Chuck Collins: How you pay taxes and they don’t

Via OtherWords.org

BOSTO

My daughter, a librarian in Tucson, paid more taxes in 2017 than Donald Trump. So did my neighbor Rita, a teacher, and her son Tony, who stocks grocery shelves in Leland, Mich.

I also pay more in taxes than the president of the United States. And, probably, so do you.

We now understand why Trump was the first presidential candidate since the 1970s not to divulge his tax returns.

In 2016 and 2017, the billionaire paid just $750 each year in taxes to the U.S. Treasury. In 10 out of 15 years between 2001 and 2017, Trump paid zero taxes.

The average middle class household paid approximately three times as much in federal taxes as Trump did in 2017, an average of $2,200 based on an income of roughly $60,000. Any individual earning over $25,000 most likely paid more than the president.

It’s not that Trump wasn’t paying taxes at all. In 2017, Trump paid $156,824 in taxes in the Philippines and $145,500 in India. He just wasn’t paying them to support veterans, build roads, or protect seniors in this country.

The other secret Trump doesn’t want you to know is that his image as a wealthy successful business mogul is a mirage.

Over the decades, Trump personally lobbied Forbes Magazine to report that he was wealthier than he really is. Two decades of tax returns, however, reveal he is a man in deep financial doo-doo. He may even owe more than he owns.

Trump’s real estate and resort businesses are mostly money losers, contributing to hundreds of millions of tax-deductible business losses each year.

On top of these losses, Trump deducts tens of millions in lavish personal living expenses — such as $70,000 in hair styling, consulting fees to his children, and mansion retreats — to reduce his tax obligations.

Only someone with Trump’s army of tax attorneys and wealth managers could pull off these loopholes. Trump’s assets are spread over 500 different corporate shells, enabling limitless shifting and gaming of income and taxes.

Trump takes advantage of the fact that there are two tax systems in America: one set of rules for the super-rich and another set of rules for everyone else.

Most of us get our incomes from paychecks and government agencies that know exactly how much we are paid and often withhold our taxes before we even see the money.

People with incomes over $2 million and assets over $20 million get most of their income from investments, ownership of assets, and businesses. There are endless games they can play to manipulate their income. And they can afford to hire accountants and tax lawyers to maneuver their taxes downward.

If you lose money, you grow poorer. But when the super-rich create paper losses to offset their taxes, they’re still rich. And like Trump, they aren’t sacrificing anything in terms of their cushy standard of living.

These tax shenanigans are all the more unseemly in the face of a pandemic that’s destroyed the wealth, health, and livelihoods of millions. Tens of millions of families have lost jobs, savings, home equity, and any other economic security they may have had.

They will not be “carrying over” these losses into future years and virtually eliminating their taxes for a decade, as Trump did.

Instead, they’ll pay income taxes on unemployment insurance, stimulus checks, and any paycheck they’ve been able to eke out.  There will be no deductions for haircuts or consulting contracts for their children.

Trump’s taxes reveal the real truth. He’s more about the art of the deduction than the art of the deal.

If there’s a silver lining, it’s that Trump’s tax manipulations reveal where the weak spots are in the current system. Congress should restore fairness and integrity to a tax system that has been pillaged by the super-rich.

Chuck Collins directs the Program on Inequality at the Institute for Policy Studies.

Peter Certo: On tax 'reform,' GOP in Congress reports to campaign donors, not the general public

Via OtherWords.org

Sometimes I have to remind myself that people in “real America” with “real jobs” don’t while away their mortal hours reading about politics. But God help me, if you’ve suffered through any coverage of the Republican tax plan, you’ve probably heard three things.

First, it’ll dramatically slash taxes on corporations and billionaires, raise them for nearly a third of us in the middle class, and blow a $1.5 trillion hole in the deficit.

Second, it’s unpopular. Less than a third of Americans support it, Reuters reports. That’s worse than Trump’s own approval rating, which remains mired in the 30s.

And third, the Republicans who control Congress believe it simply must pass.

In fact, this third point sets the tenor for the entire debate. “Republicans are desperate to rack up a legislative win after a series of embarrassing failures,” TIME observes. “If tax reform doesn’t pass, many in the party fear an all-out revolt in 2018.”

“All of us realize that if we fail on taxes, that’s the end of the Republican Party’s governing majority in 2018,” South Carolina Republican  Sen. Lindsey Graham told Fox News recently. In fact, “that’s probably the end of the Republican Party as we know it.”

If the tax giveaway doesn’t pass, adds Utah Republican  Sen. Mike Lee, “We might as well pack up our tent and go home.”

The thing is, that doesn’t make any sense. Gallup polls have shown over and over that most Americans think rich people and corporations should pay more, not less. Even a majority of Republican voters worry about what this wealth grab will do to the deficit.

If they were looking for a win, then, Republicans would be running against their own plan. So what gives?

Well, New Jersey Republican Congressman Chris Collins recently offered a clue: “My donors are basically saying, ‘Get it done or don’t ever call me again.'” Ah!

