ataxingmatter

Unemployment Benefit Extension with Lard--Doggett's Lone Charge

Congress knew it needed to pass a bill to extend unemployment benefits.  We are in the midst of a Great Recession that has toppled families by cutting jobs, putting public employees on "furlough" and cut back hours for those who still have jobs.  For some states, like Michigan, the blood is everywhere.  The toll in terms of human suffering is enormous, and has a cascading effect.  As laid off workers cut back spending, small businesses suffer and themselves face catastrophic losses.  The more are hurt, the more get hurt.  The Big Banks may be back to  their same old games--speculating like crazy with other people's money, high leverage, and even info borrowed from their customers (cf. flash trading) and raking in big bonuses for their activity--but Main Street is still hurting from the economic disaster brought on by the Banks' speculation. 

So we need to extend unemployment benefits.  A person that was laid off last November who supports a family of four may have been able to get an odd job or two, but may be unemployable in this economy.  If we, his collective neighbors, don't come to his rescue, what happens will be bad.  Violence and crime are possible.  Degradation and reliance on individual and group charity is unavoidable.  So we need to extend unemployment benefits.

I wish, just once, that Congress could pass the bill that needs to be passed without larding it with giveaways for their lobbyist cronies and the lobbied-for industries.  As noted in a recent post on the homebuyer tax credit extension and expansion, the unemployment benefits, which cost very little and are considered a great spur to economic growth, would only be about $2 billion.  But the giveaway to huge multinational and other large firms that made oodles of money several years ago but happened to lose some in 2008 or 2009 is huge--about $10 billion.  And those kinds of provisions (a smaller version of which was included in the stimulus package earlier) don't do much to stimulate. 

Doggett said it all in  a speech on the floor of the House today.  The remarks (distributed by his office staff) are excerpted below.

This bill represents a textbook example of how not to deal with the economic challenges that our country faces.  While previously approved by the House solely to address the needs of the unemployed in America's most economically depressed areas at a cost of $1.4 billion, the Senate has taken the good work of Chairman McDermott, delayed it, and mushroomed this bill's cost to $24 billion.

Economists advise that every dollar we invest here on unemployment benefits spurs economic growth (GDP) by $1.61 cents--very effective, a winner.

But the corporate giveaway added to this bill--the so-called 'loss carryback provision'--yields, according to the same economist, 19 cents for every dollar we invest--a real loser.

After noting that the bill rewards $10 billion to some of the same corporations that "brought us to the brink of economic ruin" Doggett asks:

If this is such a great idea, why don't we first apply loss carryback to workers, who have lost their jobs[?]  Give them a rebate check for a big chunk of whatever they paid in taxes when they had a job?  That would certainly be more [stimulative] than asking some corporations to pay nothing for our national security.

Right on, Doggett.  You remind me a little bit of Paul Wellstone.  If only we had more people in Congress willing to talk truth to power, we might be able to unseat these financial megacompanies from their protected perches, as well as the corporate lobbyists that are able to get Congress to do tricks on command for their corporate bosses.  If Congress really wants to turn this country around, it cannot continue to apply an economic understanding that looks only to providing what they want to the big corporations, no matter the result to ordinary Americans.

Warren Buffet and taxes

Tax Prof reported today on a critique of Warren Buffet.   As many will recall, Buffet was outspoken during the presidential campaign about the problem of a tax system that favors the super-rich over the middle class.  He noted that he paid tax at a rate considerably below that of his secretary, suggesting that we have a distorted tax system that should be addressed.

The Wall Street Journal reports on Buffet's recent deal for his Berkshire Hathaway firm to buy the Burlington Northern railway.  See Behind the Decision, a Lesson from a Mentor (Nov. 5, 2009).  The author notes the perhaps unique problem perennially plaguing Berkshire--lots of cash on hand to invest.  He states that

Mr. Buffett would rather not resort to the simplest way of solving this problem--paying excess cash out to shareholders in the form of a dividend.  Since he owns roughly 26% of Berkshire's shares, a cash dividend would saddle Mr. Buffett with one of the largest personal-income tax bills in American history.  That's not the kind of thing at which he likes to excel.

Further, Buffett's firm is bidding for Fannie Mae's low-income tax credits, which are not of use when Fannie is losing money but can be sold for a significant boon to the buyer in reduced taxes.  See this Wall STreet Journal article (noting that credits used to sale for about 95 cents on the dollar, but recently the market has dropped to 65-79 cents on the dollar).

