ataxingmatter

The GOP Tax Bill Disses the Working Class

Here's something about the GOP House and the GOP Senate:  they each passed tax bills (supposed to come out in a "conference" agreement sometime today) that diss the United States' working class taxpayers.  White or black, Christian or Jew or other, citizen by birth or naturalized citizen--workers are treated as an inferior "taker" class and owners are treated as a superior "maker" class--the same old GOP class warfare that has been evidenced in Republican-driven tax legislation for decades.  That shows in the provisions that have been discussed quite a bit already, even though there is no official distributional analysis and even though the Treasury Department put out a one-pager claiming to provide an analysis showing huge economic growth would eliminate any deficits (based on both the tax "reform" legislation and promised cost-cutting "reforms" to Medicare and Social Security):

• the  significant reduction in impact of the estate tax,
• the huge reduction in the statutory corporate tax rate of most benefit to officers/shareholders (it was 35%, it will be 21% under the conference agreement, apparently, even though the "effective" corporate tax rate ranged from negative to around 24-25%--essentially more favorable than many of our fellow advanced economies' corporate tax rates);
• the territoriality of the corporate tax (generally, zero tax on foreign earnings of U.S. companies);
• immediate expensing of company investments (a five year provision that allows companies huge tax benefits for those five years);
• the elimination of the corporate alternative minimum tax (AMT), at a cost of about $250 billion in revenues.
• the reduction in the top rate for wealthy individuals (from 39.6% to 37%),
• the substantial reduction in the  State and Local Tax Deduction for workers (thus changing entirely the economics of paying for a house already purchased, while allowing sole proprietors, partnerships and other "owners" of equity in businesses the ability to deduct such State and Local Taxes in full);
• a larger standard deduction but the elimination of personal exemptions;
• a larger child tax credit that only becomes refundable over time (limiting how much it helps the poor) but is available to wealthy households (starting to phase out at half-a-million of income!);
• the only slight reduction in the ability of wealthy individuals to take advantage of the mortgage interest deduction (reducing the debt limit to $750,000 instead of $1,100,000)
• the elimination of the corporate AMT (which cuts taxes for wealthy shareholders/owners/managers) but the retention of the individual AMT (which primarily affects the upper middle class and not the wealthiest taxpayers under the current rate bracket system);
• the elimination of the Affordable Care Act mandate and penalty (which reduces the amount of Medicaid and insurance subsidy funds for poor and middle-income taxpayers, as well as guaranteeing the deconstruction of the health care system for 13 million or more Americans by 2027 and  increasing insurance premiums for upper-middle-class taxpayers); and
• the opening of the Arctic National Wildlife Refuge to rape by fossil fuel oligarchies (a piddling amount of revenue, but sufficient to buy off the principle-less Sen. Lisa Murkowski from Alaska );
• making the corporate tax changes permanent (and effective without any transition period) while making the individual tax cuts other than benefits for the wealthy like the estate tax changes temporary.
• (just to name a few).

When the health care mandate removal is combined with the other provisions,  "On net, the poor would actually lose out in all years once this effect is taken into account."  Dylan Matthews, The Republican tax bill that could actually become law, explained, Vox.com (Dec. 14, 2017).  The following Tax Policy Center graph from the Vox article (using the Urban-Brookings Microsimulation Model) shows that by 2027 the top 0.1% end up doing much better (average tax cut for the top 0.1 percent is $221,550 a year).  The bottom 20% do worse while the middle--the second and third quintiles--have a very insignificant plus (average tax cut of the third quintile is $490).   Within the third or middle quintile, more than 62% of taxpayers that earn between $54,700 and $93,200 would see their taxes go up, "[b]ut only about 0.1% of the very richest one-thousandth of Americans would see a tax hike."  Id.  Early gains--though small, intended perhaps to benefit the GOP in earlier votes--don't last because the individual cuts aren't permanent.  A change to chained CPI for indexing brackets amounts to a tax increase on individuals, while the permanent corporate tax cuts mean rich and very rich do well while middle and upper-middle lose out. 

 

Maybe the most damnable characteristic of these House and Senate provisions, other than the sheer favoritism for the already wealthy, is the favorable treatment in determining the rate at which income is taxed for "owners" compared to the disfavored treatment for taxation of workers' wages.  As the Tax Policy Center notes, the Senate version of the tax bill "would reduce taxes on business owners, on average, about three times as much as it would reduce taxes on those whose primary source of income is wages or salaries."  Paul Krugman, Republicans Despise the Working Class, NY Times (Dec. 15, 2017), at A27.  And this dissing of the working class goes along with treating partners in real-estate partnerships (like the Trump family and many other real estate developers) with kid gloves:  "a partner in a real estate development firm might get a far bigger tax cut than a surgeon employed by a hospital, even though their income is the same." Krugman, Republicans Despise the Working Class, NY Times (Dec. 15, 2017) (quoting Howard Gleckman at the Tax Policy Center). 

The Vox article describes the pass-through provision as part of its "here's who would be better off" section:

Pass-through companies, like the Trump Organization, which get a new deduction reducing their tax burden. The House-Senate compromise bill allows people with pass-through income to deduct a portion of that income from their taxes; the deduction is reportedly for 20 percent of pass-through income, less than the 23 percent under the Senate-passed bill.  Dylan Matthews, The Republican tax bill that could actually become law, explained, Vox.com (Dec. 14, 2017).

Note that this is an off-the-top reduction of what would otherwise be personal taxable income taxed at the taxpayer's individual tax rate.  Workers who are paid wages get no such break. And wealthy people will use good lawyering and tax planning to organize their businesses so that their income is counted as pass-through income rather than wages. This is just a continuation of a trend of favoring passive ownership of capital in this country.  See, e.g., the Berkeley Blog, Wealthy investors to win bigly with Republican tax plan ( Nov. 9, 2017).

Imagine a company where two siblings as owners and a third sibling is the principal employee.  They all receive about the same income from the company--for the worker bee, as wages and for the other two, as a profit share.  The worker bee does all the creative thinking and working.  So the two owners pay tax under this provision on 20% less income than the worker bee.  And this is true in an economy in which economists are generally agreed that pass-throughs are currently taxed favorably, taking everything into consideration, and "don't need another break".    Dylan Matthews, The Republican tax bill that could actually become law, explained, Vox.com (Dec. 14, 2017).  This pass-through provision is as clear a snubbed nose to all those who work hard to earn a decent living as one can imagine.  Fact is, the "owners" are often the takers, and the "workers" are the makers.

 

PS. The Vox article suggests that the corporate tax break is justifiable, based on the GOP "economic theory" that claims that a lower corporate tax rate will "spark so much additional investment in the United States that it would bid up wages and leave the middle class better off through its indirect effects."  Id.  This is just another way to state the "supply-side" "trickle-down" theory that has been relied on  for decades by right-wingers but has never been shown to be justified empirically.  In 2004, the GOP made the same claim for its "repatriation tax holiday" for multinational corporations, claiming that the low tax would allow those corporations to invest and expand, leading to job creation.  It didn't.  It led, instead, to share buybacks and more money for the shareholders.  In fact, a large number of repatriating corporations that did share buybacks with the money also laid off thousands of workers.

PSS.  The Vox article also suggests that the limitation of the state and local tax deduction for individual taxpayers (but not for businesses) has a "reasonable case" supporting it.  Sure, the benefit of the state and local tax deduction is regressive, in that higher income taxpayers in larger houses with larger property taxes and larger incomes get more of a deduction.  And yes, it tends to benefit those states with higher state income taxes that are used to develop infrastructure and education.  But that misses several points in response.  First, for people at the upper-middle income bracket, the Alternative Minimum Tax generally limits the availability of the state and local tax deduction.  Second, people who currently own homes and are paying taxes on those homes and living in states with higher taxes likely took the availability of a property tax deduction into account in determining what they could pay for their home: the bill does nothing to provide a reasonable transition for these folks that takes their expectations into account.  Third, when the GOP is trying to counter a Democratic president, it always makes the argument that it makes more sense to support states in allowing them to experiment with different ways of raising revenues and supporting their economics.  That's what the "blue" states have done:  they have recognized that having higher taxes allows development of infrastructure, support for education, funding for research and other priorities, and these expenditures have created a more sustainable economy and better standard of living in those states--exactly what the "state experimentation" is supposed to do.  Yet the GOP provision on state and local taxes is now justified as a way to undo the benefit for "rich" states without doing anything to help the "poor" states.  (In fact, Ryan and McConnell have made it clear that their goal is to harm the poor states by reducing funding for Medicaid, Medicare and Social Security on which those states in particular depend.)

 

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The Utterly Terrible GOP Tax "Reform" Scam

The Republicans in the House and Senate continue on their downhill rush to pass their so-called "tax reform" plan before the holiday break.  It's a mad rush to nowhere, a corrupt process of "please the oligarch" that will cause a huge deficit increase (on the scale of $1 to $1.5 TRILLION over ten years) and be used by the Ryan, McConnell and Trump cadre of liars to justify a domino effect of Medicare, Medicaid, and Social Security cuts.  It is class warfare of the one percent against everyone else.  And it is being sold to the American people with a litany of falsehoods.

Almost all the provisions in the bill are designed to be generous to the ultra wealthy and stingy to the middle class and poor. 

