California Free Press

Another Look at the Financial Transactions Tax That Could Eliminate Need for All Others

A small financial transactions tax could correct a number of maladies in our economic system, from the federal debt crisis to the widening wealth divide to the rampant financialization of the economy, while eliminating taxes on income and sales.

From Web of Debt Blog

Posted on June 2, 2023 by Ellen Brown

The debt ceiling crisis has again brought into focus the perennial gap between what the government spends and what it accumulates in taxes, and the virtual impossibility of closing that gap by increasing taxes or negotiating cuts in the budget. 

In a 2023 book titled A Tale of Two Economies: A New Financial Operating System for the American Economy, Wall Street veteran Scott Smith shows that we would need to tax everyone at a rate of 40%, without deductions, to balance the budgets of our federal and local governments – an obvious nonstarter. The problem, he argues, is that we are taxing the wrong things – income and physical sales. In fact, we have two economies – the material economy in which goods and services are bought and sold, and the monetary economy involving the trading of financial assets (stocks, bonds, currencies, etc.) – basically “money making money” without producing new goods or services. 

Drawing on data from the Bank for International Settlements and the Federal Reserve, Smith shows that the monetary economy is hundreds of times larger than the physical economy. The budget gap could be closed by imposing a tax of a mere 0.1% on financial transactions, while eliminating not just income taxes but every other tax we pay today. For a financial transactions tax (FTT) of 0.25%, we could fund benefits we cannot afford today that would stimulate growth in the real economy, including not just infrastructure and development but free college, a universal basic income, and free healthcare for all. Smith contends we could even pay off the national debt in ten years or less with a 0.25% FTT.  

A radical change in the tax structure may seem unlikely any time soon, due to the inertia of Congress and the overweening power of the financial industry. But as economist Michael Hudson and other commentators observe, the U.S. has reached its limits to growth without some sort of debt write down. Federal interest expense as a percent of tax revenues spiked to 32.9% in the first quarter of 2023, and it will spike further as old securities at lower interest rates mature and are replaced with new ones at much higher interest. A financial reset is not only necessary but may be imminent. Promising proposals like Smith’s can lead the way to a much-needed shift from serving “capital” to serving productivity and the broader public interest.

Off the Top of My Head

Republican Presidents Have Been Mainly Responsible for Increases in the National Debt

by John Lawrence

The Reagan, George W Bush and Trump tax cuts are responsible for most of the US national debt. During the Trump administration, the debt increased by roughly $7.8 trillion, and The George W. Bush administration  enacted sweeping tax cuts that will have cost more than $8 trillion by the end of fiscal year 2023. The nation’s fiscal pictured changed in 1981 when President Ronald Reagan enacted the largest tax cut in U.S. history, reducing revenues by the equivalent of $19 trillion over a decade in today’s terms. Although Congress raised taxes in many of the subsequent years of the Reagan administration to claw back close to half the revenue loss, the equivalent of $10 trillion of the president’s 1981 tax cut remained. Donald Trump Built a National Debt So Big (Even Before the Pandemic) that it’ll weigh down the economy for years.

A series of massive, permanent tax cuts have created large federal budget primary shortfalls and continue to exert upward pressure on the debt ratio. In other words, the current fiscal gap—the growing debt as a percentage of the economy—stems from legislation that cut taxes, disproportionately for the very rich. While it is true that the Great Recession and legislation to fight it, along with the costs of responding to the health and economic effects of COVID-19, pushed the level of debt higher, these costs were temporary and did not change the trajectory of the debt ratio. If Congress wants to decrease deficits, it should look first toward reversing tax cuts that largely benefited the wealthy, which were responsible for the United States’ current fiscal outlook.

Therefore, taxes on the rich should increase while spending on the poor and middle class should also increase. Americans want both: social programs and reduced taxes. However, the gross inequality that exists between rich and poor begs the question: why raise taxes on everyone? Shouldn't the rich have their taxes increased while the poor and lower middle class have their taxes reduced? Of course, that 's the ideal solution. However, Republicans represent the interests of the rich so they would never agree to this proposal. They will continue to argue for increasing taxes on the poor while cutting spending that mostly benefits the poor and lower middle class. That's the American situation, writ large, folks. That's all you need to know to understand American politics. It's a struggle between rich and poor. The rich think they deserve all their money even if it runs to billions of dollars while the poor are only trying to get a foothold in the American Dream. The rich think the poor deserve their lot in life because they didn't work hard enough to overcome their poverty. The rich also believe in a meritocracy where they themselves are the winners who made all the right moves and worked the hardest. What's wrong with this picture?

Read "The Tyranny of Merit" by Michael Sandel.

Off the Top of My Head

Why Didn't Democrats Raise the Debt Ceiling When They Controlled Both Houses of Congress?

by John Lawrence

What is clear is that Democrats can only get new legislation passed when they control all three branches of government. This legislation usually increases spending on social programs. Likewise, Republicans can only get their legislation composed - usually of tax cuts - when they control all three branches of government. Both cases usually require the government to deficit spend, the former because of increased government spending, the latter because of decreased government revenues from taxes. So whichever party controls Congress and the Presidency and passes a budget requiring increassed deficit spending should also at the same time raise the debt limit. Make sense? So now we're in this dystopian dilemma that, after Democrats passed Biden's budget requiring a huge amount of government spending, Republicans, who now control the House, effectively want to repeal Biden's budget or else they won't agree to raise the debt ceiling. What a conundrum! These problems would never come up if the party that deficit spent also raised the debt ceiling to accommodate the deficit spending.

Congress has raised the debt ceiling twice under Biden, by about $3 trillion. Republicans voted three times to raise the debt ceiling under President Donald Trump, who added nearly $8 trillion to the national debt. "Republicans in Congress raised the debt three times when Donald Trump was president and each time with Democrat support, but now they won’t raise it, even though they're responsible for more than $8 trillion in bills incurred in four years under the previous administration," Biden said. The 115th Congress (2017–2019) featured unified Republican control of the government with GOP majorities in the House and Senate, and Republican President Donald J. Trump in the White House. So Republicans had no problem with raising the debt ceiling during the Trump administration which added $7 trillion to the national debt. Please note that Democrats could have filibustered the debt ceiling increases during the Trump administration because Republicans did not have a filibuster proof Senate, but they didn't

Raising the debt limit is not about new spending; it is about paying for previous choices policymakers legislated. However, if the previous choice were made by a government controlled by the Democratic party in a two party system, there is every reason to get those choices reversed when the Republican party comes into power and vice versa although Democrats have never tried to bring the country to the brink of default, a game of chicken which Republicans have been all to eager to engage in. They were successful in doing this when Obama was President. Having seen that chaos and mess as vice Preesident, Biden is not willing to engage in negotiations this time around hoping that more sensible heads will prevail. It didn't used to be this way. Sometimes called the Gephardt Rule in honor of Representative Dick Gephardt who introduced its first version, the rule used to provide that when the House agrees to a budget resolution, the Clerk shall prepare a joint resolution suspending the debt limit for the fiscal year covered by the budget resolution. In other words the debt ceiling was automatically effectively raised to accommodate the budget. This all changed when Newt Gingrich became Speaker of the House. When Newt Gingrich took over the House in 1995, he nullified the ingenious “Gephardt rule” that deemed the debt limit to be increased whenever a budget passed. This eventually led to the 1995 and 1996 government shutdowns, when Republicans refused to increase the limit because the president was a Democrat. In 2011, a showdown over the debt ceiling during Barack Obama’s presidency led to the Budget Control Act and ten subsequent years of austerity budgets.

So the simple answer to the question posed by the title of this piece is that, although Democrats controlled both Houses of Congress during the first two years of the Biden administration, they did not have a filibuster proof majority in the Senate. Therefore, they could get a budget passed under the budget reconciliation rule which prevents a filibuster, but they could not raise the debt ceiling because that is subject to the filibuster. Oh what tangled webs these politicians weave! Nothing makes clearer the need to end the filibuster than another round of hostage-taking of the full faith and credit of the U.S. government. Add this to the mounting problems of American democracy. Congress has created an arcane jumble of chaotic rules which threatens government of the people, for the people, and by the people. Go figure.

Off the Top of My Head

The Sword of Damocles Which is the Debt Ceiling

by John Lawrence

The Federal Reserve can just create the money like they did with quantitative easing. They created the money and gave it to the banks. Now their balance sheet is $8.5 trillion. This is not a debt, but it is similar to the national debt which is $31 trillion. You could say that this $31 trillion is on the US' balance sheet or, similarly, the Federal Reserve has an $8.5 trillion debt. See if the Fed creates money, it's not a debt, but if the US Treasury needs money, it has to borrow it. What if no one wants to buy Treasury bonds? Well then, the Fed would buy them itself and just create the money to buy them and add it to its balance sheet. The debt ceiling is such a useless and bogus aspect of American democracy and has the potential of causing the US to default on its debts with disastrous consequences. The Fed never has to pay down its balance sheet nor does the US ever have to have its taxpayers pay off the national debt. The national debt is just an accounting mechanism as is the number on the Fed's balance sheet. As a sovereign fiat currency, the US can just create money. That's not to say that it should do this hap hazardly or willy nilly. But there was a lot of willy nillyness in the years after the Great Recession in 2008 when the Fed kept on quantitatively easing and creating money and giving it to the banks. However, the Fed is prohibited by law from creating money and giving it to poor people. Of course.

So why is the national debt so high? The simple answer is tax cuts for the rich. Americanprogress.org reported:

Tax cuts initially enacted during Republican trifectas in the past 25 years slashed taxes disproportionately for the wealthy and profitable corporations, severely reducing federal revenues. In fact, relative to earlier projections, spending is down, not up. But revenues are down significantly more. If not for the Bush tax cuts and their extensions—as well as the Trump tax cuts—revenues would be on track to keep pace with spending indefinitely, and the debt ratio (debt as a percentage of the economy) would be declining. Instead, these tax cuts have added $10 trillion to the debt since their enactment and are responsible for 57 percent of the increase in the debt ratio since 2001, and more than 90 percent of the increase in the debt ratio if the one-time costs of bills responding to COVID-19 and the Great Recession are excluded. Eventually, the tax cuts are projected to grow to more than 100 percent of the increase.

So why not tax the hell out of the rich, flood the coffers of the Treasury with cash and pay down the national debt? Or at least tax the rich as Biden has proposed doing? Biden famously changed the narrative from "tax and spend" to "no one making less than $400,000 will get a tax increase." So Republicans always want to reduce taxes on the rich and reduce or eliminate social programs which benefit mostly the poor and middle class. The alternative, which Democrats should loudly state, is to raise taxes on the rich and enact programs which benefit the poor and middle class. Voila, the budget is balanced. Raise taxes a little more on the rich and the national debt is paid down. Actually it doesn't matter what the figure of the national debt is. Foreign holders of US Treasury debt could be paid off tomorrow by virtue of the fact that the Fed could just with a few keystrokes on a computer create the money and take it on their balance sheet. This money would then be added, again with a few keystrokes on a computer, to China's or Japan's account at the Fed thus zeroing out the debt. Instead the US government goes on paying interest on its debt which could turn into a problem as it crowds out other budgetary items. Clearly, this is no way for the US government to conduct its business.

Off the Top of My Head

Biden Has Changed the Narrative on Taxes

by John Lawrence

One of the great things that Biden has done is to take the tax issue away from Republicans. Remember when George H R Bush said, "Read my lips. No new taxes." The conventional wisdom at that time was that if taxes were raised, they would be raised on everyone from Joe Six Pack to Warren Buffet. It was also conventional wisdom that tax cuts would apply to everyone from the very rich to the very poor. The American public was not sophisticated enough to know that Republican tax cuts, although they would apply to everyone, were much more favorable to the rich than they were to the poor. Now Joe Biden has completely altered that narrative. In Joe Biden's world tax increases apply only to the rich and tax cuts apply only to the poor. What a major paradigm shift! Biden has repeated his mantra so many times that he wouldn't raise taxes on anyone making less than $400,000 that now that scenario is starting to take hold in the American mind.

It's about time. The American public is starting to wake up to the reality that the very rich pay taxes at a lower rate than a nurse or a teacher or a fireman. If you're a hedge fund manager, you can take advantage of the 'carried interest' loophole to pay less than your fair share. As economic inequality has soared in the era of easy money, the very rich could take advantage of all sorts of games to make themselves even richer while most working people are living paycheck to paycheck. One way to restore some measure of equality is to increase taxes on the rich while cutting them on the poor. This idea was unheard of even a few years ago. Republicans rue the day when it was heard of thanks to Joe Biden, Elizabeth Warren and Bernie Sanders among others. Another way to restore some semblance of equality would be to tax wealth in addition to taxing income. People with assets, say, more than $50 million should pay a tax on their wealth while middle class and poor should be given help to start creating wealth for themselves. That would probably be something to do with home ownership since this is the way most middle class people have been able to create wealth for themselves.

However, it is becoming increasingly difficult for people of modest means to create wealth through home ownership because real estate prices have gone through the roof. It has become increasingly difficult for young people to come up with a down payment for a house, much less to make their monthly mortgage payments. The net result is that more and more people are forced into the situation of never owning property and being life time renters. This is the plan as private equity and hedge fund managers have accessed easy low interest money to buy up real estate and then rent it out so that the typical middle income young family is now renting a home from a hedge fund. NBC News reports: "The lack of supply of single-family homes has pushed up housing prices in many markets across the country — but would-be homebuyers find they are being outbid not just by other home seekers, but also by hedge funds." Hedge funds like the Blackstone group come in with all cash offers which are more attractive to sellers than the terms that average Joes and Janes can come up with. The Real Deal reports:

"Blackstone Group is planning to buy about 5,800 apartment units in San Diego for more than $1 billion.

"The New York-based private equity and investment firm has agreed to purchase 66 complexes across the city from the Conrad Prebys Foundation, according to the San Diego Union-Tribune. It also plans to make $100 million in improvements to the properties.

"With the deal, Blackstone will own 6,700 units in the Southern California city. It already owns $4.5 billion of assets in the city, including the Legoland theme park and the historic Hotel del Coronado.

"“We look forward to ensuring that these properties continue to provide the community with a high-quality rental option at a good value,” Blackstone Real Estate’s global co-head, Kathleen McCarthy told the Union-Tribune.""

According to the San Diego Union, "The deal makes Blackstone one of the biggest real estate holders in San Diego County." The writing on the wall is that, if you want to own a home, you have to move out of San Diego where the median home price is $855,000. For instance the median home price in Indianapolis is $229,900.

Off the Top of My Head

Chump Towers: Why the Worst is Yet to Come

by John Lawrence

Yesterday the Attorney General of New York sued Trump for bank fraud. But that is only the half of it. The other half is tax fraud. The referral to the IRS will take care of that. Trump's dilemma is that he overestimated his assets to get cheap bank loans and then turned around and underestimated his income to reduce his taxes. Most banks refused to deal with Trump. Even Deutsche bank, which is a sprawling behemoth in which the right division doesn't know what the left division is doing, refused to deal with Trump except for one enabler - Rosemary Vrablic.She oversaw hundreds of millions of dollars in loans to President Trump’s company. She resigned in 2021. According to the New York Times:

"Ms. Vrablic ... joined Deutsche Bank in 2006 from Bank of America.  Ms. Vrablic quickly made a name for herself as one of her division’s leading rainmakers. In 2011, she landed a prominent new client: Mr. Trump, who for decades had been mostly off limits to the mainstream banking world because of his tendency to default on loans. With her bosses’ approval, Ms. Vrablic agreed to a series of loans, totaling well over $300 million, for his newly acquired Doral golf resort in Florida, for his troubled Chicago skyscraper and for the transformation of the Old Post Office building in Washington into a luxury hotel."

Rosemary was a V.I.P. guest at Trump's inauguration. She was Trump's personal banker at Deutshe at a time when no other bank and most divisions of Deutsche would not even do business with him. Trump had a history of defaulting on loans and stiffing contractors. The article continues:

"Mr. Trump’s key contacts at his biggest financial backer are leaving at a perilous time for the departing president. He owes Deutsche Bank about $330 million, and the loans come due in 2023 and 2024. Mr. Trump provided a personal guarantee to get the loans, meaning that if he fails to pay them back, the bank can pursue his personal assets."

Attorney General, Letitia James, is suing Trump for $250 million for bank fraud in addition to essentially shutting down all his operations in the state of New York. But this might be a small amount when the IRS comes forth with its own accounting and accusations. A few hundred million here, a few hundred million there, pretty soon you're talking about real money. With Rosemary Vrablic gone, Trump has lost probably the last banker even willing to do business with him.

Deutsche bank is cooperating with the investigation. Stay tuned.

Off the Top of My Head

Why the Fed's Raising Interest Rates Won't Work

by John Lawrence

Inflation is a supply and demand problem. The Fed only sees it as a demand problem: there is too much demand. Therefore, it seeks to reduce the public's ability to demand by reducing wages and creating more unemployment. Problem is that businesses are short staffed. They are trying to hire more workers, not laying them off. There is no "industrial reserve army" of people competing for jobs. Businesses are competing for workers. The reason why prices are going up (hence inflation) is not that there is too much demand, but that there is too little supply. This is caused by supply chain problems which comes down to the fact that most things Americans consume are produced overseas, mainly in China. Also the sanctions on Russian gas and oil combined with Russia cutting off supplies even beyond the sanctions means that everything that is transported including consumer goods is even more expensive. The problem is that the US does not produce much of what it consumes. Again it's a supply problem. Container ships coming from China raise their rates because gas is more expensive. This makes the goods they transport more expensive. When the major things Americans consume come from China (consumer goods) and Russia (energy costs), America is at the behest of countries that it considers enemies. And so is Europe.

The traditional way of fighting inflation is for the Fed to raise interest rates and drive up unemployment. When unemployment increases, demand decreases because unemployed people don't have as much money to spend. In other words money is withdrawn from the economy. This is of course to the detriment of the unemployed people which are usually those on the lowest rung of the economic ladder. But as we've seen during the pandemic, those at the bottom of the economic ladder are usually those who are indispensable workers - grocery workers, agricultural workers, truck drivers, nurses, caregivers. The economy cannot function for anyone without their services. So the only way the Fed can achieve its goal is to drive businesses into bankruptcy. Then all those workers will be in the ranks of the unemployed and be forced to underconsume. Actually, the more that Americans consume, the more greenhouse gasses are created. Underconsumption could have a very salutary effect on the atmosphere and the environment.

Another way to withdraw money from the economy in order to reduce demand is to raise taxes. Again taxes are usually raised on the poor and middle class further immiserizing them. Congress refuses to raise taxes on the rich which Joe Biden has proposed doing. This would help inflation to some extent, but the rich don't consume basic items to the extent that the middle class and poor do. So in order to reduce demand to the point where it is more or less equal to supply, money must be taken out of the pockets of the poor and middle class. The other alternative is to increase supply. But since the US is dependent on supply from foreign suppliers, this is not that easy to do. Long range, the solution is for the US to make more stuff, but corporations have settled on a model of getting stuff produced where labor is cheapest and that means overseas.