So now Ira Stoll (a former New York Sun editor and Wall Street Journal consultant), in his website on the future of capitalism (which suggests, in its "about" page, that it is exploring the "financial downturn" and that way the "big argument" about "communism and socialism" versus "capitalism" had been thought to be settled prior to the "financial downturn" that was turned into a "crisis" and "panic" "in part" by "government regulators) suggests that Warren Buffet is a tax hypocrit.  See post, here.

When Warren Buffett was critical of the way the tax system works, he didn't say that he planned to personally redress the imbalance in our system by paying lots more taxes to make up for it, nor would one have expected him to do so.   A vow of poverty (which could be accomplished by giving all of one's assets to the state) is a mode of action for some who protest the excesses of capitalism, but not within the fortitude of most and certainly not in any way a price of credibility--or treatment as not being a hypocrit-- when merely stating the obvious fact that those of us who are better off pay relatively too little in taxes under our system.

Buffet was using his personal situation of high income/low taxes to illustrate a system gone awry, one that favors the titans of financial wealth over the Everyman and Everywoman who are the bulwark of this country's economy and its society.  The fact that he prefers to keep cash in the business, and invest that cash in businesses that he thinks will be here for the long term, rather than paying out dividends to himself and others (which, by the way, would be taxed a very preferential low capital gains rates) doesn't make him a hypocrit. 

And in spite of my dislike for the way low income housing tax credits work, it's quite clear that the credits are available for businesses that can take advantage of them and owners of those businesses might well object to a "principled" refusal to do so.  I'd prefer to eliminate them from the system (I'm not convinced that subsidies like that make sense at all), but I'm not in a position to fault anyone for taking advantage of them, any more than I can fault a neighbor for using the homeowner's tax credit, in spite of my view that it is a frivolous waste of taxpayer money that gives an unfair subsidy mostly to those who would buy anyway and real estate professionals.  

What would be genuine hypocrisy, from my perspective, is for someone to claim that they are supportive of tax policies that favor the lower and middle income classes and then to actually lobby for or enact policies that are predominantly of value to the upper class and super-rich.  Think of all those legislators claiming that they were concerned with ordinary Americans, family farmers,  entrepreneurialism and small business owners, while they were busy trying to pass a zero income tax rate for capital income and eliminate the estate tax for estates of the rich.

Wall Street's Swagger--and the ineffective response

As everyone knows, the Wall Street banks that have benefited from an unprecedented federal bailout are making money hands over fists in proprietary investments and trades.  Lending is still slow, and while they've had access to the low Fed rates, they are charging an arm and a leg for everything.  What are they doing with all those profits-after this last year, no one will be surprised to hear that they are NOT figuring out how to return the favor done them with their record profits earned with the life-saving assistance of ordinary citizens.  They have no "magnificent obsession" to do good to make up for the extraordinary global harm that their reckless speculation caused.  No sir.  They are planning to pay record bonuses and using some of those profits to fund intensifying lobby efforts to try to make sure that Congress does nothing to prevent a replay of their cozy game of socialized losses/privatized gains.

So into this picture come the chidings of President Obama's aides, including Wall Street buddy-in-chief Rahm Emanuel.  See Fletcher & Goldfarb, Top Aides to Obama Upbraid Wall St., Washington Post (Oct. 19, 2009).  "The bonuses are offensive," Obama strategist Axelrod says.  "They ought to think through what they are doing."  "Not only do they come for a bailout . . . they're now back trying to fight a consumer office and the type of protections that will prevent another type of situation where the economy is taken over the cliff by the actions taken on Wall Street and the financial market," says Rahm Emanuel.

Talk is cheap.  Maybe somebody will think that this "increasingly confrontational tone against Wall STreet bonuses" will accomplish something.  I don't.  In my experience, most Wall Street bankers think they are entitled.  If they are "smart" enough to turn the loan of cheap funds from the Fed into more high return investments, they've "earned" their millions in bonuses, they think.  So what if the rest of the country is jobless, homeless and hopeless.  That's someone else's problems.  I suspect they can't even comprehend what it is like to be a member of the lower half of the distributional curve in this country, much less to be at the bottom. 

I just went through the home of one of the millionaire familes of the early 1900s in Detroit--a family of 2 adults and five children lived in a 17,500 square foot house (plus two story carriage house)  with twenty servants to take care of their every need.  The servants were packed into tiny rooms while the family enjoyed seating areas next to their bedrooms.  The floors that headed towards the servant quarters in the rear wing of the house even sloped downhill to make clear that the servants were not on the same level as the family's quarters on the same floors (the in-house gym, and other spaces).  That same disconnect and sense of entitlement as superiors that existed in the roaring twenties--and the problems inherent in such allocational imbalances--exists between Wall Street and Main Street today.