Corporations and their owners and managers--among the wealthiest people in the country--get the only permanent tax breaks.  It's done in the name of competitiveness, but that's bunk.  It essentially encourages corporations to continue to move profits out of the US because foreign profits are taxed at zero while US profits are taxed at 20%.  It pretends that the multiple tax breaks for big corporations are necessary (under disproven trickle-down and supply-side theories) to lead to more investment in business in the US and to more jobs and higher pay for workers.  But in fact corporations are enjoying record profits under current law and they aren't using those record profits to pay their workers more or to create more jobs or even necessarily to invest in the US.  Mostly they are just doing share buybacks for shareholders (ie, owners/managers and other shareholders) that include the  wealthiest people who own the most corporate stock.  That's because it is demand, not capital, that determines what business expansion is needed and results in labor shortages that give workers leverage to demand more pay.  Tax cuts for corporations just add to the already existing capital glut.

The estate tax cut (elimination in the House bill; doubling the exemption to levels that only the very few multi-billionaires will pay any at all in the Senate) ensures that the wealthy will pay almost no tax at all.  They borrow against their wealth while alive.  Their estates pay no tax on the accumulated wealth when they die.  Their children inherit with a "step up" in basis so they get a huge windfall.  And their children can pay off the parents' debt by selling a few items (because of the basis step-up, with no taxes either) and live on their windfall without ever lifting a finger to do any real work.

Individual workers really lose out in these bills.  Under the House bill, the rate on the lowest wage earners is INCREASED 20%--from 10% to 12%.  And all of the 'tax cuts' for ordinary taxpayers sunset after a few years, while the corporate cuts are permanent.  Shows where the GOP loyalties lie--not to the worker base that put them in office, but to the wealthy oligarchs like the Koch Brothers who donate to the GOP political campaign chests.

The pass-through provisions (a 23% "deduction" from income before tax is one version)--along with the ability of businesses but not individuals to deduct state and local taxes--are a great boon for wealthy owners of real estate partnership interests, like the Trump family.  But they make no sense at all.  The more different kinds of income categories that are created with different rates, the more you empower the wealthy to gamesmanship with the tax system.  That's what this legislation does in spades.

And after the American people spoke up in Town Hall after Town Hall that they wanted the Affordable Care Act health insurance system protected, the Senate's version of the so-called "tax reform" bill (developed in utter secrecy by Republicans bargaining with Republicans as though nobody else counts) eliminates the individual health insurance mandate (and accompanying penalty).  Without that, the entire idea of affordable insurance through government-operated exchanges fails, because the only people on those exchanges will be those who are sick enough or old enough or vulnerable enough to realize that they will need health insurance soon.  Insurance works by diversification of risk--that's why the Republican insurance plan in Massachusetts, the model for Obamacare, called for an individual mandate and penalty.  Without that core feature, the exchanges can't work because the risk isn't sufficiently diversified.  The Republicans who are trying to gut Obamacare know that, and apparently they don't care that this particular "tax cut" will in fact cost more than 8 million Americans the possibility of having affordable health care, likely leading to early deaths for a large number of that group.  They don't care, I guess, because "those people" are less likely to be wealthy and less likely to vote Republican.  If you are so blinded by partisan fealty that you no longer care about legislating for the good of the nation, you descend to the garbage dump level of this Republican tax bill.

Of course, the elimination of the individual tax cuts, the expansion of the real-estate-industry favorable tax cuts, the inclusion of what can only be called a 'mock' provision to deal with carried interest (it doesn't), the elimination of the medical expense deduction (in the House bill) that will leave the disabled, the injured, and the elderly in dire straits, the decimation of the casualty loss provision that helps ordinary people recover from natural disasters, the huge cutback to the state and local tax deduction for individuals (while continuing to allow it for all businesses)--all these provisions prove that Republicans don't care a fig about ordinary people.  We won't be spending money on basic scientific research (needed to be competitive in a global marketplace and needed to save lives from cancer and other diseases).  We won't be spending money on infrastructure (needed to have safe roads, trains, airports. etc).  We won't be spending money on  education (other than Betsy DeVos's favored religious charter schools that teach falsehoods on a daily basis).  We won't be creating a sustainable economy that serves all of our citizens.

Oh, but we will be decimating the environment, as Trump's lineup of industry trolls continues to reduce wilderness areas, as Lisa Murkowski sells her tax and healthcare vote to get to open pristine and irreplaceable Arctic wildlife refuge to the oil and gas fossils that have grown obese off 200 years of government subsidies (see The tax bill is bringing drilling in the Arctic National Wildlife Refuge closer than ever, Vox.com (Nov. 28, 2017)), as Zinke reduces FOR THE FIRST TIME EVER national monuments set aside by other presidents so that those obese coal and oil and gas guys can get even wealthier (see Zinke backs shrinking more national monuments and shifting management of 10, Washington Post (Dec. 5, 2017)), as Pruitt ensures that nobody at the EPA does anything to protect the air, water and land from industry pollution, see Goodby science, hello industry, LA Times editorial board (Nov. 6, 2017). .....

The passage of a tax bill that will create an additional one-to one-point-five trillion-dollar deficit is proof that the Republicans don't care if they destroy this country in their effort to return to the Gilded Age of the past (or, in Roy Moore's definition of the time that America was great, the slavery era when (white) families stayed together and were able to sell black babies away from their black mothers (or half white babies away from their raped black mothers)).

What is the Republican response to the deficit and mal-distribution problems created by such a huge tax cut for the already wealthy?

1) The tax cut will pay for itself.  This is trickle-down gobbledy-gook.  The vast majority of economists and tax experts are quite clear that this is simply not a supportable claim.  It's pie-in-the-sky ideology with no basis in fact when there have been a number of attempts to find such a basis.  It wasn't true for Reagan, back in an economy for which tax cuts held much more promise of economic stimulus than they do for our current situation.  The Kansas experiment shows this trickle-down reasoning is without foundation. Russell Berman, You Better Learn Our Lesson: Kansas Republicans say they are worried that Congress and the Trump administration will repeat the mistake they made in enacting budget-busting tax cuts, The Atlantic (Oct. 11, 2017).  But Treasury has now put out a one-page analysis--compared to the careful, extensive, fact-based analyses usually prepared to support well-researched tax proposals--saying that the GOP plan would produce record growth and that growth would pay for the tax cuts.  See Alan Rappeport and Jim Tankersley, Treasury Defends Tax Plan Cost with One-Page Analysis (Dec. 11, 2017).  Event the speculative Treasury 'defense' assumes away half of the deficit with legislative cuts that aren't even on paper yet.  It's pure fiction.

2) Medicare, Social Security, Medicaid (the "entitlement" programs) will have to be cut to make up for any deficits.  That, of course, is the underlying plan. See Jeff Stein, Ryan says Republicans to target welfare, Medicare, Medicaid spending in 2018, New York Times (Dec. 5, 2017).  Create a deficit and use it to 'starve the government' to justify cutting any programs that don't serve the oligarchs.  Most of that minority of people who voted Trump into the presidency (assuming there wasn't a good bit of ballot falsification, which I think went on in Detroit to not count everyone's ballot) will suffer from this--they depend on Social Security when they retire and on Medicaid when they become incapacitated in their old age and need nursing home or assisted living care.  Under the Republicans, we'll return to the "good old days" of the Great Depression when old folks became homeless and the government didn't have to bother with caring about the vulnerable.

We all should be hitting the phones and telling every GOP member of Congress that they are not there to protect their wealthy donors: they are there to protect us and ensure that the economy is sustainable and viable for all of us.  This tax legislation stinks. Tell Congress to ditch it in the sewers where it belongs.

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The Times Handles the Trump Tax Cut Framework with Kid Gloves

There's been a good bit written about the Trump tax cut framework released just over a week ago.  Most of it points out, as I have here and here, the absurdity of the claims by Trump and GOP spokespeople that this isn't a tax cut aimed at benefiting the ultra wealthy.  After all, even with few details and no attempt to deal with the really tough issues that would face real tax reform considerations, it is awfully clear that almost everything in the package is designed to make the wealthy even wealthier. 

Just a quick review of the way the proposed tax cuts exclusively or primarily benefit the ultra wealthy:

• elimination of the estate tax, which taxes fewer than 2% of the estates, those that have in excess of $11 million (the couples' exempt amount) and haven't used the various trusts and family partnerships to let even more estate value escape tax through valuation gimmicks
  • Not waiting on the tax cut proposal, Trump's Treasury secretary Steve Mnuchin announced in "Second Report to the President on Identifying and Reducing Tax Regulatory Burdens" (Oct. 2, 2017) a current step to let wealthy people continue to use valuation gimmicks to avoid a fair estate tax, through withdrawal of the Obama Administration's proposed regulation under section 2704 that would disregard the purported restrictions on certain family-controlled entities in setting estate valuations--a regulation clearly merited because of the ridiculous scams of putting assets in family partnerships in order to claim that they are worth 1/3 of their actual value, even though the partnership can be dissolved afterwards with the full value magically returning.  (I'll deal with the regulatory changes in my next post.)
• elimination of the AMT, which imposes tax when the taxpayer would otherwise benefit from a surfeit of regular income tax subsidies (loopholes, tax expenditures, deductions, credits).  For a thorough analysis of the AMT, see A Taxing Matter series of 6 posts, beginning here.
• reduction of the statutory corporate tax rate for the largest corporations from 35% to 20%, which benefits primarily the highly compensated managers (who receive substantial amounts of stock options as part of their compensation) and big shareholders (who tend to be mainly the ultra wealthy who own most of the financial assets) and does little or nothing to help small businesses, that already pay tax rates of 25% or less
• creation of a single 25% rate for recipients of all business pass-through income (i.e., from partnerships), which benefits almost exclusively the ultra rich, since small business income is already taxed at 25% or less, while wealthy partners in real estate firms would be taxed at the highest individual rate under current law on their pass-through income, and
• creation of full, upfront expensing, resulting in a non-economic windfall to businesses that will, again, mainly just increase profits passed on to their wealthy owners. (Although this is purportedly a five-year provision, everybody knows that is just a gimmick to pretend that its impact on the deficit is less than would be admitted if it were permanent.  Everybody also knows that the intent is to make it permanent.)

