ataxingmatter

Finance Committee acts/doesn't act on important Tax Court, Social Security, and HHS Appointments

As the Senate Finance Committee continued work on its markup yesterday, it approved several important nominees for positions in the Social Security Administration and in the Tax Court, but failed to move forward the nomination of the current Acting Deputy Director of Health and Human Services to position of Director.  

Elizabeth Copeland and Vik Stoll were reported favorably as nominees for position as a Tax Court judge.  

• Elizabeth Copeland was nominated on May 1, 2015 by President Obama.  She graduated with honors from the Univeristy of Texas in 1986 and then worked as an auditor for several years before studying law at the University of Texas and receiving her J.D. in 1992.  She was an attorney-advisory to U.S. Tax Court Judge Mary Ann Cohen in 1992-93, and then joined the law firm of Oppenheimer, Blend, Harrison & Tate in 1993.  In 2012, she moved with others from Oppenheimer to become a partner at Strasburger & Price LLP.  Her practice has been in the tax controversy area, and she has been an active member of the ABA Tax Section and the State Bar of Texas, chairing the State Bar's Section of Taxation in 2013-14.  She received the Janet Spraegens Pro Bono Award from the ABA Tax Section in 2009
• Vik Stoll was nominated on November 5, 2015 by President Obama.  He is a University of Missouri Law School graduate who started work with a boutique tax firm in Kansas City in 1979, doing tax controversy work.  He stayed there as the firm expanded into a 500 member firm (Stinson, Leonard & Street).  During that time, he worked on a range of tax matters for small businesses and individuals.  He left that firm in 2009 to become Director of Collections in Jackson County.

Andrew Eanes was also favorably reported as nominee to be deputy commissioner of Social Security. See the Social Security News providing biogratphical information from August 3, 2014 (yes, this is a nomination that has not been acted on for a considerable period of time).  He graduated from Ohio Northern University and earned an M.B.A. from Baldwin Wallace College.  He has served in various positions, including a Director at Sprint United Management Company from 1989-92, VP and General Manager for Sprint (United Telephone Florida) from 1992-94 and various positions at Sprint from until 2003.  He has also worked with Premiere Global Services, BT Conferencing, and served as Chief Operating Officer at Dynis from 2011-2012.  Since then, he has been a vice president at Agile Government Services Incorporated.   When one sees the length of time this nomination has been outstanding, one might think it was just another example of the obdurate right-wing obstructionism that has been on display most pointedly in connection with the Republican majority's refusal to act on the President's nomination for a replacement for Antonin Scalia on the Supreme Court.  Yet one does have to wonder why a person with no experience in government and no obvious involvement with, or understanding of, the complex Social Security system and agency would be nominated by President Obama for this position or approved by the Senate Finance Committee for this position.    It may be, however, that Mr. Eanes' IT knowledge and experience will add a needed awareness about technological potential to what seems to be a very staid Social Security Administration that is still functioning in a very old non-digital environment most of the time.  If he has those skills that will allow him to help move the agency into the digital era, that could well be a truly winning qualification.

But there was one nominee that has been up for consideration for an extraordinarily long time that the Senate Finance Committee did not include in its favorable reporting.  That is Dr. Mary Wakefield, who was nominated to be the deputy secretary of the Department of Health and Human Services (announced in a July 9, 2015 White House press release). Dr. Wakefield has a nursing degree (B.S.N. and M.S.N. and Ph.D.) and has served as a professor  and Director of a health center at both George Mason University and at the University of North Dakota.  She has been active in national health issues for all of her career, including serving as a member of the President's Advisory Commission on Consumer Protection and Quality in the Health Care Industry and the National Advisory Committee on Rural Health and Human Services.  She is also familiar with the ways of Congress, having served on the staffs of Senators Kent Conrad, Jocelyn Burdick, and Quentin Burdick from 1987 to 1996.  At the time of her nomination, she had been serving in an administrative position in the Department since 2009 and has been Acting Deputy Secretary of Health and Human Services since April 2015.  Senator Ron Wyden (D-OR) issued a statement in the Finance Committee markup of the ID Theft Prevention and Taxpayer Protection Bills yesterday (Apr. 18, 2016) noting that her nomination has not been moved forward "for reasons that have absolutely nothing to do with her top-notch qualifications or her job." 