Tough talk on the Sunday CNN program from a couple of Obama's aides isn't gonna turn the tide.  Teddy Roosevelt got out on the stump and talked about the corporate titans of malfeasance.  Maybe Obama should turn some of his eloquent speechmaking to targeting today's corporate titans, so that we can start using antitrust to bust up these "too big to fail" banks and using tax laws to tax them and their Big Pharm, Big Oil buddies more fairly by getting rid of the crazy loopholes like the "depletion allowance" and accelerated depreciation, etc.

Tax Foundation's assessment of economic data--Guest Post

The Tax Foundation has been pouring out its analyses and blog themes lately--they all have catchy titles.  Back during the presidential campaign, the Tax Foundation "Bemoans Egregious Errors in Presidential Tax Policy Debate" or "Fact-Checks Final Presidential Debate for Joe the Plumber". 

Of course, the Tax Foundation is known for inventing the concept of "tax freedom day"--which is a statistic that is truly just a number and meaningless, but useful, it seems, in making people think they are working to hard to support "government" rather than themselves.  It's meaningless, since of course support of government is support of ourselves--our roads, our institutions of justice, our institutions of mercy.  It is meaningless, since it averages Bill Gates and Joe the Plumber taxes and income to get a rate and then multiples that rate by the number of days in the year to come up with how many days of work it takes to pay off the taxes.  It claims the calculation answers the question--"what price is the nation paying for government" by dividing total tax collections by total income.  See, for example, the blog blurb at this post, with the subtitle : "America will work 8 days less to pay taxes in 2009 than in 2008 (full "report" is available there as well).  The number of days doesn't apply to any individual taxpayer of course, but you have to understand something about statistics to realize that.  The language of the report doesn't help:  in 2009's report, the second sentence says that "Americans will work about three and a half months, from January 1 to April 13, before they have earned enough money to pay this year's tax obligations at the federal, state and local levels."  It goes on to compare that statistic to other dates and then notes that "Americans will pay more in taxes than they will spend on food, clothing and housing combined." Note that this is misleading for other reasons as well, when you realize that some of that tax liability is paid on money that isn't "earned" by "working" and that some of it is "earned" by corporate entities, not individuals, but many readers are likely not to understand that.  When it says "Americans will have to work an additional six days to pay their share of corporate income taxes", most will think it means that they will each work 6 days to pay corporate taxes that we directly bear (though of course it doesn't mean that).  Each year the papers pick it up and talk about how many days America has to work to pay off the government before "tax freedom day" arrives, and the masses assume that means that they had to work that long themselves just to pay money over to the government. 

 One of the Foundation's recent blogpostings caught the eye of my colleague Ted Seto, Professor of Law at Loyola Law School in Los Angeles.  The post shouts that The Tax Burden of the Top 1% Now Exceeds That of the Bottom 95%.

Here's what Prof. Seto had to say about it (reprinted, of course, with his permission).

The Tax Foundation’s latest release asserts that “Newly released data from the IRS clearly debunks the conventional Beltway rhetoric that the "rich" are not paying their fair share of taxes.”

Examination of the underlying data reveals that in 2007 the “bottom 95%” paid 39.37% of all income taxes paid, while the “top 1%” paid 40.42% -- in other words, more.

Does this factoid support the Tax Foundation’s conclusion? Obviously, different folks have different views about what makes distribution of the tax burden “fair.” Putting this problem aside, however, the Tax Foundation’s use of this particular factoid to support its bottom-line conclusion is deceptive for many reasons.

First, the data the Tax Foundation is relying on omits the single largest tax on income paid by the bottom 95%: the payroll tax. According to the 2007 Budget, a total of $869.6 billion in Social Security and other payroll taxes were paid in FY 2007 -- primarily by the bottom 95%. Added to the $439.2 billion that the bottom 95% paid in income taxes, the bottom 95% paid roughly three times as much tax on its income as the top 1%.

Second, the Tax Foundation fails to disclose the reason the percentage of income taxes paid by the top 1% went up: the top 1% received a much larger portion of all economic income in 2007 than it did twenty years earlier. According to the same IRS release, the top 1%’s share of AGI rose from 11.30% in 1987 to 22.83% in 2007, a 102% increase. In other words, the top 1% paid more income taxes in 2007 because they received more income.

But the top 1%’s share of income taxes paid did not go up correspondingly. In fact, it went up only 57%. This implies that their average tax rate declined by 45% -- substantially more than the bottom 95%’s average tax rate declined over the same period. (emphasis added)

There is a further problem with the Tax Foundation’s assertion, a technical but important problem. The underlying data categorizes taxpayers by AGI, not by economic income. Middle- and lower-income taxpayers have far fewer opportunities to exclude income from AGI than upper-income taxpayers. Bill Gates probably had very little, if any, AGI during 2007; if so, he would have been included in the bottom 95%, not the top 1%. For purposes of the Tax Foundation’s conclusion, therefore, he would not have been part of the “rich” who are paying “their fair share of taxes.”

