estate tax

Chuck Collins: Stop talking about 'winners and losers' in GOP tax scam

midclass.jpg

Via OtherWords.org

Republicans are pushing a huge corporate tax cut bill through Congress. You might’ve seen a lot of coverage trying to sort out “who wins” and “who loses.”

All that misses the point.

The driving motivation behind this bill, rhetoric and packaging aside, is to deliver a whopping $1 trillion tax cut for a few hundred badly behaved global corporations — and another half a trillion to expand tax breaks and loopholes for multi-millionaires and billionaires.

All the other features of proposed tax legislation are either bribes (“sweeteners”) to help pass the bill or “pay fors” to offset their cost.

The news media has been talking about “winners and losers” like this were some sort of high-minded tax reform process with legitimate trade-offs, as in 1986.

But this isn’t tax reform. This is a money grab by powerful corporate interests.

The key question isn’t who wins and loses, but whether we should undertake any of these trade-offs to give massive tax breaks to companies like Apple, Nike, Pfizer and General Electric — companies whose loyalty to U.S. communities and workers is historically abysmal.

These companies have been dodging their taxes for decades while small businesses and ordinary taxpayers pick up their slack to care for our veterans, maintain our infrastructure, and educate the next generation.

Apple alone is holding $250 billion in offshore subsidiaries to reduce its taxes.

For wealthy individuals, the proposed House tax bill eliminates the federal estate tax, which is paid exclusively by families with over $11 million, mostly residing in coastal states.

It eliminates the Alternative Minimum Tax, a provision that ensures that wealthy taxpayers chip in at least a few dollars after gaming all their possible deductions.

And while the top tax rate on high earners remains roughly the same, Congress is proposing to open up a “pass through loophole” that will enable wealthy people and their tax accountants to convert their income to be taxed at a lower tax rate.

We should avoid distracting debates over whether to reform one provision or another, such as the home mortgage interest deduction. The real estate industry understands the score. “These corporations are getting a major tax cut, and it’s getting paid for by the equity in American homes,” said Jerry Howard, chief executive of the National Association of Home Builders.

Reforming the home mortgage interest deduction makes a lot of sense — the current tax break mostly benefits the already wealthy and fails to expand homeownership. But we shouldn’t restructure housing tax incentives to pay for a massive tax cut for billionaires and badly behaved global corporations.

Nor should we eliminate the deductibility of student debt, eliminate the deduction for state and local taxes, or require families with catastrophic health expenses to pay more to reduce taxes on big drug companies and Jeff Bezos of Amazon. This tax bill would do all of those things.

The good news is people aren’t falling for the marketing baloney that this tax cut will help the middle class. Fewer than 30 percent of voters support these tax cuts, and solid majorities believe that the wealthy and global corporations should pay more taxes, not less.

But this won’t stop Republicans who care more about their campaign contributors than they do about voters.

If the GOP majority in Congress were responsive to voters, they’d invest in updating our aging infrastructure and in skills-based education, as we did after World War Two. Instead of saddling the next generation with tens of thousands in student debt, real leaders would be figuring out how to lift up tomorrow’s workers and entrepreneurs, just as we did in previous generations.

Under this tax plan, small business and ordinary taxpayers will be the big losers. That’s the only score that matters.

Chuck Collins directs the Program on Inequality at the Institute for Policy Studies and co-edits Inequality.org. 

Chuck Collins: A guide to the coming tax heist

-- Bundesarchiv, Bild 102-12762 / CC-BY-SA 3.0

-- Bundesarchiv, Bild 102-12762 / CC-BY-SA 3.0

 

Via OtherWords.org

For 40 years, tax cutters in Congress have told us, “we have a tax cut for you.” And each time, they count on us to suspend all judgment.

In exchange, we’ve gotten staggering inequality, collapsing public infrastructure, a fraying safety net, and exploding deficits. Meanwhile, a small segment of the richest one tenth of 1 percent have become fabulously wealthy at the expense of everyone else.

Ready for more?

