111 million to fight offshore tax evasion, which the IRS estimates will bring in $6.40 for every dollar invested by FY 2015
• An increase of $39 million to improve international businesses’ compliance with the tax code .... The IRS estimates a return on investment of $8.80 per dollar invested
• An additional $129 million to implement recent legislative tax changes, including new reporting requirements and certain provisions of the Affordable Care Act (ACA), which the IRS estimates will bring in $3.50 for every dollar invested
• An increase of $88 million to implement the “Revenue Protection Strategy,” which allows the IRS to adjust a taxpayer's refund if examiners catch errors. The IRS estimates this initiative will return $1.90 per dollar invested as soon as new hires reach their full potential in FY 2015
• An additional $35 million to continue certifying tax preparers, which the IRS estimates will bring in $2.30 for every dollar invested by FY 2015

The IRS estimates that combined, these funding increases will bring in an additional $673 billion in FY 2013 alone, and, by FY 2015, an estimated $1.5 trillion in additional annual revenue.

 Sounds reasonable.  The Bush effort to cut back on IRS funding was a naked gambit for a weakened watchdog that would allow more corporate tax evasion.  Enforcement has paid off considerably over the past two years, as the IRS's effort to unveil offshore bank accounts of US taxpayers has led to significant numbers of taxpayers brining those assets back onto the tax rolls.  Congress should recognize the reasonableness of this request, unless it is so besotted with campaign fever that it is willing to sacrifice sound legislation to ideological obstructionism.

Obama FY 2013 Budget Proposal Released Today--President's Message

The Obama administration released its FY 2013 budget proposal today.  Obama projects that the deficit will be cut by over $4 trillion over the next decade, coming within the goalpost of 3% of GDP by the end of the decade.  That includes a reduction in defense spending of almost $500 billion over the decade.  At the same time, Obama makes the case for continuing the nation's investment in non-defense research & development--including clean energy. 

The President's message (part of the budget document, see link at bottom) sets the theme of attention to the way the gains of the top 1% have coincided with aggravated problems for the majority of hard working Americans.  It notices, that is that budgetary and tax policies, combined with  deregulation and financial crisis, are moving ordinary Americans towards despair and out of the middle class.

By giving every American a fair shot, asking everyone to do their fair share, and ensuring that everyone played by the same rules, we built the great American middle class and made our country a model for the world. Today, ... for many Americans, the basic bargain at the heart of the American Dream has eroded.

Long before this recession hit, there was a widespread feeling that hard work had stopped paying off; that fewer and fewer of those who contributed to the success of our economy actually benefited from that success. Those at the very top grew wealthier while everyone else struggled with paychecks that did not keep up with the rising cost of everything from college tuition to groceries. And as a result, too many families found themselves taking on more and more debt just to keep up—often papered over by mounting credit card bills and home equity loans.

Then, in the middle of 2008, the house of cards collapsed. ... Banks had packaged too many risky loans into securities and then sold them to investors who were misled or misinformed about the risks involved. Huge bets had been made and huge bonuses had been paid out with other people’s money. ... [M]illions of hardworking Americans lost their jobs, their homes, and their basic economic security. ...

We built this Budget around the idea that our country has always done best when everyone gets a fair shot, everyone does their fair share, and everyone plays by the same rules. It rejects the “you’re on your own” economics that have led to a widening gap between the richest and poorest Americans that undermines both our belief in equal opportunity and the engine of our economic growth.

The President's message also points out something important for citizens to bear in mind as the elections hurtle towards us at the end of this year--the reason for the financial crisis and the huge deficits we face now relate to the irresponsible tax cuts of the Bush administration--all passed when everyone knew that they would result in significant deficits that would be hard to ever make up--and the military buildup underway since Reagan, in particular the huge costs of two preemptive wars undertaken by that administration.

When I took office 3 years ago, my Administration was left an annual deficit of $1.3 trillion, or 9.2 percent of GDP, and a projected 10-year deficit of more than $8 trillion. These deficits were the result of a previous 8 years of undertaking initiatives, but not paying for them—especially two large tax cuts and a new Medicare prescription drug benefit—as well as the financial crisis and recession that made the fiscal situation worse as revenue decreased and automatic Government outlays increased to counter the downturn.

The budget proposes a number of good changes. 

• Obama proposes ending "special tax breaks" for Big Oil;
• Obama wants to finally end the "carried interest" fiasco, whereby equity fund partners that make much of their money by purchasing companies, overleveraging them to pay out debt proceeds to partners, and then breaking them up and firing workers are allowed under current interpretation of the partnership rules to treat their compensation income as capital gains if that is what the partnership they are servicing has. 
• Obama proposes enacting a Buffet Rule (a type of alternative minimum tax requirement that millionaires pay at a rate at least equal to the middle class--the sentence presenting this in the President's message is badly botched); 
• Obama wants to limit certain deductions for high income taxpayers to 28%: various deductions were subject to phaseouts at higher incomes before the Bush tax cuts but were  phased out under those cuts. 
• Another good change relates to the various temporary tax provisions enacted in the Bush administration that are a significant cause of the country's current deficits.  Obama recommends allowing the temporary Bush capital gains rate decrease (from 20% to 15%) to expire as scheduled for high income taxpayers, and allowing the dividend treatment as a net capital gain, instituted first as a temporary measure in 2003 and extended several times so that it currently is set to expire at the end of this year, to expire as scheduled for high income taxpayers.  The result would be that the unearned income from dividends would once more be taxed  at the same rate as earned income from wages, a circumstance which many provisions of the corporate tax in Subchapter C--those  designed to prevent schemes that "bailout" of corporate earnings at capital gains rates rather than the expected ordinary income rates--presuppose as basic to the corporate income tax (see, e.g., the section 302 redemption analysis that considers whether the redemption is a sufficient reduction to count as an exchange or rather should be taxed as a distribution under section 301).