More simply, the top 1% by AGI does not include "the rich" who are able to use features of the Internal Revenue Code to avoid taxes. Taxpayers with high AGI are simply those who haven’t been able to do so. The fact that the latter are paying more and the former less doesn’t mean the system is fair.

Does the Tax Foundation know all this? Of course they do. They know exactly what they’re leaving out. But they publish their “conclusions” anyway, misstating what they’re doing in the process. This is agitprop, not analysis.

 

Kornhauser's Tax Literacy Project--about time.....

One of my big gripes (in case you haven't noticed) is the ease with which ordinary Americans can be fooled about tax issues by organizations, often ones with greedy purposes of furthering their own interests in lower taxes for themselves, that publish misleading or downright untruthful information and just keep repeating it.  This has been a special problem with estate taxes, which hit only the very wealthiest amongst us and for a relatively small amount even for the large estates.  It is also true of income taxes in general, the way flat taxes would work, the rationales for the corporate tax and many other key tax policies.  Lobbyists frame the issues with inflamatory language, and most are too unknowing about the way tax really works to recognize the ruse for what it is. 

Some of the worst phrases that have furthered the cause of cutting taxes for the wealthy so that the majority of Americans can either pay higher taxes themselves or do without the kinds of things that governments, not private enterprises, do best  are "death taxes" and "double taxation" . 

Much of the estate that is taxed when a decendent passes it along to his heirs as an unearned windfall has never been taxed at all during the decedent's lifetime, in the case of wealthy people with mostly financial assets.  If there is not a good sized bite out of the estate upon the transfer to beneficiaries, there'll be very little contribution to taxes from an agglomerate of wealth that has benefited enormously from the US legal system.  And the heirs won't have any taxes to pay either--they'll just keep holding and will have a stepped up basis when they sell.  All that is is a system for perpetuating or creating oligarchy--letting the wealthy become a ruling class with all the money and all the power without contributing anything much to help pay for the system that made all the wealth possible in the first place.

Similarly, the phrase "double taxation" is used to make people think that taxing corporations is unfair.  But the decision about whether we tax entities or not is a reasonable one for societies to make.  We made it a long time ago--deciding that we should treat corporations as taxpayers and we should tax capitalist owners of corporations on the income they are paid out of their corporate ownership as well.  It is one of the most progressive parts of the federal income tax, and it makes a lot of sense from a democratic egalitarianism perspective.  Corporations can horde money and have enormous power because of their ability to lobby for their own benefit.  Look at the way Big Pharm and Big INsurance has gotten Max Baucus in their pocket--putting money in his, and getting out of that a watered down health bill that doesn't do half of what we should be doing to move towards a single payer, single provider system like the most advanced countries already have.  The presupposition behind the term "double tax" is that you are overtaxing and that you are taxing somebody that shouldn't be taxed.  Since Reagan, there has been a huge push by the same economic thinkers that brought us our current Great REcession to undo the US classical corporate tax system.  It's really a push for giving more money back to the wealthy and cutting the size of government.  But it's all done in the name of economic efficiency--a theory without basis in reality that is probably more to blame for the greed that dominates today's society and the consolidation of huge megafirms--Big Pharm, Big Oil, Big Banks, Big multinationals in general--than anything else. 

So I'm glad to see Marjorie Kornhauser's project take off.  Maybe others won't agree with me on these pet peeves, but if we have better educated citizens who have more basic knowledge about taxes and how they work, it won't be so easy to bamboozle them into voting against their interest to support tax cuts for the wealthy and service cuts for everybody else while the boondoggles for the big corporations just keep pouring out (like an agreement that the government can't use its bargaining power to get cheaper drugs, or that Big Pharm can prevent generics being sold for 12 years and other crap that is getting put into the "health reform" bill that is becoming, like so much else these days, a corporate giveaway).

What's her project?  It's called The Tax Literacy Project--"a non-partisan effort to informally educate the public about taxes through popular methods such as web-based games and other internet activities.

Want to help?  Donations are being accepted.  What follows is the appeal, direct from Kornhauser and the ASU Foundation.

Money from Taxes Helps Every Person Every Day!

But polls show most of us do not understand anything about our taxes.

Why should we bother learning about taxes? Because:

Tax ignorance costs each of us money. Many of us pay more tax than we actually owe. Because tax ignorance makes it hard to discuss and enact sound tax policies, we are not able to raise money in the fairest and most efficient manner possible.

