Revenue Ruling 2013-17 released today builds on a much earlier ruling (Rev. Rul. 58-66) that recognized common-law marriages for federal income tax purposes. It states that same-sex couples whose marriage takes place in a state (including domestic and foreign jurisdictions entitled to grant marriage licenses) that recognizes same-sex marriages will continue to be recognized as married for federal law purposes even if they move to a state that does not recognize same-sex marriages. Its rationale is straightforward:
Although states have different rules of marriage recognition, uniform nationwide rules are essential for efficient and fair tax administration. A rule under which a couple’s marital status could change simply by moving from one state to another state would be prohibitively difficult and costly for the Service to administer, and for many taxpayers to apply.
As Treasury Secretary Lew noted, “This ruling also assures legally married same-sex couples that they can move freely throughout the country knowing that their federal filing status will not change.” Id. This is a significant relief for such couples, since their federal tax obligation could otherwise have shifted markedly merely because of a move. The new guidelines will apply beginning September 16, but married couples can now also file an amended return for prior years to claim correct marital status.
In spite of the relief this federal ruling provides, same-sex couples will still face enormously complex legal issues because of the states that discriminate against such couples. They may have adopted children in the state in which the marriage was celebrated, but they may move to a state that doesn't recognize gay marriages and doesn't permit gay adoptions. What kind of issues will that raise? They may be able to transfer property at death without probate in their home state, but not in their new state of domicile. All of these issues continue to argue for an equal protection right to gay marriage and the rights and obligations that correspond to it, as well as sister state comity in recognizing gay marriages conducted in other states.
Chris Bergin over at Tax Analysts has a good point about the exclusion from income for the rental value of the minister's residence--it makes no sense and has no place in the tax code. See Bergin, What we need is a Godless tax code, Tax Analysts (Aug. 29, 2013) [hat tip--Roberta Mann, Oregon]
His riff is based on recent stories in the Washington Post (here, and here) that the head of the Freedom from Religion Foundation has been given a housing allowance and is litigating over the fact that she cannot exclude the rental value like a "minister of the gospel" may do under section 107 of the Internal Revenue Code.
As Bergin notes, this isn't really the kind of suit that the government likes to get involved in--it's a lose-lose situation for the government.
If the government argues to uphold the special exclusion available only to religious ministers, it seems to be arguing against a core principle of the Constitution--the idea that freedom of religion in the First Amendment ensures the separation of church and state and permits every American to choose to be free to be religious or free "from" religion: religion will not be imposed on us nor its support demanded of us.
if the government argues to reject the special exclusion available only to religious ministers, which acts as a tax subsidy to religious institutions and individuals, the Christian right will ponce on this as further evidence of what it sees as a "war on Christianity" (sometimes cast as a war on religion itself). Anytime that a privileged group that has received a privilege over a long period of time faces the possibility that it will lose that privilege as societyh recognizes the basic unfairness of it, the privileged group will tend to claim that it is society which is attacking them, rather than that they have been 'attacking' society for decades due to the preference that they claimed that others were not entitled to.
[Aside: Supreme Court jurisprudence has, unfortunately, not understood the latter "freedom from" part of religious freedom very well, perhaps because so many on the Court are practicing members of traditional religions that lobby strongly for their traditional privileges. Such things as Nativity Scenes on public property are allowed (so long as they are accompanied by Christmas trees, which the Justices somehow concluded were just holiday symbols and had nothing to do with, well, Christmas). And the Supreme Court recently extended its "ministerial exception" to discrimination laws to allow a broad category of positions to be hired and fired based on the religious institution's "religious freedom" to enforce its institutional religious principles--clearly something far removed from, and in fact antithetical to, individual Americans' freedom of religion. Some day the Supreme Court will see the light on this issue--as Americans' affiliations with traditional religious institutions continue to wane and agnostics, atheists and those merely spiritually inclined but unaffiliated with any religious institution claim, with increasing ardor, their civil rights not to support religious institutions and not to have religious institutions discriminate against them.]