Another False Media-Generated IRS "Scandal"

Fox News and similar outlets (and even some of our esteemed Congresspeople, like Jim Jordan) have been fuming that Doug Shulman, the former IRS Commissioner, had more visits to the White House than any other cabinet officer.  See, e.g., Evan McMurray, Bill O'Reilly Rails: IRS Commish's 157 White House Visits "A Smoking Gun", Mediaite (May 30, 2013).

“The President of the United States should explain tomorrow what Mr. Shulman was doing at the White House so many times,” O’Reilly added. “There’s no way on earth this Shulman should not have to explain in detail what he did inside of the IRS. So again we call upon President Obama to clarify the situation. Make Shulman testify as soon as possible.” Id. (quoting O'Reilly on Fox program).

The right-wing blogosphere went ballistic with this, as one would expect. See, e.g., Coglianes, IRS's Shulman had More Public White House Meetings Than Any Cabinet Member, Daily Caller (May 29, 2013) (apparently one of the frequently quoted sources for the misleading statistic);  For God's Glory Alone Ministries, May 30, 2013 (repeating information generated by the Daily Caller); Michael Patrick Leahy, Former IRS Head Shulman Visited White House 118 Times in Two Years, Breitbart.com (May 28, 2013) (same); Rick Moran, IRS chief visited White House more than any other cabinet officer, AmericanThinker (May 30, 2013).  The Moran article is about as bad as the O'Reilly junkfomation.  In the typical way that these rightwingers have of presupposing corruption in government, Moran confides

 If you were the head of an agency that was doing something you know your boss would approve of - if only in private - wouldn't you brag about it to him and get a good chuckle about the discomfort visited upon your boss's political enemies?  Id.

This is the kind of conspiracy craziness that abounds in Washington these days. It makes for blogposts going viral and conjures up donations for tea party politicking.

But  the first response of most reasonable people was NOT to see a report of visits by the IRS commissioner to the White House complex as a scandal but rather as something perfectly expected and, in fact, mandated by the job.  Anyone who is aware of the broad range of responsibilities that have been heaped on the (underfunded, understaffed, and outmgunned) IRS's shoulders by Congress knows that there would be plenty of reasons for an IRS commissioner to visit the White House complex, since the IRS Is the critical agency central to the implementation of Obamacare and dozens of other federal government programs.  Banking secrecy --FATCA, the effort to get Switzerland to open up its bank records--could also require consultation with White House executives.

The second response of responsible journalists was to doublecheck the records to see if there was other information to shed light on this purportedly "unique" access of the IRS commissioner to the White House.  Something important to recognize--these are the first public records we've had of such visits--Obama made them public; other presidents before him did not.  That means that you can't compare how often a Bush or Clinton IRS commissioner had clearance to visit the White House complex, because the records for that aren't public.  Those who checked the records found some very interesting facts--very very very very many of those visits approved for Shulman to the White House complex were for routine meetings of the group putting together the implementation of Obamacare.  Very very very few were face-to-face meetings with Obama, and those were not the kind of secretive sessions where the right-wing conspiracy theorists orders for "targeting" conservative groups could take place.  

For a good discussion of this issue and the junky media coverage of these routine opportunities for Shulman to visit the White House, see Franke-Ruta, The Fake Story about the IRS Commissioner and the White House: White House records show Douglas Shulman signed in for 11 visits, not 157, between 2009 and 2012, The Atlantic (May 31, 2013).

In a prior posting on "The real IRS scandal", I noted that right wing commentators have spewed a lot of hot air to make a scandal out of something that really isn't one.  Even the TIGTA report seems to fall into that line--it may have been politically insensitive to use "Tea Party" as one of the search terms for likely politicking groups, but it probably was a quite efficient choice and not clearly "inappropriate" as the TIGTA report dubbed it.

 At any rate, for anyone truly interested in how accurate right-wing pundits like Bill O'Reilly actually are,  you might want to read the Atlantic story fairly closely.  It is a detailed, fact-based study of the actual and potential visits that Doug Shulman was cleared for attending. 

Here's what Franke-Ruta says about Bill O'Reilly and that group.

[F]ew of those pushing this line have bothered to read more than the topline of that public information. Bill O'Reilly on Thursday called them the "smoking gun" and demanded of Shulman, "You must explain under oath what you were doing at the White House on 157 separate occasions." His statement built on a Daily Caller story, "IRS's Shulman had more public White House visits than any Cabinet member." An Investors Business Daily story and [a] slew of blog items repeated the charges.
 