We can expect that the proponents of corporatism--especially the corporate coalitions fighting for preserving the benefits for the mostly higher-income shareholders such as ALEC and the U.S. Chamber of Commerce--are prepared to raise a stink about this provision and will expect the GOP members in the House and Senate to vote with them.  The obstructionist GOP is already holding a press conference and conference calls on the matter.  See this C-SPAN item.  This will be a test of whether Congress has been listening to the issues raised by the Occupy WallStreet movement across the country. 

The arguments made by the corporate coalitions don't hold water.  See various earlier posts on this matter at A Taxing Matter.  Clearly, the dividend rates until 2003 didn't prevent people from investing or prevent people from making lots of money investing.   Nor did the change in the dividend rate lead to corporations retaining more income in the US--instead, after getting one "tax holiday" in 2004, more corporations moved more money offshore in expectation of continuing the gravy train with future tax holidays.  Anything the ALEC group says has to be taken with a very large grain of salt.  Especially about how increasing the sum total of corporate and dividend taxation will drive people awy from investing and reduce corporate capital formation.  The fact is that corporate taxation is at an extraordinary low and that most sales and purchases of corporate shares take place in the secondary market, putting no cash into corporations whatsoever!

But there's a good bit not to like as well.  The President calls for "corporate tax reform"--a favorite agenda item of the radical right that will decimate any plans for reducing the deficit without overburdening the middle class if the GOP is able to move it forward.  Obama suggests that corporate tax reform should close loopholes and lower rates so that it doesn't result in increased deficits.  But any loophole closure will be undone shortly thereafter, and any lowering of rates will never be undone.  It is folly to think that the kind of base broadening/rate lowering model applicable in 1986 could work in the "greed is good/taxes are bad" poisoned climate of 2012.

Office of Management and Budget FY2013 Budget Overview

 President's Message

White House Budget Proposal Text

President Discusses Budget Proposal (at Northern Virginia Community College) (with C-SPAN video)

Payroll Tax Cut -Keystone vote up Saturday at 9 in Senate

Apparently, Senate leaders on Friday ironed out the difficulty between the GOP and the Democratic party.  The GOP got most everything it wanted, and the Dems got just barely more than nothing.  That's the way "negotiating" seems to go in the Congress these days.  The right demands and demands and demands and gets most of it by obfuscating and obstructing. 

This time the Dems were worried about not getting a spending bill.  So while the House passed a spending bill to carry the Federal Government through September 2012, the Senate caved on all the things they'd said they wouldn't cave on--like the ridiculous provision for expedited approval of the Keystone Pipeline.  All to get just a 2-month extension of the payroll tax cut and expanded unemployment benefits--which the GOP knew it could not afford not to pass, no matter what.  And Obama has already flipped on his earlier looks-like-he's-finally-figured-out-how-to-stand-tall position that he would veto any bill that carried the expedited Keystone approval provision.  See Steinhaur & Pear, Senate Agrees to a Two-Month Extension of the Tax Cut, New York Times (Dec. 16, 2011). 

The GOP continues to call the Keystone pipeline project a "job creator", even though it will create no more than 50 permanent jobs, at a considerable environmental cost.  Schumer calls the Keystone provision a "Pyrrhic victory" for the GOP, because he says Obama will not approve it if pushed.  That's not so clear to me.  Schumer also spins the cave-in as a victory for Dems! saying that the GOP won't have the leverage of the need to pass a spending bill when this issue comes back.  See  Rubin et al, U.S. Senate Leaders Agree on Two-Month Payroll Cut , Bloomberg.com (Dec. 16, 2011). 

Again, past experience suggests this may be too rosy an assessment.  There were commentators who thought that surely the Congress would not pass further tax cuts after the 2001 tax cuts resulted in large deficits but instead we got the 2003 bill and the 2004 tax giveaway for corporations bill and many others, with the deficits mounting with each one.  One would have thought that the sunset of the various Bush tax cuts in 2010 would have been a perfect time for the Dems to develop a spine, but they didn't.  And the Dems weren't even able to pass a bill ending the carried interest subsidy for hedge fund managers, in spite of the Great Recession and the need to reign in financial institutions.

The Senate bill will apparently at least not include some of the bad stuff  that was in HR 3630 as passed by the House--it is "scaled back" so it looks like medicare premiums won't rise for seniors, and  the GOP won't win its attempt to end medicare's coverage of outpatient rehabilitative therapy for stroke victims and medicare payments to doctors will not be affected.   Nor will it include the "extensions" of expiring tax provisions like the R&D credit or the active financing exception for the financial  industries' deferral of its offshoreprofits.  Id.

The Senate bill will apparently be paid for by raising the guarantee fees for Freddie and Fannie, something that was included in HR 3630.  Id.  Vote is to take place at 9 am Saturday.

Disaster Aid Disaster Averted, barely

Once again, Republicans intent on obstructing the normal operation of the federal government unless they can extract cuts to programs they don't like (in the name of deficit reduction) applied the combination of House recalcitrance and Senate anti-majoritarian filibuster to threaten a government shutdown and siderail needed funding for emergency assistance to ordinary Americans until they could get at least some of their objectives.   A compromise that will get money to FEMA and keep the government funded for a spell has been reached.