But there are always journalists who try a little too hard to give obviously bad tax ideas a surface claim to reasonableness.  Apparently, even James Stewart, who writes "common sense" entries for the business section of the New York Times, suffers this vulnerability.  See, for example, his "Tax Cuts are Easy, but a Tax Overhaul?  Three Proposals to Make the Math Work," New York Times (Oct. 6, 2017), at B1 (digitally titled "Tax Reform that doesn't bust the budget? I've got a Few Ideas, Oct 5, 2017). 

I like the print title better, since the Trump Plan has clearly already ditched any real idea of "tax reform" for a wholesale attempt at trillions of dollars of tax cuts mostly benefiting the rich.   There are other things that aren't so good about the article.

1) Stewart calls the Trump giveaway to the rich "the most ambitious attempt at tax reform in over 40 years."  That's simply not correct, because it isn't an attempt at tax reform and it isn't really ambitious. 

• Ambitious? How can Stewart call a grab-bag of all the old GOP cuts-for-the-rich gimmicks "ambitious."  Unless he thinks that conning typical Americans who don't understand much about taxes into thinking that this is a populist tax reform intended to help the middle and lower income classes and not drop more riches on the already rich makes it 'ambitious'..... 
• Tax reform?  This isn't tax reform; it's just a series of tax cuts.  The framework leaves any thinking about tax reform for somebody else to do--which means it really isn't intended to happen at all.  Later in the article Stewart quotes Holtz-Eakin (right-wing tax cut advocate) and Kevin Brady (same) about the "ambitious" framework.  They're gung ho.  Brady says it's ambitious because they are trying to do what the 1986 reform  effort did in several years in only a few months.  Nope--they are not trying to do what the 1986 reform did.  The 1986 reform was a fully bipartisan effort in both the House and Senate, with  Packwood in the Senate and Rostenkowski  in the House leading lengthy hearings and in-depth study of issues, along with a responsible and active Treasury and CBO providing in-depth analysis of impacts.  Trump and the GOP now intend to pass a tax cut for the rich with only GOP support (unless Trump can bully some election-vulnerable Democrats into going along with the travesty).  And they don't intend the kind of exhaustive study and consideration that would provide real information on who would benefit and who would be hurt.  We've already heard that some GOP want to pay an outside (GOP-friendly) consultant to do the "dynamic scoring" and not the CBO, because they want to be sure that it predicts plenty of growth (a number that is easily manipulable, which is why 'single score dynamic scoring' is utterly absurd).
  • Tax reform would look at the wasteful expenditures we make through the tax system to support old technologies that are clearly part of human-caused climate change, such as our continuing century-long subsidy of fossil fuel extraction, coal-based mountainside destruction, and environmental wildlands-destroying oil, gas, mineral and cattle leases. 
  • Tax reform would consider who has benefited most from the many loopholes and tax expenditures that we've riddled the original 1986 tax reform act with in the years of money-smoothed lobbying since--such as the reinstatement of the preferential capital gains rate within 2 years of the 1986 tax reform's well-considered removal of the preference, or the reinstatement of the absurd R&D credit when thorough study and consideration showed that it did not result in more research but merely more money (fungibly located, to the advantage of IP-intensive industries like pharmaceuticals and digital software firms).
  • Tax reform would have a target amount of revenue to raise with taxes, based on social, infrastructure, and other important spending and the debt service needs of the already incurred federal debt, rather than a mere pie-in-the-sky idea of a "dynamic scoring" that would "show" that trillions of dollars of tax cuts over ten years would magically pay for themselves through turbo-charged economic growth that none of the top economists think possible.

2) Stewart acknowledges that the framework appears to be a tax cut for the rich and that it appears to recklessly drive up the deficit and that it leaves the hard part for Congress to figure out (which loopholes to close and how to do it) while claiming huge benefits from corporate and business tax cuts that add to the huge corporate and business tax cuts enacted under Bush 2, many of which were made permanent under Obama.  But he excuses all that with the cop-out phrase "this plan is just the opening salvo."

• Opening salvo?  Something that comes after years of GOP planning and saying they wanted to cut taxes on corporations, eliminate the estate tax, eliminate the AMT, cut taxes on high earners, move to a rate structure with fewer and lower rates, and move to much lower tax revenues by eliminating world wide taxation and adopting a territorial system --i.e., do all the things that this 'framework' does?   That's just an "opening salvo"?  I think that term casts what is going on here in much too friendly a light.
• Opening salvo?  when these planners have already said that they are convinced that dynamic scoring (i.e., counting your chickens (economic growth) before they hatch, even before there are any eggs to count) will solve all their problems because they ALWAYS assume that tax cuts to wealthy people will trickle down to everybody else and make the economy grow, even when every bit of evidence from history suggests that simply isn't the case, including the recent Kansas disaster? 

3) Stewart claims that "substantial aspects" of the framework already have bipartisan support, by which he means the idea that "global competition" demands that we cut corporate tax rates and everybody agrees that companies should not be able to stash earnings overseas tax-free. 

• Bipartisan support?  Of course, while there are various 'free-market' economists who make the argument that we need to cut corporate rates for competitive reasons, it can be argued that when 75% of corporations pay no federal income taxes whatsoever and when highly profitable companies have been able to increase their profits and when U.S. corporations pay a smaller amount of taxes as a portion of GDP than corporations in other advanced countries, global competition does not seem to be a problem.  The problem is the loopholes in our system that allow multinational firms--especially those that depend on intangible intellectual property rights--to pretend to move those rights around and thereby claim that the profits from that intellectual property created here are earned abroad and not subject to U.S. taxation.  We could deal with that, but the GOP in House and Senate aren't interested in asking those questions in ways that lead to effective answers.  Democrats tend to be more interested in considering what the root problems are.  So "bipartisan support" that appears on the surface is likely only skin deep. 
• Global competition?  Right now, we already allow U.S. companies to move active businesses abroad tax free.  We facilitate their ability to take advantage of low-tax jurisdictions to compete with U.S.-based companies!  We give financial institutions a pass on the 'subpart F' provisions of the Code through the "active financing" exception.  And the Mnuchin report on regulatory "burdens" indicated that the Trump administration will pull back on the anti-inversion regulations.  We know things we can do to stop the way quasi-sovereign U.S. multinationals play various tax jurisdictions against each other.  We could deal with that with a renewed emphasis on something other than the old 'transfer pricing' methodologies and with full taxation on taking business assets out of the country.  We could clamp down on transfer of technology to China in exchange for China letting our multinationals into the markets there.  So it is not really "global competition" but failure of this administration or this congress to focus on addressing remedies to problems.

4) Stewart claims that the framework's "doubling" of the standard deduction will allow "many more individual taxpayers ... to file a simple short-form return."

• Doubling of the standard deduction? Looked at alone, it sounds good.  But doubling the deduction while eliminating the personal exemption actually puts a cap on the amount of income exempt for low-income families, rather than increasing it.  A family of 5 might well end up paying more in taxes out of an income already inadequate to provide a decent standard of living, especially when coupled with the 20% increase in the lowest rate, from 10% to 12%.  Why does Stewart just repeat the (not necessarily correct) selling points for the framework without taking these issues into account?
• Simple short-form return?  having 4 rates instead of 7 and doubling the deduction while eliminating the personal exemptions is simplification on an inconsequential scale.  The real complications are character of income (that nasty preferential capital gains rate, again), and whether something counts as income or not.  The people on the low-income of the scale don't have simple returns because they have an Earned Income Tax Credit to calculate.  People in the middle may have pensions, capital gains, income from investments of varying types, rental income, mortgage interest deductions, and various other items that requires a little more work.  Many provisions have exceptions designed to aid certain kinds of businesses or small businesses, all of which add to complications while filling an important function.  But let's also remember that tax preparation software has already made even  complicated tax returns fairly "simple" to figure out--just enter the right numbers into the right places in the software.  We don't need tax cuts for the rich to have a fairly simple tax return process for the majority of the people of this country.  Most already claim no itemized deductions (nearly 70%, a fairly consistent number).  Most can easily do their tax returns with cheap software.  Most don't need tax cuts for the rich to facilitate their tax returns.

5) Stewart claims that "a lower rate for small businesses and pass-through entities, while more controversial, should promote economic growth."  And he thinks that is the most important thing this framework does.

• Lower rate for small businesses?  Who is kidding who.  Most small businesses are just that--they are SMALL in assets and in revenues, and they are NOT taxed at the 35% statutory rate that applies to corporations that have more than $18 million in taxable income (note--taxable income of 18 million means gross revenues of many more millions).  Most small businesses are taxed at 25% or less already!
• Lower rate for pass-through entities?  The main pass-through entity is a partnership, and there is no current rate for partnerships to pay tax, because their income, gain, loss, deduction and credit items pass-through to the partners, who take them into account on their tax returns and pay at whatever rate the partners pay based on their total taxable income 'picture'.  Creating a flat rate of 25% for pass-through income won't benefit small business proprietors, who already pay a lower rate in most cases.  But it will hugely benefit wealthy partners in real estate development partnerships and similar companies that would have otherwise been paying tax at the 39.6% rate and under this would pay tax at only 25%.
• Promote economic growth?  What about this is in any way empirically supported as promoting economic growth--especially the broad-based, raising- all-boats type of economic growth that actually goes to the middle and lower classes and has a multiplying effect on growth because of the increased demand that creates more business that creates more jobs, etc.?  There's really no support for these long-term GOP tax cut proposals to actually do anything about creating jobs and creating sustained economic growth that will actually help the middle and lower income groups.  Cutting corporate taxes mainly puts more money into the pockets of corporate managers already paid in 12-15 million a year and more.  Cutting the tax on recipients of partnership pass-through income mainly puts more money into the pockets of the real estate developers and hedge fund managers and joint venture capitalists who already earn tens or hundreds of millions annually.  None of those profits will necessarily remain in this country (they are likely to be used to expand in China). And again, Kansas.  The Kansas "experiment" in drastic cutting of business taxes was supposed to prove, once and for all, that the GOP ideology of tax cuts that pay for themselves was not an Arthurian legend based on Arthur Laffer's absurd napkin theory but a real, empirically provable, workable way to jumpstart huge economic growth.  After finding the state swamped in deficits and facing reduced growth from the predictable decline in state services, even the GOP members of the Kansas legislature recognized that taxes had to be raised.  And they did it over Gov. Brownback's veto.....That says a whole lot about cutting taxes that the Trump framework people will, of course, call 'fake news' (their favorite term for dissing any facts they find inconvenient).