"The alibi the White House has wedded itself to is that it had to work closely with the IRS to implement ObamaCare," the Investor's Business Daily has written -- as if that were not true."

The Atlantic story proves the weakness of journalistic investigation by O'Reilly, the Daily Caller, and the Investor's Business Daily, since the public record clearly shows that the vast majority of the Shulman cleared visits to the White House complex were to work on the ongoing health-care implementation. 

Shulman was cleared primarily to meet with administration staffers involved in implementation of the health-care reform bill. He was cleared 40 times to meet with Obama's director of the Office of Health Reform, and a further 80 times for the biweekly health reform deputies meetings and others set up by aides involved with the health-care law implementation efforts. That's 76 percent of his planned White House visits just there, before you even add in all the meetings with Office of Management and Budget personnel also involved in health reform.

 But the cleared visits and attended visits are two different things.  And there is public information that shows that Shulman actually signed in to attend very few visits.

According to the White House records, Shulman signed in twice in 2009, five times in 2010, twice in 2011, and twice in 2012.

 Folks, if anybody talks to you about the "evidence" that Shulman met with Obama more than a hundred times, make sure you set the facts straight.  This kind of misleading punditry appears to have no purpose other than the arousal of anti-Obama partisanship and furthering the anti-tax/"starve the beast" mentality. 

 

Related articles

The real IRS scandal

Records show Former IRS Commissioner signed in for 11 visits, not 157 as the right wing media claims

The 'smoking gun' fires blanks

Wingnuts go bonkers over phony story about IRS commissioner's visits to the White House

IRS sharkfest continues: Media rampages; Obama scolds; Holder investigates

While the information about the applications of tea party and other groups for tax-exempt 501(c)(4) "social welfare" status has been causing a feeding frenzy in the press, the Obama Administration continues to pander to the right by agreeing Monday that the use of terms designating primarily tea party and other groups with politically important terms in their names for scrutiny was intolerable.  This is the kind of statement that makes it difficult for the IRS to retain employees, in an underfunded agency with a highly visible mission to collect taxes, including from people who don't want to pay them.

I'm not convinced that it was anything other than a political deaf ear to how the right would respond when it was disclosed.  After all, there were thousands of new conservative groups seeking approval at the height of tea-party mania, and many of those groups were likely to be conducting considerable political activity that might make them inelgible for (c)(4) status.  It is much more likely that targeting such groups was simply a political no-no because of the hue and cry that right-wingers in Congress and out would raise (as they have), rather than that it was an improper exercise of the IRS's limited resources to select groups for review. 

Now Eric Holder has announced that he has ordered the Justice Department and FBI to investigate whether IRS officials broke any criminal laws in singling out groups for special scrutiny.  Shear & Shane, Justice Department Opens Criminal Inquiry Into I.R.S. Audits, New York Times (May 14, 2013).

We don't investigate federal government officials for targeting US citizens for assassination by drone or for imprisoning US citizens in military brigs, but we start an investigation of mid-level IRS officials trying to find reasonable ways to filter the many political groups who apply for (c)(4) status to find those that are inelgible?  Sounds like skewed priorities to me.  Especially when the IRS's inspector general is already investigating the gency and is expected to release its report in a few days, describing in detail the way the agency screened political groups for extra scrutiny.

And of course, a Republican in Congress has already introduced a bill to make it illegal for the IRS to 'target' political groups. 

Are there other options to prevent the recurrence of these issues?  One idea is to publish all donors: If a (c)(4) is funded almost exclusively by a party machine, the public should know about it.  Another idea is to eliminate tax-exempt status for any group that does any political campaigning or lobbying. Another is to require all tax-exempt groups to provide a full monthy report of activities on their website, listing every event and every contact of any member or agent of the group with any sitting official or any political candidate.   The price of tax-exemption would be transparency regarding the organization's activities.