 

Right-wing Blogger Peter Pappas' Problematic Post About Tax Lies

Peter Pappas is not a left-leaning blogger.  His "tax lawyer blog" tends to serve as a booster for the right-wing rants about how the rich are paying more taxes than the poor (as though that's any surprise--the rich are the ones with the staggeringly large incomes and the uber-rich are the ones garnering the gains from productivity, while the rest of us stagnate or decline).  He also tends to engage in ad hominem attacks on left-wing bloggers--yours truly being a frequent honoree.

Here's the most recent one--a rant that left wing bloggers complain about the misleading tax rhetoric of the right and "never" complain about the misleading tax rhetoric of the left.    Pappas, Tax Lies Some Left Wing Bloggers Ignore, Sept. 13, 2011.

Let's unpack this.  Bernie Sanders, in Congress, makes a speech and in it he states that Exxon Mobil didn't pay any taxes on its $19 billion in income.  Pappas thinks I should have complained about how this rhetoric was misrepresenting the facts and misleading the public, since the company didn't pay any federal income taxes but did pay a piddling amount of other (state, local, excise) taxes.  But Sanders' next sentence in the blurb that Pappas excerpts mentions the company's $157 million refund from the IRS:  that sentence fairly clearly sets the context as a discussion of what the companies pay in federal income taxes, don't you think?  Yeah, Sanders should have spoken perfectly articulately and made absolutely clear that he was talking about federal income taxes. After all, Exxon did pay a piddling sum in overall taxes on their $19 billion of income (they claim $500 million on $19 billion, which is about 2.5%, counting all state, local and excise taxes).   But that de minimis error of lack of specificity or ambiguity is very very small potatoes compared to what the right-wing rhetoric chain does.

Pappas gives a link to his earlier post, which shows a 'guide' that Sanders' office prepared about corporate freeloaders.  Note that the first item in that guide states the following: " Exxon Mobil's 2009 profits totaled $19 billion but according to the company's SEC filing it received a $156 million rebate from the IRS PLUS it didn't pay any federal taxes." 

However, Pappas doesn't give a link to the particular speech that he's quoting, which always makes me think that there is something in the speech that he doesn't like because he knows it is telling about the state of America today.  By not giving a link (or any other direct information about the speech), Pappas avoids providing any context.  What was the context of the speech?  Sanders was addressing the question of whether Congress should extend yet again the Bush tax cuts for the wealthiest Americans.  (Now I didn't say "federal income tax cuts passed in the Bush administration" but I believe all you readers know that when we talk about the Bush tax cuts we are talking about federal income taxes, don't you?)

Instead, Pappas just links to Politifact.com--a reader might think it is just a link to the website home page, since he doesn't provide the title in the link, but it is actually a link to PoliltiFact's "rating" of the statement about Exxon Mobil in Sanders speech on the Bush tax cut extension decision.  if you pursue that link you find a link to the Nov. 30, 2010 Sanders speech (which I've also linked here).  Here are a few excerpts from that speech:

It is very clear to anyone who spends 2 minutes studying the issue that the people on top are doing extraordinarily well at the same time as the middle class is collapsing and poverty is increasing.  ***

If you can believe this, since between 1980 and 2005, 80 percent of all new income created in this country went to the top 1 percent--80 percent of all new income. That is why people are wondering and asking: What is going on in my life? How come I am working longer hours for lower wages? ***

After we bailed them out, those [Wall Street] CEOs today are now earning more money than they did before the bailout. And while the middle class of this country collapses and the rich become much richer, the United States now has by far the most unequal distribution of income and wealth of any major country on Earth. ***

In the midst of all of this growing income and wealth inequality in this country, we are now faced with the issue of what we do with the Bush tax cuts of 2001 and 2003. And if you can believe it, we have people here--many of my Republican colleagues--who tell us: Oh, I am so concerned about our recordbreaking deficit. I am terribly concerned about a $13.7 trillion national debt. I am terribly concerned about the debt we are going to be leaving to our kids and our grandchildren. But wait a minute. It is very important that we give, over a 10-year period, $700 billion in tax breaks to the top 2 percent. ***

[in the penultimate paragraph, Sanders referred to the oil companies and their demand for even more tax breaks--(federal income tax breaks, I'm sure he meant to say).  That's where the quoted sentences discussed by Pappas are embedded.]

These people want to cut back on the powers of the EPA and the Department of Energy so that ExxonMobil can remain the most profitable corporation in world history while oil and coal companies continue to pollute our air and our water. Last year, ExxonMobil made $19 billion in profit. Guess what. They paid zero in taxes. They got a $156 million refund from the IRS. I guess that is not good enough. We have to give the oil companies even more tax breaks

All in all, Pappas' chagrin at the "misleading" nature of Sanders' talk seems manufactured.  Anybody reading the speech would have been quite clear that this was a discussion of federal income taxes.

And let's put Pappas' choice of doing this posting (and claiming that I in particular am somehow derelict in my duty as a blogger for not pointing out the "lie" in Bernie Sanders' speech) in context.  Let's look, for example, at one of the "related posts" on Pappas' own blog.   Pappas, 51% of Americans Pay Zero Tax; Share of Government Funded by the Rich Increases, May 9, 2011.   Now, of course you all know that the title by itself is an outright lie.  It is very hard for any American who buys various items necessary for existence (gas, food, clothing, necessaries, an occasional splurge) to manage not to pay any state or local sales taxes, and of course many states have income taxes as well and even poor Americans who have jobs will also pay payroll taxes (for Social Security and Medicare).  It simply isn't true that  51% of Americans pay "zero tax".  Now, in the body of the  post itself, Pappas does state that the 51% figure is a number in a congressional study suggesting the percentage of Americans that owe no federal income tax in 2009.   Does that make up for the headline?  It's an attention grabber--and a terribly misleading one.