Why do we need taxes?

Taxes support democracy. They fund government services and goods such as court systems and national defense that protect your life, your property, and your constitutional rights.

Taxes support economic growth. Governments use taxes to encourage economic growth in numerous ways such as maintaining a stable currency, enacting and enforcing laws that protect both workers and employers (their life and property), and helping to build and maintain large and dependable energy, transportation and communication systems.

Taxes support your daily quality of life. They help you and your family buy a house, breathe clean air, have safe food and drugs, travel safely and efficiently on highways, trains, and planes. Taxes help pay for your health care (in the form of tax benefits or direct care) and they pay to educate you and your family. Taxes help you at work (e.g. enforce contracts, provide safe workplace) and help you at play (e.g. national parks).

Become part of a solution to the problem of tax ignorance by contributing to the Tax Literacy Project.

What is the Tax Literacy Project?

It is a non-partisan effort to informally educate the public about taxes through popular methods such as web-based games and other internet activities.

Can you support the Tax Literacy Project regardless of your political outlook?

Yes, the Project’s only purpose is to help provide information about tax, not to support any particular type or amount of taxes. No matter what kind of government people want, that government will cost money. Americans must understand how that money can be fairly and efficiently raised.

How can you make a charitable contribution?

Make your donation payable to the Tax Literacy Fund at https://secure.asufoundation.org/giving/online-gift.asp?fid=418 (no appeal code necessary) or Make your check payable to the  ASU Foundation and mail to the Sandra Day O’Connor  College of Law, Arizona State University, PO Box 877906, Tempe, AZ 85287-7906.  Please write Tax Literacy Fund (30004788) in the memo line of your check. 

Thank you in advance for your interest and support.

For more information or to become involved, please contact the Project Director: Marjorie E. Kornhauser, Professor of Law Sandra Day O’Connor College of Law, Arizona State University

[email protected] 480.965.0396

All funds will be deposited with the ASU Foundation, a separate non-profit organization that exists to support ASU. Your payment may be considered a charitable contribution. Please consult your tax advisor regarding the deductibility of charitable contributions.

 

 

Income inequality and growth

For several decades, economists have told us that income inequality is a necessary evil. Lonnie Stevans, an associate prof at Hofstra's business school has looked into this again, in Income Ineuality, Net Investment, and the U.S. Capital Stock: Is there an equity-efficiency tradeoff (available on SSRN, here). He asks whether it is really true that a society that "tries too hard at reducing inequality" will have "fewer incentives resulting in diminished productivity and a lower standard of living."

The reasoning about the relationship between inequality and growth (tracing back, for example to A.M. Okun, Equality and Efficiency: The Big Tradeoff (Brookings 1975) is that efficiency costs of trying to redistribute income or regulate the economy are too high--entrepreneurial and "rent-seeking" activity go down, causing a drop in national income affecting everyone, rich and poor alike.  But as empirical evidence seemed to suggest that income inequality was actually bad for growth, market economists went hunting for theories to explain it, such as incomplete markets or credit rationaing.  See e.g., Stiglitz The Distribution of Income and Wealth Among Individuals, Econometica (1969) at 382-397.  Others have suggested that as income inequality increases, support for redistributive policies also increases, resulting in higher tax rates that diminish investment and economic growth.  See e.g., Alesina and Rodrik, Distributive Politics and Economic Growth, 109 Quarterly J. of Econ. 465 (1994).  Of course, reaganomics developed the "trickle down" approach that we followed fairly religiously under the two Bush presidencies--the idea that reducing taxes on the rich will be an incentive to increase net investment, resulting in economic growth.   

So what does Stevan's study show?  here's the conclusion.

It is clear that for over a quarter of a century, the higher the income category, the more income continued to grow and the rich-get-richer pattern has contiued to prvail.  Many have asked why prosperity is not spreading more equally, but when it came to hard policy decision, the resonse has always been that there is a trade-off between equality and growth.  If a country tries too hard to redistribute income, there are fewer entrepreneurs, less capital investment, and a lower standard of living.  According to the results of this study, there is no empirical evidence over the past 30 years in the United States to support such a contention.  In fact, in three of the five inequality measures, increases (decreases) in inequality have had no influence on the U.S. capital stock, net investment and consequently economic growth.  The three remaining inequality measures have had an inverse effect on caital productivity. (bolding in original)

Links worth reading

An Even Worse Financial System Than the One With Which We Began, Naked Capitalism, July 1, 2009.