 

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Orrin Hatch on tax reform at the ABA--a predictable right-wing rant

More on the IRS's "targeting of conservative groups"

Holder orders probe of IRS

Justice Department To Open Probe Of IRS's Actions

IRS Chief Says 'Mistakes Were Made' But Weren't Partisan

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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Illinoisans Detest President Obama's Chained CPI Budget Proposal

Congressional Democrats Blast Obama 'Chained CPI' Proposal To Cut Social Security Benefits

The Inequality Gap

Obama not standing up to radical right attempting to undo America's Social Insurance Program

Obama seemed to get a spine for a brief time around the State of the Union address.  But he just can't seem to maintain a strong progressive position--too easily swayed by the Wall Street bunch that run his Treasury or just not understanding what is required to keep his base voting for him.  If he treats Social Security--which doesn't have anything to do with the deficit--as one of the cards he can "trade" to the right-wing Republican crowd for some kind of a "grand deal" (of undefined necessity), he will destroy the gains of Roosevelt's New Deal for petty concessions from the entrenched GOP that intends to dismantle the New Deal.

Obama has been threatening to include chained CPI as one of his own budget recommendations.  This is foolhardy.  For those who depend on Social Security, which they have paid into all their working lives, reducing benefits--which is what moving to chained CPI does--is nothing short of betrayal.

Robert Reich is urging people to sign onto a MoveOn petition to Obama to make clear that we understand the importance of holding firm against the radical right's attempt to dismantle the New Deal.  I've reproduced the letter and link, below.

From: Robert Reich
Date: Thu, Apr 4, 2013 at 11:10 AM
Subject: Mr. President, don't hurt seniors with your Chained CPI

Social Security is not driving the deficit, therefore it should not be part of reforms aimed at cutting the deficit. The chained CPI, deceptively portrayed as a reasonable cost of living adjustment, is a cut to Social Security benefits that would hurt seniors.

There are several sensible reforms to Social Security that should be considered to help make it sustainable, including lifting the ceiling on income subject to Social Security from $113,700 to $200,000 or more, as well as instituting a 1% raise in the payroll tax rate, a rate that hasn't changed in over 20 years.

Both of these reforms would go a long way toward protecting the long-term health of Social Security, but neither should not be conflated with efforts to reduce the federal budget deficit.

President Obama needs to stand by his Democratic principles and fight to protect Social Security benefits.

That's why I created a petition on SignOn.org to President Barack Obama, which says:

Mr. President, the chained CPI is a cut to Social Security benefits that would hurt seniors—it's an idea not befitting a Democratic president. If you want to reform Social Security, make the wealthy pay their fair share by lifting the cap on income subject to Social Security taxes.

Click here to add your name to this petition, and then pass it along to your friends.

Thanks!

–Robert Reich, former U.S. Secretary of Labor

This petition was created on SignOn.org, the progressive, nonprofit petition site. SignOn.org is sponsored by MoveOn Civic Action, which is not responsible for the contents of this or other petitions posted on the site. Robert Reich, former U.S. Secretary of Labor didn't pay us to send this email—we never rent or sell the MoveOn.org list.

 

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Tell Your Senators to Defend Social Security and Medicare by Supporting These Amendments

Ben Veghte: Don't Be Fooled by Misleading Report Calling for Chained CPI

AFL-CIO won't back a deficit deal that cuts Social Security through chained CPI

Robert Reich Accuses Tea Party Of 'Plot To Undermine' U.S. Government

Senate votes against chained CPI

Lew's Senate Finance hearing as Treasury Nominee

Jack Lew, former budget director under Clinton and Obama and former Obama chief of staff, answered questions at Senate Finance today in his bid to succeed Tim Geithner as Treasury Secretary.  See, e.g., Rubin & Klimasinska, Lew Says He Didn't Know Money-Losing Investment Was in Caymans, Bloomberg.com (Feb. 13, 2013) and other related articles linked below.

When he was first nominated, I noted that I found his candidacy somewhat worrisome.  While there are a number of considerations that suggest a decently competent person, there are also some suggestions of a person who has lived in the "Wall Street" flow too long and thus falls into line with the typical Wall Street/mainstream economics thinking--thinking which ultimately supports policies that will continue to slide towards oligarchy.

The hearing focused on several interesting aspects of Lew's career and investment choices.

1) Investing in the Caymans.  Lew made an investment of 50 to 100 thousand in a Citigroup fund based in theCaymans while he was at Citigroup, and claimed that he didn't know it was an offshore investment.  He got out of it when he went into government and lost money on it. 

ME:  There we have it--like most rich people, he just didn't care enough to consider closely whehter his investment was in a tax haven country and certainly didn't ponder the negatives .