I doubt if anyone thinks that anybody who talks frequently about tax gets it right all the time--we are human, after all, and we make mistakes.  But there is a big difference between an ambiguity that is clarified by context and the type of misleading tax rhetoric that the right indulges in regularly in order to push a corporatist and pro-elite, anti-tax, anti-government agenda.  You know those false claims about taxation-- that poor people don't pay taxes and they really "need" to so that they will have some "skin in the game", that family businesses and farms are lost due to the estate tax (no, there's only anecdotal evidence about some very few being slightly impacted and none about "loss" due to the piddling estate tax), or that capital gains preferential rates for stock sales reward investment in corporations (no--they primarily reward gains from secondary trades between investors), or that Social Security is insolvent (no, it is not ), or that the investor-class merits preferentially low taxes because they are the job-creation engine of America (no--jobs are created by entrepreneurs and by mom-and-pop business and by big corporations, not the secondary market investors in those corporations and certainly not by the private equity funds that routinely buy so that they can fire), or that the active financing exception to subpart F is merited because big banks otherwise would be taxed to death (no--it is merely a way to give a special subsidy to foreign banking operations that results in very low tax rates for such financial institutions), and on and on.....  Most Americans are so ill-informed that they do not understand that the "taxable income" that may be reported by the elite is already a figure far removed from (and generally much less than) the economic income of that same elite--because of the exclusion for muni-bond interest, the tax preferences for retirement income and the elite's access to incredibly generous benefits even while those of the vast majorithy of Americans are being reduced, etc.  Nor do they understand that many of the deductions that the middle class also enjoys --for example, the mortgage interest deduction--give special benefits to the elite.

There is a reason that vast numbers of Americans are misinformed about tax matters, the role of the debt ceiling, the solvency of Social Security, the relative distribution of incomes, the relative rates of taxation, and the share of government funding paid by major corporations and similar points.  It is due to a conscious campaign by the radical right to discredit government and protect the elite from taxation.  And as we saw in the recent manufactured 'debt ceiling crisis', the radical right today is wililng to commit economic terrorism in order to get its way and protect the elite at all costs. 

House GOP Response to Obama Jobs Bill Speech

The House GOP responded to Obama's jobs act speech by writing a letter asking for the text of his proposed legislation. 

Two things are noteworthy here:  the insistence on offsets, and the presupposition that deregulation would do more for creating jobs than unemployment expansion, payroll tax cuts, and credits for hiring the long-term unemployed and the other Obama proposals.

The letter says that Republicans "look forward" to receiving information about the offsets proposed for the jobs proposals.  This  highlights one of Obama's mistakes in the jobs speech and in fact throughout his administration.  He has allowed the GOP to set the agenda.  Even when it is obvious that the economy is stalling, he still walked the "deficit reduction" walk --including calling for changes to workers' earned benefit programs (Medicare and Social Security) in line with the GOP's four-decade campaign to decimate them as unjustifiable 'entitlements'.   That permits the GOP to practice their obstructionism in two places--first, in the jobs-supporting proposals and second, in the pay-for proposals. 

The letter presages that battle by noting that the House GOP wants to look back to GOP-sponsored bills that would "remove government barriers to private-sector job creation". In other words, the GOP is repeating the same worn mantra that government regulation that protects ordinary Americans from the air, water, land pollution, bad labor practices, and other anti-consumer actions of a too-powerful corporate business sector is the thing hindering job creation. 

Everyone (except perhaps the low-information American voters who have been constantly misled on this issue by the corporate media) knows that isn't true.  What hinders job creation is the lack of a consumer base to buy the products that would be produced by new jobs.  It isn't regulation--regulation is at most a cost that limits the corporate managers' and owners' profits, since it forces business to internalize costs that it had foisted off on the public prior to the regulations.  It isn't taxes--taxes are similarly just a cost of doing business.  Remember that corporations have had an enormously profitable time, and they have huge warchests of cash, both abroad and at home.  They have plenty of money to hire if there were only people to buy the products and services to be provided by the new hires.  Until that vicious cycle is broken, stagnation will continue.   

Other than its repetition of the Reaganomics anti-regulation mantra, the letter says nothing in substance.  It claims to approach the Obama jobs proposals with bipartisanship and cooperation.  But the years of the Obama administration have demonstrated that there is no such thing as cooperation among the current Republicans in Congress.

Jon Huntsman's Wall St. J. Op-Ed: warmed over Reaganomics

There he goes again.  Huntsman's op-ed ran in the Sept. 6, 2011 Wall St. Journal: Reigniting the Entrepreneurial Spirit.

As though enterpreneurs aren't being entreprenuers right now.  HOw about the group that made the news last night--two young men who realized that they could repai iPhones and other electronic gear for half the amount that the manufacturers charge and still make a cool profit (YoubreakIFix)?  If you have a good idea and you try to make it work, odds are you can make money off it.  That makes you an entrepreneur.

Huntsman seems to think that making the tax code friendly to Google and other Big Corps is the way to encourage entrepreneurialism.  That's like saying that taxing  the wages of partners in private equity funds at capital gains rates encourages entrepreneurialism--it's a big laugh.  Carried interest managers aren't entrepreneurs; they are speculators who buy cheap, breakup, and sell expensive. 

Huntsman wants "tax simplification, regulatory reform, and changes in energy and trade policy."  That's just more of Reaganomics--tax simplification means tax cuts for business and the 'owner' class, regulatory reform means deregulation, and changes in energy and trade policy mean deregulation and opening up of protected areas for exploitation.  None of those things will create jobs, foster entrepreneurialism, or create a sustainable American economy.