Yves Smith has a disconcertingly dismal outlook on the reform on the financial system, , where he sets out Martin Wolf's concerns and "toughminded" proposals, as presented in the Financial Times.   Wolf notes that "the survivors [of the financial crisis] are an oligopoly of 'too-big-and-interconnected-to-fail' financial behemoths."   I agree that we need to understand that the political intransigence on enacting adequate reforms--including breaking up the "too big to fail" banks, enacting stringent controls of derivatives like credit default swaps, and forcing banks to rely on banking business rather than the exotic financial stuff they have engaged in that causes systemic risk-- amounts to acquiescence to the big financial institutions.  One of the commenters notes that part of the problem is accepting the corporatist dogma that we must retain a 'financialized globalist system', which leaves us unwilling to break up the "too big to fail casino banks". Another points out the consistent failure to recognize the importance of counterparty risk in evaluating whether derivatives like credit default swaps really make sense, even in the more vanilla versions.  Ultimately we need "Glass-Steagall on steroirds" but we aren't likely to get it from today's Congress.

Igor Barenboim, Loukas Karabarbounis, One Dollar, One Vote (SSRN Jun 1, 2009) and abstract displayed on Tax Prof, here.

My thesis in this blog, democratic egalitarianism, argues that a more egalitarian society is essential to the sustainability of democratic institutions, and that our economy has strong pressures that lead to redistribution of resources upwards towards the more affluent and not enough that balance with redistribution downwards towards the less affluent.  Tax can be a force for good, or bad, in that balancing act, so we should harness it to support rather than undermine democracy.  Accordingly, I argue, the estate tax should not only be retained but also strengthened, so that it helps prevent the accumulation of mega-fortunes that create dangerous plutocractic forces of power within the society.  Similarly, reforms to the AMT or the regular tax should build in more progressive structures rather than moving towards the flatter, national sales tax model pushed by the right, which favors capital over labor. 

In this context,this study by Barenboim and Karabarbounis provides some interesting insights.  These two authors have studied the relationsh8ip between inequality and redistribution in advanced OECD countries.   They conclude that countries with richer upper classes have less public spending for redistribution (used here, as it typically is, to refer to reallocation of resources in favor of lower classes) and vice versa.  "When the income of a group of citizens rises (relative mto mean income), aggregate redistributive policies tilt towards this group's most preferred public policy."  That sounds like another way of acknowledging that power comes to them that's got the green, and that power typically is used to get more of it.

Nina Olson, National Taxpayer Advocate Report to Congress: FY 2010 Objectives (June 30, 2009)

Ihave tended to view the NTA as overly partisan in support of taxpayers, even when the complaints of taxpayers to which she is responding are relatively weak.  But on some issues, the NTA has played an important role in calling attention to problems and pushing the IRS and Congress to take action.  One example, of course, is the use of private debt collectors, a practice that the NTA opposed from the beginning, with good reason.  An ongoing goal of the NTA is to make the offers-in-compromise program more accessible to taxpayers, and on the whole this works in the direction of greater compliance and more collection of tax revenues. 

I am strongly supportive of the NTA's advocacy of better regulation of "unenrolled tax preparers--the majority of tax return preparers today.  As the report notes, these preparers often prepare "inaccurate returns" and "even take[] positions that they know are not supportable", conduct which "usually results in understatements of tax." Report, at xiii.  the NTA proposes three steps for the IRS to take on this issue: (i) advocate for legislation to regulate tax return preparers; (ii) step up enforcement actions (earlier studies showed that penalties were rarely imposed and even more rarely collected); and (iii) require a preparer tax identification number on all returns, to permit identification of those who tend to submit inaccurate returns.

I think however, that the NTA also tends to adopt positions that are taxpayer favorable without justification in the underlying policies of the Code.  For example, the NTA may go somewhat too far in wanting the IRS to assess taxpayer's financial circumstances before pursuing the legal means available, sucn as liens, to collect on taxes.  Similarly, the NTA push to streamline the Offer in Compromise process may result in taxpayers thinking that they can easily compromise their actual tax liabilities by not paying, resulting in poorer compliance.  I'm not sure she has paid sufficient attention to the competing concerns in this area.

At any rate, the report is worth skimming for an understanding of the various issues and the role that the NTA plays in the tax system.

Robert Reich, What Can I Do?, Robert Reich's Blog, Jun 25, 2009.

To paraphrase (with admittedly some coloring of my thoughts--you can read  the Reich piece for his own words), Reich notes that we can't just expect the Obama administration to do the right thing, or Congress either, for that matter (I'd say,  we can almost expect them not to), unless we the people push them enough towards the hard decisions that need to be made. 