2) Compensation at Citigroup.  Lew got a "bonus" of $940,000 in January 2009 when Citigroup was receiving federal bailout funds.  He defended it as being paid in the same way other private-sector employees in similar jobs were paid. 

ME:  But there was a ridiculous racheting up of financial sector compensation during the years when the big banks were feeding at the trough of easy mortgage securitization money and derivative speculation.  Shouldn't someone that we hire as the head of Treasury have been more aware of that speculative binge?    Or shouldn't that person be at least somewhat ashamed now that such an exorbitant "bonus" (10 times what most Americans receive in annual pay) should have been funded, in essential part, by taxpayer bailouts of his institution?

Now, Orrin Hatch (GOP-Utah) tried to make a big deal out of Lew overseeing the Financial Stability Oversight Council in administering the Volcker Rule limiting proprietary trading, saying that "it could lead to an awkward situation in which, in your role as chair of the FSOC, you would effectively be saying to financial firms: 'Do as I say, not as I did.' "  Hatch claimed that this issue "bear[s] directly on your qualifications."  I'm not so sure that is such a big worry since I think it is advantageous if Treasury has some understanding of how big banks trade, but it is just one more piece of Lew's overall nature of being well-attuned to Wall Street (and not so well-attuned to Main Street).    

3)  Corporate taxes.  Lew suggested in the hearing that Republicans and Democrats could "work together" so that changes in the international tax scheme could lead to lighter burdens on some foreign income of US multinationals.  The Bloomberg report notes that he supported a global minimum tax, but indicated that could be nominally territorial, with limits on offshoring income to tax haven countries. 

4) Earned benefit programs.  Lew is one of those Democrats who is more right of center than the party's base.  He still mentions the need for "entitlement" program changes as well as additional revenue increases as a part of "balanced" deficit reduction.

ME:  This is one of the most disturbing aspects of the Lew nomination.  He is pushing the GOP agenda of deficit reduction and "entitlement" reform when instead he should be staunchly defending the New Deal against the oligarchs who want to shrink government, diminish the safety net, end any support for innovative environmental and energy progrms, yet continue to reap benefits from the long-term government subsidies for Big Oil.....We should not tamper with Social Security--and there is no deficit reason for doing so. 

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Lew almost official as nominee for Treasury Secretary

Lew Stresses Bipartisanship As Republican Questions Start - Bloomberg

Treasury Nominee Lew Says US Economy in 'Better Position'

Lew Sees Bipartisan Chance to Rewrite US Tax System - Businessweek

Grilling for Lew on bank job during bailout

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". 

Heatlh Care Reform and Religious Exemption--Whose Freedom Are We Talking About, Anyway?

 The Treasury, IRS, Department of Health and Human Services, and Department of Labor finalized regs Firday that exempt certain religious employers from covering contraceptive care under the Patient Protection and Affordable Care Act.    T.D. 9578 (available here now to subscibers to BNA) will be published Feb. 15 in the Federal Register and become effective April 16.

Seems like the Catholic Church wants to impose its own views on these matters of religious theology on all of the people its employees.  And they try to use the idea of religious and individual freedom to allow them to impose their views on people who may or may not share them (whether or not they are Catholic themselves).

Under Supreme Court precedent, religious Native Americans can be told they can smoke peyote because it is a regulated substance and the laws regulating that substance are "laws of general application" so they aren't discriminating towards Native Americans.  See the Wikipedia entry for Employment Division, Department of Human Resources of Oregon v. Smith, 494 U.S. 872 (1990), excerpted below.

Employment Division, Department of Human Resources of Oregon v. Smith, 494 U.S. 872 (1990), is a United States Supreme Court case that determined that the state could deny unemployment benefits to a person fired for violating a state prohibition on the use of peyote, even though the use of the drug was part of a religious ritual. Although states have the power to accommodate otherwise illegal acts done in pursuit of religious beliefs, they are not required to do so.

The Smith result was replace with a "strict scrutiny" review in the Religious Freedom Restoration Act, described here on Wikipedia.