The Pitchforks Aren't Coming

For the last two years, Joe Biden has been talking about raising taxes on large corporations and wealthy Americans. It's not happening.

Stephanie Kelton

 

Nearly a decade ago, tech entrepreneur Nick Hanauer warned his fellow billionaires that “the pitchforks are coming.” The economy was still reeling from the financial crisis, and for the vast majority of Americans the policy response had been a near total failure. There were too few jobs, too many foreclosures, and way too much inequality. Eventually, Hanauer wrote, the masses would rise up.

If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us. No society can sustain this kind of rising inequality. In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out. You show me a highly unequal society, and I will show you a police state. Or an uprising. There are no counterexamples. None. It’s not if, it’s when.

Instead of fixing the glaring inequities, Republicans used their majorities to deliver huge tax cuts that overwhelmingly benefited people like Hanauer.

It was on the heels of the Trump tax cuts that billionaire hedge fund investor, Ray Dalio, started to worry that the pitchforks were coming. Capitalism, he argued, “was not working for the majority of Americans.” Unless policies were put in place to generate better economic outcomes—including a better distribution of wealth and income—a “revolution” was coming.

Around the same time, fellow billionaire Jamie Dimon wrote in his annual letter to shareholders that “far too many people were living on the edge.” He described a system in crisis and urged “a call to action.” Like Dalio, Dimon stressed the urgent need to build a more “inclusive economy.” Keeping the pitchforks at bay meant improving life—if only modestly—for those who might otherwise take to the streets.

Instead of taking to the streets, COVID kept many of us home. And while the pandemic caused immeasurable harm, the policy response was so much better that life did improve—at least financially—for millions of ordinary people.

The financial lifeline that started with the $2.2 trillion CARES Act in March 2020 culminated with the $1.9 trillion American Rescue Plan (ARP) Act in March 2021. The ARP was intended to put a punctuation mark on the economic recovery, not to permanently tackle the sort of inequities Hanauer described in his “memo to fellow zillionaires.”

To deal with the more structural problems, President Biden offered his Build Back Better agenda, explaining that “for too long, the economy has worked great for those at the top, while working families get squeezed.” No more tax breaks for billionaires. Instead, Biden wanted to tax them. In addition to a slew of other taxes, Biden proposed a “billionaire’s tax” on the top 0.0001, those with annual incomes over $100,000,000. The pitchforks were coming, and the rich were in the crosshairs.

It was time to rebuild the economy from “the bottom up and the middle out,” the president said in his State of Union address. To wring some of the inequality out of the system, he offered a plan that would have raised taxes on those at the top while investing trillions in child care, elder care, housing, education, climate, and more. For a while, Congress seemed poised to act on a $3.5 trillion package.

And then this happened.

Senator Manchin (D-WV) refused to vote for a package that wasn’t “fully paid for,” while Senator Sinema (D-AZ) refused to vote for the sweeping tax hikes that Biden insisted were necessary to “pay for” the spending. I wrote about the whole saga at length last year.

Anyway, the media teased us (again) last week, reporting that constructive negotiations with Senator Manchin were underway and democrats might yet pass portions of what was once part of the Build Back Better agenda. And then Lucy yanked the football once again.

As Washington Post columnist Greg Sargent reported on Friday:

This will surprise only people who haven’t paid even cursory attention to the last year of Democratic politics, but Sen. Joe Manchin III may have just killed any hopes for a resuscitated version of the Democratic agenda.

The West Virginia Democrat reportedly told party leaders late Thursday that he won’t support any new incentives to combat climate change or any new tax hikes on corporations or the wealthy.

So there you have it. The pitchforks aren’t coming. At least not the way some had expected. The top marginal tax rate isn’t going back up to 39.6 percent. We are not going to tax capital gains at the same rate as ordinary income. The corporate income tax rate isn’t going up. We’re not ending the step-up-in-basis or closing the carried-interest loophole. There will be no “billionaire’s tax.” None of it is happening.

President Obama once told a room full of bankers that his administration was “the only thing standing between [them] and the pitchforks.” Today, there’s a tendency to paint Senator Manchin as the lone obstacle. But for that single missing vote, action on climate, prescription drugs, and more would sail through Congress with higher taxes to “pay for” it all. I doubt it.

I think Jonathan Chait is probably right about this:

A key faction of Democrats in the House, along with Senator Kyrsten Sinema, blanched at the tax hikes. Moderates have been privately coordinating their opposition, and it seems very likely that Manchin’s sudden opposition to raising taxes on the rich comes not from him, but from them — he sometimes takes the heat for fellow Democratic moderates. In this case, he is likely channeling their concerns and passing them off as his own.

Whether it’s Manchin or Manchin & Co., it’s looking bad for millions of Americans, the future of the democratic party, our democracy, and life on earth.

There’s a lot we can’t predict in life. But one thing is for sure. Climate change is an accelerant on inequality. Within a few decades, billions of people will be forced to migrate due to extreme weather, rising sea levels, and damaged ecosystems. Fires will continue to ravage communities, rivers will swallow more homes, heat-related deaths will mount, and food shortages will lead to mass starvation. That is not a world in which the pitchforks can be kept at bay.

We need to act now!

How Wealth Inequality Spiraled Out of Control

by Robert Reich

Wednesday, November 3, 2021

Elon Musk’s wealth has surpassed $200 billion. It would take the median U.S. worker over 4 million years to make that much.

Wealth inequality is eating this country alive. We’re now in America’s second Gilded Age, just like the late 19th century when a handful of robber barons monopolized the economy, kept wages down, and bribed lawmakers. 

While today’s robber barons take joy rides into space, the distance between their gargantuan wealth and the financial struggles of working Americans has never been clearer. During the first 19 months of the pandemic, U.S. billionaires added $2.1 trillion dollars to their collective wealth and that number continues to rise. 

And the rich have enough political power to cut their taxes to almost nothing — sometimes literally nothing. In fact, Jeff Bezos paid no federal income taxes in 2007 or in 2011. By 2018, the 400 richest Americans paid a lower overall tax rate than almost anyone else.  

But we can not solve this problem unless we know how it was created in the first place.

Let’s start with the basics.

I. The Basics

Wealth inequality in America is far larger than income inequality. 

Income is what you earn each week or month or year. Wealth refers to the sum total of your assets — your car, your stocks and bonds, your home, art — anything else you own that’s valuable.Valuable not only because there’s a market for it — a price other people are willing to pay to buy it — but because wealth itself grows. 

As the population expands and the nation becomes more productive, the overall economy continues to expand. This expansion pushes up the values of stocks, bonds, rental property, homes, and most other assets. Of course recessions and occasional depressions can reduce the value of such assets. But over the long haul, the value of almost all wealth increases.

Lesson: Wealth compounds over time.

Next: personal wealth comes from two sources.The first source is the income you earn but don’t spend. That’s your savings. When you invest those savings in stocks, bonds, or real property or other assets, you create your personal wealth —  which, as we’ve seen, grows over time. 

The second source of personal wealth is whatever is handed down to you from your parents, grandparents, and maybe even generations before them — in other words, what you inherit. 

Lesson: Personal wealth comes from your savings and/or your inheritance.

II. Why the wealth gap is exploding

The wealth gap between the richest Americans and everyone else is staggering.
In the 1970s, the wealthiest 1 percent owned about 20 percent of the nation’s total household wealth. Now, they own over 35 percent. 

Much of their gains over the last 40 years have come from a dramatic increase in the value of shares of stock. 

For example, if someone invested $1,000 in 1978 in a broad index of stocks — say, the S&P 500 — they would have $31,823 today, adjusted for inflation. 

Who has benefited from this surge? The richest 1 percent, who now own half of the entire stock market. But the typical worker’s wages have barely grown. 

Most Americans haven’t earned enough to save anything. Before the pandemic, when the economy appeared to be doing well, almost 80 percent were living paycheck to paycheck.

Lesson: Most Americans don’t make enough to save money and build wealth.

So as income inequality has widened, the amount that the few high-earning households save — their wealth — has continued to grow. Their growing wealth has allowed them to pass on more and more wealth to their heirs. 

Take, for example, the Waltons — the family behind the Walmart empire — which has seven heirs on the Forbes billionaires list. Their children, and other rich millennials, will soon consolidate even more of the nation’s wealth. America is now on the cusp of the largest intergenerational transfer of wealth in history. As wealthy boomers pass on, somewhere between $30 to $70 trillion will go to their children over the next three decades. 

These children will be able to live off of this wealth, and then leave the bulk of it — which will continue growing — to their own children … tax-free. After a few generations of this, almost all of America’s wealth could be in the hands of a few thousand families.  

Lesson: Dynastic wealth continues to grow.

III. Why wealth concentration is a problem

Concentrated wealth is already endangering our democracy. Wealth doesn’t just beget more wealth — it begets more power. 

Dynastic wealth concentrates power into the hands of fewer and fewer people, who can choose what nonprofits and charities to support and which politicians to bankroll. This gives an unelected elite enormous sway over both our economy and our democracy.

If this keeps up, we’ll come to resemble the kind of dynasties common to European aristocracies in the seventeenth, eighteenth, and nineteenth centuries.

Dynastic wealth makes a mockery of the idea that America is a meritocracy, where anyone can make it on the basis of their own efforts. It also runs counter to the basic economic ideas that people earn what they’re worth in the market, and that economic gains should go to those who deserve them.

Finally, wealth concentration magnifies gender and race disparities because women and people of color tend to make  less, save less, and inherit less.
The typical single woman owns only 32 cents of wealth for every dollar of wealth owned by a man. The pandemic likely increased this gap. 

The racial wealth gap is even starker. The typical Black household owns just 13 cents of wealth for every dollar of wealth owned by the typical white household. The pandemic likely increased this gap, too. 

In all these ways, dynastic wealth creates a self-perpetuating aristocracy that runs counter to the ideals we claim to live by.

Lesson: Dynastic wealth creates a self-perpetuating aristocracy.

IV. How America dealt with wealth inequality during the First Gilded Age

The last time America faced anything comparable to the concentration of wealth we face today was at the turn of the 20th century. That was when President Teddy Roosevelt warned that “a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power” could destroy American democracy.

Roosevelt’s answer was to tax wealth. Congress enacted two kinds of wealth taxes. The first, in 1916, was the estate tax — a tax on the wealth someone has accumulated during their lifetime, paid by the heirs who inherit that wealth. 

The second tax on wealth, enacted in 1922, was a capital gains tax — a tax on the increased value of assets, paid when those assets are sold.

Lesson: The estate tax and the capital gains tax were created to curb wealth concentration.

But both of these wealth taxes have shrunk since then, or become so riddled with loopholes that they haven’t been able to prevent a new American aristocracy from emerging.

The Trump Republican tax cut enabled individuals to exclude $11.18 million from their estate taxes. That means one couple can pass on more than $22 million to their kids tax-free. Not to mention the very rich often find ways around this tax entirely. As Trump’s former White House National Economic Council director Gary Cohn put it, “only morons pay the estate tax.”

What about capital gains on the soaring values of wealthy people’s stocks, bonds, mansions, and works of art? Here, the biggest loophole is something called the “stepped-up basis.” If the wealthy hold on to these assets until they die, their heirs inherit them without paying any capital gains taxes whatsoever. All the increased value of those assets is simply erased, for tax purposes. This loophole saves heirs an estimated $40 billion a year.

This means that huge accumulations of wealth in the hands of a relatively few households can be passed from generation to generation untaxed — growing along the way — generating comfortable incomes for rich descendants who will never have to work a day of their lives. That’s the dynastic class we’re creating right now.

Lesson: The estate tax and the capital gains tax have been gutted.

Why have these two wealth taxes eroded? Because, as America’s wealth has concentrated in fewer and fewer hands, the wealthy have more capacity to donate to political campaigns and public relations — and they’ve used that political power to reduce their taxes. It’s exactly what Teddy Roosevelt feared so many years ago.

V. How to reduce the wealth gap

So what do we do? Follow the wisdom of Teddy Roosevelt and tax great accumulations of wealth. 

The ultra-rich have benefited from the American system — from laws that protect their wealth, and our economy that enabled them to build their fortunes in the first place. They should pay their fair share. 

The majority of Americans, both Democrats and Republicans, believe the ultra rich should pay higher taxes. There are many ways to make them do so: closing the stepped up basis loophole, raising the capital gains tax, and fully funding the Internal Revenue Service so it can properly audit the wealthiest taxpayers, for starters. 

Beyond those fixes, we need a new wealth tax: a tax of just 2 percent a year on wealth in excess of $1 million. That’s hardly a drop in the bucket for centi-billionaires like Jeff Bezos and Elon Musk, but would generate plenty of revenue to invest in healthcare and education so that millions of Americans have a fair shot at making it. 

One of the most important things you as an individual can do is take the time to understand the realities of wealth inequality in America and how the system has become rigged in favor of those at the top — and demand your political representatives take action to unrig it. 

Wealth inequality is worse than it has been in a century – and it has contributed to a vicious political-economic cycle in which taxes are cut on the top, resulting in even more concentration of wealth there – while everyone else lives under the cruelest form of capitalism in the world. 

We must stop this vicious cycle — and demand an economy that works for the many, not one that concentrates more and more wealth in the hands of a privileged few. 

Off the Top of My Head

Americans Getting Tired of All the Delays

by John Lawrence

Shit or get off the pot. Politicians of both parties are going round and round ad infinitum. A couple of Democrats are helping Republicans with their policy of making Joe Biden spin his wheels until they can take over again. They talk and talk or they don't even do that since they can't even vote in the Senate to debate something. Gridlock, political constipation and never-get-anywhereism. They just are not doing their job. They're letting 2 conservative Democrats control the party's agenda. Republicans are very pleased. They are carrying the Republicans' water. They will be even more pleased if Joe Biden gets nothing done other than what he's already accomplished which is considerable. Mitch McConnell wants to defeat Biden's entire agenda. Republicans are only too happy to sit back and let Manchin and Sinema do their dirty work. Meanwhile, China surges ahead not being restrained by any of these problems. After they delay and delay, they will be going on vacation for the August recess. They don't deserve a recess. They are proceeding at a glacial pace, and then finally they will have a vote which will not have enough Republican support to pass.

C'mon, guys. You're living in the pony express days. This is the age of computers. Expedite. Expedite. Don't spend so much time dialing for dollars. You can work remotely during your recess. These guys are overpaid for what they do, and then what they do doesn't amount to much. Juneteenth is a federal holiday. Clap. Clap. Symbolism is about as far as bipartisanship can go. MSNBC reported:

"Mitch McConnell's come under a lot of criticism for saying, at one point, he wanted to make sure that Barack Obama was a 'one-term president,'" [Wyoming Senator John] Barrasso said last Thursday at an event hosted by the Ripon Society, a centrist Republican think tank, which posted the remarks Tuesday. "I want to make Joe Biden a one-half-term president."

Problem with American Democracy: No sooner has one administration been elected, Republicans are getting ready for the next one in which they hope to regain power. So of necessity they have to do everything they can to make the current administration fail. No thoughts of doing something for the American people. It's all about defeating Democrats who just might do something constructive for the American people. Then when the Republicans get in power, they will reduce taxes on the rich which is about all they can think about doing, and they will do this without any worries or concerns about "pay fors." But anything Democrats want to do has to be covered by "pay fors."

Modern Monetary Theory explains that the US government doesn't need to tax before it can spend. The way the system works is that the Federal Reserve puts enough money into the US Treasury's account to cover any payments the US government has to make whether or not there is tax money to pay for it. The only thing to be concerned about is inflation if too much money in the economy is chasing too few goods and services or if enough human resources aren't available to soak up the spending. Most politicians are still living in the world that the US needs to tax before it can spend. They are totally ignorant in this regard. They don't know how the system actually works. The US has a sovereign currency. Therefore, it can never go bankrupt. It does not have to borrow money in the capital markets and pay the going rate of interest. It sets the interest rate on US debt. If no entity wants to buy US debt it ends up on the Fed's balance sheet where it can remain indefinitely. It never has to be paid off.

Forget about competing with China. The Chinese are running circles around the US because they don't have to deliberate ad nauseum before they act. They don't have to argue with states about states' rights. They don't go on August recess for a month when no work gets done. The US law stipulates that “unless otherwise provided by the Congress,” both Houses must adjourn no later than July 31 each year or the first Friday in August that occurs 30 days before the first Monday in September, until the second day after Labor Day. How many American get the entire month of August off?

The Wealth Supremacists

by Robert Reich

Wednesday, June 9, 2021

ProPublica’s bombshell report on America’s super-wealthy paying little or nothing in taxes reveals not only their humongous wealth but also how they’ve parlayed that wealth into political power to shrink their taxes to almost nothing.

Jeff Bezos, the richest man in America, reportedly paid no federal income taxes in 2007 and 2011. Elon Musk, the second richest, paid no taxes in 2018. Warren Buffett, often ranking number 3, paid a tax rate of 0.1 percent between 2014 and 2018.

The real scandal is it’s legal.

Wealth and power are inextricably connected. The super-rich have bought armies of lobbyists to keep their taxes miniscule and to create and maintain tax loopholes large enough to drive their Lamborghini’s through.

The loopholes are tougher than kryptonite. Remember the notorious “carried interest” loophole that almost every presidential candidate over the last five elections has promised to close? It’s still there.

The armies of the wealthy also prevent any major changes in the system that might threaten their wealth, such as a wealth tax, stronger unions, or tougher antitrust.

American democracy is being attacked from two directions right now – from the white supremacist followers of Donald Trump who are suppressing votes, and from the wealth supremacists who are bribing lawmakers with campaign contributions.

Some of the wealth supremacists are quietly bankrolling the white supremacists (see: Koch network, US Chamber of Commerce, Trump and his business boosters), because their mutual enemy is democracy.

A few weeks ago, hundreds of US corporations and CEOs lent their names to a two-page ad in the New York Times and Washington Post in support of voting rights.

It turns out many of these companies and CEOS are also members of the US Chamber of Commerce, the powerful Washington business lobby that recently put out a “key vote alert” against the For the People Act – designed to protect voting rights from state laws suppressing votes as well as the from the moneyed interests buying votes.

The hypocrisy is running thicker than ever. Corporate public relations departments put out noble statements while corporate legislative departments continue to put out legislative bribes. Billionaires like Warren Buffett publicly advocate higher taxes while privately paying almost zilch.  

The For the People Act targets both white supremacists and wealth supremacists, which is why it’s hugely popular with the public but is running into roadblocks even among Senate Democrats.