What are those issues, from my perspective, that we should be writing Obama, Baucus (in particular), Rangel about?:--creating a REAL public option on health care (not these finky little state-based "coop exchanges" or any of the half-baked schemes to look like a public option while ceding the field to the same old private insurance system that fails us by weeding out sick people and refusing to pay claims for people that it does ensure);--raising taxes on the rich in spite of the right-wing hullabaloo that taxes will cause GDP to go down instead of up;--ensuring that we tame the Wall Street greed that landed us in systemic risk by breaking up the "too big to fail" institutions before they fail again, etc.

While you are at it, you might want to look at his "Why the Critics of a Public Option for Health Care Are Wrong", Jun 23, 2009.  The AMA, Big Insurance and Big Pharma are against the public option, so odds are it has something they don't want to ever see come to light.  What?  An effective reform that would prohibit them from continuing to make rent profits and force them to undertake major reforms.  Got it?  They don't want a public option because they fear (know?) it will work.  What do we the people want? Health care that works.  Guess that makes it clear where Congress should go, doesn't it?

Divorced One Like Bush, Deja Vu Health Care Reform: Hillary Care is the Wrong Feeling, Angry Bear, Jun 29, 2009.

When we started talking (again) about genuine health care reform that would reduce costs and ensure universal care, many of us were optimistic that, this time around, Congress would recognize that the private system of health insurers/HMOs that make money by denying care (including by fooling their insureds about what care they are obligated to cover) is broken beyond repair.  Surely, we thought, the greedy insurers won't be successful in blocking the needed reforms yet again.  This time, we can finally move our system towards the ones in Canada and european countries that have achieved better health care at a cheaper price than ours. 

Now, it's not looking so good.  Business lobbyists have announced that they will step away from the table if we don't stop talking about a public option.  (Why don't we just say--step away and good riddance?)  The GOP talk machine is making the same old noises about how a real public option will destroy "choice" and lead to rationing care.  (Why don't the people understand that going bankrupt when you can't pay your medical bills is not a very valuable choice, or that health care is rationed today by what economic class the sick person is in?)

DOLB tells us we've seen all this before.  Not in the nineties, when Hillary was pilloried by the private health insurance lobbyists who used mcCarthy like tricks to scare ordinary taxpayers into thinking that single-payer public option would be disaster.  But back in 1971, when Nixon and Ehrlichman deided that supporting HMOs like Kaiser Permanente made a lot of sense, because he'd be "running this Permanent deal for profit" and could do it, too, because "[a]ll of the incentives are toward less medical care--because the less care they give them, the more money they make."  Read it, and weep.

Mark Thoma, The Purely Rational Economic Man is Indeed Close to Being a Social Moron (discussing and excerpting Daniel Little's "Polanyi on the market") Economist's View, July 2, 2009.

More debunking of the notion of economic rationality and markets as the organizational principles of human economic behavio and the corollary that it is "natural" for people to be motivated primarily by their own self interest.  A good read.

Roni Deutsch, How Offshore Tax Evasion Affects You, The Tax Lady Blog, Jun 29, 2009

Roni provides a good summary of the detrimental impact on ordinary taxpayers of a few  greedy taxpayers' offshore tax evasion antics.

A Must Read: CTJ's Proposals for Funding Health Care Reform

Citizens for Tax Justice (CTJ) favors the kind of revenue raisers that make sense to fund our country's decision to ensure that every American has decent health care.  Not a new tax on health insurance premiums, not a regressive national sales tax or VAT.  Not passing the burden to all the ordinary folks to pay for the continuation of the privatized health insurance that has resulted in the U.S. paying much more for less than our European counterparts. 

Nope. None of that.  Instead, after Main Street's bailing out of Wall Street from its binge of risky leverage (and hefty fees and bonuses), we should let Wall Street bail out Main Street.  Tax capital gains a little more (at 28%, the rate that currently applies to collectibles gains); apply the Medicare tax to all income, with a rate increase of about 1% for upper-income taxpayers; eliminate the many other tax subsidies for Wall Street millionaires--including those for stock options and intangible assets; and reduce the tax incentives for investing offshore, like worldwide interest allocation and deductions on deferred foreign income. 

Here's the report, with some good charts and numbers.

Yankee Stadium--"the house that taxpayers built"

David Sirota, on Salon.com, sometimes has the perfect word painting for today's over-the-top age of Reagan-inspired government corporatism, where our government has been captured by Wall Street and the big corporations.  Here's his description of the "destructive greed" behind the Yankee Stadium fiasco, whereby "a billionaire politician using the municipal office he bought [defends] charging $2,500 a ticket to a new Yankee Stadium he forced the public to finance."  As Sirota notes, the Yankees are "the wealthiest corporation in sports".  Sirota concludes--"In the new Gilded Age, socializing risk and privatizing profit has become the standard--as American as General Motors, Bank of America and, yes, the New York Yankees."  See Sirota, the House that Taxpayers Built, salon.com, May 23, 2009.