Yet here are the Catholic Bishops claiming that even the direct accommodation provided by the Obama administration--that the church does not have to pay for contraceptive coverage, but the insurers must provide that to the church's employees who want it--isn't enough. See e.g., Newcomb, Contraceptive Compromise Doesn't Please Bishops, ABC News (Feb. 11, 2012).  And Mitch McConnell in the Senate is threatening to try to take down the contraception mandate as "just another example of government meddling."  See Flaherty, Top Republican Wants Vote on birth control mandate, AP (Feb. 12, 2012)--the flap over contraception provided the GOP what seemed like an opportune chance to pile on against the health reform act yet again: "And this is what happens when the government tries to take over health care and tries to interfere with your religious beliefs."

But individual freedom and interference with religious beliefs is one of those things that looks different depending on whose perspective you take.

The Obama administration compromise means the religious institutions don't have to provide that which they disagree with.  There is minimal or no cost to insurance companies from providing the contraceptive coverage separately to employees of such religious institutions.  In fact, it is likely that contraceptive coverage is much cheaper in the aggregate to women, government and insurance companies than having more (unwanted) pregnancies. Yet the Bishops think the Church should be exempted from the health care provision requirements --and their employees shouldn't have this option to get covered outside the church's plan--just because the church doesn't agree with it.

In part, they are relying on that statutory protection enacted after Smith--the Religious Freedom Restoration Act, under which the federal government is subject to strict scrutiny regarding laws that impose on religious freedom.

But the question here, of course, is whose freedom are we talking about? 

The freedom of individuals of various religious backgrounds to work and receive the kind of coverage that they know they need and that is compatible with their own religion? or the freedom of the institution of the church to impose its religious dogma (and the consequences thereof) on all of its employees, no matter their religious faith?  Whenever the two are not consistent--and they will not be for any woman, whether Catholic or not, who wants to use contraception and in fact believes that her faith permits her to do so or even that it requires her to do so to be able to provide appropriately for her family--then the position supporting greater religious AND individual freedom is the one that requires contraception to be covered, one way or another.

Yes, the Obama compromise is a little gimmicky--sort of like the Islamic finance arrangements which justify interest by camoflaging it in ways that make it look like some traditional accepted payments (leases, rents, etc.).  But if that helps make it possible to do what needs to be done in this modern age--provide opportunities for borrowing funds to people that need to borrow to start businesses, or opportunities for decent contraceptive health care for people who work for a church that doesn't believe in it--then by all means, use the quasi-gimmicks in order to achieve the better public good.  But don't cave to the shrill cries of the mandate amounting to religious persecution.  It's nothing of the sort.

PS the same-sex marriage issue is another one where the Catholic Church shouldn't be able to impose its views on its workers who are not teaching theology.  There, however, the Supreme Court (with a significant number of Catholic justices who might be expected to empathize with the church on these dogma questions) recently decided a case that supports a "ministerial exception" to laws that otherwise protect employees from various kinds of invidious discrimination in employment for employees of religious organizations.   Personally, I see this as a black mark against religious freedom for individuals, and another example of corporatism at work, this time in support of institutionalized views being imposed on individuals that make up the institution.   See, e.g., Music director's marriage leads to his firing from St. Gabriel Catholic Church (Feb. 12, 2012) (gay music director--who had worked in the church while having an openly gay relationship for years--suddenly fired for taking advantage of New York's new law permitting same-sex couples to marry, even though his state (South Carolina) and his employer (the Catholic Church) would not recognize the New York marriage anymore than it had recognized his earlier common law marriage).   Much like the fundamentalist protestants who accuse the government of discriminating against Christians when the government appropriately uses "happy holidays" rather than "Merry Christmas" to wish its employees well, these religious groups are seeking to have the government impose restrictions on workers that take away worker rights in the name of religious freedom for some, but with the result of limited freedoms for others.

Why we don't need corporate tax "overhaul": GOP poormouthing on behalf of rich corporate allies(Part I in a series)

These days, one hears a great deal from politicians on the right about how a corporate tax "overhaul" is needed because our taxes are "too complex" and/or "too anti-competitive" or because our tax rates are "too high".  The same GOP politicians who whine and whimper about how huge the deficit is, and accuse President Obama of driving our country to ruin with the deficit are willing to lower the tax burden paid by highly profitable corporations considerably (thus increasing the deficit and adding to regressivity of the tax system)--so long as they are appeasing their multinational constituency, the huge corporations who are the new providers of campaign funds and the new decisionmakers in elections--even though the corporate entities have no vote.  Claims of revenue neutrality are generally little more than PR cover for corporate giveaways.