This is the fight of our time.

Off the Top of My Head

The Infrastructure Bill and How to Pay for It Are Two Separate and Distinct Issues That Have Nothing to Do With Each Other

by John Lawrence

We know that the US government does not have to tax in order to spend since the US has a sovereign currency (See Modern Monetary Theory), and the Federal Reserve can just place the requisite amount of money for the infrastructure bill in the Treasury's account at the Fed. The problem is that, according to US law, if there is not enough money in the Treasury's account to pay for stuff, it must issue and sell Treasury bonds to make up the difference. These bonds then contribute to the deficit which is added to the national debt. We also know that the national debt never needs to be paid off, but Treasury bonds do need to be paid when the holder asks for the money when they come due. In addition interest does need to be paid on them. If the Fed keeps the interest rate for Treasuries at zero, this is not a problem. So why would anyone purchase Treasury bonds if they get zero interest? Well, countries that peg their currencies to the dollar (like China) need dollars in order to conduct business. Besides if someone comes to them with a basket full of renminbi and asks for US dollars, they have to be able to pay them the dollars and accept the renminbi. So there is always a market for US Treasury bonds. Even if there wasn't, the Fed would end up purchasing them and taking them onto its balance sheet where they would essentially disappear into a black hole never having to be paid back.

So what is the problem with just having the Fed create the money and place it in the Treasury's account without "paying for" it with taxes. No problem really. Joe Biden just wants to kill two birds with one stone. The first bird is the money for infrastructure. The second bird is doing something about the widening economic inequality by taxing the rich. There is no actual need to issue Treasuries in the first place except that US law requires it. The money could just go directly on the Fed's balance sheet without the intermediate step of selling Treasuries. There are however some good reasons for not taking too much advantage of this possibility. One is inflation. As more money floods into the economy through deficit spending, inflation could heat up whether or not the money comes from taxes. The other issue is that as other countries accumulate more and more Treasury bonds with or without interest being paid on them, they start to have the ability to use those dollars to purchase US assets. It's not inconceivable that a particular country - let's say China - couldn't accumulate enough Treasuries to buy up cities.

New York City has the most valuable real estate in the U.S. at $2.8 trillion — slightly more than the entire GDP of the United Kingdom for 2019. In fact, this is greater than the GDP of all but just five countries — India, Germany, Japan, China and the United States. The value of New York is comparable to the combined market value of tech giants Apple and Microsoft. China owns about $1.1 trillion in US Treasuries. If they demanded it all tomorrow, the Fed would have no problem paying them, but then they could buy up more than a third of New York City or almost all of San Francisco valued at $1.3 trillion. This could eventually become a problem so it would be better not to even make up the difference by issuing Treasuries in the first place. The alternative is for the Fed just to create the money and place it in the Treasury's account as authorized by Congress without the Treasury having to sell bonds to make up the difference between the amount of taxes and the amount of the authorization.

Then the issue becomes inflation. There is already wage inflation as employers are forced to pay more for employees, for a number of reasons, thus raising the price of products and services. This is "good" inflation since wage earners have not seen an increase in their income for 40 years. There is also "bad" inflation in that the increasing wealth of the upper 10% , and especially the upper 1%, is causing asset inflation in terms of the increasing cost of real estate and rent. Asset inflation is also happening in the stock market although it's hard to see how this is a bad thing except for the fact that about 50% of the people don't own stocks so that gap between rich and poor is only increasing. The third form of inflation occurs when there is too much money chasing too few goods and services. This could be caused by too much deficit spending. The fourth kind is the "super bad" inflation known as hyperinflation. This is the kind of inflation that affected the Weimar republic in Germany before the Second World War and also affects poor countries. It also recently affected Greece because Greece gave up its sovereign currency when it adopted the euro. Hyperinflation occurs when a country needs to borrow money from the capital markets subject to increasing interest rates. As their economy declines interest rates go up until finally they are paying more in interest than their economies can keep up with. The US can never be put in this position since it never has to go to the capital markets to borrow money. The Federal Reserve can just issue whatever money is needed and can set its own interest rate since the US dollar is a sovereign currency.

So while there are limits to the amount of prudent deficit spending, one of them is not paying for it through taxes. The US Federal government never has to tax in order to spend. It can pass a bill to build infrastructure with the only limitation being the physical and material resources that are available to do it.

https://www.cnbc.com/video/2019/03/01/stephanie-kelton-explains-modern-monetary-theory.html

 

Off the Top of My Head

How to Pay For Infrastructure

by John Lawrence

Modern Monetary Theory (MMT) points out that neither social programs nor tax cuts need to be "paid for." A government such as the US with a sovereign currency can issue the money without having to tax first. Taxes are only necessary to control inflation. The biggest amount of inflation in the economy right now is the inflation of billionaires' wealth assets because their increases in wealth are not taxable. The IRS only taxes workers' incomes, not billionaires increasing asset wealth. That's why economic inequality is growing by leaps and bounds, and we need a wealth tax. But as for infrastructure, the Fed can just create the money in the Treasury's account at the Fed with a few keystrokes on a computer like it did when it bailed out Wall Street in 2008.

In The Deficit Myth, Stephanie Kelton writes (circa 2015):

"No one [on Capitol Hill] questioned the significant need for infrastructure investment. A trillion dollars, while ambitious, would have only taken a bite out of the problem. No one blanched at the price tag, but there was considerable debate about whether (and how) to pay for it.

"Before I tell you about that debate, it's important to understand what those words mean to lawmakers and their staffers on Capitol Hill. In truth, there is only one way to pay for anything. All federal spending is carried out in exactly the same way - that is, the Federal Reserve credits the appropriate bank account(s). But in Washington speak, you "pay for" your spending by showing that you can "find" enough money to cover the cost of whatever it is you're proposing to spend. It's all a game, really, and it's rooted in the flawed mental model [that the government needs to tax and/or borrow before it spends] that holds back so much of our potential. To avoid adding to the deficit, lawmakers look for ways to cover the costs of their proposed spending without borrowing. That means they usually go looking for new tax revenue."

As Kelton points out, the US doesn't need to tax before it can spend. Biden's wanting to pay for infrastructure by taxing the rich is not necessary to pay for infrastructure per se, but it is necessary to get unbounded economic inequality under control.

Kelton continues:

"So back to the debate over the trillion-dollar infrastructure ill. The conversation began with staffers being asked whether we thought a so-called pay-for should be attached to the bill. It was my first week on the job, so I was relieved when another staffer spoke up first. "No," this person began, "I think we should just do it as a clean bill." A clean bill meant writing a spending bill that didn't include any language abut how to pay for it. Another staffer agreed, and soon I echoed their sentiments. Our country desperately needed to make these investments. There was clearly enough fiscal space to do it, and infrastructure is one of the things that has traditionally enjoyed bipartisan support. Since the GOP was in control of the Senate, we reasoned, the bill would need at least some support from Republicans to pass. [Ha. Ha] Proposing a tax increase would guarantee defeat. Not everyone agreed. Another staffer objected that the press wouldn't take the legislation seriously unless it specified exactly how it would be paid for. In the end, the bill included a proposal to raise revenue by closing a variety of tax loopholes that overwhelmingly benefit the rich. Needless to say, the legislation did not pass. Meanwhile, the latest ASCE [American Society of Civil Engineers] report card shows how deferred maintenance is catching up with us, as the cost of our needed improvements has climbed to a whopping $4.59 trillion."

Is it deja vu all over again? Is it gridlock or spinning our wheels as infinitum? Is it Republicans thinking it is more important to defeat Obama's and now Biden's agendas than it is to prevent bridge collapses?

Kelton's point is that the US doesn't really need to "pay for" anything by taxing first or finding the money first. "In 2017, a 1215-page bill, known as the National Defense Authorization Act, sailed through the Senate with a vote of 89-9. The White House had requested $700 billion, but the Senate had authorized $737 billion, kicking in another $37 billion without hint of concern about where to "find" the money. They simply voted in an overwhelmingly bipartisan way to increase the Pentagon's discretionary budget."

Yet the Pentagon budget has not protected us from international ransomware attacks nor domestic terrorists. May I submit that the money is misspent and misdirected? Instead of going where the money is really needed it goes to the vested interests in the military-industrial complex who continue to justify war in order to line their own pockets.

Kelton continues: "That might seem like a double standard. As Congresswoman Alexandria Ocasio-Cortez put it, "We write unlimited blank checks for war. We just wrote a $2 trillion check for the GOP tax cut, and nobody asked those folks, 'How are they going to pay for it?' She's right. Somehow, there's always money for war and tax cuts. For just about everything else, however, lawmakers are expected to show that they can "pay for" their spending."

As MMT has shown, the US government does not need to tax or borrow in order to spend. Taxation is necessary to control inflation, to extract money from the economy if there is too much of it out there chasing too few goods or services. Right now there is too much money out there in the hands of billionaires that should be extracted in order to prevent runaway financial inequality. But it is not necessary to tax before money can be spent on infrastructure or anything else. There are limits, and the limits are the material and human resources that are available to soak up that money by providing constructive economic activity like building infrastructure. Hyperinflation like what happened in the Weimar Republic or even Greece cannot happen in the US because the US never has to go to the capital markets to borrow money at prevailng interest rates. The US central bank, the Fed, issues whatever money is necessary to pay US bills and that includes any money appropriated by Congress whether for war, tax cuts or building infrastructure.

https://www.youtube.com/watch?v=a9pAPIUYXxQ

 

'Biggest Tax Story of the Year, If Not the Decade': Analysis Shows Just How Little Richest .001% Pay in Taxes

Bill Gates and Warren Buffett speak at an event organized by Columbia Business School on January 27, 2017 in New York City. (Photo: Spencer Platt/Getty Images)

 

"The personal federal tax bill for the top 25 in 2018: $1.9 billion. The bill for the wage earners: $143 billion."

Jake Johnson, staff writer

June 8, 2021

A first-of-its-kind analysis of newly disclosed Internal Revenue Service data shows that the richest 25 billionaires in the United States paid a true federal tax rate of just 3.4% between 2014 and 2018—even as they added a staggering $401 billion to their collective wealth.

"Many will ask about the ethics of publishing such private data. We are doing so—quite selectively and carefully—because we believe it serves the public interest in fundamental ways, allowing readers to see patterns that were until now hidden."
—Richard Tofel & Stephen Engelberg, ProPublica

Published Tuesday by the investigative nonprofit ProPublica—which obtained a sprawling cache of IRS data on thousands of the nation's wealthiest people dating back 15 years—the analysis takes aim at "the cornerstone myth of the American tax system: that everyone pays their fair share and the richest Americans pay the most."

"Our analysis of tax data for the 25 richest Americans quantifies just how unfair the system has become. By the end of 2018, the 25 were worth $1.1 trillion," ProPublica notes. "For comparison, it would take 14.3 million ordinary American wage earners put together to equal that same amount of wealth. The personal federal tax bill for the top 25 in 2018: $1.9 billion. The bill for the wage earners: $143 billion."

"Many Americans live paycheck to paycheck, amassing little wealth and paying the federal government a percentage of their income that rises if they earn more," the outlet adds. "In recent years, the median American household earned about $70,000 annually and paid 14% in federal taxes."

The new analysis juxtaposes the recent wealth gains of U.S. billionaires—as estimated by Forbes—with the information in the newly obtained IRS data to derive the "true tax rate" paid by the mega-rich.

The results show that Amazon CEO Jeff Bezos—the world's richest man—and Berkshire Hathaway CEO Warren Buffett paid a true tax rate of 0.98% and 0.10%, respectively, between 2014 and 2018. In 2007, ProPublica notes, Bezos paid nothing in federal taxes even as his wealth grew by $3.8 billion.

Economist Gabriel Zucman, a professor at the University of California, Berkeley, said the ProPublica reporting is "full of incredible findings."

"Looks like the biggest tax story of the year, if not the decade," Zucman added.

ProPublica makes clear that, far from being the beneficiaries of a sprawling, illegal tax dodging scheme, "it turns out billionaires don't have to evade taxes exotically and illicitly—they can avoid them routinely and legally," a point that spotlights the systemic inequities of the U.S. tax system.

As the outlet explains:

Most Americans have to work to live. When they do, they get paid—and they get taxed. The federal government considers almost every dollar workers earn to be "income," and employers take taxes directly out of their paychecks.

The Bezoses of the world have no need to be paid a salary. Bezos' Amazon wages have long been set at the middle-class level of around $80,000 a year.

For years, there's been something of a competition among elite founder-CEOs to go even lower. Steve Jobs took $1 in salary when he returned to Apple in the 1990s. Facebook’s Zuckerberg, Oracle's Larry Ellison, and Google's Larry Page have all done the same.

Yet this is not the self-effacing gesture it appears to be: Wages are taxed at a high rate. The top 25 wealthiest Americans reported $158 million in wages in 2018, according to the IRS data. That's a mere 1.1% of what they listed on their tax forms as their total reported income. The rest mostly came from dividends and the sale of stock, bonds, or other investments, which are taxed at lower rates than wages.

To illustrate the consequences of a system that doesn't tax unrealized capital gains, ProPublica cites the example of Bezos' $127 billion explosion in wealth between 2006 and 2018. The Amazon CEO "reported a total of $6.5 billion in income" during that period and paid $1.4 billion in personal federal taxes—a 1.1% true tax rate.

"America's billionaires avail themselves of tax-avoidance strategies beyond the reach of ordinary people," ProPublica notes. "Their wealth derives from the skyrocketing value of their assets, like stock and property. Those gains are not defined by U.S. laws as taxable income unless and until the billionaires sell."

Richard Tofel, ProPublica's founding general manager and outgoing president, said Tuesday that he considers the tax analysis "the most important story we have ever published."

"In the coming months, we plan to use this material to explore how the nation's wealthiest people—roughly the .001%—exploit the structure of our tax code to avoid the tax burdens borne by ordinary citizens," Tofel and ProPublica editor-in-chief Stephen Engelberg wrote in a separate article Tuesday. "Many will ask about the ethics of publishing such private data. We are doing so—quite selectively and carefully—because we believe it serves the public interest in fundamental ways, allowing readers to see patterns that were until now hidden."

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Our work is licensed under Creative Commons (CC BY-NC-ND 3.0). Feel free to republish and share widely.

Off the Top of My Head

Joe Biden's Trillion Dollar Budget Plan

by John Lawrence

Don't worry about how to pay for it. Any nation with a sovereign currency (let alone the world's reserve currency) and a floating exchange rate can never go bankrupt. The Federal Reserve can issue the money. In fact in the real world this is exactly how it works for any budgetary legislation passed by Congress and signed by the President. Let's say, for example, Biden's $2 trillion infrastructure plan is signed by him into law. The US Treasury has an account at the Federal Reserve bank. Let's say there is only a trillion dollars in that account. What happens next is that the Fed just augments the Treasury's account by a trillion dollars by means of a few keystrokes on a computer. Bingo the government now has all the money it needs to spend on infrastructure. It didn't have to receive tax money in advance of the money it needed to spend. At the same time the Treasury Department creates a trillion dollars worth of Treasury bonds and sells them to the primary dealers who are required by law to buy them. These are mainly big Wall Street banks. These banks sell the bonds in the secondary market. If they can't find enough buyers, the Fed "adds liquidity to the market" by taking the Treasuries onto its balance sheet in return for marking up the Wall Street banks accounts at the Fed with the appropriate amounts of cash. Now everybody is happy. The US government has the money it needs in its Treasury's account at the Fed. The Wall Street banks have plenty of liquidity in their reserve accounts at the Fed, and the amazing thing is that it didn't require any money from additional taxes.

Another amazing thing is that most politicians are totally ignorant about how government financing actually works. The Republican Governor of Ohio, Mike DeWine gets on TV and opines about the fact that the US is going into too much debt and how will our grandchildren ever pay it off. "Here in Ohio," I'm paraphrasing," we have to pay our bills and pay down our debts. Every household has to be fiscally responsible and pay their debts." Well households and states are in a different category from the Federal government. They actually do have to pay their debts. So what he is claiming is a half truth. States and households cannot issue a sovereign currency whereas the Federal government can. States and households use the Federal government's currency. The big lie, however, is that the US government has to pay off its debts. It never does, and no entity can force it to do so. The other constraint that Larry Summers and others worry about is inflation or currency devaluation. Inflation could be a problem, and that problem, should it arise, can be dealt with by sucking money out of the economy by means of taxes. Biden's plan to tax the rich will suck some of their superfluous wealth out of the economy thus forestalling inflation while tending to reduce the runaway economic inequality that is now threatening democracy in the US.

The Federal government is not like a household or a state. Households and states actually do have to pay back the money they borrow plus interest. That's why it's so important that the various COVID rescue plans provide the states and municipalities with money. Otherwise, they could become financially insolvent and go bankrupt like Orange County in California did a few years ago. Birmingham, AL also got itself in hot water and went bankrupt. Countries in the Euro zone have the same problem as states in the US. They gave up their sovereign currencies when they joined the EU. So now countries like Greece and Italy have to beg the European Central Bank for relief, relief they could have provided for themselves if they had retained their sovereign currencies like Britain did. Britain will not have any problem with financial shortages because, like the US, its government can issue whatever currency is deemed necessary to weather any storm.

So in addition to the Big Lie that Trump won the election, politicians of both parties are perpetrating another Big Lie that the US actually has to borrow the money to pay for Biden's trillion dollar infrastructure and safety net programs. Some politicians, like Bernie Sanders and AOC, actually know the truth, and, evidently, they have convinced Joe Biden thereof as well although they won't actually come out and say it to the media: the US government can just issue money into the private economy. It doesn't need to borrow it or even tax for it in advance in order to spend. So the real policy of the Biden administration is not tax and spend. It's spend and maybe tax later, but target those taxes on the wealthiest among us. As opposed to the Republican philosophy of giving tax breaks to the wealthy and taking the social safety net away from the poor.

Off the Top of My Head

The Caring Component of Biden's Infrastructure Plan

by John Lawrence, April 6, 2021

It's about time that the need for a caring infrastructure is addressed. Caring used to be supplied almost entirely by wives when wives didn't work outside the house. However, they did considerable work inside the house caring for children, sick relatives and elders in addition to taking care of their husband's needs. Now that most wives are required by economic necessity to work outside the home, there is a need for child care for young children not old enough to attend school. There is a need for pre-K education plus babysitting services. Older family members have special needs for care giving as well. Who is to provide for this if wives are in the work force? Rich people can pay tuition for pre-K and child care as well as hiring caregivers for older relatives or paying for senior living facilities. For poorer people, wives have to do all this themselves in addition to working to provide income for the family.