Bruce Bartlett on the "tea parties"

As I have often mentioned in this blog, it is a simple truth that U.S. taxes are lower than those in most other developed countries.  One conclusion from that fact may be that it is somewhat foolish to speak of "overtaxation" if our taxes are relatively light compared to the benchmark of what our peer countries are doing.  From that perspective, we might want to ask what we are missing out on by not paying higher taxes.  The answer to that would likely range over a number of items, but surely would include universal health care , wider safety nets in general (for unemployment, education, and other concerns that important to human capital development), and infrastructure maintenance. 

Bruce Bartlett made the point about comparative taxation in his Forbes blog last week, Tax Tea Party Time? April 10, 2009: "[t]he trut is that the U.S. is a relatively low-tax country no matter how you slice the data."   In particular, the CBO figures show a rapid decline in federal taxes as a percent of GDP, from 20.9% in 2000 to 15.5% in 2009. Even considering all taxes (federal, state, local), the US even back in 2006 came out considerably less than other OECD countries (35.9%) or Europe (38%).  This, by the way, represents a significant decline in government revenues at the same time that the Bush administration redoubled spending efforts, spending increasingly larger sums of money on the military and war-mongering activity.  With taxation declining, the gap was made up with huge borrowing (which now has to be increased to deal with the tattered economy left after 8 years of wrong-headed Bush policies).

(Aside:  Bartlett didn't note the irony that the original Boston Tea Party was not really an "anti-tax event," but instead it was an "anti-non-representation in the decisions about taxation event."   It's rather odd, in other words, to use the Boston Tea Party as the rallying image for the mix of anti-government, anarcho-libertarian, anti-immigrant, anti-taxes and plain ol' anti-Obama (and anti-Dems) stuff that was evident at the "teabagging" parties--we have representation, and it is those representatives who pass the tax laws.  So this isn't really a similar gig at all.)

Naturally, Bartlett got some pushback from the group that always complains about how highly taxed the US is.  Any reader of my blog knows that this is a constant refrain from the anti-tax groups--oh, they moan, the US has a 35% corporate rate and a high rate of 35% on individual incomes, whereas other countries have lower statutory rates.  As I have frequently pointed out, this is a fake distress call:  the US statutory rate may look decently high, but in fact the corporate and individual effective rates are significantly lower, so that the US is considered a tax haven, even by corporations, compared to the vast majority of our peer countries.

So what does this anti-tax group-- that relies on statutory rates to compare US taxation to other countries as the basis for a complaint about the US being too highly taxed and therefore purportedly uncompetitive--do when someone like Bartlett (in Forbes, no less) calls them on the facts?  They switch the argument.  They change the argument.  It doesn't matter, they say, that most other countries are much more highly taxed than the U.S., because the U.S. is still too highly taxed.  Ah, now we see the real truth.  The anti-tax group just wants to get taxes down--maybe to zero, ideally, especially for the corporations, managers and owners of most capital income.  So if you defeat one of their arguments, they'll make another one.   Anti-tax rants are the answer for every ill, and removal of one rant just brings another to the fore.

So Bartlett's second foray on this compared U.S. taxes today to those in the past, asking in Tax Tea Party Time, Part Two, Forbes.com, Apr. 17, 2009,  whether we are more heavily taxed than we used to be and whether polls show greater dissatisfaction about taxes now than in former years.  The answers, of course, are no and no.  Taxes paid as a share of income for a family with the median income were only 5.91% in 2007, compared to 11.79% in 1981. In fact, taxes from  for 2003 through 2007 are the lowest for any period since 1958 (chart in article).  And a Gallup poll shows a minority of Americans think taxes are too high--"the lowest percentage since 1961."

So then Bartlett deals with the "but Obama has increased the deficits ridiculously, and our children will have to pay high taxes to pay it off, so that is what we are protesting" rant.  Not so fast, he says, because there's no credibility if you didn't complain about the Bush tax cuts and spending policies, which moved us from surpluses under Clinton to record deficits under Bush.  There were no tea parties then, so this cannot be your real concern.

Bartlett is generally a Reagan-style economist, and I've often disagreed with him.  But he is right on here--the anti-tax rants can't have it every which way at once.  Fact is, the US has low taxes, either when compared to our peer countries or compared to our own historical taxes.  We probably should be raising them, especially on the wealthy, to pay for the heavy costs of making right an economy ditched by Bush policies of regulatory laxness, crony capitalism, and military spending gone wild.