Now, Trump and congressional Republicans have rolled out a tax plan that the independent Tax Policy Center estimates will give 80 percent of the benefits to the richest 1 percent of taxpayers.

The good news is the majority aren’t falling for it this time around. Recent polls indicatethat over 62 percent of the public oppose additional tax cuts for the wealthy and 65 percent are against additional tax cuts to large corporations.

Here’s the independent thinker’s guide to the tax debate for people who aspire to be guided by facts, not magical thinking. When you hear congressional leaders utter these claims, take a closer look.

“Corporate tax cuts create jobs.”

You’ll hear that the U.S. has the “highest corporate taxes in the world.” While the legal rate is 35 percent, the effective rate — the percentage of income actually paid — is closer to 15 percent, thanks to loopholes and other deductions.

The Wall Street corporations pulling out their big lobbying guns have a lot of experience with lowering their tax bills this way, but they don’t use the extra cash to create jobs.

The evidence, as my Institute for Policy Studies colleague Sarah Anderson found, is that they more often buy back their stock, give their CEOs  massive bonuses, pay their shareholders a bigger dividend, all the while continuing to lay off workers.

“Bringing back offshore profits will create jobs.”

Enormously profitable corporations such as Apple, Pfizer and General Electric have an estimated $2.64 trillion in taxable income stashed offshore. Republicans like to say that if we give them a tax amnesty, they’ll bring this money home and create jobs.

Any parent understands the folly of rewarding bad behavior. Yet that’s what we’re being asked to do.

When Congress passed a “repatriation tax holiday” in 2004, these same companies gave raises to their CEOs, raised dividends, bought back their stock, and — you guessed it — laid off workers. The biggest 15 corporations that got the amnesty brought back $150 billion while cutting their U.S. workforces by 21,000 between 2004 and 2007.

For decades now, those big corporations have made middle class taxpayers and small businesses pick up the slack for funding care for veterans, public infrastructure, cyber security, and hurricane mop-ups. Let’s not give them another tax break for their trouble.

“Tax cuts pay for themselves.”

Members of Congress who consider themselves hard-nosed deficit hawks when it comes to helping hurricane victims or increasing college aid for middle class families are quick to suspend basic principles of math when it comes to tax cuts for the rich.

The long discredited theory of “trickledown economics” — the idea that tax cuts for the 1 percent will create sufficient economic growth to pay for themselves — is rising up like zombies at Halloween. As the economist Ha Joon Chang observed, “Once you realize that trickle-down economics does not work, you will see the excessive tax cuts for the rich as what they are — a simple upward redistribution of income.”

“Abolishing the estate tax will help ordinary people.”

This is the biggest whopper of them all. The estate tax is only paid by families with wealth starting at $11 million and individuals with $5.5 million and up. There is no credible economic argument that this will have any positive impact on the economy, but it would be a huge boon for billionaire families like the Trumps.

This tax cut plan is an unprecedented money grab. Whether the heist happens, is entirely up to the rest of us.

Chuck Collins directs the Program on Inequality at the Institute for Policy Studies and co-edits Inequality.org. 

 

Bob Lord: Trump prepares to use tax-cut plan to cut himself a huge check

The Worship of Mammon (1909),    by  Evelyn De Morgan .

The Worship of Mammon (1909),  by Evelyn De Morgan.

Via OtherWords.org

What’s the largest personal stake a U.S. president has ever had in legislation he signed into law? Whatever it was, it’ll be dwarfed by what Donald Trump’s signature will be worth — to himself — if Congress passes his proposed tax plan and puts it on his desk.

If that happens, Trump will be effectively cutting himself a check from the U.S. Treasury for several billion dollars.

Call me cynical, but it seems that’s exactly what Trump has in mind. His plan just fits his tax situation — or what we know of it, without access to his tax returns — too perfectly.

The president’s tax proposal eliminates two taxes that mostly benefit the wealthy, and cuts a third tax roughly in half. That would bestow a windfall worth billions on the Trump family.

First, there’s the elimination of the alternative minimum tax, or AMT.