So, Bergin notes, the government did what probably seemed like a reasonable thing to avoid a lose-lose situation.
Now to the funny part. The government is arguing that the leader of an atheist group can qualify for a parsonage exemption. (I believe this is called the "please go away defense.") It seems belief in a deity is not a requirement to be a minister. But the taxpayer’s point is that she doesn’t want the exemption, for her or anyone else. And it’s probably a pretty good guess that she is not interested in promoting the gospel. Id.
Of course, right-wing pundits went berserk (see "Insane" headline, below). But this question--can the leader of an atheist organization be a "minister" for purposes of this provision (or for other situations where we seem to favor religion over non-religion under our current rules)--is an important one. Because it makes us realize that defining something as religion is not obviously easy. That difficulty was what gave rise to the scientology dispute and the disputes over Santeria's slaughter of animals. It is the reason that we seldom see IRS cases challenging a church exemption, even when churches defy the law to engage in overtly political campaigning. And of course, almost anyone can proclaim themselves to be following a "new" religion with beliefs quite contrary to mainstream religions. As the Justice Department points out in connection with the FFRF suit, Buddhism and other systems of philosophy are treated by the government as religions, even though they are non-theistic. The only alternatives seem to be (i) to recognize anything that has various aspects of religion (including perhaps most importantly a dedication to a philosophical perspective) as a religion eligible for the special tax provision OR (ii) to eliminate any special tax preferences for anything religious. Given that dilemma, Bergin's conclusion that we should just take God out of tax is one that I can fully embrace.
The tax code’s job should be to collect revenue, not to provide tax breaks for religions, non-religions, or libertarians, who seem to think of themselves sort of in the middle there. Years ago, there was basically a war fought over whether Scientology was a religion. Frankly, I don’t care whether Scientology is or isn’t a religion. I respect anyone’s right to believe in it. But why should the tax law care?
It would appear to be a good move to get rid of section 107 altogether--simplifying the tax code, removing an unnecessary tax expenditure that gives religious ministers a preference unavailable to anyone else, getting rid of an anomaly of tax code support for religion over non-religion that conflicts directly with the Constitutional religious freedom right for individuals, and saving the government from having to figure out whether some set of personal beliefs is or is not a religion.
Bloomberg reports (in a minimal news story at this point based on an anonymous tip prior to the settlement being officially released) that the United States and Switzerland have reached an agreement that settles the dispute about Americans' use of Swiss banking secrecy to evade US taxation of undeclared accounts.
Apparently, the deal will result in some banks being permitted to voluntarily disclose activity, while others will face penalties because of undeclared assets.
One of the common assumptions about health care costs (and the costs of benefit programs like Medicare) has been that the increasing life spans of Americans will result in significantly greater health care expenses. It is common knowledge that much of the highest cost medical care occurs near the end of life, as the elderly need more medicines and assistance in daily living. So speculation has suggested that as Americans live longer, health costs will increase correspondingly.
A recent study provides a glimmer of good news--apparently, most of the highest medical care costs occur in the last year of life, even for those that are living longer. That means that the longer lifespans aren't translating into more time in intense medical care, but rather more years of generally healthy and active lifestyle followed by a similar duration of end-of-life care. See Michael Fitzgerald, Old Age May Not Ruin Medicare Budgets After All, Salon.com (Aug. 22, 2013).
What should that information mean for policy makers? It seems to support the progressive, social justice goal of ensuring that we have a system for universal health care coverage like "Medicare for all". Under democratic egalitarianism, a combination of general revenue support and additional premium payments from those who have the ability to pay provides a means for decent protection of all of our citizens and the creation of a just society. By asking those with the ability to pay to carry more of the burden, such a system ensures adequacy for all even in times such as ours when there is extraordinary inequality of wealth or income. Our forebears handled that kind of situation through one-on-one charities, back when communities were much smaller and people knew that they depended on their neighbors for help in tough times, so were willing to help out when they were able. The modern version of that neighborly compassion is a government that creates safety net programs for all of its people, with public programs in those areas where a profit motive interferes with the creation of adequate, sustainable, just programs for everyone. Education and health services are clearly two key areas where people acting together through government create fairer and more adequate systems that serve all of the people.
