Taxes are going to be in the news a lot this week. The word itself is now used in mostly pejorative declarations, shorthand for a collection of victimization stories puffed up around a kernel of truth by grifters wearing Brioni suits with 24-karat gold thread woven into the fabric.
President Trump is giving a ‘populist’ tax policy speech in Missouri. The crowds cheering his promises apparently haven’t gotten the word about the administration not actually having a legislative proposal.
The crackling sound you’re hearing around California is the hair on fire of Howard Jarvis’ minions since the state Supreme Court decided citizen driven tax initiatives maybe don’t have to meet the two-thirds threshold for approval.
Republicans have been beating the “tax reform” drum in recent years, with the wonkish Rep. Paul Ryan serving as poster boy for the collection of ideas they would like to see made into reality.
There’s only one problem with all these reforms: in practice, they would amount to a massive transfer of wealth to the people who need it least.
Since ‘let’s make the rich richer’ is not anybody’s idea of a unique selling proposition, their proposed changes to the tax code are gift wrapped with promises designed to appeal to our baser instincts– mostly greed, but faux empathy when needed.
The President’s speech this week is, I’m told, to be based on promises to “Unrig the Economy, Jump Start America, and Win Again.”
White House aide Stephen Miller, a leader of the nationalist wing of the administration reportedly drafted the speech. The sloganeering part of it makes perfect sense, particularly when there is no actual detail to discuss.
When you have the Koch brothers’ minions leading cheerleading, there can be little doubt about who will benefit the most. From Politico:
“One of the keys to selling tax reform is the president making the point that tax reform will unrig this economy by stripping out the special-interest deductions and carve-outs that riddle this code,” said Tim Phillips, president of Americans for Prosperity, a group founded by the billionaire industrialist Koch brothers that is spending heavily to push changes to the tax code.
The Missouri speech will be the first in what is expected to be a heavy push by the White House to get the Republican Congress to pass a tax package including lower rates for corporations and individuals and send it to Trump’s desk to sign by the end of the year. Both the White House and congressional Republicans are desperate for a big legislative accomplishment before attention turns to the midterm elections next year, especially following the failure to repeal Obamacare.
The downside to all those lower tax rates will amount to a reduction in the ability of government to fund the things we all too often take for granted.
Promises of lower rates for middle-income taxpayers will be offset by the elimination of various deductions. Two such items under discussion are the end of credits for state and local taxes paid and the home mortgage interest write off. White House reactionaries are pushing ending the state taxes deduction as a way of punishing the Blue States, which are more likely to have income taxation systems.
Let’s run through a couple of the other Big Lies About Taxes you’re likely to be hearing in the coming weeks, presuming that the Dear Leader doesn’t decide some other drama is more worthy of his intentions. The tax code, after all, is complicated stuff and is difficult to express in 140 characters on Twitter.
The Death Tax. Perhaps my favorite right-wing myth. Currently, 99.8% of estates pay no estate tax at all, since it only applies to individual assets worth more than $5.49 million, according to the Center on Budget and Policy Priorities. The average tax rate paid–as opposed to the statutory rate of 40%–is 17%. Roughly fifty small businesses and/or farmer annually are subject to the estate tax. And finally, we’ll get to the REAL reason why the “Death Tax” is the Holy Grail of Republican reformers: it’s the most progressive part of the US Tax Code.
But What About the Jobs? Really? Does anyone believe lower taxes equal more jobs? Ask the people of Kansas how that’s worked out for them. Tip: It hasn’t. Let us not also forget that ‘smart’ companies rarely pay the highest rate, if they pay at all. Meanwhile, they’re selling their products and services using public infrastructure, paid for by the rest of us.
The Institute for Policy Studies just released a report analyzing the job creation records of the 92 publicly held U.S. corporations that reported a domestic profit (2008 through 2015) and paid less than 20% of these earnings in federal income tax.Here are the main takeways:
- Tax breaks did not spur job creation (These firms reported -1% job growth)
- Tax-dodging corporations paid their CEOs more than other big firms
- Job-cutting firms spent tax savings on buybacks, which inflated CEO pay
A Simpler Tax Return. As Matthew Yglesias at Vox points out, the possibility of filing your taxes via a postcard has little to do with the tax code and everything to with the lobbying power of the accounting industry and tax prep software vendors.
The reality is American conservatives have fought every proposal (even bi-partisan ones) involving taking steps to simplify the tax process. And making taxes simpler isn’t all that hard to do.
Japan, the United Kingdom, and several other countries have adopted a system known as “precision withholding” that lets taxpayers avoid filing any kind of tax return at all. The tax return, at the end of the day, is an anachronistic legacy of the old days of paper record-keeping when it wouldn’t have been feasible to calculate taxes without outsourcing a huge share of the work to individual families.