The AMT applies to taxpayers whose income tax liability otherwise would be reduced excessively by certain deductions, including deductions commonly claimed by real estate owners like Trump. It’s like an alternative tax system in which the rates are lower but fewer deductions are allowed.

The one glimpse we’ve had of Trump’s tax returns suggests he stands to benefit massively from the repeal of the AMT. In 2005, Trump’s income exceeded $150 million, but his regular tax liability was just $5.3 million — that’s barely a 3.5 percent tax rate.

But the AMT increased Trump’s tax liability that year by over $31 million. Had Trump’s tax plan been in effect in 2005, it would’ve saved him that $31 million.

Still, that’s chump change in comparison to the tax windfall he hopes to bestow upon himself by cutting the top tax rate on the bulk of his income by more than half, from nearly 40 percent to 15.

We’re not talking about the corporate tax rate here. Trump could reap a tidy personal benefit from slashing the corporate income tax too, but the far bigger prize in his plan is its treatment of income from businesses that don’t pay corporate taxes.

Under current law, the income of those businesses is taxed to their owners at individual income tax rates. Under Trump’s plan, income from those businesses would receive preferential tax treatment, with a maximum tax rate of 15 percent.

That would be the final act in turning our nation’s tax policy on its head.

In 1980, before Ronald Reagan’s election, the maximum rate on workers’ wages — earned income — was less than the maximum rate applicable to all other types of income except long-term capital gains.

Under Trump’s tax plan, the maximum tax rate workers pay, after accounting for employment taxes, will be higher than the rate applicable to any other type of income.

That means no matter how Trump invests his billions — in real estate, bonds, stocks, business ventures, etc. — the income he generates would be taxed at a rate lower than what workers pay on their wages.

Trump’s preferential rate for business income is unprecedented. Is it a coincidence that the first politician to propose it just happens to be a real estate magnate with interests in literally hundreds of unincorporated businesses?

The biggest tax windfall Trump hopes to secure for himself, however, is one he won’t live to enjoy. I’m referring to the estate tax, of course — a federal levy on estates worth over $5.5 million for individuals.

Trump’s plan would eliminate that tax, no matter how large the estate. For Trump, that would mean as much as $1.4 billion on an estate estimated by Forbes at $3.5 billion.

The bottom line: If Trump’s tax plan passes, he’ll have secured for himself billions in tax benefits in less than a year as president. Not bad work if you can get it, huh?

Bob Lord is a veteran tax lawyer who practices and blogs in Phoenix.  He’s also an associate fellow of the Institute for Policy Studies. 

Chuck Collins: Rich folks in overalls seek to kill estate tax

 

Via OtherWords.org

After this summer, President Trump and the Republican Congress have one big item on their agenda: taxes. Specifically, cutting them for the rich.

One tax they’ve got in their crosshairs is the estate tax — which they malign as “the death tax.” But it’s nothing of the sort.

Passed a century ago at the urging of President Theodore Roosevelt, the estate tax is a levy on millionaire inheritances. It puts a brake on the concentration of wealth and political power, and raises substantial revenue — over a quarter of a trillion dollars over the next decade, if it’s kept — from the richest one tenth of 1 percent.

Yet lobbyists are trying to put a populist spin on their effort to abolish this tax, which is paid exclusively by millionaires and billionaires. Puzzlingly, they’re deploying farmers as props and claiming that the tax means the “death of the family farm.”

The accusation is pure manure.

Only households with wealth starting at $11 million (and individuals with wealth over $5.5 million) are subject to the tax. “This hurts a lot of farmers,” claimed Treasury Secretary Steven Mnuchin. “Many people have to sell their family farm.”

But a new report by President Trump’s own U.S. Department of Agriculture shows this claim is bull. Only 4 out of every 1,000 farms will owe any estate tax at all — and the effective tax rate on these small farms is a modest 11 percent.

Of those few farms, most have substantial non-farm income, according to the report — think billionaire Ted Turner’s ranch in Montana. And estate tax opponents haven’t been able to identify a single example of a farm being lost because of the estate tax.

Still, the rodeo continues.