The New York Times ran an interesting piece by Kim Messick on the Tea Party's psyche yesterday: Messick, The Tea Party's Paranoid Aesthetic, New York Times (Aug. 10, 2013). It's worth trying to understand this political group's understanding of itself, since it " is a political movement ... that tries to shape the decisions of political actors — voters,legislators, pundits — into maximum coherence with its own agenda." Id. Its agenda is much influenced by the corporate funding that supports it but there is clearly something that holds the group together. Messick says that they so identify their own ideas and values with the country that they see any divergence from those values and ideas as literally "unAmerican" and any evidence that the country supports things they do not support as evidence of a vast conspiracy causing the undoing of the true America.
In the case of the Tea Party, the content, though mostly political, is often religiously inflected. (A 2011 study ranked the predictors of Tea Party affiliation. The strongest was being a Republican. The second strongest? Believing that religion should play a larger role in politics.) There are invocations of God and His justice, historical interpretations (of the Constitution, say, or some program or proposal), evaluations of candidates for office, and policy recommendations. (“Affordable Care Act bad! Tax and spending cuts good!”) These elements are then assembled in various ways to communicate the message an advocate finds appropriate for a given audience or occasion. I want to argue that we can discern in these messages a kind of master narrative, a collection of meanings that expresses the Tea Party’s sense of American history and of its own place within that history. It is this “story line,” I think, that explains the powerful appeal of the Tea Party movement to so many of its adherents, as well as its endorsement of a uniquely intransigent approach to the conduct of political affairs.
The key, says Messick, is Columbia historian Richard Hofstadter's description of paranoia in American politics (originally set forward in a 1963 essay):
The central image is that of a vast and sinister conspiracy, a gigantic and yet subtle machinery of influence set in motion to undermine and destroy a way of life. One may object that there are conspiratorial acts in history, and there is nothing paranoid about taking note of them. This is true… The distinguishing thing about the paranoid style is not that its exponents see conspiracies or plots here and there in history, but that they regard a ‘vast’ or ‘gigantic’ conspiracy as the motive force in historical events. History is a conspiracy, set in motion by demonic forces of almost transcendent power, and what is felt to be needed to defeat it is… an all-out crusade. The paranoid spokesman sees the fate of this conspiracy in apocalyptic terms— he traffics in the birth and death of whole worlds, whole political orders, whole systems of human values. Id.
So Messick surmises that the intransigent, destructive tendency of the Tea Party to fight "to the death" against any policy or idea that it disagrees with stems from this paranoid identification of its own values as the only true American values, and any divergence from those values as a betrayal engendered by conspiratorial Others whose efforts to destroy the 'real' America must be stopped at all costs.
Tormented by difference, unable or unwilling to abide the fluidity of American identity, some persons anchor it in the racial, ideological, or ethnic features of their own community. This community then becomes “normative” for the nation as a whole; any threat to the former, any challenge to its prestige or authority, is automatically a threat to the latter.
***
The Tea Party’s paranoid aesthetic conveys this narcissistic view of itself and its role in our politics and history. ... This is the message paranoid narcissism ceaselessly delivers to its devotees. “The Others are irreligious, unproductive, licentious, treacherous. You are the rock on which this nation was built and you are the foundation on which it will rise again. You. It’s all about you.”
***
[W]hen our identity is at risk — as it always is for the paranoid narcissist — there can be no room for compromise. The very suggestion is absurd: it amounts to the claim that we should accept being only partly ourselves. For the Tea Party, intransigence is another name for self-preservation.
If Messick is correct, we can count on this group to place itself and its own values above all else, to be willing to destroy in order to avoid having any bit of its view of the correct American way being undone.