Huntsman says he favors a "revenue-neutral tax overhaul modeled after Ronald Reagan's 1986 tax reform package--which will require taking on sacred cows."  So he is willing to eliminate a few carveouts and deductions, that's good.  But he wants to lower rates even more, that's bad.  In fact, he says "flatter" is "fairer"--that's a weird view of fairness in a country that has consistently favored progressive taxation as a way to ensure that the wealthy pay for the many advantages bestowed upon them by government.  The 1986 tax cut worked as well as it did (it was no panacea) because rates could be cut in half and still be at 35%.  Today's rates are already at tax haven lows and can't really be cut any further without decimating important government programs.  Moreover, one of the key 1986 reforms was to eliminate the preferential rate for capital gains and tax the wealthy on their income the same way that the middle class is taxed--all at ordinary income rates.  Huntsman wants to couple rate reduction from all time lows with elimination of all taxes on capital gains!    He of course calls that 'eliminating the double taxation on investments" but as I've explained several times before, that use of "double taxation' is mostly false, especially in respect to investment in companies' stocks.  We already have a special tax code provision that provides for very low taxation on the capital gains an entreprenuer invests in a company directly.  But the preferential capital gains rate goes far beyond that and applies to secondary market capital gains.  That has nothing to do with direct investment.  Moreover, we have accelerated depreciation, bonus depreciation and expensing provisions that essentially make investment in business equipment very close to tax free--there's no 'double taxation' involved. 

 Huntsman repeats his proposed new rate schedule--8%, 14% and 23%--combined with "eliminating deductions and credits".  That means that the poor and middle class would bear an unconsciounable tax burden, while the wealthy would pay even less than most of them do today.  He says he'll "make business tax rates globally competitive"--that should mean RAISING rates, since the US business tax rates is already at tax haven status among the 40 OECD countries.  But of course, he actually intends to lower business taxes even further, for the benefit of wealthy managers and owners.

Huntsman's objections to regulations are equally misleading.  Regulations are the way that government acts to prevent business from passing along costs to taxpayers as 'externalities'--costs that they don't have to take into account to make a profit, but that create real harms for others, such as air pollution,  long term ecological destruction, ruination of mountains (strip mining), ruination of streams (sewage discharge), etc.  Huntsman has already reached judgement on the NLRB's consideration of Boeing's plant relocation to a right-to-work (union destroying) state.  He similarly has decided that the Dodd-Frank financial system overhaul represents "another regulatory sin" because it creates "massive compliance costs."  It appears he'd rather that the too big to fail banks continue to speculate freely in interconnected ways that end up creating a financial crisis like 2007-2008.  After all, the banksters will enjoy that, and the politicians will benefit from the big campaign contributions.  But the rest--ordinary Americans that make up the vast majority of living, breathing 'beneficiariies' of the kind of unsteady, speculative, volatile financial system created by deregulated banks--will suffer.  Huntsman understands taht the regulations that protect ordinary bank customers may face the big banks to "choose between downsizing or facing much higher capital ratios."  He casts this as a parade of horribles resulting from Dodd Frank.  Oddly, because that's actually a desirable result of banking legislation--if only that were a real possibility, it would help to end the 'too big to fail' problem!

Huntsman as president also would favor Reagan's mantra of privatization--he would 'privatize' Fannie and Freddie and "let the housing market clear".  In other words, he would let private companies now garner all the benefit of the federal taxpayer dollars in vested in Fannie and Freddie (he posed no conditions about returning all the benefits of the long-term federal guarantee) and he wouldn't give a damn about ordinary Americans who have underwater mortgages.  There's nothing in his proposal for clawbacks on mortgages in bankruptcy or otherwise.

Huntsman's warmed-over reaganomics proposals for favoring big business over ordinary Americans through a deregulatory regulatory policy, tax cut tax policy, and privatization don't address the right issues, don't promote entrepreneurialism, and are not fair. 

Friday Animation: Obama vs GOP on Debt Ceiling

So here's an animated cartoon that at least gets the gist of the story right--the GOP tea-partiers in Congress are trying to hold the US economy hostage with the debt ceiling decision.  The minority party says that if the country doesn't do what it wants, it will not support a debt ceiling increase.

http://www.nma.tv/obama-faces-gop-debt-ceiling/

 

What does the GOP want?  Let's consider the list.

1. No tax increases, even for the wealthiest Americans who are getting more than ever but paying less in taxes. 

This is a class warfare position.  The House GOP argues that increasing taxes on private equity and hedge fund managers, for example, would harm the economy because the tea partiers treat these elite classes as the only true entrepreneurs.  The people who are being protected are the carried interest elite who get their compensation as mostly capital gains and often deferred, through a gambit of treating a profits interest in a partnership as though it were an investment of their own money even though it is not after tax dollars;  the wealthy families who own most of the financial assets of the country; the wealthy families whose estate taxes have been reduced to a dribble by the Bush tax cuts and the new temporary estate tax 'compromise' enacted under the same type of economic terrorism; and the corporate managers who benefit from the many corporate loopholes so that most corporations pay almost no taxes and those that do pay taxes well below the statutory corporate rate.

This is class warfare because the US is a tax haven for the wealthy who can often 'monetize' their financial assets to provide money to live on without actually selling them, thus paying no taxes and passing the assets to their heirs with almost no taxes then either under the new estate tax.  Meanwhile the middle class pays substantial income and payroll taxes and sales taxes.