That's why Biden's initiatives provides for a caring infrastructure. However, it is insufficient. The Guardian reported:

Just as our physical infrastructure is crumbling and requires substantial reinvestment in a 21st-century economy, our care infrastructure is fundamentally broken. As the only industrialized country in the world without a national paid family and medical leave program, only 17% of our people have paid family leave through their employers. Hundreds of thousands face daunting waitlists for essential home care. Childcare is the highest household expense for families in much of the United States. And the median annual pay of childcare and home care workers is $25,510 and $17,200, respectively, leading to high turnover and reliance on public assistance.

In the past most elderly people on Medicaid that needed care giving were forced into institutional care like nursing homes. There was no comparable funding level that provided care givers for people to stay in their own homes. Biden's care infrastructure corrects this anomaly by providing money for care givers to provide care outside of nursing homes and other institutions. However, the limitation is that people who qualify for either nursing homes or home care must be on Medicaid. Basically, this means that they have no assets. They could stay in their own home only if they don't own it. If they owned it, that would be considered an asset that would disqualify them from being on Medicaid. So older people on Medicare, but not Medicaid would not qualify under Biden's "care infrastructure" initiative. People with assets like home ownership usually want to pass those assets on to their children. It represents the intergenerational transfer of wealth. That's how white people have built wealth over the generations whereas black people, who were by and large prevented from owning their own homes after WW II, are by and large renters.

Elderly renters are mainly poor people who live off of social security which hardly provides for a decent living much less the intergenerational transfer of assets once the person dies. Biden's pre-election agenda called for an uping of social security payments so that people could have a decent existence just based on social security alone. It also called for an increased amount of social security for people who had been on social security for 20 years, in other words, the really old. The Boston Globe reported:

A critical part of Biden’s campaign plan was not only raising funds for Social Security but also expanding the benefits to reduce poverty among elderly Americans. It would, for example, ensure that benefits for workers who were in the labor force for 30 years or more would be at least 125 percent of the federal poverty line. The oldest beneficiaries would also receive a bump to offset dwindling retirement savings, and widows and widowers would receive a 20 percent increase so that their Social Security benefits don’t get cut in half when their partner dies.

The reason that Biden didn't include this in his "caring infrastructure" initiative is that the cap on wages subject to the payroll tax would (in the minds of politicians) have to be raised to "pay for" it, and Biden has promised not raising taxes on anyone making less than $400,000 annually. Right now, payroll taxes that go toward funding Social Security are capped at the first $142,800 of a taxpayer’s income. First of all the social security trust fund is basically a hoax. Money is available for social security in the same way that money is available for COVID relief, infrastructure and even tax cuts. As Modern Monetary Theory points out, the Federal Reserve creates the money without the need of taxes to pay for it. The same is true for social security. But Biden did not want to complicate the discussion around his infrastructure plan so he left his plan for social security increases behind presumably to be brought up at a later date.

There is much talk about enlisting the help of Republicans for Biden's infrastructure initiative, but it is a not a secret that Republicans will help with nothing Democrats want to do. The working across the aisle thing is a loosely held fiction. Democrats know that they must pass all Biden's bills just with the slim Democratic majority. That gives Joe Manchin of West Virginia, the most conservative Democrat, enormous power. You can bet your booty that West Virginia will get more than their fair share of roads and bridges. He wants to not raise the corporate tax rate to 28% as Biden as suggested. Big deal! Again tax money is not required for government spending. The Federal Reserve just issues the money, and then the Treasury Department sells the bonds. What bonds can't be sold to individuals or foreign governments end up on the Fed's balance sheet. The deficit between money spent and tax money collected is irrelevant. Taxes are only relevant to reduce income inequality as long as they are targeted on the rich. The Fed controls the interest rate, and as long as it keeps it at about zero, the Federal government can keep the amount of money it spends on interest under control.

Off the Top of My Head

How to Throw Republicans for a Loop: Biden Should Propose Tax Breaks for the Middle Class and Tax Increases for the Rich

by John Lawrence, February 25, 2021

The proper use of taxation is to reduce income and wealth inequality. Instead Republicans use tax breaks to primarily benefit the rich. Democrats should modify this playbook. The increasing income and wealth inequality among American citizens cries out for redress. Robin Hood needs to come out and play. There's no law that says tax breaks have to go primarily to the wealthy or be based on some proportionate percentage over all incomes. Democrats should get into the tax break game too. We know that taxes aren't necessary to fund the government. Sure they're part of it, but the government can spend whatever Congress authorizes regardless of whether or not there is money from taxes to pay for it. The shortfall is made up with Treasury bonds most of which end up on the balance sheet of the Federal Reserve just like the Fed used Quantitative Easing (QE), a fancy name that signified that the Fed issued trillions of dollars to bail out the Wall Street banks in 2008. In that case the Fed took MBSs (Mortgage Backed Securities), most of which were worthless onto its balance sheet as "collateral." The Fed can lend money to any entity it likes as long as it takes collateral onto its balance sheet. Much of this collateral is worthless such as defunct MBSs and even old bicycles!

In the article, "Modern Monetary Theory and the Changing Role of Tax in Society," by Andrew Baker and Richard Murphy, published online by Cambridge University Press we find the following:

"Tax is traditionally viewed as the main funding mechanism for government spending. Consequently, social policy is often seen as something determined and constrained by tax revenue. Modern Monetary Theory (‘MMT’) presents a reversal of the tax-spend cycle, by identifying a spend-tax cycle. Using the UK as an example, we highlight that one of MMT’s most important, but under-explored, contributions is its potential to re-frame the role of tax from both a macroeconomic and social policy perspective. We use insights on the money removal, or cancellation function of taxes, derived from MMT, to demonstrate how this also creates possibilities for using tax to achieve social objectives such as mitigating income and wealth inequality, increasing access to housing, or funding a Green New Deal. For social policy researchers the challenge arising is to use these insights to re-engineer tax systems and redesign social tax expenditures (STEs) for creative social policy purposes."

MMT is a game changer. Conventional thinking is that government can only spend money collected from taxes. But that is not how the system really works. As a sovereign currency, the Fed can just create US dollars with a few keystrokes on a computer. The budget deficit and national debt just become accounting entries on the Fed's balance sheet. We are not mortgaging our children's and grandchildren's future. This is money that never needs to be paid back, that our children never need to pay back. China is not holding this debt over our heads; China could be paid back tomorrow if need be. The US government operates on a different set of principles than the US states, European countries in the Euro zone, and households. All these entities do need to pay back loans. The US government does not because it can just create or issue the money which is how the Fed operates on a daily basis. Even local banks create money when a loan is taken out without the need for deposits. They just have to have collateral - usually 10% of deposits - in their reserve account at the Fed. So money can just be created by the Federal Reserve, but, obviously, it does not do so willy nilly. Like alcohol, this facility must be used responsibly. So that is what the debate should be about, not the size of the deficit or the national debt.

The national debt was a problem when the US dollar was on a gold standard. The US promised to redeem dollars - paper currency - for gold up until 1971. Obviously, there was not enough gold if, all of a sudden, China, let's say, wanted to take all its US dollars and demand gold at $35 an ounce. But in 1971 President Nixon took the US off the gold standard. He said the US would forevermore not redeem US currency for gold. At that point the US dollar became a "fiat" currency. That means that a dollar was worth a dollar just because the US government said it was. The US dollar did not become immediately worthless. People continued to use it, and it continued to retain its value vis a vis other currencies. In fact it's the world's reserve currency as Nixon made a deal with the Saudis only to accept payment for oil in US dollars. That alone meant that the other countries of the world needed US dollars if for no other reason than to buy oil. As a matter of fact today most business dealings of foreign countries are settled in US dollars. So the US dollar has a bright future at least for now.

The conclusion is that US households, businesses, US states and European nations that use the Euro need to pay back loans when they borrow money. A nation with a sovereign currency such as the US, the UK, Japan, China and others creates its money when its central bank issues it by means of keystrokes. No one can demand repayment or exchange of dollars for gold or anything else. If China wants to be paid back for the Treasury bonds it holds, the money in its Treasuries (savings) account at the Fed will be debited and credited to its checking account at the Fed. It's as simple as that. That money can be exchanged for Chinese currency on the open market at the prevailing exchange rate. But probably the Chinese would want to keep much of their financial assets in dollars rather than renminbi since their currency is pegged to the dollar and many of their business dealings are settled in dollars.

Off the Top of My Head

Why Should Blue Collar Workers Have to Pay Taxes to Bail Out White Collar Student Loan Debt?

by John Lawrence

Short answer: There is no need for the Federal government to tax in order to spend. That has been demonstrated by Modern Monetary Theory. However, taxation, if imposed in order to fight inflation, needs to be imposed primarily on the rich and upper middle class, not on the poor or lower middle class. The smart thing for the Biden administration to do would be to decrease taxes on the lower middle class ^i.e. blue collar workers before 2022 thus drawing them away from the Trump camp. In general the American people need to be educated that deficits don't matter except just as accounting entries on the Fed's balance sheet. Biden's COVID relief initiative of $1.9 billion will not raise taxes nor will his follow-on trillion dollar initiative for the build-out of green infrastructure.

The question, "Can We Afford to Pay for the Green New Deal?" is equivalent to the question "Can We Afford to Pay the Costs of Avoiding Annihilation?". In the past we have been able to afford a massive build-up to pay for the Second World War. The climate challenge is the moral equivalent of war. If we lose this war we lose not just our freedom. We lose the habitability of the entire planet. Various attempts have been made to cost out the components of a Green New Deal. Green power generation and transportation are not sufficient in themselves to get to net zero carbon emission, but they are a start. As Bill Gates has pointed out in his recent book, How to Avoid a Climate Disaster, major industrial processes also generate much greenhouse gas emission. For instance, every ton of cement that is produced contributes one ton of carbon dioxide which goes into the atmosphere. Every ton of steel produced results in 1.8 tons of carbon dioxide emitted into the atmosphere, and every ton of plastics produced emits 1.3 tons of carbon dioxide. So it's not enough just to deal with green transportation (electric vehicles) and green power generation (solar and wind).

The cost of "greening" these industrial processes is pretty steep. Capturing carbon dioxide at the site of the manufacturing process is possible, but there is no cheap way to do it. Bill Gates is investing in promising start-ups and is counting on innovation to come up with new processes and materials which will not result in so much carbon dioxide being released into the air. Gates points out that we need to electrify every possible manufacturing process and make sure that all that electricity is generated cleanly. He advocates a new generation of nuclear power sources as wind and solar can not possible fill every energy need mainly because they are intermittent. Nuclear can fill the gap for consistent power generation when solar and/or wind are offline. Smart nuclear power which Bill Gates has been instrumental in developing would solve the problems encountered so far of explosion and what to do with nuclear waste. As a last resort Direct Air Capture of carbon dioxide from the air is possible but also costly.

What it all boils down to is this: we will need on the order of a trillion dollars a year for 10 years commitment to address climate change if we have a prayer for avoiding the worst consequences. What's more a lot of this commitment must be made in cooperation with China which is one of the worst polluters. Rivalry and even a Cold War must be set aside if the world is to avoid the worst outcome from global warming. India and China are building coal fired power generation plants at a rapid pace because coal fired power plants are so cheap comparatively and those countries are developing so quickly. It's not enough just to "green" the US. It has to be cooperation on a world wide basis. Competition has to be set aside and replaced by cooperation. The ownership of intellectual property is irrelevant when it comes to saving the planet.

A national budget for a Green New Deal shouldn't contribute to inflation since there are currently so many unemployed people available for work, and particularly because so many of the small businesses that were lost during the pandemic are not coming back. Also further robotizing of manufacturing processes will eliminate whatever blue collar workers are left working in those fields. In World War II there was some postponement of consumption in order to fight inflation. That may be necessary for the moral equivalent of war which the Green New Deal represents. If so, workers in certain nonessential industries may have to be repurposed and retrained for industries involved in combating climate change.

Off the Top of My Head

Mitch McConnell: "Loony Lies and Conspiracy Theories are Cancer for Republican Party"

by John Lawrence, February 3, 2021

Now even the leader of the Senate Republicans is admitting the Republican party is a joke. They've got nothing besides idol worship and rabbit holes. What do they stand for? White supremacy, bellicose machoism, xenophobia and solipsism masquerading as the American Dream. They stand for nothing except greasing their own palms and staying in power. McConnell at least and a few other principled Republicans like Liz Cheney, Mitt Romney and John Kasich actually are trying to reconstruct the Republican party based on conservative principles. Their problem is that their base is a bunch of wahoos that can't get enough of being entertained by Donald Trump or Marjorie Taylor Greene. Fantasy trumps reality for them.

The point is that in realistic terms the Republican party has nothing to offer. In a world that cries out for cooperation among great powers, they stand for bellicose machoism and bullying. In world where private enterprise is incapable of solving major outstanding problems like climate change and the pandemic, their emphasis on small government falls flat. In a world where it is becoming clear that taxes alone are not necessary for government spending, their pejorative negative hurled at Democrats - "tax and spend" - is meaningless. Their attempts at pulling the wool over Americans' eyes are becoming dispelled. Their fiscal policies have only served to increase economic inequality - to make the rich richer and the poor poorer. So what have they got? A base composed of looney tunes and no nothings and a head composed of the rich and powerful. It doesn't compute.

Republicans want to hearken back to a nostalgic past where black lives didn't matter, white people occupied all positions of prominence, Native Americans were extras in western movies and the concept of global warming had not even been formulated and was not on anybody's radar. They want things like they used to be. Well a lot has changed since then, whatever your definition of "then" is.  Forever wars are draining government finances that could be used in more productive ways. Global warming needs a MEOW solution - the Moral Equivalent of War. This calls for a large amount of government spending. It is becoming more evident, thanks to the exposition of Modern Monetary Theory, that the US government can never run out of money because the US dollar is a sovereign currency which can be created by a few keystrokes at the Fed. Even regular banks create money when they loan money for mortgages, auto loans etc. They don't need to have deposits before they make loans. It's called fractional reserve banking, and it's backed up by the US central bank, the Federal Reserve, which clears checks and is the loaner of last resort.

Government spending should not, however, represent fiscal profligacy or imprudence. The government should spend money responsibly which it has not been doing with spending on forever wars and tax breaks for the rich. IMHO Republican supported government spending has not been responsible spending. Fiscal conservatism should mean that money should solve actual problems and make the lives of most Americans better. So if Republicans want to be the party of fiscal conservatism in the future, they should be concerned that deficit spending does not lead to inflation or deflation, rather than just minimizing government spending other than on defense and tax breaks. Let's see if Republicans want to reformulate themselves on responsible terms or do they just want to continue to be the party of the rich.

Off the Top of My Head

The Republican Game Plan is No Mystery: Obstruct Democratic Attempts to Help the Poor and Middle Class

by John Lawrence, January 24, 2021

The Washington Post article said it best: Right on schedule, Republicans pretend to care about deficits again. When they are in power, they run up the deficit by giving tax breaks to the rich. When Democrats are in power, they use the filibuster if necessary to deny Democrats any success in helping the American people who need help the most. They are deficit hawks, supposedly, but only when Democrats are in power. Knowing how this game operates by now, Democrats are prepared to do whatever is necessary to thwart it. The main tool at their disposal to get the COVID relief package passed is budget reconciliation which escapes the filibuster and only requires a majority vote in the Senate, exactly what Republicans have used to get their tax cuts passed. It seems clear that what the Republican party really stands for is aiding and abetting the rich while denying financial help and opportunities to the poor.

Even conventional economists like Larry Summers advocate for more Federal spending since interest rates are low. "We note that in a world of unused capacity and very low interest rates and costs of capital, concerns about crowding out of desirable private investment that were warranted a generation ago have much less force today. We argue that debt-to-GDP ratios are a misleading metric of fiscal sustainability that do not reflect the fact that both the present value of GDP has risen and debt service costs have fallen as interest rates have fallen." His point is, since interest rates are near zero, the US debt is not going to increase much as a result of paying interest on Treasury bonds. Furthermore, pump priming to get the economy up to full capacity as quickly as possible results in more taxes being collected by the Federal government which lowers deficit spending. Also, since the Fed sets interest rates, it can keep them at zero.

Furthermore, the piece de resistance is that in the final analysis deficits don't matter. The US Federal government can never run out of money since the US dollar is a sovereign currency. It can just be created by a few keystrokes on a computer by the Federal Reserve as it was when trillions of dollars were created to bail out the big banks. It is the same process that is used when the Federal government needs money. Instead of the Fed creating the money and moving it into the accounts of the big banks at the Fed, the money is created and moved into the account of the US Treasury which also exists at the Fed. This is the process that takes place when the amount of Federal government spending exceeds the amount the Federal government takes in from taxes. Republicans know this because of the $2 trillion that was created this way due to the Trump tax cuts.

So Republicans basically are lying to the American people as they have done so many times before when they pretend that money is not available to accelerate the COVID response or to provide relief to the American people or to rebuild infrastructure or to combat climate change. They are deluding the public. Democrats need to reeducate the American people about how the economy really works. Government debt just ends up on the Fed's balance sheet the same way that the trillions to bail out the big banks ended up on the Fed's balance sheet. Since the US dollar is a sovereign currency, there is never a need to pay it off. The US can never be in a situation of dependency on China or Japan or be constrained to pay off the Treasury bonds that they own since they could be paid off tomorrow again by a few keystrokes if necessary by moving money to their accounts at the Federal Reserve. Modern Monetary Theory has unmasked the way that the US economy really works in terms of how the US currency is created or destroyed by the US central bank - the Federal Reserve. In her book The Deficit Myth, Stephanie Kelton details this process.

So are there limitations on the creation of money by the Fed. Of course, but, as long as there is unused productive capacity in human or material terms, deficit spending can benefit not only the economy in general in terms of increasing GDP, but it can benefit the actual lives of people who are suffering because of food insecurity, rent and mortgage insecurity, health care insecurity, crumbling infrastructure and a desire to save the planet as a habitable place to live for their grandchildren. As the article points out, "the greater risk now, as Federal Reserve Chair Jerome H. Powell and others have warned in recent months, is that policymakers will do too little, rather than too much, to prevent permanent damage to the country’s productive capacity."  Janet Yellen, U.S. President-elect Joe Biden’s nominee to run the Treasury Department and former Fed Chairman, has also said that the government must “act big” with its next coronavirus relief package. So do Fed Chairmen and current and former Treasury Secretaries know more than Republican hacks who are spewing deficit hawk propaganda? You bet they do. They know how the relationship between the Fed and the US Treasury actually works. And it works how Stephanie Kelton outlines in her book.