These days, in countries that have implemented modern tax systems, the tax agency simply takes exactly the right amount out of every paycheck. If they find that a mistake was made — not accounting for a charitable donation or mortgage interest, for example — they find that mistake in charity and bank records, and they fix it for you.
Despite their rhetoric, Yglesias points out what the tax avoidance set “wants to make taxes complicated so people hate them, just as Intuit wants them complicated so that people remain dependent on its terrible, unnecessary software.”
Which brings me to a point about taxes that is important to understand; the point of ‘tax reform’ is NOT how much or HOW they gets collected–it’s about how it is spent.
Ryan Cooper at The Week uses the example of the nation’s infrastructure, vis-a-vis Hurricane Harvey, to make this point:
All this is a microcosm of the general condition of the United States: coasting on an increasingly rickety foundation our grandparents put up at tremendous effort and expense. Our ruling class, like some addle-brained late Habsburg monarch, is not only ignoring the problem, but denying the very necessity of public investment in the first place.
The simple fact is that the United States could not possibly exist in its hyper-wealthy form — and probably not at all — without tremendous public investment in infrastructure. As societies grow wealthier, they necessarily require more and more sophisticated transportation, communication, and education. Highways, airports, rail networks, telephone and internet, schools, and so forth all require extensive government spending and regulation to function. Indeed, many absolutely vital systems — like the GPS satellite network — are to this day still owned and operated by the federal government.
The libertarian fantasy of the night watchman state was not utterly ludicrous back in the 19th century. But in the 20th, it became so. During the Great Depression, a laissez-faire “self-regulating” market system seized up and collapsed, and orthodox capitalist measures of austerity and tight money only made it worse. It took gargantuan New Deal projects — many of them the largest of their kind ever built up to that point — along with huge war spending, to put the country on a footing where it could continue to grow and develop. […] (h/t Meteor Blades at Daily Kos)
A potentially earthshaking 5-2 California Supreme Court ruling may allow citizen-based initiatives to raise taxes with a simple 50%+1 majority. Simply put, the ruling states the taxation-limiting Proposition 218 was aimed at government entities, not people.
I just love this quote from the ruling:
As Ulysses once tied himself to the mast so he could resist the Sirens’ tempting song (Homer, The Odyssey, Book XII), voters too can conceivably make the clear and important choice to bind themselves by making it more difficult to enact initiatives in the future. The electorate made no such clear choice to tie itself to the mast here. Without a direct reference in the text of a provision — or a similarly clear, unambiguous indication that it was within the ambit of a provision’s purpose to constrain the people’s initiative power –– we will not construe a provision as imposing such a limitation.
The shrink-government-until-you-can-drown-it-in-a-bathtub crowd was less than thrilled, as Scott Lewis pointed out at Voice of San Diego:
It’s pretty devastating,” said Jon Coupal, president of the Howard Jarvis Taxpayers Association. “It will incentivize collusion between local governments and special interest groups to create special tax increases.”
He also said he worried the ruling would mean conservative local governments will have to accept tax increases they don’t want.
“When voters exercise the initiative power, they do so subject to precious few limits on that power,” the Supreme Court majority wrote. The court explained that the argument that “local government” includes citizens who might put up an initiative was just too hard to accept. If the Constitution was meant to include voters and the electorate in the law, it would say so.
Before anybody runs out to start collecting signatures for an initiative involving taxes, they might do well to look at the fine print in the ruling.
An article in the Mercury News cites legal experts saying the ruling was narrowly focused and its intent was only that general tax increases put on the ballot by citizens should go before voters in a special election. Tax increases sought by local government are required to appear on a general election ballot.
Darien Shanske, a tax expert at the University of California, Davis School of Law, said the ruling won’t be the final word on whether the two-thirds requirement applies to citizen-initiated special tax hikes. There will be additional lawsuits on that issue.
“Some local group is going to do it,” he said. “They are going to insist they are entitled to a majority vote.”
Lower courts will likely interpret the Supreme Court ruling to say the 2/3 rule doesn’t apply to citizen tax measures, but there is a chance for disagreement among courts, and that could send the issue back to the California Supreme Court, he said.
Then there’s the matter of the inherent corruption of the initiative process by corporate entities. They’re likely the ones will benefit from special elections, where low voter turnout makes ad campaigns worthwhile.
Ugh. Bring on the lawsuits.
And can we fix the initiative signature gathering process before a future Doug Manchester-type persuades voters to pay for gold plated bathroom fixtures?
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