OKAY, I know.  I've already got 5 items picked for discussion and I've not even gotten to Stewart's three ideas for making the absurd Trump tax framework "add up mathematically."  That's because he assumes away many of the problems with the framework, making it easier to claim he's found a solution to the deficit issues.

6) Stewart takes the framework at its word but disregards the state and local tax deduction (likely to be heavily lobbied against) and the expensing (costs $220 billion for just 5 years and would be much more costly than that when made permanent).  He's willing to buy the idea of a budget resolution that says it is okay if the tax cuts result in a $1.5 trillion revenue shortfall over ten years (i.e.,, okay if tax cuts for the rich create an additional $1.5 trillion deficit), on the assumption that drastically faster economic growth will make up much of the difference.  As he puts it, "that's a debatable proposition, but for purposes of this discussion, let's accept it."

• A budget resolution for a $1.5 trillion cost over ten years to tax cuts that likely will cost $3 trillion to $7 trillion?  How is just "accepting" that reasonable, or common sense?  Sounds nutty to me.  Especially in light of the arguments that the GOP has made in the past (and can be expected to make again in the near future, in part justified by the deficits created by their tax cuts for the rich) for decreasing funding for Medicaid, Medicare, Social Security and any other programs for the vulnerable based on their "worry" about deficits and debt.
• Accepting an assumption of economic growth at sustained high rates that are much higher than experienced even during periods of economic stimulus from federal spending?  Not just "debatable" but outright "unreasonable."

7) Finally, Stewart gets to his "three ideas".  Based on his conclusions in item 6, he assumes that he needs to find just $1.1 trillion over 10 years to make the framework workable.  (You already know that I think that it is ridiculous to assume away huge portions of the problems with the framework, so I won't reiterate more than in this sentence.)  How does he propose bridging the gap and raising the $1.1 trillion? With some ideas that progressives have been proposing for the last 40 years.

• A tax bracket of 44% on the top 0.1% of taxpayers who have more than $2.1 million of adjusted gross income would raise about $300 billion over 10 years.
  • This wouldn't be near enough to compensate for the huge tax breaks that go mostly to these same taxpayers, but it is something that should be added to at least clawback some of the largess to the rich.  The rich received tax cuts from Reagan and Bush 2 that have drastically lowered their share of taxes paid.  They would receive another wallopingly huge gift of tax reduction from the Trump framework.  Probably the rate ought to be higher (a number of rates at 40%, 44%, 48% and 55% rate, for example, for various levels of income).
  • Stewart says raising rates would "raise issues of fairness" by penalizing earned income (i.e., for those CEOs and hedge fund managers who make $300 million or $700 million annually in compensation) while leaving passive investment income that is subject to a capital gains preferential rate untouched.  Yeah, that's a problem, but it is easily solved.  Eliminate the preferential capital gains rate, which just favors the very rich anyway, isn't justifiable under any of the reasons put forward for it, and was eliminated in the well-considered 1986 reforms (before the lobbyists got to Congress and got them to un-eliminate it).  Even Holtz-Eakin acknowledges that raising capital gains rates to the same as ordinary income rates would be reasonable. 
• Tax capital gains at death, he says,  because they are taxed preferentially (if at all) during the owner's life  and there is no justification for allowing them to pass from generation to generation without ever being taxed.
  • Hard to disagree with this idea.  There is no justification for allowing appreciation to pass untaxed to heirs, with or without an estate tax.   This is something that should be enacted (without the elimination of the estate tax) because most estates haven't been taxed at all, and most estates of the ultra wealthy have huge appreciation that horribly exacerbates inequality when it passes to heirs (who did nothing to earn it, in many if not most cases) with bump up in basis and no taxation of the gains.  Combine that with the way such assets permit borrowing during life, to be paid off by sale of a few assets at death at no taxable gain, and you have the ability of the ultra-wealthy to live off their assets with almost no taxation during their lives or in their estates (especially if the estate tax is eliminated) or in the hands of their heirs.  As Steve Rosenthal puts it in commentary to Stewart in the article, "to take away the backstop of the estate tax without a tax on capital gains at death is crazy."  Couldn't say it better myself.
  • Stewart says Congress could exempt "family owned farms and small businesses."  Yeah, it could.  But it shouldn't.  Those family-owned farms  may be huge corporate entities, not 'small' in any sense of the word.  They can afford to pay tax on gains that haven't been taxed in a lifetime.  Any exemption should be minimal (maybe  exempting gains on assets of $1 million or less, like the pre-Bush estate tax exemption amount).
• Curb the deduction for corporate interest expense.  This is another workable idea, since debt remains one of the ways that corporations finagle where income goes and where deductions are generated, in spite of the various existing provisions for limiting deductibility of corporate interest payments. 
  • Most GOP proposals, as Stewart notes, couple reductions in interest deductions with elimination of taxes on interest income. That is not necessarily a sound approach, and you can bet that the real estate industry (among others) would huff and puff and blow the straw house of limitations away in no time.  Just look at the "at risk" rules under section 465, which were intended to prevent taxpayers from using nonrecourse debt to create basis to allow utilization of phantom losses, as originally enacted in 1976.  It just took another session of Congress to get a loophole that essentially swallowed the rule, allowing "at risk" treatment of "qualified nonrecourse financing" for real estate projects.  So any reductions to the deficit here would likely be temporary at best.  And there are other real estate tax expenditures that should be attacked, too, like the section 1031 like-kind exchange rules that favor in particular real estate developers by allowing deferral of  gain when trading properties (even when it is actually getting cash that a middleman holds, and then buying another--a far cry from the original intent of the section).

Stewart, at the end, takes a victory lap, because these three provisions, if enacted, could conceivably raise enough revenues to close the (assumed) $1.1 trillion gap.  The problem --this is very misleading for typical readers.  It looks like he is presenting the "tax cuts for the rich" framework as a workable plan that can be easily paid for and that is promising in terms of economic growth potential.  As you can see from my analysis, I think the framework itself is not a workable plan, it cannot be easily paid for, and it does not hold out a real promise of economic growth.

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The Tax-Cut Framework Won't Create Jobs and Digs the Inequality Ditch even Deeper

Marcus Ryu, a self-described Silicon Valley entrepreneur who created, with others, a company now worth $5 billion on the New York Stock Exchange, argues in today's Op-Ed section of the New York Times that "Tax Cuts Won't Create Jobs", NY Times (Oct. 9, 2017), at A23 (the title in the digital edition is different from the print title:  Why Corporate Tax Cuts Won't Create Jobs).  He is right.

The tax cuts proposed in the framework set out by the Trump administration and Republican leaders in Congress claims to be pursuing economic growth that will benefit ordinary people (Trump's purported base).  These claims are based in part on claims that  U.S. taxpayers (individual, corporate and individual who owns businesses through partnerships) are much more heavily taxed than taxpayers in other advanced countries.  Trump often points to the statutory tax rate for corporations (35%), which is higher than the statutory rate in most other advanced countries. But Trump usually ignores the fact that the vast majority of corporations (including very profitable U.S. multinationals) pay no or much lower taxes, in part because of the many loopholes and deductions that reduce the income that is taxed.  When one considers the nation's GDP and the percentage of GDP paid in taxes, it is quite clear that the U.S. is actually one of the lowest taxed of developed countries, which often have income taxes, corproate income taxes and value-added taxes (which the U.S. does not have), as well as specialty taxes such as financial transaction taxes (which the U.S. does not have).  See, e.g., Business Insider, Is the U.S. the highest taxed country? (Sept. 6, 2017).

"[T]he most comprehensive measure by which to judge Trump's claim, combining corporate and individual taxes paid, is tax burden as a percentage of gross domestic product. It compares how much money in a country is put toward taxes with the economic output of the country.  By this measure, the US has the fourth-lowest tax burden of any OECD country, with only South Korea, Chile, and Mexico ranking lower." [emphasis added]

  Trump has claimed that the proposed cuts in the Trump tax-cut "reform" framework don't benefit the wealthy and don't benefit him but are for the middle class and those with less wealth and income.  The only way that claim would work would be if tax cuts that are clearly targeted at the rich (elimination of the estate tax, elimination of the AMT, drastic cut in the rate at which wealthy partners pay taxes on partnership income shares, drastic cut in the corporate tax rate  when most of the benefit of tax cuts to corporations is used to pay dividends or do share buybacks for the wealthy managers and shareholders) had such a dramatic impact on overall economic growth and on sharing of the benefit of the tax cuts with ordinary workers that it made up for the fact that almost all of the benefit goes directly to the very wealthy and almost all of the negative impact (via additional borrowing and deficits) will result in fewer benefits from the poor.  That positive balance is so unlikely from these tax-cuts-for-the-rich that they appear to be just another of the many Trump lies intended to mislead the American people.  See, e.g., Business Insider, Trump tax reform plan just got its first brutal review showing how it would benefit the rich and almost no one else (Sept.  2017) (noting that "Americans among the top 1% of earners would see the bulk of the plan's benefits, while lower- and middle-class Americans — even most upper-class people — would see few benefits," citing the Tax Policy Center's study of the framework).