Off the Top of My Head

Which is better: A Universal Basic Income (UBI) or a Government Job Guarantee (JG)?

by John Lawrence, January 22, 2021

Modern Monetary Theory (MMT) favors a JG where the government is the employer of last resort employing people that the private economy cannot accommodate. Now Larry Summers, Secretary of Treasury for Clinton, is coming around to the MMT view. Especially now when there is so much work that needs to be done (infrastructure, renewable energy) and so many idle workers, a JG makes much sense. One might ask where will the money for this come from? Answer: from the same place it came from for Reagan's $100 billion tax cuts, Bush 1's $125 billion tax cuts, Bush 2's $1.2 trillion tax cuts and Trump's $1.5 trillion tax cuts, all of which benefited the rich a lot more than they benefited the poor. Surprisingly, MMT maintains that government spending whether in the form of tax cuts or government programs benefit the private sector economy whether or not they are "paid for" out of tax receipts. Since the US dollar is a sovereign currency, the Federal Reserve can just create the money by a few keystrokes on a computer and move it into the US Treasury's account at the Federal Reserve. This process does not depend on tax receipts or money generated from the sale of Treasury bonds.

Either way - tax cuts or government programs - benefits the private economy. It's just that tax cuts benefit the rich more and government programs benefit the poor more. The fact that both entail deficit spending is irrelevant because the Fed can never run out of money. Don't believe me? Read: The Deficit Myth by Stephanie Kelton. She explains it better. Larry Summers says:

"The impulse behind the latest “big” progressive idea of creating a federal job guarantee is entirely valid. Studies show that those without jobs are much more likely to be dissatisfied with their lives, to become addicted to alcohol or drugs and to be abusive within their families than even those working at low wages they find inadequate.

"On this point, the U.S. economy is falling short of its potential. The fraction of the adult population between ages 25 and 54 that is working or seeking work has declined over the past 20 years. Despite America’s vaunted labor-market flexibility, the chance that a 25- to 54-year-old man will be out of work is much greater than it is in France and not very different than what it is in Spain . And in sharp contrast to the rest of the world, the fraction of adult women working in the United States has been declining since 1999 .

"These trends are important causes of the increasingly bitter nature of U.S. politics and of resistance to technological change and overseas trade. President Trump received disproportionate support in parts of the country where joblessness increased most.

"If the United States could guarantee jobs in even a modestly efficient manner and in a way that significantly increased employment, it would be a very good thing. I want to be enthusiastic about job-guarantee proposals. But at a time when cynicism about government runs strong, it is important for progressives to avoid making promises that they cannot keep. We must rigorously examine the practicality of a job guarantee."

Here's how the Fed's money creation process works. Tax receipts are deposited into the US Treasury's account at the Fed. The US Congress authorizes either spending programs or tax cuts. The US government spends money. When the Treasury's account at the Fed gets down to zero (spending equals tax receipts), the Fed injects money into the Treasury's account. It is impossible for the US government to ever run out of money. Then Treasury bonds are sold by the Treasury Department which are bought by "primary dealers" (mainly big Wall Street banks) which are obligated to buy them. Some are sold to investors whether they be private individuals or governments like China and Japan.

When the point is reached that the banks don't have enough liquidity (cash - because they've been buying up Treasury bonds)), the Fed creates liquidity by buying up the Treasury bonds from the Wall Street banks in return for cash. Where did it get the money to do this? It created it by a few keystrokes on a computer. So by a roundabout process the Federal Reserve makes sure that the US government has all the money it needs as authorized by Congress regardless of any considerations for deficit spending or the total amount of the US national debt. Those are just accounting entries on the Fed's balance sheet. The Fed buys and sells Treasuries every day as a means of setting the interest rate or of providing liquidity as it did in the Great Recession of 2008. The Fed is the loaner of last resort to the US banking system, and it stands ready to create as much money as is necessary to keep it running smoothly. It also stands ready to provide the same guarantees for the US government, but the money has to be authorized first by Congress.

The takeaway is that Deficits Don't Matter. The private sector benefits from government deficit spending whether those deficits are created by tax breaks or government programs. Government spending programs primarily help the poor while tax cuts primarily help the rich. A government Job Guarantee in which the government becomes the employer of last resort is better than a Universal Basic Income because a job provides one with more dignity than a handout and there is much work to be done. Congress - not taxes - is the limitation to government spending. Republican obstructionism is the only thing that can limit economic benefits to the American people because, while the Fed can directly benefit the Big Banks without Congressional approval, it cannot benefit the American people without Congressional approval. Democrats want to benefit the American people, convert to renewable energy, provide jobs and income for the American people and prevent the earth from burning up due to climate change. Republicans want simply to hold on to political power by preventing Democrats from being successful.

Off the Top of My Head

K Shaped Recovery Calls For K Shaped Tax Structure

by John Lawrence, January 4, 2021

It has been well documented that the rich have gotten richer during the pandemic while the poor have gotten poorer. Over a roughly seven-month period starting in mid-March – a week after President Donald Trump declared a national emergency – America’s 614 billionaires grew their net worth by a collective $931 billion. Although the CARES Act led to a diminution of poverty in the early stages of the pandemic, poverty rates have risen since then to around 17% of the population. Among blacks and Hispanics the poverty rate is closer to 25%. The one thing that has benefited minority groups is the fact that for the first time many of them were able to vote by mail because of the pandemic. Before the pandemic many poor voters were not likely to stand in line on a week day to vote thus losing a day's pay. While the many techniques of voter suppression used by the Republican party kept the votes of blacks and Hispanics to a minimum, the last election proved that voting by mail allowed many more poor and especially black voters to cast a ballot

After Joe Biden is finally in office, we will see an increase in programs that will benefit poor and minority communities many of whom are essential workers who sacrificed in many ways to keep the economy going. While the rich got richer during the pandemic, it became clear that poor essential workers should be making more money while rich inessential workers deserve less. However, the results were the opposite of that. People invested in financial assets and people who could work from home by and large did well economically during the pandemic while those workers, without whom the economy would have come to a grinding halt, were working for minimum wage in many cases. Signs went up at nursing homes "Heroes work here", but what they forgot to add was the phrase "at minimum wage." Nursing homes are staffed with CNAs, Certified Nursing Assistants, who make little more than the minimum wage.

The K shaped recovery refers to the fact that the rich got richer while the middle class working from home did well while the bottom half of the economy, the lower half of the K, did worse financially. In any event the tax structure should reflect that fact in order to diminish economic inequality. The rich should be taxed more while the poor and lower middle class should be taxed less and actually subsidized. This is the enlightened purpose of taxation - to reduce economic inequality. According to Modern Monetary Theory, taxes are not important for raising money for government expenditures because the Federal Reserve can make any amount of money available to the government by means of a few keystrokes on a computer. Stephanie Kelton writes:

"But taxes are important in other ways. As the World Inequality Report notes,'the income-inequality trajectory observed in the United States' is partially explained by 'a tax system that grew less progressive.' Taxes can be used to curb astronomical accumulations of wealth. That's important precisely because the wealthy use their money to amass power and influence over the political process: they've rigged the tax code in their favor; they've rewritten labor laws, trade agreements, rules governing patents and protections, and much more. They've made public policy serve their economic interests."

This accumulation of economic and political power by the wealthy has been somewhat redressed recently by mail voting which tends to serve the interests of the poor and lower middle class. If it remains in effect, the voter suppression techniques of the past, used mainly by Republicans to suppress the African American vote, will have been counteracted with the result that the interests of the poor and lower middle class will have been elevated at the expense of the rich.This is what Donald Trump is so mad about - that the pandemic caused a revolution in mail in balloting at his expense. This is largely why he lost, and he's mad as hell about it. So what. The Republicans had it coming. Maybe the pandemic was a blessing in disguise at least in this respect.

Off the Top of My Head

How Joe Biden and the Democrats Can Attract Trump's Base to Their Side

by John Lawrence, November28, 2020

Aside from the entertainment value of the Trump Presidency, his main appeal and the main appeal of Republicans in general is that they stand for reducing taxes. Democrats can co-opt this issue. Here's how: before the next election, they announce that, if elected, they will reduce taxes on everyone making less than $400,000. Joe said he wouldn't raise taxes on that group, but he didn't go far enough. He needs to reduce taxes on everyone making less than $400,000 while raising them on everyone making more than $400,000. Trump's base, I assume, are people making less than $400,000. They are attached party wise to the wealthy Republicans who make up the top 1% with whom they have nothing in common economically. How will Joe pay for this? Simple: the money raised by raising taxes on the rich, making corporations pay their fair share, closing loopholes like the "carried interest" loophole and a financial transactions tax (FTT). And it wouldn't have to balance out equally. In other words the money raised in increased taxes on the rich would not have to equal the money spent on tax breaks for everyone making less than $400,000. It would represent the destruction of the Republican meme: "Democrats will raise your taxes."

The Federal budget need not balance out exactly. It hasn't done that since President Clinton balanced the budget in 2001. He had budget surpluses for fiscal years 1998-2001, the only such years from 1970-2020. Clinton's final four budgets were balanced budgets with surpluses, beginning with the 1997 budget. Since then Republicans, supposedly the guarantors of fiscal conservatism, have deficit spent by means of tax cuts going mainly to the rich. Even before Clinton, Reagan deficit spent with tax cuts in the 1980s. This meme that Republicans represent tax cuts and fiscal conservatism needs to come to an end and be exposed by Democrats for what it is. Evidently, the middle class Republican voters are satisfied with a meager tax cut and don't mind that the rich are getting a more hefty one. That's why Democrats have to take over this meme by giving tax cuts to the middle class and tax raises to the rich. This is the only way finally to get economic inequality under control.

Modern Monetary Theory and the Federal Reserve's own history prove that Deficits Don't Matter. The US dollar is a sovereign currency. The Federal Reserve can just print money and spend it into the economic system without adding it to the national debt. This is exactly what Abraham Lincoln did during the Civil War when he printed greenbacks instead of borrowing the money at interest which would have created huge debts for the United States. So there are two ways that money can be created by the Fed. 1) They can buy US Treasury bonds which would require Congress to deficit spend. 2) They can just print the money and pour it into Federal coffers. This does not add to the national debt but goes on the Fed's balance sheet. The bottom line is what is the money to be used for? If it's for a good cause like building green infrastructure and creating jobs in the process if the economy is less than fully employed, it probably won't create inflation. If it's just a gift to people in an already fully employed economy, it will most definitely create inflation or even hyper inflation.

So in the long run deficits do matter in the sense that, if the money is spent frivolously, inflation and potentially a loss in the value of the dollar on international markets could occur. However, if the money is spent constructively on building and repairing of infrastructure and other useful purposes, deficits won't matter. It boils down to prudent and responsible spending by government. Is Congress up to this task? Is the Fed? At this point a deal between the Executive branch and the Fed would seem more appropriate than running the whole thing through Congress where political ambitions of one party or the other can get in the way. The problem is that there is no consensus in Congress unless one party holds control over both Houses and the Presidency. Barring that, each party will try to limit the other party's spending goals which are tax breaks for the rich (Republicans) or government spending on social programs (Democrats). One way to break this stalemate is for Democrats to be the party of tax breaks for the 99% and tax increases for the 1% while maintaining their commitments to the social safety net.

Off the Top of My Head

Raising Taxes on Those Making More Than $400,000 While Lowering Them on Everybody Else - What a Novel Concept!

by John Lawrence, October 28, 2020

Politicians have been stuck for centuries in the mind set that you either have to raise taxes on everyone or lower them on everyone. Republicans have taken advantage of this by lowering taxes significantly more on the rich while giving the middle class a pittance of a tax break. Let's face it: this is the only arrow in Republicans' quiver! Now Democrats are finally getting smart. Joe Biden will raise taxes on the rich while keeping them the same on everybody else. This means that whatever break everyone making less than $400,000 got from the Trump tax breaks will remain in effect. Joe should have gone even further and lowered taxes on everyone making less than $400,000 while raising them on everyone making more than $400,000. Trump added a trillion dollars to the deficit with his tax cuts. Since then trillions more have been added to the deficit with coronavirus relief packages. But as we know from Modern Monetary Theory and from the Federal Reserve's own recent examples of Quantitative Easing, Deficits Don't Matter. They don't matter because the US dollar is a sovereign currency. The Fed can print money any time it wants. It's not a good idea to use this facility frivolously, but money is always available which should only be used for a good cause.

This makes the old antagonisms between "tax and spenders" and "deficit hawks" moot. There is no need to tax in order to spend. The need to tax at this point is only the need to address income and wealth inequality. Spending is not dependent on taxation and there is an almost limitless amount of money available. The old concepts of Left and Right, of Liberal and Conservative can be relegated to the scrapheap of history. The only political spectrum that makes any sense at this point is the one between progressives and regressives. For instance, there are those (like Trump) who want to preserve the fossil fuel industry even though we know the fossil fuel industry is destroying the planet. These guys I would call regressives. Then there are those (like Joe Biden) who want to phase out the fossil fuel industry while replacing it with renewable energy. These guys I would call progressives. Regressives want to preserve the status quo because their financial interests are with the status quo. Progressives want to replace jobs in the fossil fuel industry with jobs in the renewable energy industry.

Financial interests wedded to the fossil fuel industry will lose money, no doubt. However, investors are already divesting from fossil fuels and investing in renewables. The smart money is getting ahead of the inevitable curve in the knowledge that the fossil fuel industry is already on the way out due to the fact that renewables are already cheaper than fossil fuels. Progressives would hurry this process along in the knowledge that planet earth is not waiting for humans to sort this process out. Mother Earth has its own timeline, and will bring about change in the planet's ecosystem in a destructive way if humans cannot get their act together and stop emitting greenhouse gasses into the atmosphere. We don't want to become another planet Venus where greenhouse gasses elevate the surface temperature to 900 degrees F.

Hopefully, in a few days the Trump era will be over, and we can get down to work rebuilding infrastructure, which Trump promised to do and then never did, while at the same time creating green infrastructure while at the same time creating good paying jobs. This is essentially what Joe Biden has promised to do. In order to do it, they need a Democratic Senate as well as a Democratic House. They also need to get rid of the filibuster rule as, if there is even one Republican in the Senate, he or she will torpedo every progressive act of legislation using the filibuster. I think this time Democrats will go for broke as Republicans have done for years using every bit of power available to them. Democrats should do the same and not let what happened to Obama, who was essentially neutered by the Republican filibuster, happen to them. Republicans will try to throw every roadblock in the way of Democrats' progressive legislation so those potential roadblocks have to be systematically removed or a Democratic administration will get nothing done.

Of course Republicans will take every legislative act to the Supreme Court in the hopes that a conservative court will squelch it there. That's why a Democratic administration should consider packing the court. Joe Biden would have been within his rights to say he wouldn't do it and then to go ahead and do it since Republicans swore up and down that in an election year the next President should fill a Supreme Court vacancy, and then totally did the opposite when it was in their interests to do so. But Joe is a more honorable man than Lindsay Graham and the other Republicans who put Amy Coney Barrett on the court at the last minute while saying they would never do such a thing. Instead Joe finally came up with a reasonable answer to the question demand "Would you pack the Court?". A bipartisan panel. Hmmm.

Off the Top of My Head

Increase Taxes on the Rich. Reduce Taxes on the Middle Class

by John Lawrence, October22, 2020

Finally, the Democrats are getting smart. Republicans have won on one issue: reducing your taxes. Unfortunately, they reduce them a lot more on the rich than they do on the middle class. So now Joe Biden has introduced some nuance. Can the American people comprehend it? Reducing taxes on everyone making less than $400,00 per year and raising them on everyone making more than $400,000. What a great idea! What took them so long? It's absolutely necessary if we want to decrease economic inequality which is out of control. So Joe Biden would increase taxes only on the upper 1%. To be among the upper 1%, a family needs an income of $421,926. In terms of wealth the upper 1% owns 38.5% of the nation's wealth. The upper 1% owns more wealth than the bottom 90%. The bottom 80% of Americans are net debtors. Debt is negative wealth; that should be obvious, but many Americans are financially illiterate. Financial literacy should be a course in high school. Wealth and income are two separate but related issues. Middles class Americans who own homes pay a wealth tax: property taxes. Rich people don't pay wealth taxes on most of their assets which are in stocks and bonds.

Wealthier Americans don't spend all their income on consumption. A portion of it just goes to add to their wealth. Middle class and poor Americans spend all their income on consumption, even going into debt to consume. So the wealthy extract rent and interest from the middle class and the poor who devote a huge share of their incomes to rent and interest. Now more than ever, Americans are drowning in debt. Prior to the Great Recession of 2008, many Americans were struggling to keep their heads above water. When the bubble burst, those with the most debt were left drowning in a sea of financial insolvency. While the country has since recovered financially, the COVID-19 pandemic is threatening to derail the economy once more. In order to diminish not only income inequality but wealth inequality, policies should be undertaken to tax both the wealth and income of the wealthy while encouraging the middle class and poor to build wealth and get out of debt. A small financial transactions tax would tax the wealth of the rich which is mostly comprised of stocks and bonds and real estate. If every stock trade were taxed, this would create a huge pool of money which could be spent in more constructive ways than simply adding to the wealth of the rich.

While the rich can go bankrupt and bail themselves out with golden parachutes, most struggling student loan debtors have no such option. The laws preclude them from going bankrupt. They cannot discharge their debts in bankruptcy. In addition to student loan debt, most middle class people who own a home have a lot of mortgage debt. So they don't really own the home; the bank does. They have the privilege of making payments on a home which include a lot of interest. If they are successful in paying off their mortgage, they will have an asset which represents wealth. This is the main way the middle class creates wealth for itself. Unfortunately, this wealth takes a life time to create so is unavailable to most middle class people until it's too late to enjoy it. The good thing though is that their children can inherit it. This represents an intergenerational transfer of wealth so that their children or grandchildren start out not from zero, where most children of the poor start out, but from a positive accumulation of wealth no matter how small.

Since most Americans overconsume and under save in many cases by necessity but in some just by predilection, they have nothing to fall back on when there is a disruption in the economic system like a pandemic. Since American GDP is predicated on 70% consumption, the American economy cannot stay out of recession if people stop consuming. That's why the Republican controlled government, understanding this, came up with the CARES Act. It was not so much out of a concern for the middle class and the poor as it was a consideration to keep up consumption which is essential to maintaining GDP and hence a necessary economic statistic. A Joe Biden administration will get the economy back on the right track which will increase the income and wealth of the poor and middle class while diminishing that of the wealthy. Financial literacy should make clear the importance of not going into debt but of creating wealth no matter what your income statistics are at the beginning of this process.

Off the Top of My Head

Quantitative Easing = Printing Money

by John Lawrence

In her book, "Deficits Don't Matter," author Stephanie Kelton makes the case that we don't have to worry about deficit spending. That's when the US government spends more than it takes in in taxes. So in a sense taxes don't matter either at least as far as balanced budgets go. The US dollar is a sovereign currency. This means we don't have to ask anyone's permission to print money. The US dollar was taken off the gold standard in 1971 under President Nixon. It is a fiat currency meaning that it is not backed by anything other than the word of the US government. The US has experienced the phenomenon of printing money to bail out the banks in the Great Recession of 2008. As of September of this year, the Fed's balance sheet was $7.1 trillion. As of January 2008, the Fed's balance sheet was less than $1 trillion. That means that the Fed has printed money to the tune of over $6 trillion since 2008. Yet there has been no inflation in the US economy which is the danger a lot of economists had predicted from printing so much money.