When the House Ways and Means Committee staged a July hearing against the estate tax, they summoned South Dakota farmer Scott Vanderwal to talk about the woes of the estate tax. The problem was, as Vanderwal himself revealed, his farm wouldn’t even be subject to the tax.

In 2014, right-wing election groups ran $1.8 million worth of ads featuring farmer John Mahan of Paris, Ky.  “For our family farms to survive, we’ve got to get in this fight” to end the death tax,' he said.

What the ad fails to disclose is that Mahan is the 15th biggest recipient of farm subsidies in Bourbon County, taking $158,213 of taxpayer money between 1995 and 2014. While some farm subsidies promote price stability and conservation practices, the bulk of funds go to the richest 1 percent of farmers and corporate agricultural operations.

Farm organizations  such as the National Farmers Union and the American Family Farm Coalition support retaining the estate tax. They believe the concentration of farmland and farm subsidies has created unfair corporate farm monopolies across rural America.

“The National Farmers Union, through its grassroots policy, respects what the estate tax represents,” said union president Roger Johnson in testimony to the Treasury Department. “We are not opposed to the estate tax.”

When defenders of the estate tax have proposed a “carve out” to exempt any remaining farms, the anti-tax crusaders oppose it. They don’t want to lose their fig leaf.

All this farm talk mystifies who actually pays the tax. Most estate taxpayers live in big cities and wealthy states such New York, Florida, and California. Few have probably ever driven a tractor.

Instead of farmers in overalls, picture Tiffany Trump. If Congress abolishes the estate tax, the president’s children stand to inherit billions more.

In the coming tax debate, watch out for the advertisements and sound bites about farmers and the estate tax. The tax lobbyists for billionaires will be pulling the strings.

Chuck Collins is a senior scholar at the Institute for Policy Studies and a co-editor of Inequality.org. He’s the author of the recent book Born on Third Base.

 

 

Josh Hoxie: The mathematical and moral mess of the Trump budget

 

Via OtherWords.org

Federal budgets, while boring and wonky, can have a serious impact on our lives. They dictate our collective priorities for how we choose to spend our public resources in support of the common good.

That is, good budgets do that. But you’d be hard-pressed to call the most recent budget from the Trump administration good.

To be clear, it’s hard to even refer to this budget as serious. Sure, it’s written in official-looking thick blue books, and it outlines spending figures using precise numbers. But that’s about where the formality ends.

Tucked into the formal budget is a set of assumptions that present a fantastical approach to simple arithmetic.

Take the estate tax for just one example, also known as the inheritance tax. The estate tax is a pretty straightforward idea: a levy on the inter-generational transfer of immense wealth that only the very wealthy pay. It’s been on the books for about 100 years.

If left untouched, it will generate an estimated $174 billion over the next 10 years, precisely $0 of which will come from anyone who could reasonably be considered middle class.

The Trump budget proposes to eliminate the federal estate tax. Trump’s own family stands to benefit enormously from this gift to the wealthiest households.

The budget also proposes to dramatically cut federal student loan programs by about $143 billion. Notably, the Public Student Loan Forgiveness program is eliminated, a program that hundreds of thousands of graduates signed up for expecting their student loans to be eliminated after 10 years of service in the public sector.

Trading a massive tax cut for the ultra-rich in exchange for massive cuts to programs that help young people go to college is bad enough. But then there’s the math.

The Trump budget, despite proposing to eliminate the estate tax, still counts the estate tax revenue as part of its revenue projection. In fact, the administration expects estate tax revenue to top $300 billion, nearly double the normal projection. This lie is critical to their absurd claim that their budget will balance.

News flash: If you cut taxes, it means you don’t get the revenue from said taxes.

The estate tax double-count is just one of the many mystical components of their mathematical menagerie.

A poll of top-tier economists by the University of Chicago (which has among the most conservative econ departments in the country) found practically unanimous agreement that there’s no way the budget will balance. The administration’s assumptions are just too far-fetched — no matter how many times you spin in a circle, squint, and pray that the numbers on the page change.