Marcus Rye sets out a number of key ideas in his op-ed.

First, "lower tax rates will not motivate more people to start companies."  That is because most people who start a company do so because they have an idea, they want to strike out on their own, or they are ambitious for fame and fortune generally.  Research on the 1986 significant changes to marginal tax rates shows that those changes did not induce higher-income people to work longer hours.

Second, existing companies won't shy away from a promising investment because of the tax rate on potential gain.  Company leaders are motivated to expand if possible, and "lowering the corporate tax rate isn't going to make us create jobs any faster."

Third, tax cuts just "increase our post-tax profitability, which effectively transfers money from the federal government to our shareholders."  The result is a bump in the share prices but no long-term impact on operations or employment plans.  It doesn't even make it easier to raise cash for expansion, since companies are having no trouble getting capital now because of low interest rates. 

Fourth, the tax-cut proposal demonstrates shoddy business reasoning.  It "wish[es] away huge tax-revenue shortfalls with stupendous growth projections."  No well-run business would do that kind of shoddy planning.

Fifth, "by 2027, when [the tax cuts] are fully phased in, four out of every five dollars ... will flow to the top 1 percent, an egregious wealth transfer to those who least need it."

Finally, "tax cuts that deepen our already severe inequality in income and wealth are not in the long-term interests of any citizens, not even the very wealthy. Extreme inequality is corroding our civil society, poisoning our politics, and undermining our effectiveness as a nation.  This is an extremely hard problem to solve, but when you're in a deep ditch, the first thing to do is to stop digging."

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Trump Administration Plays Havoc with Education--and your tax dollars

Betsy DeVos was confirmed as Secretary of Education in a Senate vote that had every Democratic Senator voting against her, along with two brave Republican Senators (Lisa Murkowski, Alaska; and Susan Collins, Maine).  Thanks to those no-voters who showed integrity.  Regrettably, the vote created a tie, broken in DeVos's favor by Trump's Veep, Mike Pence.  Note that the result is that Senators representing by far the vast majority of the American people voted AGAINST DeVos.

As a Michigander, I can tell you firsthand that this is a disastrous choice for the head of the most important Education agency in the country.  Betsy DeVos is just another one of Trump's billionaire crony capitalists who are using service in the government--which  is supposed to be about service on behalf of We the People--as a way to funnel more money to their fellow crony capitalists through elimination of protective regulations, open exploitation of federal lands, and willful ignorance about the harm that their crony capitalist policies have done and will do to the economy. 

ASIDE:  Check out, for example, Melania Trump's new lawsuit claiming $150 million in damages from The Daily Mail because it's article on the company she modeled nude for suggesting that the company was an 'escort service' cost her the "once-in-a-lifetime opportunity" to get rich off of her "multi-term" exposure to being the most photographed woman in the world--i.e., (not explicitly stated but clearly implied) her status as First Lady.

Betsy DeVos  is an heiress with billions who married into another crony capitalist family with billions.  The DeVos family has used its wealth to curry favor and influence in state and federal government.  IN particular, Betsy DeVos has been busy using her wealth to remake public education in Michigan in line with her own particular religious and crony-capitalist views on Michigan's education.  She supports junk science including "intelligent design", the pseudo-science replacement term for religious "creationism", in an attempt to undo scientific support for evolution.   She has pushed charter schools on Detroit--blaming any education shortcomings on dedicated teachers and disadvantaged students in public schools that have been deprived of hundreds of millions of state dollars owed them while turning a blind eye to the abject failures of for-profit charter schools in which 'management companies' rip off taxpayer dollars to overpay executives without having to comply with any of the accountability measures that are pressed on public schools that are underfunded.  Betsy DeVos knows nothing about public education, knows very little about the privatized charter schools she pushes, knows nothing about education law, and knows nothing about improving education in inner cities or poor rural areas.   What she does know is that she supports any way possible to take taxpayer money and give it to religious and other private schools to use without accountability to the public. 

I predict that the result of her term as Secretary of Education will bring further devastation of public schools, more funneling of taxpayer money to line the pockets of private school managers and even less requirements of assessment and accountability from those very managers, a dearth of fact-based evidence for anything in education, more and more rip-offs of ordinary Americans by for-profit purported schools like the fraudulent so-called "university" that was "Trump University"--i.e., a precipitous slide in American education caused by the crony capitalist privatization impulse and real harm to the children and grandchildren of that minority of the American population that voted Trump and his ilk into office.

The result is that tax dollars that public education so desperately needs will be  sent instead to the pockets of the already rich.  Public education will continue to struggle to innovate and expand programs that can reach underprivileged children who don't have enough food, shelter or home stability to learn well.  MOre and more children will be subject to religious indoctrination rather than education, and be less prepared to deal with the global world we all live in and to take the kinds of jobs--like renewable energy, and engineering and medical research--that provide the basis for a broad-based, stable, productive economy that makes life better for all of us. 

Trump voters, beware.  You thought Trump's promise to 'restore energy jobs' was one devoted to helping you.  Look, there are already more jobs in electric power generation from renewable energy in this country than in coal.  See, e.g., US solar power employs more people than oil, coal and gas combined, report shows (Independent.co.UK, Jan 23, 1017); There are now twice as many solar jobs as coal jobs in the US (Vox Feb. 2, 2017).  The way to 'restore jobs' (whether energy or otherwise) isn't to try to drive the country back to the 1950s when white men were almost the only workers at any decent paying jobs and the multinational corporations had not yet taken over U.S. businesses and moved much manufacturing to other countries.  The way to create jobs in the United States is to embrace the creativity and ingenuity of the American people, build an environmentally better world with clean water, clean air, clean food, regulating the companies to protect the people, and teach our children facts rather than "alternative facts" about the world we live in.  Climate change denialism, continuation of the hundred-year-old giveaways to  oil and gas and coal industry polluters while squelching assistance to the new renewable energy industries; privatizing education and health care (including moving Medicare to the States in a way that would allow them to make serious cutbacks in health care for those on Medicare)--these things that the Republicans stand for will ultimately leave America the Great more of a third-world country and seriously hurt that group of rural and suburban ordinary Americans  that voted for Trump more than anyone else.  Betsy DeVos is the most obvious example of a Trump crony money-bags who has no business in government, but there are plenty of others that Trump has put forward, such as the EPA director nominee (a person who has filed numerous lawsuits intent on destroying the EPA and doesn't want the government to act to protect Americans from rich polluters), the Labor Secretary nominee (a person whose company has frequently violated worker protection laws and who wants businesses able to make profits by exploiting (and harming) their workers), and the Attorney General nominee (Jeff Sessions, a person who in his career made a point of trying to squelch black vote organization drives). 

The Trump administration is engaged in class warfare in its most heinous form--using the agencies of the federal government that are designed to protect ordinary American people to roll back those protections and give away federal resources to crony capitalists.  And the Republican party leaders, after their obstructionism of health care and environmental protection for working class folk during the last 8 years, are now rolling over backward in spineless obedience to the Trump machine steamrolling over ordinary Americans' needs.

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Obama caves yet again: offering Social Security cuts to appease the right...

Obama's budget isn't even released yet and he's already caving to the "let's make the rich richer and forget the rest" crowd.  That crowd that claims that we need a capital gains preference so the rich can gather all that extra money to purportedly create jobs.  The crowd, that is, that fails to acknowledge that the rich tend to take all that extra money to Singapore, the Bahamas, or the Cayman Islands or hide it away in some Swiss bank, none of which does any good for our economy compared to what the government investing that money in infrastructure projects would do. See, e.g., David Leigh, Leaks reveal secrets of the rich who hide cash offshore, The Guardian (Apr. 3, 2013);  The corporatist crowd that refuses to admit the empirical evidence that says government investment is as important as private investment in creating jobs.  It is the government that makes the market go round.  And government money--our money--spent for schools, bridges, safer communities provides jobs and improves lives.  Without that government investment, there is no market, just barter.

President Obama seems to have forgotten that he was elected. as a Democrat, over the Republican candidate.  Obama has no business proposing cuts to Social Security benefits as part of a purported deficit reduction package.  Social Security is not a deficit driver: it is a social insurance program earned by those who receive it by payments over lifetimes of hard work.  It is the only stable retirement income most have.  The average Social Security beneficiary receives just short of $14,000 a year from Social Security--that's just 125% of the poverty line, which of course is defined so low as to guarantee that anyone living at or below that line is indeed in abject poverty and unable to move out of it.

The Republican Party has argued for cuts to Social Security benefits for decades, using whatever crisis of the momen they can engender to argue that we can't afford the system in place.  They've invented the perjorative term "entitlement" to imply that those who rely on social insurance because of disabilities or old age are just 'freeloaders' who are mooching off others.   Not so, since Social Security is an earned benefit program like insurance: workers pay premiums throughout their working life, and then once they reach retirement age they may draw benefits. 