The Federal Reserve bank can print US dollars just by a few keystrokes on a computer. Approximately $3.5 trillion was printed to bail out the banks during the Great Recession. Another $2.5 trillion has been printed so far to deal with the COVID pandemic. The question arises that, if the Fed can print money any time it wants, why can't there be Quantitative Easing (QE) for the people? In other words, if the Fed can bail out the banks, why can't it bail out the homeless, why can't it bail out the $4 trillion deficit in infrastructure spending, why can't it bail out the hungry and the poor? The answer is that it can do all those things, but this tool, QE, for that is what it is - a tool - should be used judiciously. It should be used to accomplish useful and necessary goals. It should not be used frivolously. It should be used in conjunction with other tools like tax policy. It should be used to promote a full employment economy and achieve socially useful goals.

Tax policy should be used to raise most of the money needed for government spending, and it should be used to redress the balance of the high amount of inequality in the American economy. Taxing the wealthy both in terms of income and wealth while giving tax breaks to the middle class and poor while implementing policies to help them build wealth is one of the major things US Federal tax policy should do. Additional money can be obtained by reducing the bloated military and military-industrial complex budget. If, however, there are additional goals that should be met like hastening the switch to renewable energy or a fuller safety net for the American people, then QE for the people should be implemented. The goal is to have a balanced and useful economy, one that promotes net zero carbon emissions, one that promotes sustainable development on other parts of the world, one that hastens the day when no child goes hungry or uneducated, one that reduces financial inequality.

It has already been demonstrated that deficits don't matter because the Great Recession of 2008 was quelled by the Fed's policy of printing money with no adverse effects on the economy. We have seen again the salubrious effects pf printing money or QE, if you want to call it that, during the COVID pandemic during which another $2.5 trillion has been printed so far. There is no reason why any country that has a sovereign currency like the US does cannot print money. Since the US dollar is the world's reserve currency, other countries and individuals are willing to buy up most if not all of US debt. But if they didn't buy up any of it, the Fed could still take it - or as much as necessary - on its balance sheet. In other words the fact that other countries are buying US debt means that the Fed doesn't have to print as much money. Any country with a sovereign currency can do the same even if their currency is not much in demand on world markets. Since the US dollar is used a lot in world trade, other countries need a supply of US dollars and are willing to buy US debt to get them.

There is no reason why any American should go hungry or be homeless or lack health care. Speaking of health care, Medicare for All would not eliminate private health care as some have suggested. Even with Medicare some doctors refuse to see patients because they don't like the reimbursement Medicare provides. There would be a private market for the wealthy who would just pay out of pocket to doctors who refused to accept Medicare patients. The wealthy don't even need health insurance. It could not be made illegal for such a market to exist. So even though everyone would have health care under a Medicare for All plan, the wealthy would still hire private and presumably better doctors at their own expense.

The policy of the Fed's buying US debt, which is equivalent to printing money, should be used wisely and the money not wasted.  QE for the people combined with the fact that deficits don't matter should lead to a more productive society providing that those additional tools and resources are used in a constructive way and not used to further militarize the society and the world. Any tool can be used for good or for ill. QE for the people could be used for a more healthy, beneficial and well balanced society for all people, could eliminate poverty in the US and the world, bring US infrastructure into the modern era and combat global warming and future pandemics.

'The American People Should Be Pissed Off': Critics Say Trump Tax Dodging Exposes System Rotten to the Core

Published on Monday, September 28, 2020

by Common Dreams

"The American people should be angry about President Trump's tax evasion, but that's not all. They should be much more angry about how much of what Trump did is legal."

by Jake Johnson, staff writer

 

8 Comments

People take part in a protest against the Republican tax bill in Los Angeles, California on December 4, 2017. (Photo: Ronen Tivony/NurPhoto via Getty Images)

While President Donald Trump's long-running effort to game the U.S. tax code for his own financial benefit was the central focus of explosive new reporting on the billionaire's tax returns by the New York Times, progressive observers and lawmakers were quick to note that the behaviors revealed by the documents are commonplace among America's wealthy elite—a fact they said is cause for widespread outrage and a renewed push in Congress for transformational change to a system that is fundamentally rotten.

"Donald Trump is a liar, a cheater, and a crooked businessman, yes. But he's also taking advantage of a broken, corrupt, and unequal system that's built for people like him to do what he did."
—Sen. Elizabeth Warren

"The American people should be angry about President Trump's tax evasion, but that's not all. They should be much more angry about how much of what Trump did is legal," Morris Pearl, the chair of advocacy group Patriotic Millionaires, said in a statement Monday. "The American people should be more angry about how many other millionaires and billionaires are able to avoid supporting the country that made them rich in the first place."

"Most of all," Pearl added, "the American people should be pissed off about the fact that instead of offering them healthcare, or affordable childcare, or financial support during a pandemic, their government instead prioritizes protecting the wealth of the rich, powerful, and selfish."

Frank Clemente, executive director of Americans for Tax Fairness, said he hopes the new reporting provides "a wake-up call to Congress."

"If we are going to create an economy that works for all of us, not just those at the top," said Clemente, "we need to create a fair share tax system that closes loopholes, cracks down on tax cheats, and prevents any unscrupulous tycoon—sadly, including the president of the United States—from dodging their tax obligations for decades on end."

Based on more than two decades of tax records the president has long fought to conceal from the public and Congress, the Times report details how Trump has repeatedly exploited gaping loopholes and business-friendly provisions in the U.S. tax code to massively reduce his federal income tax bill. The result of Trump's maneuvering, according to the Times, was that the billionaire paid just $750 in federal income taxes in both 2016 and 2017 and not a dime in 10 of the 15 years before his White House victory.

"Trump's tax returns tell us that he's either a very bad businessman or a tax cheat—likely both," tweeted Sen. Bernie Sanders (I-Vt.), alluding to Trump's use of major business losses to dodge income taxes.

"But more importantly," Sanders added, "it shows how the wealthy, unlike most Americans, are able to avoid paying taxes. The top 1% is responsible for 70% of unpaid taxes. It's time to tax the rich."

Sen. Elizabeth Warren (D-Mass.) echoed Sanders, arguing that the revelations in the Times reporting are "about more than one man's personal tax scams."

"Donald Trump is a liar, a cheater, and a crooked businessman, yes," said Warren. "But he's also taking advantage of a broken, corrupt, and unequal system that's built for people like him to do what he did."

Since taking office in 2017, Trump has worked with his Republican allies in Congress to make the U.S. tax system even friendlier to the wealthy and large corporations while leaving working- and middle-class families in the dust.

Steve Wamhoff, federal policy director at the Institute on Taxation and Economic Policy, noted in a statement that the Times reporting does "not include Trump's tax returns for 2018 and 2019, the first two years after the 2017 Tax Cuts and Jobs Act went into effect. The law opened new tax avoidance opportunities for wealthy business owners."

"There are two tax systems: one that most of us follow and another far more generous one for the very rich. While it is common for the wealthy to use the tax code this way, Trump is in a league of his own."
—Steve Wamhoff, Institute on Taxation and Economic Policy

"There are two tax systems: one that most of us follow and another far more generous one for the very rich," said Wamhoff. "While it is common for the wealthy to use the tax code this way, Trump is in a league of his own. His losses seem to be, in many cases, more than just paper losses. Anything he is personally involved in tends to lose money. And it is possible that his various maneuvers do, in fact, exceed what is allowed by the law."

In addition to hiking income taxes on the rich and imposing a wealth tax, analysts said in response to the Times reporting that congressional Democrats must also prioritize enforcement of the nation's tax laws by adequately funding the IRS, which has been crippled in recent years by Republican budget cuts.

"Right now the IRS is fighting with paper swords," tweeted Binyamin Appelbaum, economics writer for the Times Editorial Board. "Making rich people follow the law is a matter of justice and oh, by the way, it would also be hugely profitable for the government. Every time a billionaire cheats on their taxes, that's less money for roads, schools, etc."

Pearl of the Patriotic Millionaires said that "it seems obvious that Trump has committed some amount of criminal tax evasion, but that's not the biggest issue here."

"The real problem is a system that provides such absurd loopholes to the ultra-wealthy in the first place, and a deliberately underfunded IRS that lacks the capacity to properly prosecute rich people's criminal tax evasion," said Pearl. "Trump's case may be particularly egregious, but he's far from unique."

In July, as Common Dreams reported, the Congressional Budget Office estimated that the amount of unpaid taxes between 2011 to 2013 averaged just over $380 billion per year—a figure Sanders decried at the time as "an absolute outrage."

"Congress is leaving hundreds of billions of dollars in taxes uncollected from the wealthy," Sanders added. "Make no mistake: the primary beneficiaries of IRS funding cuts are wealthy tax cheats and large corporations. Do not think for one second that the wealthiest country on Earth is unable to make critical investments to meet people's basic needs in terms of healthcare, food security, education, and unemployment."

Writing for the Discourse Blog on Monday, journalist Paul Blest argued that the U.S. tax system in its present form "invites manipulation by anyone rich enough to do it." But, Blest added, the tax code's current construction is the result of deliberate policy decisions and thus—with adequate political will—reversable.

"It really doesn't have to be like this; the government can act to heavily tax the rich and powerful and use the money to fund public services and has in the past," wrote Blest. "And if people want to reduce the power, influence, and mythos surrounding obscenely wealthy people like Donald Trump, there are far worse places they could start than the U.S. tax code."

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Trump’s Worst Attacks on Workers

by Robert Reich

Tuesday, July 28, 2020

Donald Trump campaigned as an insurgent outside of the political establishment who would restore the long-neglected working class. That was a lie. As president, he’s turned his back on working people, governing instead as a lackey for billionaires, CEOs, and corporations. Even during a public health and economic crisis, Trump has left working people in the dust.

Consider his signature tax law, sold as a benefit to working people. More than 60 percent of its benefits have gone to people in the top 20 percent of the income ladder. In 2018, for the first time in American history, billionaires paid a lower tax rate than the working class.

Trump said every worker would get a $4,000 raise, but nothing trickled down. Instead, corporations spent their tax savings buying back shares of their own stock, boosting executive bonuses and doing nothing for workers. To make matters worse, some of the richest corporations are paying nothing in federal income taxes, despite making billions in profits.

Meanwhile, Trump’s corporate lobbyists and industry shills have systematically dismantled worker protections – rolling back child labor protections, undoing worker safeguards from exposure to cancerous radiation, gutting measures that shield workers from wage theft, and eliminating overtime for 8 million workers.

Trump has even asked the Supreme Court to take away the health insurance of 23 million American workers by invalidating the Affordable Care Act –  in the middle of a global health crisis, no less! If Trump gets his way, protections for people with pre-existing conditions will be eliminated.

Oh, and remember his promise to rein in drug prices so working people can afford the meds they need? Well, forget it. Remdesivir, a drug to reduce the severity of COVID-19, from pharma giant Gilead, was developed with $70 million of taxpayer funding, yet Trump is letting the company charge $3,000 per treatment. And he is omitting pricing protections from federal contracts to develop drugs for Covid-19 – making it likely that life-saving treatments and vaccines will be out of reach for people in need.

Donald Trump doesn’t give a fig for working-class Americans. He even wants to end the extra unemployment benefits that countless Americans are depending on to get through this crisis.

So whose side is Trump really on? 

Well, here’s a clue: Tucked away on page 203 of the COVID stimulus package backed by Trump, is an obscure provision that delivers a whopping $135 billion in tax breaks to millionaire real estate developers and hedge fund managers. One real estate tycoon who stands to profit handsomely from the provision is none other than the president’s son-in-law and senior adviser, Jared Kushner.
In total, the cash secretly spent on tax cuts for millionaires in the COVID-19 package is more than three times as much money as was included for emergency housing and food relief.

Kushner isn’t the only Trump insider getting paid off during the pandemic. Forty lobbyists with ties to Donald Trump have helped clients secure more than $10 billion in federal COVID aid. And if Trump succeeds in getting the Supreme Court to repeal the Affordable Care Act, the richest 0.1 percent of Americans will get an average additional tax cut of $198,000 each per year.

Donald Trump is no working-class champion. He’s a corporate con man – the culmination of a rigged-for-the-rich system that’s shafting working Americans at every turn.

 

 

 

 

 

Off the Top of My Head

Explainer: Quantitative Easing for the People

by John Lawrence, April 19, 2020

Let's say a Wall Street bank has a mortgage that's been defaulted on. That qualifies as a "toxic asset" meaning the guy isn't paying his mortgage. The bank then pleads with the Federal Reserve to take it off its hands because the bank is running low on money that it thought would be coming in if the guy had made his monthly payments. So the Fed adds "liquidity" by saying to the bank, "Give me that mortgage. I will take it off your hands and pay you the full value of the amount borrowed, and then I will be the mortgage holder for the "toxic asset." So the bank is made whole, and the Fed is now the holder of the toxic mortgage. The Fed has "taken it on its balance sheet" and taken it off the balance sheet of the Wall Street bank. This is what happened during the Great Recession of 2008. It's what Quantitative Easing is all about. Theoretically, some day the Fed will sell this mortgage in the marketplace, but who wants to buy a mortgage that no one is paying either interest or principal on especially if the mortgagee is long gone. Instead the toxic asset disappears in what amounts to the Fed's black hole.

Although the Fed will do this for a bank especially for those banks that are too big too fail, they will not do this for Joe Blow. Joe blow, for instance, may have a toxic asset of $30,000 in credit card debt or $100,000 in student loan debt. Why couldn't Joe Blow approach the Federal Reserve and say please will you take this toxic asset off my hands? That would mean adding "liquidity" to Joe Blow's bank account by taking the credit card debt or student loan debt onto the Fed's balance sheet and paying off Joe's creditors. This would make the Fed Joe's creditor. Perhaps some day, when Joe is better off, the Fed might be able to move Joe's debt off its balance sheet and put it back on Joe's account. At least theoretically that could happen.

What is happening today with the coronavirus relief package and the stimulus checks is a variation on QE which amounts to QE for the people. Where is all the money coming from you say? Will it just be added to the deficit and the national debt, God forbid? Right now interest on the national debt is $479 billion. The more money the nation borrows, the more interest on the debt crowds out other items in the Federal budget like social security, Medicare and the military. But there is a neat little trick that is played between the Treasury department which issues the bonds that comprise national debt and the Federal reserve which has the aforementioned capacity to make debts disappear down a black hole.

Those toxic assets that the Fed took off of banks' balance sheets? Some of them were Treasury bonds. Now more than ever the Fed will be taking Treasury bonds off the big banks balance sheet for two reasons: 1) they can't be all sold in the open market because there are no buyers and 2) the US taxpayers will not have to pay interest on these bonds because although the government pays interest to the Fed on these bonds all profits the Fed makes are returned to the Treasury after deducting minimal expenses at the end of the year. So one hand really does wash the other or, if you prefer, the Federal government is playing a shill game with the Federal Reserve. The Federal Reserve monetizes the debt which is the same as saying that it disappears down a black hole on the Fed's balance sheet. The middleman in this whole operation is Wall Street since the Fed by law cannot buy Treasury bonds directly from the Treasury Department. So by monetizing the debt, the Fed is doing two things: 1) it is taking the pressure off of interest paid in the Federal budget and 2) it is guaranteeing that the Federal government will have whatever amount of money it needs to pay its bills without having to increase taxes.

Now this is good news for pandemic relief. Deficit hawks are muted because they know how this shill game is played, and it's no skin off their backs. The Fed essentially prints money (although it's doe with a couple of keystrokes on a computer) and bails out the whole economy. There is no inflation since unions which drove up the price of labor were essentially muted during the Reagan administration which saw most manufacturing jobs transferred to China. So then Fed can print away giving everyone a taste of a Universal Basic Income (UBI). (See Ellen Brown's accompanying article.) Since the cat is out of the bag there is no reason why this same game couldn't be played to relieve American consumers of student loan debt and credit card debt although you can get rid of credit card debt in bankruptcy. Not so for student loan debt.

Also money for infrastructure could be obtained this same way by having the Fed monetize the debt. This would create good union jobs according to Bernie Sanders. But this is exactly what the bond market and the Fed doesn't want - good union jobs - because that would create wage inflation. When wages go up prices go up, and the bond market would not be pleased because inflation eats up the yields on their bonds. What the Fed and the monied interest want is an economy in which workers are deeply indebted because that means a ton of interest going to the banks which are totally in cahoots with the privately owned Fed. If your a worker, the Fed is not really your friend. They are the banker's friend. The Fed was set up in the first place to bail out banks not American consumers. Now it is giving American consumers a taste of a bail out because the coronavirus presents a unique situation with everybody being out of work. When things get back to normal, the Fed will go back to just bailing out banks, and relieving pressure on the national debt.

Off the Top of My Head

Progressive Taxation and Remuneration: A Progressive Universal Basic Income

by John Lawrence, April 2, 2020

It's obvious that the Federal government has the power to get $1200 or any amount to every citizen. It's actually doing that as a result of COVD-19. So it could provide a Universal Basic Income if it wanted to. It also has the power to tax the rich and untax the poor. The idea is to progressively tax the rich and progressively remunerate the poor. If progressives controlled the Federal government, this is what would happen. Right now conservative Republicans control the Federal government so the opposite happens: money is transferred from poor to rich. The only reason the Federal government is providing everyone with $1200. is that they don't want the 70% consumer economy to totally collapse. Progressive taxation and progressive remuneration are possible. In fact they could balance each other out. As incomes and/or wealth increased, taxes would increase; as incomes and/or wealth decreased, remuneration would increase. This would not totally equalize incomes; it would just bring poor people up above the poverty line to a point at which each family had an income which would adequately provide the basic necessities of life. People would still have an incentive to do better.

It's well known that the Federal Reserve is willing to provide unlimited amounts of free money to the banking system and hedge funds. It provided trillions in the form of Quantitative Easing (QE) during the Great Recession of 2008. Even though this was supposed to be a one time shot in the arm, it didn't turn out tom be that. Even today the Fed is doing QE. It is still providing trillions to the banking system free of charge. It could also be doing that for the average person - QE for the people. This is effectively what the Federal government is doing now during the COVID-19 pandemic. The only difference is that the government is doing it from the "fiscal side," which means it comes out of the budget and is added to the deficit. Which means that the taxpayers are ultimately responsible. The national deficit was about one trillion dollars before the pandemic. The bill Congress passed that gave $1200 to every US citizen was a two trillion dollar bill. This bill alone added two trillion dollars to the deficit for a total of $3 trillion for fiscal year 2020. This means that the national debt will increase by at least 3 trillion in FY 2020 from 23 to 26 trillion dollars, and that's if there's not another phase to the bailout.