The wealthy can well afford to pay more in taxes.  The wealthy should pay more in taxes, because taxes represent one of the few ways that we can help reduce the huge inequality that has boomed under the four decades of reaganomics.  Vast inequality of income such as we have in this country today creates social strife and balkanizes the population because the 'haves and have-mores' don't give a damn about the have-lesses.

2. Substantial spending reductions--even in programs that actually bring money into the Treasury by holding tax cheats and securities cheats accountable.

   Consider, for example, the House-passed bill's REDUCTION of funding for SEC enforcement.  Note that the SEC enforcement office isn't paid for by tax dollars.  It is paid for out of penalties, fines, assessments, etc.  But the budget sets the limit on the amount of money that can be collected.  So the GOP House just voted a $135 million subsidy to the big banks that are guilty of getting us into this mess in the first place.  See the article today in the New York Times.

Enforcement at Treasury is a great investment for taxpayer dollars.  With adequate tax enforcement, we have a fairer system that is less able to be gamed by the wealthy and sophisticated, meaning that ordinary taxpayers are not as likely to bear the burden of their own taxes AND the tax cheats' unpaid tax burden.  But the GOP isn't interested in funding the IRS at all.  Remember that this House GOP is dominated by government haters who think private companies can do everything better than government.  That's absurd, of course.  It has never been the situation in our history, since we have always involved government in various ways in making the kinds of systemic infrastructure that supports business.  We have learned over time that private actors charged with self-regulation do not regulate--they rip off.  That is apparently the kind of universe that the House GOP tea partiers want.

3. Spending cuts that are set without regard to programming needs but in terms of an arbitrary figure as a percentage of GDP.

What's even worse than the fact that the Republicans are (i) playing economic terrorism with the debt ceiling, (ii) refusing to consider any revenue increases -- after themselves being responsible for the revenue shortfalls that began in 2001 with the passage of Bush's 2001 $1.3 trillion tax cut package and continued with each additional tax cut especially the 2003 package and the 2004 corporate wish-list package,  and (iii) insisting on ridiculous spending cuts that don't even save taxpayer money? 

How about the idea of deciding how much you are going to borrow and/or tax based on a phony notion of how well the economy is doing, and without thinking about what the essentials are that you need to cover?  That is what the tea partiers are up to when they say that spending or borrowing should be no more than some arbitrary percentage of GDP.

The right-wing as a group tends to like absolutes--they treat government as the problem, not the way that democracies give people a voice in the solution to problems that they cannot resolve by themselves; they want all wealthy people's income to be tax free--that is what zero capital gains taxation means, of course; they want all corporations to be able to shift resources wherever without any repercussions, speculate at will, and then be rescued by the federal government if they get into trouble (that is what the GOP really means by 'free market'--freedom of those that have to rape and exploit for profit, with the knowledge that ultimately there will be a soft landing provided by the very system that they have defiled); they want the entire nation to adhere to the set of moral rules that they have adopted for themselves, in their fundamentalist mixture of constitutional revisionism, seizing of the government for promulgation of their evangelical brand of christianity, and their dogmatic refusal to look at economic reality because of their clinging to a utopian, 'free market' notion that allowing brute capitalism to operate without protections for ordinary people enhances rather than destroys individual liberty.

So these absolute-thinking ostriches who disregard the failures of the Friedman 'free market' ideology want to impose an austerity program on the poor and the elderly and those in the middle class who dare to support unions and think that they are entitled to the pension benefits that they have already earned (especially those that they bargained for and took lesser wages in order to secure).

The austerity program they are interested in is one that will have short-term benefits for the elite class the GOP represents in this class warfare.  They want to cut Social Security, so that there will not be a demand to have the wealthy contribute more to the program .  They want to cut Medicare, so that they can push all Americans into privately run health insurance--the system that we already have and one that has failed utterly to provide decent health care to all or reasonably priced health care to anyone.  They want to cut Medicaid, so they can shove aside the poor and vulnerable and blame their inability to afford health care on their 'irresponsibility'.

4.  A continuation of the misinformation and propaganda campaign that has misled the American public about debt, deficits, monetary systems, spending and taxes. 

You'll note that the rhetoric advanced by the right often compares the US government to a family.  It suggests that borrowing to make ends meet is irresponsible, and therefore the only solution is to quit 'cold turkey'--to have the US cut spending drastically, no matter the consequences.

That is a false analogy and a false cure.

It is a false analogy because the US government is a sovereign that has its own monetary system.  Families and local governments and states cannot adjust the supply of money to suit the economic needs.  Families can only earn more to have more.  States, of course, can tax more, but the tea partiers--aided by the Koch Brothers and all of the well-funded propaganda tanks on the right like the Cato Institute, the Heritage Foundation, the American Enterprise institute, Grover Norquist's ill-named "americans for tax reform', etc.--have been able to mislead most Americans into thinking that taxes kill jobs or that Americans are terribly overtaxed and there are few politicians with the decency and courage to vote for the tax increases they know is necessary. 

Folks, the US is a tax haven.  We pay way too little in taxes.  That's why our bridges are falling, our highways are full of potholes, our health care is inferior to, yet more expensive than, most of the developed world's, and our infrastructure basically is stagnating like the middle class itself.  We should be building super-fast trains to connect the country and connect within cities.  We should be creating a stellar publicly provided, free, wireless communcation network.  We should be spending more money on schools, to ensure that our children enter their adulthood prepared for a better life.  Instead, we are letting roads crumble.  Instead, we are privatizing our schools in order to let profit-makers make profits off of teaching the best students while breaking unions and thus making even higher profits, and while leaving the poorest students in the public schools. Instead, we are continuing with a patchwork health care system that doesn't put the public in the center by recognizing that access to decent health care throughout life is an inalienable human right that government should foster.