Just a couple of examples from a recent Bloomberg piece:

• Republican Senator Robert Portman says he will unveil a new proposal soon that will cut taxes for multinational companies' repatriated offshore profits--i.e., a permanent tax holiday for multinationalsm as a first step towards a very MNE favorable move to a territorial tax system--that will remedy "an inefficient and complex maze of tax preferences".   See, e.g., Kathleen Hunter, Portman Corporate Tax Plan to Include Low Repatriation Rate, Bloomberg.com (Feb. 1, 2012).   Portman claims this huge tax cut for the high and mighty MNEs (and their managers/owners) is needed because they "pay[] a very steep tax bill if and when they choose to bring their money home."  Ludicrous.  There is a very generous foreign tax credit provision that allows many MNEs to reduce their taxes to near zero anyway.  Further, the deferral they are allowed on active business income gives them the time value of money benefit.  Most of what foreign corporations want to do is allow their taxes on non-US income to reduce their taxes on US income--which is a kind of subsidy for offshoring that costs US jobs.  And of course, as I've noted in earlier posts on tax holidays and proposals for a territorial system to replace a worldwide system, corporations hold more money overseas when they think there is a good chance that their buddies (or "bought pols"?) will give them the tax break they have been lobbying for--so these proposals encourage corporations to engage in the activity that these proposals say they are addressing, thus giving them more ammunition to get the change they want.  Portman, of course, says he wants to "streamline" the corporate tax and lower the rate to 25%.  We have a statutory rate of 35% now and most corporations that pay taxes (which are not by any means all of the corporations that make significant profits) pay less than 25%.  If we lower the statutory rate to 25%, it is quite likely that most corporations that actually end up paying taxes will be a smaller number than with the 35% rate and at a much lower rate--probably around 10-15% instead of 20-25%.  Of course, what the result will be--as it was in the 1986 tax reform that lowered rates for ordinary income and ended a number of problematic tax preferences such as the capital gains preferential rate--is that the lower rates will stay, and all of the loopy tax preferences (and more) will be reenacted within a couple of years under heavy lobbying for the same by the corporations that benefit from this round.
• Dave Camp, Michigan Republicans and Chair of the House Ways and Means Committee, wants to exempt 95% of overseas profits. 

Is there merit in this drumbeat of (lobbyist-induced) calls for "corporate tax overhaul legislation"?  The simple answer is no.

On Complexity:

Most complexity in the code is there for one of two reasons.

The most likely reason for complexity is the creation of tax preferences heavily lobbied for by corporate lobbyists.  One example is the so-called "domestic production activity deduction" that lowers the tax rate by 9% for most industries (even ones that don't really produce anything) and 6% for natural resource extractive industries.  There are tax breaks on top of tax breaks for the resource industries, of course, that get numerous special benefits throughout the Code, while joining in various coalitions that lobby AGAINST even extraordinarily modest support for green industries (such as reasonably low cost loans for solar power). 

The second main source of complexity is the clear need for specific anti-abuse provisions to undo the harm done when corporations use what can most charitably be called aggressive and inventive interpretations of Code provisions--often ones that are hyper-literal in nature (the kind of analysis that allowed the Bush Treasury to redefine what "exchange" means in the reorganization provisions in order to allow taxpayers to manipulate the allocation of consideration to create a hitherto unrecognizable tax loss in the reorg transaction) or turn the Code's clear textual provision on its head (look at the briefs for the defendant--or for that matter the lousy statutory interpretation in the district court opinions-- in the Black & Decker contingent liability shelter case, where Black & Decker argued for application of a provision in section 357(c) (which says explicitly that it applies only where paragraph one of that provision applies) in a context where paragraph one did not apply).  As a result of the contingent liability shelters, Congress added various Code provisions, including section 358(h) (having to do with the basis for corporate assets in transactions with significant liabilities) and section 357(d) (having to do with calculating the amount of liability assumed).

Complexity, in other words, is not an evil in itself.  Sophisticated taxpayers aren't harmed by complexity, and in fact complexity is needed to provide sufficient detail to prevent sophisticated taxpayers (with the help of their tax advisers) from cheating.  There is generally less complexity in provisions that are relevant for unsophisticated taxpayers, though it is more clearly an obstacle to good tax compliance behavior there.