Unfortunately, while the administration’s struggle with basic arithmetic can be amusing, the potential impact of this budget is far from humorous.

It will mean millions of families pushed off their health coverage, millions of mothers blocked from receiving nutritional assistance for their babies, and millions more families in our northern states forced to choose between heating their house and affording their groceries.

Long-time Rep. Barbara Lee of California put it well: “I have never seen a budget so devoid of compassion and empathy for families struggling to make ends meet,” she observed.

There appears to be no law barring Congress from enacting a budget with fundamentally bogus assumptions, and many of Trump’s supporters on Capitol Hill are happy to play ball. One hopes their constituents will be much less willing to go along with the morally bankrupt mathematical mess this administration calls a budget.

Josh Hoxie directs the Project on Taxation and Opportunity at the Institute for Policy Studies. 

Jim Hightower: Rapacious Trump's huge tax lies

 

An old saying asserts that falsehoods come in three escalating levels: Lies, damn lies and statistics. But now there’s an even higher category of lies: a Donald Trump speech.

Take his recent address on specific economic policies he’d push to benefit hard-hit working families, including an almost-hilarious discourse on the rank unfairness of the estate tax.

“No family will have to pay the death tax,” he solemnly pledged, adding that “American workers have paid taxes their whole lives, and they should not be taxed again at death.”

But workers aren’t taxed at death. The first $5.4 million of any deceased person’s estate is already exempt from this tax, meaning 99.8 percent of Americans pay absolutely zero. And the tiny percentage of families who do pay estate taxes are multimillionaires — not workers.

Of course, Trump knows this. He’s shamefully trying to deceive real workers into thinking he stands for them, when in fact it’s his own wealth he’s protecting.

In the same speech, he offered a new childcare tax break to help working families by allowing parents to fully deduct childcare costs from their taxes. With a tender personal touch, Trump said his daughter Ivanka urged him to provide this helping hand to hard working parents because “she feels so strongly about this.”

Another deception — 70 percent of American households don’t have enough yearly income to warrant itemizing deductions. So the Americans most in need of childcare help get nothing from Trump’s melodramatic posturing.

Once again, his generous tax benefits would only flow uphill to wealthy families like his, giving the richest Americans a government subsidy for purchasing platinum-level care for their kids.

As another old line goes: “Figures don’t lie, but liars do figure.”

Jim Hightower is a radio commentator, writer, and public speaker. He’s the editor of the populist newsletter, The Hightower Lowdown. This first ran on  OtherWords.org.

Some fixes for R.I.

Some of the best things that Rhode Island could do to improve its economy: Get rid of dozens of  its excess taxing authorities while making its state taxes as similar as possible to Massachusetts's.

Emphasize German-style vocational education as well as the usual academic courses. The biggest complaint  that present or potential employers have about the Ocean State is the inadequately educated population.

Clarify/simplify  its  confusing and contradictory regulations. Throw out some of them. Enact "sunset laws'' to eliminate outdated and/or redundant statutes and regulations.

Speed the runway extension. Traffic has been dropping at T.F.  Green Airport for one major reason -- the delay in getting a longer runway that will allow NONSTOP trips to the West Coast and frequent flights to Europe.  (And get more European businesses here! Vive la France, etc.)

Traffic will surge when the runway is extended. The delay in that extension can be blamed on the extreme localism of some constituencies and the spinelessness of some political leaders in the face of it.

Make Quonset Point the major seaport it is designed to be.

Get rid of the state estate tax. It loses the state more revenue than it gains. It hurts the marketing of the state to CEO's and directors who make location decisions for their companies. And while it's far from onerous, it still sends fleeing some rich retirees.

Robert Whitcomb: Ignore 'inverson'; marina people; Tughill Plateau

Corporate “inversion’’ involves a previously U.S.-based company merging with a foreign one, reincorporating abroad and, by so doing, taking advantage of foreign corporate income-tax rates generally lower than ours. Many public companies are not paying anywhere near the 35 percent federal corporate income-tax rate because of assorted tax breaks; some companies pay no income tax because of loopholes. Still, all in all, our corporate rate is not competitive with our major foreign competitors’.