On tax issues, the Tea Party's ideas seem to be sharply influenced by the assumptions of personal decisionmaking and market "freedom" espoused by Chicago School economists. Because Tea Party adherents define "freedom" in a unique way that disregards at least a century of developing understanding of the role of government in supporting the freedom of individuals to live a decent life, their views on taxes tend to be anarcho-libertarian in nature--they see taxation itself as "theft by government" rather than the reasonable contribution of each citizen to the furtherance of a civilized society that supports all members and ensures that the basic institutions for a decent life are available to all. This is perhaps the most threatening aspect of this religio-political group--their fervent ideological belief that they have the one view of the way America is supposed to work, and that progressive income taxation is anathema to that view.
It is not clear how one counters such religio-political fundamentalism. Anyone who has ever tried to have a rational discussion of religious faith with a fundamentalist religious person knows that reason cannot penetrate such belief. Facts are generally irrelevant. Any evidence that counters the exact specifications of the faith is treated as spurious. The Tea Party adherents that I've met seem very similar. It appears to be much more convenient for Tea Party adherents to close their minds to evidence than to question their ideologies or even to allow any adjustment to their "values" based on historical developments.
So the only defense appears to be making sure that this minority group never becomes a majority political group. The filibuster in the Senate, in the context of Tea Party extremists, is a worrisome procedural tool that favors just such intransigent minorities. We should get rid of it. As for the House, perhaps the only answer is engaged and energetic contesting of any election in which a Tea Party extremist has a chance.
Robert Reich says that Obama's offer to trade increased infrastructure investment for corporate tax reduction is foolish. He's right. The US has been lowering corporate taxes, through one industry-favorable tax expenditure after another, for decades. Corporate taxes as a percent of GDP have gone down, down, down, while corporations (through ALEC) write legislation to please themselves, fund 501(c)(4) groups to campaign for more corporate favoritism, offshore jobs, offshore profits from intangible properties, and generally thumb their noses at the nation and its citizens.
Reich provides a succinct description of the three main lies that the corporate lobby has been pushing for decades to deceive Americans into support corporate tax "reform" (read--revenue reduction provisions). Reich, Three Biggest Lies Why Corporate Taxes Should be Lowered, Salon.com (Aug. 5, 2013).
Lie #1:U.S. corporate tax rates are higher than the tax rates of other big economies.
As Reich notes, the Congressional Research Service did a study recently that demonstrates that US corporations are in fact taxed less than the average rate for OECD nations. The CRS study showed a US effective tax rate of 27.1%, compared to an average OECD rate of 27.7%.
Lie #2: U.S. corporations need lower taxes in order to make investments in new jobs.
Again, Reich points out the obvious. US corporations have so much cash they don't know what to do with it--with more than $2 trillion sitting in bank accounts (not yet repatriated for tax purposes, even though much of it is in US banks). It isn't lower taxes/more cash that is needed for them to create jobs; it is more customers! The declining wages of American workers (caused by the outsouring of US jobs and the cutthroat anti-labor policies of the Walmarts and other US corporations that treat workers as expendible commodities) has meant slow growth of demand, and without demand corporations will not produce more and without increased production, jobs won't be created.
Lie #3: U.S. corporations need a tax break in order to be globally competitive.
This is the lie that really gets me. As Reich says, its pure "baloney." US corporations are already competitive--they create jobs offshore, do R&D offshore, and serve global customers offshore. They don't need a US tax break to do that!
Even if a US tax break would help them do that (everybody likes more money in their pockets), it wouldn't do any good to anyone here in the US. It would only serve the owners and managers of the corporations, not American workers. There is no justification whatsoever for redistribution upwards (to global owners/managers of multinational corporations) to support outsourcing of US jobs and impoverishment of US families.
The Tax Foundation, that propaganda tank that masquerades as a "nonpartisan" "think" tank, is at it again. Now it's pushing the right-wing agenda of ending any tax expenditures that redistribute resources down to those in the lower-income distributions. It's produced a study on the "benefits" of eliminating the Earned Income Tax Credit that often makes the difference between food security and living in your car for the working poor. Erik Wasson, Tax Foundation Charts Benefits of Ending Earned Income Tax Credit, The Hill (Aug. 6, 2013).