But why worry about the national debt? The government issues Treasury bills, and Wall Street buys them if there are no other buyers. Then the Fed bails out Wall Street by taking them onto its balance sheet in return for cash. Problem solved. The Fed just deep sixes the debt in a black hole never to be seen again. Meanwhile the consumer economy just keeps humming along. This is the lesson learned from the Great Recession. The Fed can just print money although most of the money printed in 2008 went to rich people and a lot of middle class people lost their homes. Since the Fed has the capacity to print money, the US will never run out of money. Now they are printing money and distributing it to average people, and this will keep the economy running indefinitely, albeit at a lower level, even during  the coronavirus pandemic.

Off the Top of My Head

The Fed Keeps On Bailing Out Failing Businesses

by John Lawrence, March 17, 2020

The Fed announced recently that it would cut interest rates to zero. It has also promised to insert $1.5 trillion of "liquidity" into the markets. It's clear that the US is a society that runs on debt, and the biggest non profit producing industry that has gorged itself on humungus amounts of debt is fracking. But investors are getting weary. S&P Global Ratings this month cut credit ratings of six shale gas producers citing the outlook for natural gas prices. "We are particularly concerned about some of the issuers' ability to access the capital markets given investor aversion to the space," S&P said. But no worries. A Fed bailout is on the way. Zero percent interest. Free money. Whoopee. Frack away.

Just a few days ago, CNBC host Jim Cramer exclaimed, "I'm done with fossil fuel," after disappointing earnings reports from Dow Jones energy giants Chevron and Exxon Mobil. "We're in the death knell phase," he warned. The fracking industry is deathly afraid that, if Bernie Sanders is elected, the gravy train will be over. Fracking has provided a lot of jobs for a lot of people, but it is not profitable if the world oil price is less than $40 a barrel. Right now, thanks to Russia and Saudi Arabia, the price of oil is $30 a barrel. A Green New Deal would have to provide jobs for all those workers in the fracking industry who have been making pretty good money even though the industry as a whole is unprofitable.

The Fed is doing its job to create another tower of debt in the US. Alexandria Ocasio-Cortez has pointed out that the $1.5 trillion the Fed has injected into the system for "liquidity" could wipe out all the student loan debt in the US which now stands at $1.5 trillion. But the Fed insists that any stimulus to the economy which would actually help working people as opposed to investors has to come from the fiscal side meaning that Congress would have to appropriate the money. The Fed's job is to make sure that no major business player in the US economy goes bankrupt including the US government itself which is wallowing in debt to the tune of $1 trillion a year thanks to Trump's tax cuts for the rich similar to Ronald Reagan's tax cuts for the rich which quintupled the national debt. It took a Democrat, poor old Clinton, to reduce the deficit to zero.

The question naturally arises of why can't the Fed bail out American workers to the tune of $1000 a month as Andrew Yang has suggested especially now that the coronavirus has put a huge damper on consumption which is 70% of the economy. The Fed says, "Not my job. That's Congress' job." The Fed as it turns out is a wholly owned subsidiary of Wall Street. It is not a publicly owned entity. Congress will do nothing to bail out the American people because of the Republican controlled Senate led by Mitch McConnell. Even if Democrats were to attain a majority in the Senate, the filibuster would prevent them from doing anything. So Joe Biden, even if elected, will get nothing substantial done including building on Obamacare. The only reason Obamacare was even passed in the first place was that Democrats had a majority in both Houses and a filibusterproof majority in the Senate (60 votes) for a very short period of time (4 months) during which Obamacare was passed. Good luck Joe.

If the Fed, instead of being privately controlled by Wall Street, were to become a truly public institution controlled by Congress, then maybe it could bail out the general American public instead of failing businesses. According to the rules of capitalism, failing businesses at some point should go bankrupt. The Fed is essentially preventing that from happening thus fueling the stock market. However, the stock market senses that at this point the Fed has used up all its tools and can do nothing further. There is probably too much liquidity in the markets already. Providing more wouldn't do any good. Interest rates are already at zero. The Fed could go to negative interest rates, but that would screw the economy up even more. Perhaps we'll all have to settle for a good old recession after all. But one thing is for certain. About six months from now, Trump will pull out all the stops to get the economy moving again just before the election since he is basing his reelection on a robust economy. However, it all depends on whether or not the coronavirus is under control at that point. If it is, Trump will take credit.

The Real State of the Union

by Robert Reich

Wednesday, February 5, 2020

I wasn’t going to comment on Trump’s lie-filled State of the Union message but the whoppers were so big – especially on the economy – that I feel compelled. Here, for the record, is the real state of the union:

1. JOBS: Average monthly job creation dropped from 223,000 in 2018 to 176,000 in 2019. The employment rate for working-age adults has increased less than during the Obama recovery, and is still significantly below that of other developed countries. The pace of job creation is also markedly slower than it was under Obama.

2. WAGES: Wage growth has slowed, except in states with minimum-wage increases. The typical American household remains poorer today than it was before the financial crisis began in 2007. The median wage of a full-time male worker (and those with full-time jobs are the lucky ones) is still more than 3% below what it was 40 years ago.

3. TAXES: The Trump-Republican tax cut has been a huge failure. We were promised an increase in business investment, but business investment has contracted for the third straight quarter—the first time this has happened since the Great Recession in 2009. Instead, the tax cut triggered an all-time record binge of share buybacks – some $800 billion in 2018.

If fully implemented, the 2017 tax cut will result in tax increases for most households in the bottom 80 percent. 

And it has resulted in record peacetime deficits (almost $1 trillion in fiscal 2019) in a country supposedly near full employment. Even with weak investment, the US had to borrow massively abroad: the most recent data show foreign borrowing at nearly $500 billion a year, with an increase of more than 10% in America’s net indebtedness position in one year alone.

Nothing has trickled down to average workers. To the contrary, If fully implemented the 2017 tax cut will result in tax increases for most households in the bottom 80 percent.

4. TRADE: The 2018 goods deficit was the largest on record. Even the deficit in trade with China was up almost a quarter from 2016.

5 GROWTH: Last quarter’s growth was just 2.1%, far less than the 4%, 5%, or even 6% Trump promised to deliver, and even less than the 2.4% average of Obama’s second term. That is a remarkably poor performance considering the stimulus provided by the $1 trillion deficit and ultra-low interest rates.

6. WORKERS’ RIGHTS: Trump administration has systematically weakened workers’ rights. More than eight million workers will be left behind by the Trump overtime rule. Workers would receive $1.4 billion less than under the 2016 rule. New Trump administration joint-employer rule has $1 billion price tag for workers.

7. HEALTH: Millions of Americans have lost their health coverage, and the uninsured rate has risen, in just two years, from 10.9% to 13.7%. US life expectancy, already relatively low, fell in each of the first two years of Trump’s presidency, and in 2017, midlife mortality reached its highest rate since World War II.

8. CLIMATE: losses related to climate change have already reached new highs in the US, which has suffered more property damage than any other country – reaching some 1.5% of GDP in 2017.

Off the Top of My Head

Trump's Tax Cuts Forcing the Fed to Buy Up US Treasurys

by John Lawrence, November18, 2019

Republicans used to stand for fiscal conservatism. But they're only fiscally conservative when Democrats are in power. When they control the purse strings, they spend like drunken sailors with the result that the national debt is now $23 trillion. During FY2019, the federal government spent $4.45 trillion and collected approximately $3.46 trillion in tax revenue. A little simple arithmetic shows that the US Federal government has to borrow almost a trillion dollars a year in order to make ends meet or 82.5 billion dollars a month. And this will go on and only likely increase ad infinitum.

"The belief in Washington and on Wall Street has long been that the U.S. government could just keep issuing debt because people around the world are eager to buy up this safe-haven asset. But there may be a limit to how much the market wants, especially if inflation starts rising and investors prefer to ditch bonds for higher-returning stocks."

However, there is another scenario. The Federal Reserve could just keep eating the debt much as it did during the various stages of quantitative easing (QE). The Fed paid the Wall Street banks in cash for the Treasury bonds it took on its balance sheet. This cash provided the liquidity which allowed the banks to keep functioning after the Great Recession of 2008. However, the Fed promised to start selling those Treasury bonds back into the market thus unwinding its balance sheet, what you might call a quantitative tightening. But the Fed didn't get very far with that until the liquidity of the big banks started to be a problem again. So the Fed is back to QE again although now it's not calling it that. However, it is infusing $60 billion a month into the repo market, and taking that much in Treasury bonds off the Wall Street banks' books.

Wall Street banks are required to buy US Treasury bonds thus soaking up US government debt, that is if no other country or individual or other entity wants to buy it. Increasingly, it's getting difficult for the Treasury to sell its debt as other countries like China, which holds the largest amount of US debt, are cutting back on their purchases especially in light of Trump's use of the US dollar in trade wars and sanctions. US debt is not seen as the gold standard  that it used to be. Therefore, the debt piles up on the balance sheets of Wall Street banks, and there is the threat of another liquidity crisis as there was in 2008. That's why the Fed is stepping in to buy up US Treasury debt and disappear it on its balance sheet thus providing liquidity to the Big Banks.

Market Watch writes:

Primary dealers are banks and other financial institutions approved to trade with the Federal Reserve. In return for that privilege, they are obligated to place bids at the U.S. Treasury Department’s debt auctions.

With the federal fiscal deficit widening, dealers have bought up an increasing amount of government debt, constraining their ability to provide liquidity to funding markets when needed, but only a small proportion of those holdings are in shorter-term Treasury bills.

U.S. Treasurys held by primary dealers stood at $206 billion in the week ending Sept. 25. This compared with their holdings of Treasury bills which averaged $22.9 billion over the last six months, according to Fed data.

So US Treasurys, largely as the result of Trump's tax cuts for the wealthy, are clogging up the system, and the Fed must step in again after it had promised to unwind its balance sheet comprising trillions of US government debt when economic times returned to normal. But what is normal these days? A lot of pundits think there will be QE, like strawberry fields, forever. That would be the new normal. But wait until there's a Democratic President, and Republicans will start screaming bloody murder again about the national debt.

 

Off the Top of My Head

Quid Pro Quo: A False Dichotomy?

by John Lawrence, November 13, 2019

President Trump himself set up this false dichotomy by saying right off the bat, "There was no quid pro quo." Trump successfully got everyone arguing over whether or not there was one.The point is whether or not there was a quid pro quo is irrelevant. What he did by extorting Zelensky was a "high crime and misdemeanor." If it wasn't, what the heck is? The Constitution doesn't define in detail what high crimes and misdemeanors actually are. Therefore, it's left up to the Congress. But what Trump did looks like a duck, swims like a duck, and quacks like a duck. Therefore, it's a duck.Trump's strategy from the very beginning was to act like nothing of significance happened. He took pains not to look like he was hiding anything. He took pains to sound like it was just another day in the office. Ho. Hum.

However, the evidence is mounting. The real nitty gritty is Trump's tax returns which he has been fighting in court to prevent the release of. When these come to light, this will be the coup de grace on Trump's Presidency. The arcane legal arguments are almost too difficult to follow for the average layperson. Here are the key points thanks to CNBC:

1) A federal judge in Washington, D.C., on Monday [November 11] dismissed President Donald Trump’s legal effort to bar a House committee from using a New York state law to obtain his state tax returns.

2) The ruling by Judge Carl Nichols does not mean that Trump’s state tax returns will be released to the House Ways and Means Committee anytime soon. The committee has not tried to use the new law to get his state returns.

3) The committee sued the U.S. Treasury Department and the IRS in early July to obtain Trump’s federal income tax returns.

The question might be asked why the House committee has not used the New York state law to get Trump's returns which mirror his Federal returns. Can't they walk and chew gum at the same time? There are always a myriad legal workarounds and by passes and subterfuges that can be used by skillful lawyers to keep this game or any legal game going as long as possible. The longer it goes on, the more money lawyers make. "A federal judge in Washington, D.C., on Monday dismissed President Donald Trump’s lawsuit seeking to bar a House committee from using a New York state law to obtain his state tax returns, suggesting the president’s legal action belonged in another courthouse." There you go. If you can't win in one courthouse, there's always another courthouse you can try. Just try the wrong courthouse first. This eats up the clock. There are other avenues, other approaches when that one fails. Just because one judge threw out Trump's lawsuit, doesn't mean anything. The judge as much as said, "Go try your luck elsewhere." Nothing is ever definitive; nothing is ever final. There's always another way to deal with the problem as long as you keep on paying the lawyers.

As it turns out, neither of three House committees has invoked the New York State law to get Trump's tax returns. What were they waiting for? "[Judge] Nichols’ ruling in Trump’s own suit had failed to establish that a judge in Washington federal court had jurisdiction over a challenge to New York’s law, known as the TRUST Act." So what did the Judge's ruling establish? Not a heck of a lot to be sure. Who can challenge New York's law? Nobody knows. This is just all too convoluted to understand for the average layperson. It is a labyrinth of lawyerly mumbo jumbo and a mire of obfuscation There are just too many courts at too many levels so that no court knows what the other court is doing or is capable of doing or has the jurisdiction to do.

"Nichols’ ruling said that Trump did not establish a conspiracy between the Ways and Means Committee and New York officials, which could have established that a Washington court had jurisdiction over the suit." Why should the House Ways and Means Committee have to conspire with New York officials to get Trump's state tax returns in the first place, but if it did, that would mean a Washington court had jurisdiction over the suit? Well since they didn't conspire, that should mean that a New York court has jurisdiction over the suit, but a New York court just said that it didn't have jurisdiction over the suit. What is this a freakin' merry-g-round? Around and around we go, and where we stop, nobody knows. The ball is in your court; no, the ball is in your court. Let's toss the ball around some more.

It only makes sense that Congress should be able to get ahold of the President's tax returns since every President prior to Trump has voluntarily released them. Where is a whistleblower when we need one? Couldn't someone just leak Trump's tax returns? Now Judge Nichols is suggesting that Trump could refile his suit alleging said conspiracy since his lawyers failed to mention said conspiracy in the original suit. Judge Nichols, you are just wasting we taxpayers' time. Either Trump should be compelled to cough up his tax returns or the IRS or the state of New York should just be compelled to hand them over without Trump even having to be involved. After all both New York State and the IRS have the tax returns in their possession. But the judges and lawyers just want this game to continue going round and round in court. After all they make more money that way.

After Handing Rich $1.5 Trillion Tax Cut, Trump Reportedly Considering Slashing Medicare and Social Security as 'Second-Term Project'

Published on Friday, August 23, 2019

by Common Dreams

"Mr. Trump, you are not going to have a second term," tweeted Sen. Bernie Sanders in response to the president's reported plan

by Jake Johnson, staff writer

 

19 Comments

President Donald Trump speaks before signing an executive order for sanctions on Iran's supreme leader in the Oval Office of the White House on June 24, 2019 as US Treasury Secretary Steven Mnuchin looks on. (Photo: Mandel Ngan/AFP/Getty Images)

After exploding the federal budget deficit with over a trillion dollars in tax cuts for the rich and massive corporations, President Donald Trump is reportedly considering using his possible second term in the White House to slash Medicare and Social Security—the final part of a two-step plan progressives have been warning about since before the GOP tax bill passed Congress in 2017.

"The Trump/GOP tax cuts for the wealthy will add over $1.5 trillion in debt. Now we know how they'll pay for those tax cuts, by cutting Social Security and Medicare."
—National Committee to Preserve Social Security and Medicare

 

The New York Times reported this week that, with the budget deficit set to surpass $1 trillion in 2020 thanks in large part to Trump's tax cuts and trade war, Republicans and right-wing groups are pressuring the president to take a sledgehammer to Social Security and Medicare, widely popular programs Trump vowed not to touch during his 2016 campaign.

Sen. John Barrasso (R-Wyo.) told the Times that his party has discussed cutting Medicare and Social Security with Trump and said the president has expressed openness to the idea.

"We've brought it up with President Trump, who has talked about it being a second-term project," said Barrasso.

Senator John Thune (R-S.D.), the number two Republican in the Senate, echoed Barrasso, saying it is "going to take presidential leadership to [cut Social Security and Medicare], and it's going to take courage by the Congress to make some hard votes. We can't keep kicking the can down the road."

All to pay for his #GOPTaxScam... Horrific. https://t.co/IiTC2EUHY1

— For Tax Fairness (@4TaxFairness) August 22, 2019

"The Trump/GOP tax cuts for the wealthy will add over $1.5 trillion in debt," said the National Committee to Preserve Social Security and Medicare. "Now we know how they'll pay for those tax cuts, by cutting Social Security and Medicare."

According to the Washington Post, Trump has already "instructed aides to prepare for sweeping budget cuts if he wins a second term in the White House."

"Trump's advisers say he will be better positioned to crack down on spending and shrink or eliminate certain agencies after next year, particularly if Republicans regain control of the House of Representatives," the Post reported last month.

The president, despite his campaign promises, has included major cuts to Social Security and Medicare in his budget proposals—while predictably demanding massive increases in Pentagon spending.

In his budget blueprint for fiscal year 2020, as Common Dreams reported, Trump called for $845 billion in cuts to Medicare and $25 billion in cuts to Social Security.

Sen. Bernie Sanders (I-Vt.), a 2020 Democratic presidential candidate, tweeted Thursday his belief that Trump will not have a chance to carry out his "second-term project."

"Mr. Trump, you are not going to have a second term," said Sanders.

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Where Your Tax Dollars Really Go

by Robert Reich

• Wednesday, July 31, 2019

  Donald Trump and Republicans in Congress claim that America spends too much on things like food stamps, welfare, and foreign aid. 

  But let’s look at how the government actually spends your federal tax dollars each year. We’re going to look at what’s known as the “discretionary budget,” which has to be reappropriated by Congress each year.

  Start with foreign aid, the conservatives’ favorite boogeyman. It’s $29 billion a year. That may sound like a lot but it’s only 2 percent of all discretionary spending. Add all spending on international affairs, it’s 4 percent.

  What about science and technology, including NASA, the National Science Foundation, and research in clean energy, which conservatives love to hate?Just 3 percent.

  The environment and natural resources – money for clean air, safe drinking water and protecting public lands? Another 3 percent.

  Roads, bridges, highways, airports, all transportation funding: Another 3 percent.

  Community and regional development: 2 percent.

  Law enforcement, the Department of Justice, the entire federal court system: 5 percent

  The Centers for Disease Control, the National Institutes of Health, and rural health clinics: 5 percent.

  Food stamps, energy assistance, child care, other income security: Just 6 percent.

  Education and workforce training gets just 7 percent.

  Veterans benefits account for 7 percent of the budget as well.