It is a false cure, because the 'free market' ideology pushed by Hayek and Friedman and the rest of the Chicago (and Austrian) school is based on false assumptions about society.  The version of free market economics that the tea party GOPers are espousing is one that is so radically unrepresentative of the way real economies work that those tea party advocates like Michele Bachmann can actually say (apparently with a straight face) that they don't think it would matter much if the debt ceiling isn't raised and the US defaults on its debts.

That's Economic Terrorism, GOP style (meaning served with a large dose of corporatism and elitism). 

  

We're being bamboozled--debt ceiling, cuts to ordinary folks' programs, and the corporatist state continues apace

I almost can't stand watching or reading the news these days and have delayed posting on this blog because it seems there is a need to repeat the same suggestions over and over again.  Don't cave to the right.  Don't cut important social welfare programs that have enabled this country since the 1930s to treat its elderly and vulnerable populations with respect.  Quit trying to strip unions of power--they are one of the important ways that ordinary people can emplower themselves to demand a share of the prooductivity profits their labor has produced.  Quit repeating the garbage free market mantras suggesting that the wealthy investors and managers are entrepreneurs (they're not generally) and that allowing such gross accumulation of wealth as our current CEO pay of 3-400 times the salary of average workers (earning in a half day what a worker earns in a year) is somehow necessary to a good  economy in a democratic political system.  Allowing the owners and managers to continue to reward themselves with grossly oversized compensation and profits packages so that they can maintain their 20,000 square feet marble palaces with kitchens that only a caterer needs (and that the denizens of the house hardly ever use on their own) is just one of the excesses of the brute capitalism that the 'tea partiers' and other right-wing economic policy gurus are supporting.

This free market, brute capitalism where workers are expendable and the entire economy is forced to support the accumulation of wealth at the top is what we have in fact pushed on (and sometimes assisted in imposing on) developing nations in the past .  Think Argentina--where the Chicago Boys oversaw the decimation of the economy and the imposition of austere conditions on the majority so that the economy could be 'remade' to suit the owners of capital (including foreign investors and multinationals). Think Brazil, where in the 1960s we helped their military coup against a leftish president in order to support the ability of US multinationals to continue exploiting Brazilian resources. 

But now the right is so invigorated, through its ability to bamboozle the American people and elect a majority of economic extremists in the House who either don't understand history well enough to know that they are speaking gibberish, or don't care.  They are determined to undermine the meagre social welfare system of Social Security, Medicare and Medicaid, with constant untruths about 'bankruptcy' and similarly misleading statement on almost every issue.  Presidential candidates who make up facts are toasted by the purportedly 'leftleaning' mainstream media (this assertion itself a made-up fact used to continue to bamboozle the people).

The most outrageous spectacle of all is the pontificating dogmatic right in the House and Senate, threatening to cause a U.S. default on the debt ceiling issue in order to pursue their ideological dream of a 'pure' economy.  Their economic model is a disgraced one --the free market, corporatist model that ensures that the small, wealthy investor class is doing well and that Big Business gets what it wants but doesn't give a damn for ordinary folks, whatever verbiage about caring for workers, and ordinary people with mortgage difficulty, etc. they spout.

Truth is, folks, you don't get an economy working well for ordinary people when you (i) make pledges NEVER to increase taxes, (ii) reject cuts in the grossly overlarge military expenditures this country makes in order to secure the world's resources for its multinational enterprises (that then lobby for close to zero taxation on their obscene profits from that secured wealth), or (iii) try to solve all perceived fiscal problems by taking it out of the hide of ordinary folk, thus  stifling the real economy (the one where workers work in businesses that serve local people and that work generates profits that are shared with workers and owners in a way that leads to expansion of the local economy based on the broad-based workers' participation in it) and at the same time bringing the kind of class warfare that the Friedman school has long waged on Latin America and other Third World countries right here to America.  The result of those kinds of policies is concentration of income, wealth, and influence at the top, with ordinary folks in the middle class struggling just to stay even.

The idea that you cannot tax natural resource extractive industries more (by taking away the tax expenditures subsidies that literally hand them outsize profits on a silver platter) when they are making windfall profits is absurd.  The idea that you cannot reimpose a decent estate tax on the estates of the wealthiest 2% in the country, to assist with meeting the heartfelt needs of the struggling middle and lower classes, is pathetic.  The suggestion that you cannot increase taxes on financial transactions and increase capital requirements in banks to stifle the too-rapid innovation and liquidity within the financial institutions that underlies the crisis we just went through (and the worse one we will suffer within the decade if we don't enact even stronger reforms than already in Dodd-Frank) reflects the dogmatic fixation on service to the wealthy investors and financiers that permeates the right-wing in Congress.

Folks. we can't let them do this.  Congress is supposed to serve the people, and this 'tea party'/right-wing extremism that was reflected in Newt Gingrich's 'contract on America' and John Boehner's contract with the investor class is the worst of class warfare.