The Tax Foundation "study" includes various right-wing assumptions about the working poor and the benefits of tax cuts that are not empirically supportable.
1) While conceding that the EITC helps the "really" poor, the Tax Foundation repeats the old right-wing saw that those working poor who aren't "really" poor will be disincentivized to work by having the EITC, in essence making that old Romney claim that the EITC is a "bad" policy because it provides aid to the poor, which will keep them from taking "personal responsibility" and thus keep them from getting those multiple jobs that would provide them the same sustainability that the EITC provides. Here's how the Hill story describes the report on this point:
The report argues that the tax credit encourages work for very low wage individuals but serves to discourage work for those making more because the refundable credit phases out. Id.
The undertone is that poor people are lazy, so government help should be limited to the really destitute, else it will just encourage laziness.
These assumptions are integral to the Chicago School's economic analysis, which depends on nice mathematical equations about humanity that assumes away most of what makes us human, including the fact that we are quite different from one another. Chicago School ideology says that if you give somebody something, they will become essentially addicted to the freebie and no longer work. Do you know anybody for whom that is true? I don't. I know people that my family has assisted through hard times who have worked even harder to show their gratitude for helping them through a tough spot. The Tax Foundation folk apparently see only the mythical "welfare queens" when they think about the EITC.
2) Instead of giving the money to the poor, the Tax Foundation calculates that we could use it instead to provide a rate cut for those who pay taxes of about 5.7%. Now that is outright redistribution upwards. Because of the personal exemption and standard deduction and EITC, most taxpayers in the bottom two quintiles pay no or very little income tax. The benefit to those low-income taxpayers would be redistributed upwards (the only kind of redistribution that the right likes, apparently) to those in the top three quintiles. Ending one of the best anti-poverty/food-security programs in the country in order to add some more to the pockets of the have-mores.
3) Oh, and the Tax Foundation makes their End EITC Now agenda even rosier by assuming a dynamic scoring of the elimination of the EITC--with those poor families not receiving needed aid, the Tax Foundation says the economy should grow by an additional $29 billion above and beyond the dollars saved that currently go to the EITC! Jobs would flow from just cutting out this assistance for poor people.
[E]liminating the Earned Income Tax Credit would increase employment by 274,000 full-time equivalent jobs. Eliminating it and lowering tax rates by 5.7 percent across the board would create 783,000 jobs, the study says. The jobs would come in a five to 10 year timeframe, study author Michael Schuyler said. Id.
Now, maybe those rich guys getting the extra tax break will indeed make more money--but the odds of that money being invested in the US are slim, don't you think? And when poor families lose both food stamps (see yesterday's posting about the right-wing's effort to ensure that families placed on the brink of desperation by the financial crisis will be shoved over the cliff by not having enough food) and the EITC, they will cease being participants in the economy and become drains on local city, county and state budgets. They aren't going to get jobs that aren't there. And jobs aren't going to be created by the money "saved" from not helping poor working families. The Tax Foundation study's proposal is not a recipe for economic growth, but another example of the right's class warfare against everybody who isn't already in the upper class and that's a recipe for economic disaster.
Outsourcing (or offshoring) is a bigger contributor to unemployment in the U.S. than laziness.
Since 2000, U.S. multinationals have cut 2.9 million jobs here while increasing employment overseas by 2.4 million. This is likely just the tip of the iceberg as multinational corporations account for only about 20% of the labor force.
When was the last time you saw a front-page headline about outsourcing?
The House has its priorities firmly in mind. Those priorities involve making sure that the wealthy people and corporations keep their wealth while any and all possible cuts to any welfare or "entitlement" programs are made.