There are a number of reasons for the amount of debt that the US government has--most of them related to the four-decade-long drive by the Republican Party to protect the wealthy and the corporations they own from much of a tax burden and to allow the accumulation of immense wealth by a few at the top of the income distribution.  Outsize military expenditures driven by Bush's preemptive wars undertaken at the same time that the Bush Administration pushed through tax cuts that favored the rich are of course a big problem.  The Bush tax cuts threw us from surplus to deficit and we haven't gotten beyond them yet.  The almost complete capture of the financial regulatory agencies by Wall Street, and the resulting financial crisis driven by casino capitalism spiked with the heady bubbles of derivative inflation is of course another part of the problem, and we haven't gotten beyond that yet, as Big Banks still exercise far too much power over their own regulation, proven by the LIBOR scandal that demonstrated their ability to manipulate the purportedly objective market rate to suit their profit machines.

But Social Security is not one of those drivers of the debt.  And the debt is not so outsize that it merits sacrificing the most vulnerable amongst us to mollify the wealthy who merely want to avoid paying their fair share of the revenues needed to get rail service up to snuff, bridges safe, and public schools owned by the public again.

 The average Social Security benefit is just under $14,000: the use of chained CPI will result in a loss to the average recipient of "$4,631 in Social Security benefits by age 75, $13,910 by age 85; and $28,004 by age 95" (from release by Social Security Works, based on “Inflation Indexation in Major Federal Benefit Programs: Impact of the Chained CPI,” Alison Shelton, AARP Public Policy Institute, March 2013.).

Obama has no business facilitating the gluttony of the rich.  He should drop the proposal to use “chained CPI” that will  result in a cut benefits for Social Security recipients.

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More on the Threat to Social Security and Medicare from the so-called "Fiscal Cliff"

In several posts recently I have discussed the harmful demands the right is engaging in related to the so-called "fiscal cliff" created by the original Bush tax cuts (set to sunset en masse), the artificial debt ceiling (used by the GOP to exact promises of spending cuts during a recession along with extension of unneeded tax cuts for the rich), and the ill-conceived notion that the U.S. military should continue to be funded at dangerously high levels that (i) ensure that the military-industrial complex will find a war or quasi-war in which to engage their newest toys while (ii) sucking resources from public infrastructure projects and education that are vitally needed to sustain our economy.  See, e.g., The GOP's extortion demands: cut Social Security or we'll shoot; If the Dems got backbone; Is it a fiscal cliff or merely a bump in the road; We face an 'austerity crisis' not a 'fiscal cliff. 

A. The Explanation.

At least the national media and a slew of bloggers are beginning to provide some background information to ordinary Americans on just what is driving the national discussion of "fiscal cliffs" and "austerity" demands.  See, e.g., Richard Rubin & Heidi Przybyla, Tax Pledges Confound Math as Obama Seeks Deal with Republicans, Bloomberg.com (Nov. 16, 2012) (noting that "The $607 billion fiscal cliff is the combination of tax increases and spending cuts that will take effect in January if Congress doesn’t act" and characterizing the positions of the parties as follows: "Republicans want to extend expiring tax cuts for all income levels and are demanding an overhaul in 2013 of entitlement programs and the tax code" while "Obama wants $1.6 trillion in higher taxes for top earners over the next decade, achieved through a combination of limits on breaks and higher tax rates on ordinary income, capital gains, dividends and estates"); Jackie Calmes, Demystifying the Fiscal Impasse that is Vexing Washington, New York Times (Nov. 16, 2012), at A19 (the online article is dated Nov. 15). 

[A] slew of tax cuts — $400 billion for 2013 — expire on Dec. 31: All of the Bush-era rate reductions; smaller tax cuts that periodically expire for businesses and individuals; and the 2-percentage-point cut in payroll taxes that Mr. Obama pushed in 2010....  Also, 28 million taxpayers — about one in five, all middle- to upper-income — would have to pay the alternative minimum tax in 2012.... That is because Congress has failed to pass an inflation adjustment....

***

An emergency unemployment-compensation program is expiring, which would save $26 billion but end payments to millions of Americans who remain jobless and have exhausted state tax benefits.

Medicare payments to doctors would be reduced 27 percent, or $11 billion, because this year Congress has not passed the usual so-called 'doc fix' to block the cuts....

The biggest cut would be $65 billion, enacted across the board for most federal programs over the last nine months of fiscal year 2013, from January through September.  This cut, known as the sequester, was mandated by an August 2011 budget deal between [President] Obama and Congress that ended [the GOP] standoff over raising the nation's debt limit.   Demystifying the Fiscal Impasse that is Vexing Washington

It is surely accurate that our still-weak economy would do better if we do not hit it too hard with decreases in government spending--especially decreases to government spending that supports the most vulnerable amongst us who need unemployment support in order to provide the basic necessities.  Similarly, it is surely true that some of the Bush tax cuts and the Obama payroll tax reduction are still vitally important to those in the lower 60% or so of the income distribution because of the slow growth in the economy.  We will want to find some resolution to the situation that accommodates the need to avoid a harmful austerity approach.

So the Times' explanation of the components of the so-called "fiscal cliff" is okay.  And it is reasonable in noting that the situation is currently "vexing" to Washington.  Similarly, the Bloomberg article succinctly characterizes the clear poles of the Democratic and Republican positions--a Democratic insistence on higher taxes paid by the rich, and a Republican insistence on so-called "tax reform" and spending cuts, aimed in particular at the earned benefit and safety net programs of Social Security, Medicare, and Medicaid. 

B. A Grand Bargain or a Devil's Bargain--How the Heck Did Social Security Even Get In the Picture?

Where the Times article fails is in its discussion of the "reasons"  for excessive worry about the "fiscal cliff" (if one can really call the GOP recalcitrance to immediately pass an extension of at least a good portion of the Bush tax cuts for individual taxpayers in the true middle class any form of reason).  

The Times article asserts that the "main disagreement" between Dems and Republicans is merely the question of extending the Bush tax rates for the top 2 percent of taxpayers.  That is a considerable understatement, one that results in part from the way the media reduces complex issues to easily retained soundbites, in that it ignores the considerable disagreement about whether and to what extent there should be any changes at all to the various earned benefit programs. 

The  article author appears to operate on an unstated assumption that because President Obama seemed ready to trade off changes in Social Security, Medicare and Medicaid benefits for higher taxes on the very richest of the rich in August of 2011, he will still enter into such a "Grand Bargain" to avoid the so-called "fiscal cliff."  Progressives hope, at least, that Obama will not fall prey to those same conclusions: Obama is now in a position of considerable leverage, and he must recognize that he cannot allow the Democrats to be extorted into a Devil's Bargain to reduce Social Security, Medicaid, and Medicare benefits in exchange for the pittance of slightly higher taxes on the upper crust.

The article goes even further astray at the end with its label of a "two-part deal" as the "best-case outcome".  It claims that "[m]any budget experts and economists are hoping for a two-part deal.  The first part would extend many of the tax cuts and repeal the automatic spending cuts to avert the changes scheduled after Jan. 1.  But it would be contingent on the second part: a framework for reducing projected long-term deficits by overhauling both the tax code--to raise revenues--and entitlement programs--chiefly Medicare and Medicaid, whose rising costs in an aging population are unsustainable."  Id.

Of course, here the "many" is simply put out there without any context, so one can't challenge the statement as accurate or inaccurate.  The right-wing has a stable of market fundamentalist economists who want to see earned benefit programs reduced, and there are certainly the Blue-Dog Dems and a number of others (like the Bowles Simpson group) who go along with that with little questioning of the ultimate negative impact on quality of life and decency of those determinations.  Overall, there is considerable parroting of the right-wing rhetoric that suggests that these vitally important programs have to be overhauled, rather than recognizing that it is the factors that lead to ever-increasing costs for medical care in the United States that must be addressed.  And it mistakenly suggests that there is a consensus in that regard. This is a perfect example of the way today's journalists buy into the rhetoric that is promoted (at great expense) without questioning the fundamental presuppositions underlying it.  In fact, the sequester deal did not touch Social Security, Medicare and Medicaid because there was no consensus that these programs should be reduced.  And the election results demonstrate that there is no consensus now that these program benefits must be reduced, though there is likely a consensus that health care costs in this country are increasing well beyond what is reasonable.  It is absolutely critical that the distinction be made.

So let's take these issues into consideration here.

C. Thinking about the two key components of the so-called "fiscal cliff"--tax cuts and spending cuts.

1. The Bush tax cuts, job creators, and uncertainty

The right has, not unexpectedly, argued that not extending all of the tax cuts--including those that amount to significant dollars for the wealthiest upper crust--will create a dire situation since, the right argues, the wealthy are the "job creators".  There is no empirical evidence supporting the idea that tax cuts for the upper crust do anything to create jobs: most jobs are created by small businesses, and those with incomes above $250,000 make up only about 3% of small businesses. 

Others argue that the uncertainty of letting the Bush tax cuts expire on December 31 is itself a dire blow to the economy.  But in the same breath, the media and most members of the Democratic and Republican parties acknowledge that they do not disagree on the need to extend the tax cuts for the middle income group at this time--the Democrats because they recognize that the tax cuts are still needed at a time of continuing slow growth out of the Great Recession caused by the profligate regulatory and tax policies of the Bush years, and the GOP because they recognize that they have no opportunity for an electoral majority if they continue to ignore the middle class. 

Thus,  savvy political advisers note that allowing the Bush tax cuts to expire and then enacting judiciously selected tax cuts targeted at the middle class (perhaps similar to the Bush tax cuts for the lower income groups or perhaps more carefully selected and without the many corporate tax giveaways) are fairly sure things, so that the arguments from uncertainty reduce to the same-old right-wing scare tactics.

2. The sequester, military spending, health care costs, and the importance of Social Security, Medicare, and Medicaid

Some conclude that neither side wants the sequester, with its domestic spending cuts and military cost-cutting, to go into place.  This, too, may be incorrect and overly simplistic. 