Many voters in Collins’ high-tax district will likely pay more, since the GOP wants to end federal deductions for state and local taxes. But it doesn’t have a lick to do with voters. It has everything to do with the affluent donors who bankroll GOP campaigns.

A similar dynamic played out in the healthcare debate. GOP leaders trotted out plan after plan that would eliminate coverage for anywhere from 20 to 24 million Americans — plans that never topped the low 20s in public support.

But those plans would have reduced taxes on the wealthy. So they had to pass.

“Senator Charles E. Grassley of Iowa, who has been deeply involved in health policy for years, told reporters back home that he could count 10 reasons the new health proposal should not reach the floor,” the New York Times reported back in September, “but that Republicans needed to press ahead regardless.”

When those bills met their righteous demise, elite GOP fundraising took a huge dive. Senate Republicans lost $2 million in planned contributions alone, The Hill noted this summer. Fundraising in those months fell some $5 million below where it had been in the spring.

So there it is, team: Follow the money. It’s no wonder Princeton researchers found a few years ago that rich people matter to Congress, but ordinary folks generally don’t. That’s probably why many of us prefer to tune it out entirely.

It’s also exactly why we do have to pay attention. Especially in those rare moments when members admit exactly what’s going on.

Peter Certo is the editorial manager of the Institute for Policy Studies and the editor of OtherWords.org. 

Llewellyn King: GOP tax ideology contains myths, wishful thinking, stock buybacks and feudalization

"The Tax Collector's Office'' (1640), by Peter Brueghel the Younger.

An open letter to the tax writers of Congress:

Even us laymen, us non-economists have opinions about taxes. We pay them. We also benefit from loopholes and are punished for being not rich enough to have investments that lighten the tax load.

Those at the bottom of the tax ladder seem to pay their taxes with more equanimity than those at the top.

For more than three decades, I operated a small business. Over the years, I employed hundreds of people and all were keenly interested in what they would be paid, but none — not one ever — asked what hat their take home pay would be or how that could be finagled, as with benefits. In business parlance, they were interested only in the top line, not the bottom line.

By the same token, other small businesses seemed to be unbothered by taxation, although they all relied on accountants to get them the best deal. Taxes were not a subject that came up in in our trade association meetings. T.J. Zlotnitsky, a member of the progressive Patriotic Millionaires, told me that he and other very successful businesses were not crippled by taxes and saw them as a necessity — a cost of being in business, if you will. Billionaire Warren Buffet andrich economist-actor-writer Ben Stein echo that view.

But big business, unlike small business, and its agents from trade associations to their lobbyists, believes that tax rates are the problem. Take the issue of U.S. companies whose offshore subsidiaries earn profits that are retained in foreign countries to defer paying U.S. corporate tax. It is an act of Republican theology that this money would come back instantly to the United States if the tax threat were removed and that it would be invested in new enterprise, plant and products here.

It is as likely that this money will be used to buy back stock. There are plenty of companies right here in the United States sitting on billions of dollars, not investing them either here or overseas. Explain, please.

Perhaps tax rates, assuming that they are the effective rate that will be paid (seldom the case), should be thought of in terms of pricing. Pricing is a whole science, possibly an art. There is a sweet spot in pricing where buyers and sellers agree.

For President Trump and Congress to say that sweet spot is 20 percent for corporations and 35 percent for individuals is arbitrary. Despite company "inversions," where they move their domicile to tax-friendly countries, corporations, as measured by earnings, are doing nicely, thanks.

It is true that high tax ratescan discourage investment and lead to capital flight. But there are glaring exceptions: Why are companies flocking to high-tax Massachusetts rather than tolow-tax New Hampshire?

My own guess is that the sweet spot is between 25 percent for corporations and 30 percent for individuals. I expect some will try to disabuse me of that idea.

New York, by national standards, is heavily taxed, but businesses and people are pouring in. Explain perceived value, please.

Yet after World War II, when taxes really were too high in Britain, many moneyed people, including almost all the film stars, established residences in Switzerland to escape confiscatory taxes: 90 percent was just too much for the likes of Noel Coward and David Niven. Ninety percent was a sour spot, very sour.

Then, there is the highly speculative issue of how tax reduction will trigger growth. It is an argument that would not pass the loan committee at the local bank: the idea that increasing debt now will lead to huge growth later. Take a piece graph paper and draw an ascending line, make no provision for recession, war or, as now, acts of God. Is it believable?

Finally, there is the vexing question of estate taxes, which — with fiendish cleverness — the opponents have labeled "death taxes."

The fact is that if you remove or reduce these, you guarantee less revenue. But, more important, in a time when the economy has created many billionaires, you risk the creation of super class of Americans, rich in perpetuity and growing richer with even the most conservative investments: a feudalization of the United States.

Is that the America that is great (again)?

Llewellyn King is executive producer and host of White House Chronicle, on PBS.