All you have to do is look at the right's emphasis on passing a farm bill (mostly aiding corporate farmers and gentlemanly nonfarmers) and on cutting food stamps to the nation's food-insecure. In June, the House proposed slashing $20 billion from food stamps and ended up passing a separate farm bill because it was so determined to cut aid to food-insecure Americans. Now, the media is all concerned that a farm bill won't pass at all, because the right is insisting on doubling the cut to food aide--slashing $40 billion from the program. See, e.g., Nixon, GOP Rush to Slash Food Stamps Puts Farm Bill in Jeopardy, (Aug. 1, 2013).
These proposed cuts are draconian. As those legislators who took the "live a week on food stamps" challenge learned, it is extraordinarily difficult, time-consuming, and unsatisfying to try to find sufficient food on a budget of $3.00 a day. And there are literally millions of Americans without enough food to live decently, and millions whose well-being will be jeopardized if Congress does not fund food stamps at an adequate level. Food stamp recipients already faced difficulties because of the expiration of the stimulus provisions.
A report released Thursday by the Center on Budget and Policy Priorities, which studies federal spending, found that the 47 million people who currently receive food stamps will see their benefits reduced in November because of an expiring provision in the stimulus bill passed in 2009 by a Democratic-controlled Congress.
The stimulus law provided a slight boost in benefits for all food stamp recipients as part of a bill to strengthen the economy and ease hardship on millions of unemployed workers.
According to the center’s report, beginning Nov. 1, a family of three will see a reduction of about $29 a month — $319 for the remaining 11 months of the next fiscal year. The report said the cut would result in an average of less than $1.40 per person, per meal. Id.
We are the richest country in the world. Twenty of the country's richest billionaires earned in 2012 as much money as is needed to cover food aid for food-insecure Americans who go hungry or eat poorly most of the time. Food-insecure Americans lose focus and lose opportunities while those overpaid equity fund managers whine over the unlikely prospect (unlikely because of all the heavy lobbying and the quid pro quo nature of providing campaign support to those in Congress who write the laws) of actually having to pay regular ordinary income rates on their overabundant take from the profits of other people's money that they manage (i.e., their compensation income, labeled carried interest). Everybody in Michigan pays a very low flat income tax, while underprivileged, unemployed and discriminated against blacks in Detroit scrounge for used metal to sell to buy food or pay the mortgage. Ordinary people have been tossed out of their homes by the banks that were bailed out by the government, while the bank presidents and CEOs and directors and other managers continued business as usual with multimillion dollar salaries, stock options and other perks.
Poor people do not "deserve" to starve. Rich people do not generally "deserve" to be rich. Yet flat tax schemeds and preferential taxation of capital income belie that wisdom by giving the rich a pass. Democratic egalitarianism demands a change. Those at the top have been getting richer and richer, but ordinary Americans have not. It's time to reverse the redistribution direction. Instead of redistributing resources upwards to the rich, we must move them down to the needy.
Watch the Bill Moyers program on hunger in America (linked at the bottom of the post). If you do not wince with uncomfortableness at the way we Americans are dealing with food insecurity, you must have lost all compassion.
It is time, folks, to just say no to all this brute capitalism, "free" market ideology that has given us an unequal society with high teenage pregnancy, low birth weight babies, high illiteracy, shorter life expectancy, high unemployment, low educational achievement and all the other indices of an underdeveloped country in the midst of enormous, even obscene wealth. Say "NO" to the right's idea that poverty results from a lack of personal responsibility, rather than a lack of personal opportunity. Say "NO" to the ideology of the self-described meritocracy that considers its own wealth and the poverty of others merited, rather than recognizing the increasing impact of the class status one is born into and the decreasing possibility of upward mobility in America. Say "NO" to the failed pseudo-economic theories of Milt Friedman, Ayn Rand, Glenn Beck, and Karl Rove--the ideology of "free" markets and unfree persons, of "competitive capitalism" and uncompetitive positions defined by class status and money. Say "No" to the politics of the right, that would privatize, deregulate, cut tax revenues and increase military expenditures, that would willingly support a government of largesse and entitlement for the rich and austerity and "personal responsibility" for the poor.
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