Many progressives recognized that we have a substantial imbalance in spending, in which we neglect public infrastructure (roads, bridges, public transportation especially rail and inter-and intra-city rail) and human capital development (funding for public education and for basic research) while pushing money at the military-industrial complex.  The latter step merely encourages the military to find ways to use the military investment it makes--i.e., more money essentially fosters war-mongering simply by providing plenty of the tools to carry it out through exorbitant expenditures on the military.  Letting the sequester take place is probably the only way that our dysfunctional Congress--with far-right-wing/Tea Party dominance in the House and the minority-control rule through the filibuster in the Senate--will be able to undo the disastrous emphasis on military spending above everything else that began with Reaganomics.  

Accordingly, a better course might be to let the sequester take hold, too, and then selectively undo cuts that jeopardize sound government--such as cuts to research, centers for disease control, public transportation, public infrastructure, education, and funding of public pension obligations.  Surely the right recognizes that Americans are not happy when lax regulation results in deaths from medical care because Congress was lobbied out of regulating compounding pharmacies or deaths from bridge collapse because Congress refused to spend sufficiently on upgrading our antique transportation infrastructure or continually falling behind in research on Alzheimers and cancer and the many other modern afflictions because Congress has been so stingy with federal funds supporting basic research at our research universities.

OF course, we know from the election that today's GOP sees no problem with cuts to various domestic programs that the Dems (and many ordinary Americans) hold dear--the right's admitted goal since Reagan has been to reduce the size of government, on the ill-founded belief in market fundamentalism that private markets can do everything better.  

But we have years of evidence that disproves that belief, and progressives must start publicizing the absurdity of the right's claims about market fundamentalism and the right's denials about basic scientific theory.  Climate change is real, and investments will be required to protect our great cities.  Social Security is not bankrupt, and there is no reason that it cannot continue for years (even indefinitely) without reducing benefits.  Markets like medical care simply don't work without governmental intervention because Big Pharma, Big Insurance, and Big Med (especially for-profit hospitals, nursing homes but also too highly compensated doctors combined with too lowly compensated aides and other assistants) exercise near-monolithic control of access and pricing, rendering the health care "market" dysfunctional, and government intervention will be required to create health-care delivery systems that serve the people. 

(Even those who ascribe to Milt Friedman's views of how markets work--views which in my view are based on unrealistic and overly simplistic assumptions that leave out most of the truth of human behavior in order to arrive at neatly mathematical formulas--recognize problems with the health care market where physicians operate in a structure of monopolistic competition.  In Capitalism and Freedom, Friedman noted that state licensing acts as a barrier to entry that gives physicians considerable market control, thus resulting in rent profits.  Friedman's market fundamentalism solution would be to allow anyone to practice medicine without a license, thus creating consumer "choice."  Query whether anyone without considerable wealth would actually prefer a return to those "quack" days of frontier medicine where such a market existed or would rather have a version of today's regulated system of health care professionals with both affordability and competence. I argue that the latter is both preferable and attainable.  See below.)

The following provides some of the factual evidence for the importance of government intervention in the medical care market--European and Canadian health care, which are generally forms of government single-payer or single-payer/single-provider care, and Medicare, which is a form of government single-payer care, are both considerably less costly and substantially more universal in coverage than the standard, private market U.S. medical care model.   See, e.g., the OECD's comparative statistics on medical care provision in the US compared to OECD countries and Canada, available here (see statistical spreadsheet here).

Total Healh Care Spending Per Person, 2010: US (8233); OECD avg (3268); CA (4445)

Total Health Care Spending* as Share of GDP, 2010: US (17.6); OECD avg (9.5); CA (11.4)

Pharmaceutical Expenditure* Per Person, 2010: US (983); OECD avg (496); CA (741)

Practicing Physicians Per 1000 Population, 2010: US (2.4); OECD avg (3.1); CA (2.4)

Practicing Nurses Per 1000 Population, 2010: US (11.0); OECD avg (8.7); CA (9.3)

Physician Consultations Per Person, 2010: US (3.9); OECD (6.4); CA (5.5)

Medical Graduates Per 100000 Population, 2010: US (6.6); OECD (10.3); CA (7.2)

*expressed in dollars adjusted for purchasing power parities (rates of currency conversion that equalise the cost of a given 'basket' of goods and services in different countries)

The U.S. medical care market's high costs are attributable to a variety of factors, but perhaps the most significant is the potential for "rent" profits to Big Med, Big Pharm, and Big Insurance. 

Note that the right's "reaganomics" rhetoric has been that we have to reduce the size of government by cutting government costs specifically for the social justice programs that serve a majority of our citizens, particularly in their old age.  The right's most important priority for reductions in government services, that is, are reductions to the earned benefit programs that it calls "entitlements" (a term that it does not extend to the various tax expenditures that provide all kinds of gravy for the upper crust and multinational corporations like Big Oil, Big Pharma, Big Banks, etc.).  The right wants to reduce the deficit on the hides of the poor, the elderly and those who have little besides Social Security and Medicare for retirement (because of their reasonable reliance on their availability to buffer the viscisitudes of private markets in their old age).  So the right proposes either privatizing ("voucherizing" Medicare; "optionalizing" Social Security) or shifting programs to the States (where reductions in Medicaid funding for the poor can be hidden more easily) and/or reducing benefits by increasing the age for eligibility and decreasing potential payments.  In other words, the right treats a problem caused by the unduly high costs of a wacky, quasi-monopolistic, market-based medical care system as best solved not by bringing the costs down the way every other civilized peer nation has done, but instead by preventing the majority of Americans from having access to decent medical care if they are poor or old and dying or physically handicapped or otherwise unable to afford private insurance.

 *****

After all, as Robert Reich argues, the "fiscal cliff" and "looming budget deficits" aren't the worst of our problems. 

The central problem of our economy is widening inequality. It's reducing the purchasing power of the vast middle class on which job growth depends, and turning the economy into a speculative casino for multimillionaires and billionaires.  It's also undermining our ability to turn the economy around, as those millionaires and billionaires subsidize politicians who refuse to raise taxes on the wealthy and seek to cut spending critical to the middle class and the poor.  Robert Reich, Stop income inequality!, Salon.com (Nov. 15, 2012) (formatting changed).

The more I think about this, the more I am convinced that, as Kenneth Thomas says, Democrats Should Just Sit Back and Ride Over the Fiscal Cliff (in a post at Middle Class Political Economist, republished on BusinessInsider.com, here). 

[The fiscal cliff] is the combination of spending cuts and tax increases set to take place on January 1 based on several different laws.  Estimates of the consequences run as high as $800 billion next year, or 5.2% of the country's $15.29 trillion gross domestic product in 2011.  Yes, that would mean a recession, with obvious consequences for the middle class.  But this is only true if we did nothing after January 1, and that's not going to happen.  Id.

Romney shows he's a "know-it-all" who has no real ideas at all

I missed almost all of the first debate but watched most of this one.  My quick sum-up of the action was the Obama was straightforward, prepared, and much more energetic than in the first debate.  While I don't think he has been a great president, he has nonetheless acted on a number of matters in ways that move us away from the disastrous policies of the Bush years--fairer immigration actions, more interest in the middle class and jobs, wise action to save the auto industry when Romney would have allowed one of the midwest's major industries to rot on the vine, attempting to move the corporate tax debate away from giveaways for the multinationals and towards more reasonable tax policies, movement on health care reform (though still not towards the single-payer option that we must eventually embrace), movement on financial institution reform through Dodd-Frank (though still not sufficient control of the financialization of the economy).

Romney, quite frankly, came across as an arrogant shell who doesn't have any substance underneath the expensive coif of hair and Armani suit.  He constantly blames Obama for the Great Recession that stemmed directly from the failed Bush economic policies favored by the Republican party's right wing, the same policies that Romney and Ryan want to re-install if they take over the White House.  He consistently fails to acknowledge that the deficits under Obama were temporary ones caused by the trillions of dollars of unnecessary Bush individual and corporate tax cuts, the Bush preemptive wars, the class warfare of tax policies that favor the 1%, privatization of education and the militaryh, and the financialization of the economy egged on under Bush by the right's misguided views of "free" trade (meaning business can run over the workers and the environment at will and pay less taxes even while causing more societal harm).  Romney (as Obama noted in the debate tonight) goes George W. Bush even further--he would ruin Medicare by turning it into "voucher-care" that was insufficient to meet vulnerable seniors' needs, and he would destroy Social Security by privatizing it so that seniors are at the whim of the stock market and Wall Street traders for their very livelihood.

Yet this guy born with a silver spoon in his mouth and with a family of connections to power really thinks that he got where he is on his own!  What a laugh.  And then he thinks that he can bamboozle the American people by saying "I know how to do that" about creating jobs, getting rid of the deficit, creating growth, solving immigration, making us "energy dependent in 8 or 5 years" and everything else he can promise us.  But he doesn't think he has to bother to tell us anything about how he will do that.  Often when asked specific questions, he fell back on his "The last four years with Obama have been awful and I feel your pain" absurdity,   His claim of empathy with the ordinary folks asking questions in the audience was absurd because one only has to harken back to that tape of his disdain for the 47%--and his arrogant view that anyone in that group was dependent on government and unwilling to take personal responsibility for themselves--to know that he doesn't really give a damn about ordinary folk like those in the audience tonight.  He'd follow that with another claim that he would fix everything because "I know how to do that", yet in every instance there was nary a specific word about  exactly what he would do.  

 One thing is for sure--Romney's view that cutting tax rates across the board by 20% will jump-start the economy is "nonsense", as even conservative GOP economist Bruce Bartlett acknowledges.  See Bruce Bartlett, Romney's Tax Plan and Economic Growth, Economix Blog, New York Times (Oct. 16, 2012) (statng that "the idea that tax reform will jump-start an economy suffering from the after-effects of a cyclical downturn is nonsense" and concluding that "even if Mr. Romney’s plan is enacted as proposed the growth effect will be small to nonexistent").