Some have called companies using inversion “unpatriotic.’’ I disagree. The senior executives and members of the boards of directors making these decisions are legally maximizing their and the company’s wealth in a partly capitalist system that, for all its faults, fuels innovation and prosperity for the entire country — over the long haul. Most individual taxpayers also try to optimize their tax situation.

And, as I have long argued, the corporate income tax is stupid, except for the lobbyists it enriches. It encourages maneuvers such as inversions. It sends jobs abroad. It supports a lobbying system in Washington that spawns corruption and makes the world’s most complicated tax system ever more complex and inefficient as corporations seek tax breaks from elected officials.

Anyway, in the end companies’ customers, employees and shareholders pay the corporate income tax. Companies just pass along the cost.

We need to end the corporate tax and enact a value-added (consumption-based) tax. We should also put personal earned income and capital gains on a more equal tax basis and maintain substantial estate taxes. The aim should be to help streamline and detoxify our tax system, encourage economic growth and at least mildly mitigate the growth of a permanent plutocracy based on inheritance.

 

* * *

Automation and information technology are now rapidly wiping out well-paying jobs. They’ve long been wiping out low-paying ones. Indeed, those automatic store checkout machines are starting to make inroads into one of the last few fallbacks for those with only a high-school education.

The line is that somehow the economy, blessed by ever-increasing productivity, will create a whole new wave of well-paying jobs to replace the ones killed. We’re still waiting.

Even upper-middle-class jobs are in peril. Consider lawyers, much of whose routine work can be done through computers and low-paid (by our standards) people, in, say, India. And medical equipment, nurse practitioners and ever-better prescription drugs will undermine physicians’ affluence.

Then there’s finance. Many college undergraduates, especially at elite institutions, career plan as if Wall Street were the only sure way to fortune. But they may be guessing wrong. Just because finance was the big thing in the last three decades doesn’t mean that it will be in the next 20. Many young people could find their Wall Street jobs as redundant as many jobs in manufacturing became in the ’70s. We tend to fight the last war.

Some futurists suggest plausibly that such service jobs as plumbers, electricians, gardeners and maids, along with home health-care and social workers and other counselors, may have the best chance of survival. In some fields, even the middle class will still demand personal service.

To reduce social disorder, will the government eventually establish a minimum income for those millions who truly can’t find work?

 

* * *

I just visited the gorgeous Thousand Islands, on the St. Lawrence River. We cruised for parts of two days in our host’s powerboat, which he keeps in a roofed marina in Clayton, N.Y., another one of those small Northeast towns whose downtowns seem to be regaining a bit of their old energy as big-box stores lose some allure to an aging population.

The vast majority of boats remained in their slips, rather than being taken out on the river, on a beautiful summer weekend. This can be explained in part by fuel costs but more, I think, by the marina’s social role. Most of these boat owners, whose age generally ranges from 50 to 80, primarily see the marina as their summer colony, with the boats (most with sleeping space for from two to eight people) as their summer bungalows.

During the short North Country season, they relentlessly schmooze with their neighbors and derive some meaning from endless boat maintenance. They live in a cozy waterborne village. What most of these people would not have liked back home — living cheek-by-jowl — they thrive in for a few weeks every summer.

 

* * *

We drove home through upstate New York’s Tughill Plateau, which has hundreds of wind turbines. The white wind turbines and the vivid green of the countryside, with its view of the Adirondacks, create a spectacular, if a bit eerie, landscape. Most of the farms are far better kept up than I remembered from years before — because of the fees paid to them by the utilities. A very green cash crop and no cash paid to the Mideast!

 

Robert Whitcomb (rwhitcomb51@gmail.com) oversees New England Diary. He is also a senior adviser and partner at Cambridge Management Group (www.cmg625.com), a health-care consultancy,  a former finance editor of the International Herald Tribune, a former editor at The Wall Street Journal, a former  editorial-page editor and vice president at The Providence Journal and  currently a Fellow of the Pell Center for International Relations and Public Policy.