On Competitiveness:

Competitiveness is used so frequently that it seems doubtful that anybody really knows what they mean by it.  If one company destroys a union and is able to pay their workers lower wages as a result, then a company that produces a similar product will claim that "competitiveness" requires that they be allowed to do the same.  Of course, another approach would be for the company that retains an active union, and continues to provide pension and health care benefits could lobby Congress to enact stronger laws protecting worker rights to pension and health care benefits.  In other words, competitiveness is consistently used as an argunent, when it comes to corporations, for taking away benefits to workers, communities, states and the nation for the benefit of the corporations.  Competitiveness could just as easily be used to argue for maintaining programs, procedures and benefits for workers, communities, states and the nation by considering what would be necessary to buttress the system that supports those benefit levels.  And in fact that view of competition--that we are competing globally to create both profitable companies AND a secure and well-paid workforce that can support a healthy economy that can in turn support a quality of life in all dimensions--would lead to different decisions not only about taxation but also about anti-trust, excise taxes, trade treaties, environmental protection, and many regulatory projects.

Furthermore, competitiveness is often used as an argument in the abstract when the main competitors are both US based companies.  There, the argument for reducing taxes to enhance competitiveness is at its weakest, but few competitiveness arguments reveal just how the competititon is playing out even on a globalized playing field.

On Rate Structures:

The 1986 tax reform act is a frequent reference these days when people talk about amending the Code generally and specifically about amending the corporate tax provisions.  But the context for that act's passage was quite different.  Individuals were taxed at rates that were reasonably progressive--with a top rate at 70% (though the brackets could probably have been better defined to differentiate among top income recipients).  Further, the 1954 Code had built up a plethora of tax preferences (especially useful to the rich) and the Congress had realized that the preferential capital gains rate was wreaking havoc on sensible provisions because of the arbitrage opportunities it created.  Thus, there was room for "base broadening"  (removing ill-advised preferences spread throughout the 1954 Code) as a means of paying for "rate lowering" (lowering the fairly high rates about half, without costing the fisc because of the higher amount of income on which those rates would be charged).

We are not in the same situation today.  We have very high deficits because of an economic crisis caused by two interwoven problems--(i) the lax regulatory oversight of 40 years of Reaganism, which permitted the financialization of the economy and led to excessive incomes for people at the top (managers and owners, hedge fund and equity fund managers, and speculators generally) and excessive debt for banks and especially people not at the top (because of their stagnant or reduced incomes in the face of growing costs, caused in part by the relaxation of regulations and anti-trust activity coupled with the anti-union attitudees and activity); and (ii) the success of a radical right-wing fringe in characterizing government and business as having adverse interests and progressive programs supporting social well being (from Social Security to Medicare to Medicaid to (modest) heatlh care reforms intended to reign in the cost of medical care to unemployment benefits to efforts to reign in contracts of adhesion in the consumer credit markets) as "unmerited" "entitlements or costly and anti-competitive regulation of businesses that counters the "free market" that will ensure "growth and jobs".  The result of the rhetoric is a citizenry that is ignorant of the actual income distribution, tax burdens, and impact of government spending on jobs and the health of the economy.  The result of the 40-year "reaganomics" effort from the right to cut regulations, cut taxes, privatize and militarize is that this is no context for rate reduction but in fact a context in which those who can afford to do so--for sure those individuals and households in the top two quintiles of the income distribution that comprise the upper middle class and the upper class and all profit-making corporations--should be paying taxes at HIGHER rates, not lower rates.

It should be noted that President Obama--who is at best a middle of the roader on tax issues--also is said to plan to propose an "overhaul of the U.S. corporate tax system" in connection with his budget plan for FY 2013 that involves lowering rates and base broadening.  See Steven Sloan, Obama said to propose corporate tax overhaul next month, Businessweek.com (Feb. 2, 2012).   Again--lowering the rate is a bad idea.  Lowering the rate without base broadening is a stupid idea.  But the kind of base broadening that is included, if such a proposal eventually passes, matters an awful lot.  The problem is that if Obama proposes such a reform, the GOP won't support it unless the "base broadening" is essentially inconsequential and can be undone easily later or affects only little guys and not the big-monied lobbyists.  Thus this looks like another of those initiatives from the White House that play into the right's agenda and do little to advance any progressive idea.

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

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

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

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

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

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

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