On taxes, Romney now claims that he will not cut the amount of taxes paid by the top 5% but will give everybody else a tax cut.  Note that isn't the same that he has said for months on end, when he made clear that everybody would get the same 20% rate reduction (which would give the wealthy a huge dollar cut, and the middle class a piddling cut) and mocked Obama for wanting to hold the upper-crust more accountable for helping reduce the deficit.  He claims he'll not increase the deficit, even though he wants to cut taxes and eliminate the estate tax and increase military spending.  He won't say what deductions he'll cut or what protections for the poor he'll keep.  He claims the numbers add up but won't tell us what the numbers are.   I think it's perfectly clear:  he won't say how he can do that in a revenue-neutral way because it can't be done.  The New York Times editorial yesterday chimed into the growing list of reputable organizations asserting that his numbers simply don't add up, noting "the many deceptions in the campaign’s blue-sky promises of low taxes and instant growth."  See Editorial, Mitt Romney Needs a Working Calculator, New York Times (Oct. 15, 2012). 

[The Joint Committee on Taxation] asked its staff what would happen if Congress repealed the biggest tax deductions and loopholes and used the new revenue to lower tax rates. The staff started adding it up: end all itemized deductions, tax capital gains and dividends as ordinary income, and tax the interest on state and local bonds, along with several other revenue-raisers.

The answer came last week: ending all those deductions would only produce enough revenue to lower tax rates by 4 percent. 

Mitt Romney says he can lower tax rates by 20 percent and pay for it by ending deductions. The joint committee’s math makes it clear that that is impossible. Id.

Note that Romney doesn't intend to tax dividends and capital gains at the same ordinary income rate that us ordinary folks pay on our compensation income, so he wouldn't even get to a 4% reduction in rates with his version of tax "simplification."  He wants to keep allowing people like him to get a tax-advantaged "preferential rate" on carried interest that they get as their compensation in vulture capital "private equity" funds that buy up American businesses and load them with debt and offshore their jobs.  He wants to keep taxing capital gains and dividends at the ridiculously low rates achieved by the Bush tax cuts that were a major factor in driving us from surplus to deficit.  He even wants to cut capital gains and dividend and interest tax rates to zero for those making less than $200,000.  (Of course, that group doesn't have much of that kind of capital income--it is mostly the province of the very rich at the top.  One suspects the rate cut for the upper middle class that would apply to is just a prelude, like most of the Bush-era tax cuts, to a Republican push to eliminate taxes entirely on capital income, which Romney and Ryan have supported in the past.)  He wants to cut taxes for the huge multinational corporations and encourage them to continue moving our jobs offshore.

There is no way that such a tax policy makes sense for America.  It will let the rich get richer, when we are already at a point where the middle class is shrinking because of the way big business has grabbed all the productivity gains for the managers and owners and left ordinary workers hanging out to dry.

Reaganomics--with its push for privatization, tax cuts, militarization, and deregulation--stabbed at the heart of the US economy.  The Bush tax cuts drove us from surplus to deficit in one fell swoop and set the stage for the Republican obstructionist games that have gone on during the four years of the Obama administration, in which the radical right GOP has cared more about pushing for extremist policies beneficial to the wealthy and the big corporations they run rather than considering what is good for the country.  Romneyomics would be even worse--right-wing market fundamentalism at its most extreme, with the rich making off like bandits and the rest of us left to scramble for crumbs. Surely the American folk aren't going to buy this idea of rehashing the very ideas that got us into the Great Recession mess from the guy who says "I know how to run the country because I got rich as a vulture capitalist". 

Romney's Private Equity Magic Trick--equity manager's gain, taxpayers' losses (Reich Video)

Mitt Romney claims that his business experience at Bain Capital is a superb qualification for the presidency.  He implies that this experience will carry over to his economic policies, with the suggestion that he will become a "job creator-in-chief" like all those one-percenters purportedly are in the private sector.

In reality, private equity experience is a recipe for disaster in the White House.  Think about what private equity firms do.  They take an ongoing business--usually one that is making decent profits and paying its workers decently--and they make it into one that can pay outsized "rent" profits to the private equity firm.  Usually, though not always, this means cutting costs and adding debt. 

The debt is an elixir for private equity firms.  Because interest is deductible, it actually increases profits by lowering the company's federal income taxes; yet because it isn't required to be used by the firm to actually improve the products or services offered, it is often used instead to pay dividends to the private equity firms, paying off whatever actual investment the private equity firm made in the company. 

Cutting costs is the way for private equity firms to extract even more gravy from their target company.  Cost cutting is most often directed at

• firing workers and making fewer workers do the same work that more workers used to do (that's called a "productivity" gain, garnered, of course, by the private equity firm and not by the everyday workers), and/or
• outsourcing jobs to other countries so that labor can be paid less than a going wage in this country (that's often coupled with step one, since workers are no longer needed in this country--sometimes the US workers are even required to train their cheaper foreign counterparts before they are let go, and of course those "effiencicy" gains are garnered by the private equity firm and not by the remaining workers), and/or
• cutting wages and benefits for the remaining workers (and shipping those extra "savings" out as dividends to the equity firm investors), and/or
• innovating better administrative systems (this can be a good deal--for example, putting money  that the company didn't have until the new "investors" came in into digital record systems or improved communications systems, but it can also be a bad deal, if the firm uses its new technology to game the federal system on taxes, or Medicare reimbursements, or federal contracting or similar items)
  • Consider the fact that Bain and other private equity firms purchased a for-profit hospital.  One of the "improvements was to redesign the coding system for patient services to increase the reimbursements from Medicare and thus hike up the hospital system's profits, which are garnered by the private equity firm.  Julie Creswell and Reed Adelson, A Giant Hospital Chain is Blazing a Profit Trail, New York Times (Aug. 15, 2012), at A1 (noting that Medicare reimbursements for the highest classifications surged to $949,000 in 2010 from $48,000 in 2006 at one hospital, in a story about Bain Capital and other equity firms'  profit improvements at HCA, where nurses and doctors express concerns about profit-making that is driving decisions that shortchange patients through understaffing and/or shortchange the government, as in the new coding system that caused the Medicare reimbursements to skyrocket); see also Steve Denning, HCA: The unsustainable private equity bubble in US health care, Forbes (Aug. 15, 2012).
  • As one commenter on the NY Times article noted, "To be more profitable as a healthcare facility requires ... having more sick people to treat, or hav[ing] higher charges.  Both are inhumane."  Munz, New York, NY.  And as one former HCA employee commented, "patient safety and medication safety came in a distant 2nd to conformity and [the] draconian measures to make care more efficient."

These kinds of activities go hand in hand with the increasing consolidation into mega-business enterprises (regrettably aided by the tax code's "tax-free reorganization" provisions, that were also made much more flexible during the Bush years in order to facilitate such consolidations).  Big businesses reap the productivity gains of their workers for the few managers and significant shareholders at the top, and either buy  or compete with local and family-owned small enterprises to put those smaller and shallower-pocketed (and less well-connected) business out of the way, thus separating more and more businesses from the communities in which they are located.  All in all, not good for America, and not the kind of skills one wants in the presidency, where we need someone who can see the relationship between the stability of small businesses, viable communities, and stable workers.

For a clear and understandable demonstration of the way private equity firms make their money and who wins (and who loses) from those methods, see Robert Reich's video chat on the subject:

ect:   

CRS reports on repatriation tax holiday impact

Shortly before the Christmas holiday, CRS released a report by Donald Marples and Jane Gravelle on the possibility of a second repatriation tax holiday for multinational corporations.  Download Marples and Gravelle. tax cuts on repatriation earnings as economic stimulus. an economic analysis. 122011.c

The holiday has been pushed by various commentators who support reducing corporate taxation based on the argument that lower tax, and repatriated earnings, will result in greater investment in domestic business expansion and more US jobs. 

Our experience with the 2004 repatriation holiday was not impressive.  Much of the repatriated funds were diverted to share buybacks and not used to increase investments or increase jobs.  IN fact, many companies that repatriated the most money engaged in heavy firings of workers.  Hewlett Packard was notable, with large layoffs accompanying significant repatriated cash.

To repeat that experiment at a time when US companies have even more cash socked away in the US and abroad would merely reward those companies that decided to bet on (and lobby heavily for) a second repatriation holiday that would amount to a huge cut in their taxes--like having the best of a territorial tax system at the same time that they get all the benefits (foreign tax credits, active financing exception, etc.) of the current worldwide tax regime.

The CRS report doesn't suggest that another repatriation holiday would be a sure-fire economic growth engine.  In fact, it notes that it can be counterexpansionary if money is used to address cash-flow problems or to pay out to shareholders.

Viewed in the current debate on how to most efficiently stimulate the economy, economic theory suggests that the simulative effect of a temporary tax cut for repatriations may be offset, or more than offset, by exchange rate adjustments that would reduce net exports.

In addition, how businesses use repatriated earnings will impact the stimulative or contractionary effect of a tax cut for repatriations. For example, repatriated earnings will have a larger stimulative effect, or smaller contractionary effect, the greater the degree to which they are used to increase current investment. A smaller stimulative effect or a larger contractionary effect will result, in contrast, if more of the repatriated earnings are used to shore up “cash-flow” issues or pay dividends.

A repatriation tax holiday is not a good idea.  it wasn't a good idea in 2004.  It is not a good idea now.  There is no reason to give multinational corporations a tax break to bring money back to this country.  They're cash rich as it is and can make investments if they want to.