There was a time when the neo-imperialists and corporatists didn't dare do the same thing in America that they were  pushing for, and secreting doing in Third world countries.  Exploiting the environment without a care for the pollution that ordinary people suffer in their daily lives.  (Think of the Banana Republic attitudes of United Fruit  and  the Latin American oil enterprises conducted by US multinationals.)  Supporting militaristic regimes with a right wing flavor and a taste for torture and imprisonment of radical left thinkers. (Think Chile, Argentina, Nicaragua, Guatemala, etc.)  Labeling governing concepts that pay a lot of attention to the needs of ordinary people as 'subversive' and 'socialist' in order to bring up myths of communistic monsters that hide under the bed and eat the economy.  (Think Cuba and Brazil, especially, and Chile, and now Venezuela.)  All these tactics exist to keep ordinary people in their place as workers who get a pittance of their productivity profits and are "flexible" (meaning can be fired upon short notice by private equity firms flipping companies for their own (preferentially taxed) profits) while the military can control the resources and make good deals (for US multinationals and the military leaders, not for the people of the exploited country).  Read Chomsky's "Year 501" for a (somewhat rambling) account of the neo-liberal corporatist agenda in Latin America.

But now those same ultra corporatist, class-warfare policies are being implemented right here, in the open, with brazen disregard for our historical social contract, for the plight of the poorest and most vulnerable amonst us, all in the name of keeping the 'investor class" and Big Business (generally one and the same, since the investor class is mostly the owners and managers of Big Business) happy.

They paper it over with talk, as Joe Lieberman does in calling for cuts to Medicare, for 'bipartisanship"  or they claim the US is living beyond its budget because it doesn't pay its bills.  But of course they don't really care about that, since the budget put forward by the Republican House majority carved a multi-trillion dollar hole.  IN other words, they don't pay attention to their own rhetoric.  They just want to use the (absurd in itself) requirement in the US that we have a debt ceiling extension vote as an opportunity to blackmail the American people to get concessions on their favored targets--the programs that ameliorate, somewhat, the brute capitalism of the American economic system after forty years of reaganism, friedmania, and the rest of the Chicago School garbage that has been treated as "God's truth" so long by politicians that they don't even realize, perhaps, that they are letting a bunch of mathematicians who like to escape the real world into made-up formulas decide the policies for the nation.

Big Business has had its enablers in place for four decades--Grover Norquist, the Koch brothers and their 'tea party' followers, the various propaganda tanks like the American Enterprise Institute, the Cato Institute, the Heritage Foundation, and the rest  that have spent millions to brainwash Americans into thinking that the failed 'free market' ideas of Milt Friedman and Alan Greenspan and Wall Street are the only way to go.  It has a majority on the Supreme Court willing to be extraordinarily activist in overturning precedents on class action lawsuits (a way for ordinary people to empower themselves against Big Business) and free speech (a way for corporations and their owners/managers to control the political debate through the use of their overwhelming dollar power).  And that right-wing majority is serving its masters well, while Big Business's minions in Congress continue to roll over to make sure that the right-wing panacea of deregulation, militarization, tax cuts, and privatization contines apace. 

The US debt burden is high, but we are not Greece or Ireland or even Portugal.  We have a strong economy.  We have our own monetary system, unlike the Euro nations that are facing much higher debt burdens and can't individually control their monetary flows.  Austerity measures like the IMF has imposed on Latin America to satisfy foreign investors (not the natives of those countries) and like the Euro world is now imposing on its own members are not needed here (and probably are the wrong answer there as well).  Those measures are driven again by the failed corporatist economic model that assumes that the entire world should be run to satisfy the wishes of financial institutions, big money investors and the big multinational corporations that they own and manage. 

The world should be run to satisfy the needs of ordinary people.  Banks should be stripped of the power to create a world-wide crisis with their haystacks of derivatives that catch flame much too easily.  Big Business should make do with lower profits, paying their workers more and their managers (and owners) less and paying their fair share of taxes.  Hedge fund managers should pay tax on their "carried interest" compensation like ordinary people, and private equity firms should be subject to much more red tape that makes it much harder to buy companies and take them private in order to fire their workers.   In fact, consolidation and mergers among big businesses should be made much more difficult through new limitations on the tax-free restructuring provisions. Unionization should be strengthened, in order to give ordinary Americans something with which to have leverage over the hierarchical authorities that undermine economic growth by concentrating everything on the investor class.

Let's start a letter and call-in campaign to every Republican legislator in the coutnry, telling them that we are sick and tired of being treated as lambs led to the slaughter in order to place endless platters on the tables of the rich.  Tax policy should be based on what works, not on ideological dogma that has been the underlying cause of catastrophes and crises worldwide. 

 

Most Americans--even Republicans--support tax Increases to address deficits

The National Women's Law Center reports on the recent PEW survey that found that  "Beyond the Beltway, a Majority of Republicans Support Tax Increases for Deficit Reduction", NWLC.org, June 10, 2011.

[A] new poll from the Pew Research Center shows (once again) that beyond the Beltway, a majority of Americans, including Republicans, support tax increases for deficit reduction. In fact, this latest poll shows that a larger majority of Republicans (62%) and Independents (71%) than Democrats (58%) support a limit on tax deductions for large corporations. A majority of Republicans (54%), Independents (71%), and Democrats (73%) support raising the Social Security contribution cap.

It really should come as no surprise.  Most Americans that have at least some comprehension of the facts understand that we are generally a low-taxed nation, that the wealthy made out like bandits under the tax changes enacted under Bush, and that the large multinationals get off almost scott-free under the corporatist giveaways in the Bush tax cuts and the ones they are now lobbying for.  And back when those Bush tax cuts were first proposed and discussed and enacted, a majority nationwide didn't think we needed new tax cuts.

Tax cuts are a major tool of the corporatist agenda that favors increasing inequality and decreasing public goods like public transportation, public health care, public parks and other amenities that make life better for ordinary Americans.  What should be surprising is that the number that favors the right's tax-cutting regimen is ever larger than the tiny minority in the elite that primarily benefit from it.