  All other government services–including Energy, Agriculture, and Commerce–account for only 1 percent of the discretionary budget.

  But that’s only 46 percent. The remaining 54 percent of annual spending is on the military, which is more spent on the military than the next 7 nations combined. It’s huge. It’s about the only really big thing the federal government does.

  You may be thinking, but what about Social Security, Medicare, Medicaid, and the Affordable Care Act? 

  By law, these programs are mandatory spending, which don’t require Congress to approve funding every year. Americans have paid into Social Security and Medicare over their entire working lives.

  Yet they’re still vulnerable. In fact, if Trump and Republicans in Congress aren’t going to cut discretionary spending – especially on the military – the only places they can look to make way for more tax cuts for the wealthy and corporations are Social Security, Medicare, and Medicaid.  

  That’s been their goal all along. 

  Know where the money is really going. And know what they have in mind. 

Off the Top of My Head

Why Can't the 90% Vote to Raise Taxes on the 10% and Lower Taxes on Themselves?

by John Lawrence, June 25, 2019

The Repubs are Johnny One Notes when it comes to elections. "We will lower your taxes." Of course they lower taxes on the rich (the 10%) much more than they lower them on the 90%. People always fall for this. They always say "The Democrats will raise your taxes." Well now, Bernie and others are saying "We'll raise taxes on the rich, but not on the 90%." That's good because in this country the majority rules, and the 90% can outvote the 10% at least in Presidential and Congressional elections. The Dems, however, should go further. They should say, "Not only will we raise taxes on the rich, we'll lower them on everybody else." That would go over great if the general public could appreciate that much nuance.

Trump's tax cuts blew a whole in the national budget and raised the Federal debt to $22 trillion. Now over a trillion dollars a year just goes to paying interest on the debt. The debt can never be paid off. The American people are being sold a bill of goods and will wind up being perpetual debtors not only nationally but individually. That's just where the power elite wants them. Debtors are more easily controlled than those who have some agency. The only agency the American people have is the fact that majority rules, and they can vote the powerful out of office and vote in people like Bernie Sanders and Elizabeth Warren who stand on the side of the middle class.

Ellen Brown in her latest book, "Banking on the People: Democratizing Money in the Digital Age," has shown the way to a debt free America with low taxes. She has been telling us for years that the Federal government need not borrow money and then pay interest on it. It has the power to generate money and then distribute it into society. The American Congress is given the right in the Constitution to coin money, but it has delegated that right to privately owned banks. Then the Treasury issues bonds which are bought by private investors who expect to be paid interest on those bonds. The big Wall Street banks take a cut on every bond sold.

Recently the Federal Reserve bank has gotten into the act with Quantitative Easing (QE). It buys the bonds from the Wall Street banks and by law returns the interest to the Treasury. These bonds need never be paid off. Net result: the American Treasury gets free money. But instead of this shell game the American government could issue its money directly, and spend it into American society on infrastructure development and in many other ways. This is exactly what other societies, who have control over their own money supply, have done. This is how China manages to spend money on its Belt and Road initiative building infrastructure all over the world without going into debt. Meanwhile the US goes further and further into debt, and in the final analysis it's all because it has delegated the creation of money to privately owned banks including the Federal Reserve.

But there is a better way according to Ms. Brown. Congress could create its own money and spend it directly instead of borrowing it and paying interest on it. This is how Lincoln built the transcontinental railroad and won the Civil War. He issued greenbacks which were money created instead of borrowed by the Federal government. This is how Franklin Roosevelt did it with the Reconstruction Finance Corporation during the Great Depression. The whole thing here is that Congress on behalf of the American people could create its own money tax free and use it any way it pleases like the Green New Deal, for example. It could be used to cancel student loan debt as Bernie wants to do.

These are radical ideas to be sure, but in the age of global warming and the neo-feudalization of the American people, radical ideas are called for. Our Grandkids will thank us for not letting planet earth go up in smoke. Presently, the whole American midsection is being flooded out because it drains most of the water from the ever increasing torrential downfalls. It is in the process of becoming just one big flood plain. Let's get radical to save planet Earth. The first step is to let the American Congress, not privately owned banks, create the money supply and use it to build infrastructure for which there is never enough money under the present system.

The 12 Biggest Myths about Raising Taxes on the Rich

by Robert Reich

Monday, April 15, 2019

Some politicians are calling for higher taxes on the rich. Naturally, these proposals have unleashed a torrent of opposition – mostly from…the rich. Here are the 12 biggest myths they’re propounding: 

Myth 1: A top marginal tax rate applies to all of a rich person’s total income or wealth.

Wrong. It would only apply to dollars in excess of a certain level. The 70 percent income tax rate proposed by Congresswoman Alexandria Ocasio-Cortez would apply only to dollars in excess of 10 million dollars a year. The 2 percent wealth tax proposed by Elizabeth Warren would apply only to wealth in excess of 50 million dollars.

Myth 2 : Raising taxes on the rich is a far-left idea.

Baloney. 70 percent of Americans – including 54 percent of Republicans – support raising taxes on families making more than 10 million dollars a year.  And expecting the rich to pay their fair share is a traditional American idea. From 1930 to 1980, the average top marginal income tax rate was  78 percent. From 1951 to 1963 it exceeded 90 percent – again, only on dollars in excess of a very high threshold. Even considering all deductions and tax credits, the very rich paid over half of their top incomes in taxes.  

Myth 3: A wealth tax is unconstitutional.

Rubbish. Most locales already impose an annual wealth tax on the value of peoples’ homes – the main source of household wealth for most people. It’s called the property tax. The rich hold most of their wealth in stocks and bonds, so why should these forms of wealth escape taxation?  Article I Section 8 of the Constitution gives “Congress [the] power to lay and collect taxes.”

Myth 4: When taxes on the rich are cut, they invest more and everyone benefits, when taxes on the rich are increased, economic growth slows.

Utter baloney. Trickle-down economics is a cruel joke. Donald Trump, George W. Bush, and Ronald Reagan all cut taxes on the rich, and nothing trickled down. There’s no evidence that higher taxes on the rich slows economic growth. To the contrary, when the top marginal tax rate has been high – between 71 to 92 percent – growth has averaged 4 percent a year. But when top rate has been low – between 28 and 39 percent – growth has averaged only 2.1 percent.

Myth 5: When you cut taxes on corporations, they invest more, and create more jobs.

Wrong again. After Trump and the Republicans lowered the corporate tax rate in 2018, America’s largest corporations cut more jobs than they created. They used their tax savings largely to increase their stock prices by buying back their own shares of stock – enriching executives and wealthy investors but providing no real benefit to the economy.  

Myth 6: The rich already pay more than their fair share in taxes.

This is misleading, because it focuses only on income taxes – leaving out the large and growing tax burden on lower-income Americans; payroll taxes, state and local sales taxes, and property taxes take bigger bites out of the pay of lower-income families than higher-income.

Myth 7: The rich shouldn’t be taxed more because they already pay capital gains taxes.

Misleading. Rich families avoid paying capital gains taxes by passing their wealth on to their heirs. In fact, the largest share of big estates transferred from generation to generation are unrealized capital gains that have never been taxed.

Myth 8: The estate tax is a death tax that hits millions of Americans.

Baloney. The current estate tax, which only applies to assets in excess of 11 million dollars, or 22 million dollars for couples, affects fewer than 2,000 families.

Myth 9: If taxes are raised on the wealthy, they’ll find ways to evade them. So very little money is going to be raised.

More rubbish. For example, a 2 percent wealth tax, as proposed by Senator Elizabeth Warren, would raise around 2.75 trillion dollars over the next decade with very little tax evasion, according to research. A 70 percent tax on incomes over 10 million would raise close to 720 billion dollars over 10 years.

Myth 10: The only reason to raise taxes on the wealthy is to collect revenue.

No. Although these proposals would generate lots of revenue – and help us reduce the national debt while investing in schools, roads, and all the things we need – another major purpose is to reduce inequality, and thereby safeguard democracy against oligarchy.

Myth 11: It’s unfair to raise taxes on the wealthy.

Actually, it’s unfair not to raise taxes on the rich.  For the last 40 years, most Americans have seen no growth in their incomes at all, while the incomes of a minority at the top have skyrocketed. We’re rapidly heading toward a society dominated by a handful of super-rich, many of whom have never worked a day in their lives. More than 60 percent of wealth in America is now inherited.

Myth 12: They earned it. It’s their money.

Hogwash. It’s their country, too. They couldn’t maintain their fortunes without what America provides – national defense, police, laws, courts, political stability, and the Constitution. They couldn’t have got where they are without other things America provides – education, infrastructure, and a nation that respects private property. And to argue it’s “their money” also ignores a lot of other ways America has bestowed advantages on the rich – everything from bailing out Wall Street bankers when they get into trouble, to subsidizing the research of Big Pharma.

So the next time you hear one of these myths, know the truth.

Off the Top of My Head

Why They'll Never Discuss the Military-Industrial Complex on Meet the Press

by John Lawrence, February 22, 2019

Because Boeing is one of their sponsors, that's why. It's not that the news is "fake news". It's that most of it is irrelevant news. The news is show biz. Mostly the news concerning Trump is his latest preposterous tweet. Or the news is about the latest mass killing. He wasn't supposed to have a gun because he was a felon, and the authorities ordered him to turn it in but he didn't. So? They didn't go after him? Of course that detail is not covered. Considered to be less than newsworthy. Not sensational enough. Or it's about some ridiculous antics of some celebrity like Jussie Smollett, a black guy who hires two other black guys to beat him up and call him a nigger. Why is this even news? So what? Who cares?

So why aren't we discussing the role of the US in the world? Why aren't we discussing the fact that American weaponry and support is helping Saudi Arabia commit genocide in Yemen? Why aren't we discussing how Trump's vaunted tax cuts have increased the taxes of a lot of people? In states like California and New York (Democratic states by the way) property taxes are extremely high because property values are extremely high. So capping the amount of the deduction for state and local taxes actually increased the tax bills of a lot of people not all of whom were Democrats as Trump had hoped.

In California, for example, there were some reliable Republican strongholds like Orange County. The New York Times reported:

House Republicans suffered heavy Election Day losses in districts where large concentrations of taxpayers claim a popular tax break — the state and local tax deduction — which the law capped at $10,000 per household. The new limit resulted in an effective tax increase for high-earning residents of high-tax states who claim more than $10,000 per year in SALT.

Democrats swept four Republican-held districts in Orange County, Calif., where at least 40 percent of taxpayers claim the SALT tax break, defeating a pair of Republican incumbents and winning seats vacated by Representatives Ed Royce and Darrell Issa. Those districts include longtime Republican strongholds, like Newport Beach, and rank among the country’s largest users of the state and local tax break.

Can you say BACKFIRED! The Trump tax cut increased the tax bill for a lot of relatively wealthy Republican property owners while giving huge tax breaks to the super wealthy. It was supposed to lead to productive investment which would lead to more hiring and more jobs. Instead it led to stock buy backs by large corporations and higher CEO salaries. Can you say BACKFIRED? The Democrats want to restore the full deductions for state and local taxes, God bless 'em. Maybe that's why Orange County switched from Red to Blue. Forbes reported: "Even Fox News, in an August 2018 poll, found Obamacare to be more popular than the tax cuts." Ha. Ha. on Trump. The only result of his tax cuts was to sink the US into $1.5 trillion more debt and to create more Democratic districts.

As Poll Shows Majority Back 70% Tax Rate for Ultra-Rich, Ocasio-Cortez's "Radical" Proposal Proves Extremely Mainstream

Published on Tuesday, January 15, 2019 by Common Dreams

"I don't think it's surprising," said the New York congresswoman. "What we see, overall, is that the vast majority of Americans know that income inequality is one of the biggest issues of our time."

by Jake Johnson, staff writer

 

 

 46 Comments

Alexandria Ocasio-Cortez talks with a voter at the conclusion of a town hall event, September 19, 2018 in The Bronx borough of New York City. (Photo: Drew Angerer/Getty Images)

Rep. Alexandria Ocasio-Cortez (D-N.Y.) sparked a flood of hysterical and error-filled responses from the right when she suggested in a recent "60 Minutes" interview that America's top marginal tax rate should be hiked to 70 percent to help pay for bold progressive programs, but a survey published on Tuesday found that the majority of Americans are on the freshman congresswoman's side.

"This is a policy that is already popular and it's time that we embrace working Americans and it's time that the Democratic Party fights in a full-throated manner for the working class in the United States." 
—Rep. Alexandria Ocasio-Cortez

 

Conducted by The Hill in partnership with the market research firm HarrisX, the poll found that 59 percent of the U.S. public supports raising the marginal tax rate on the richest Americans to 70 percent. The poll also found a "surprising amount of support" for the proposal among Republicans, with 45 percent backing the idea along with 71 percent of Democrats.

"Oh? What's that? The majority of Americans respect when you break down reasonable policy proposals that are designed to combat runaway income inequality and help fund priorities they value most?" Ocasio-Cortez wrote on Twitter in response to the new survey. "We can win public sentiment, stand our ground, and not be scared by GOP [mis]information."

"I don't think it's surprising," Ocasio-Cortez said of the poll results in an interview with The Hill. "What we see, overall, is that the vast majority of Americans know that income inequality is one of the biggest issues of our time."

"This is a policy that is already popular and it's time that we embrace working Americans and it's time that the Democratic Party fights in a full-throated manner for the working class in the United States and to not support a marginal tax rate is to really just allow runaway wealth and inequality to persist," she added.

.@AOC: "The vast majority of Americans know that income inequality is one of the biggest issues of our time." @HillTVLive https://t.co/2eO3xwiwmL pic.twitter.com/AEK8Y3tKH3

— The Hill (@thehill) January 15, 2019

As economists and historians hastened to point out after Ocasio-Cortez first floated the idea of raising the top marginal tax rate on the ultra-wealthy to 70 percent, similar and even higher rates were the norm for much of the 20th century.

After Anderson Cooper called Ocasio-Cortez's 70 percent top marginal tax rate suggestion and other bold progressive proposals a "radical agenda" during the "60 Minutes" interview, the New York congresswoman responded, "If that's what radical means, call me a radical."

According to an analysis by the Washington Post's Jeff Stein, the revenue raised over a decade from a 70 percent top marginal tax rate on those earning $10 million or more could fund almost all of Sen. Bernie Sanders' (I-Vt.) tuition-free public college plan, forgive over half of the student debt in the U.S., or nearly fund a $1 trillion infrastructure plan.

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The Big Economic Switcheroo

Tuesday, January 8, 2019

The biggest untold story about how we pay for government involves a big switcheroo by America’s wealthy.

Decades ago, wealthy Americans financed the federal government mainly by paying taxes. Their tax rate was far higher than what it is today.  

Now, wealthy Americans finance the federal government mainly by lending it money, and collecting interest payments on those loans, profiting when the rest of us pay them back.

Follow the money: As the debt continues to grow, interest payments are becoming huge. Taxpayers could soon be paying more in interest on the federal debt than we spend on the military or on Medicaid.

Interest on the debt is expected to hit $390 billion next year, nearly 50 percent more than in 2017, according to the Congressional Budget Office.

Who’s receiving these interest payments? Mostly Americans, not foreigners. And most of these Americans are wealthy investors who park their savings in treasury bonds held by mutual funds, hedge funds, pension funds, banks, insurance companies, personal trusts, and estates.

The richest 1 percent of Americans now owns 40 percent of the nation’s wealth, which is more wealth than the bottom 90 percent put together.

Which means a big chunk of the growing interest payments American taxpayers make on the federal debt is going to… rich Americans.

Now, keep following the money. One of the biggest reasons the federal debt has exploded is that tax cuts, starting with the Bush administration in 2001 and extending through Trump’s 2017 tax cut, have reduced government revenues by over $5 trillion.

The Trump-Republican tax cut will cause the debt to explode even further. Trump’s own Office of Management and Budget predicts an added $100 billion a year in deficits over the next decade, adding up to $1 trillion of additional debt.

Keep following the money: Most of the benefits from those tax cuts are going to the wealthy. 65 percent have gone to the richest fifth of Americans, 22 percent to the top 1 percent.

So you see the big switcheroo? The rich used to pay higher taxes to the government. Now, the government pays the rich interest on a swelling debt, caused largely by lower taxes on the rich. Which means a growing portion of everyone else’s taxes are now paying the rich interest on those loans, instead of paying for government services everyone needs.

That’s wrong. America’s wealthy have never been wealthier. They should pay their fair share of taxes. The big switcheroo should be reversed.

China Tariffs are a Regressive Tax on Americans, and Risk a Recession

by Robert Reich
Tuesday, December 11, 2018

“I am a Tariff Man,” Trump tweeted last week. “When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so…. We are right now taking in $billions in Tariffs. MAKE AMERICA RICH AGAIN.”

I’m sorry, Mr President, but you got this wrong. Tariffs are paid by American consumers. About half the $200bn worth of goods you’ve already put tariffs on come almost exclusively from China, which means American consumers are taking a hit this holiday season.

These tariffs function exactly like taxes. By imposing them, you have in effect raised taxes on most Americans. You have made Americans poorer.

Worse yet, they’re regressive. The middle class and poor pay a larger percentage of their incomes on these tariffs than do the rich.

I needn’t remind you that your Tax Cuts and Jobs Act, passed last year, slashed taxes on big corporations and the rich by about $150 billion annually. You claimed it would cause companies to invest more in America and thereby create more American jobs. They didn’t. (See General Motors.)

They spent most of their tax savings buying back their own shares of stock. This gave the stock market a steroidal boost. Not surprisingly, the boost was temporary. Last week the stock market erased all its gains for 2018, and worse may be in store. The whole American economy is slowing.

Your tariffs could put us into a recession. The world’s other big economies are slowing, too. In 1930, congressmen Smoot and Hawley championed isolationist tariffs that President Herbert Hoover signed into law. They deepened the Great Depression.

Your economic advisers are trying to put the best possible face on all this, arguing that your tariffs are designed to improve your bargaining leverage with China.

The middle class and poor pay a larger percentage of their incomes on these tariffs than do the rich

But your recent US-China trade deal is already unraveling. More accurately, the deal never happened. Your claims about Beijing agreeing to buy more US agriculture and natural gas weren’t backed up by your own administration or the Chinese government. Sort of like your “great” deal with Kim Jung-un.

Some of your advisers say your real aim isn’t about trade at all. It’s to get China to stop stealing American technology. This presumably was the reason behind last week’s arrest of the chief financial officer of Chinese tech giant Huawei Technology. (Hint: That arrest won’t make it any easier to reach an agreement with China.)

I’m not sure why you’re so interested in helping American corporations protect their technology, anyway. That technology doesn’t belong to the United States. It belongs to those corporations and their shareholders. They develop and share it all over the world.

Most of these corporations have been willing to share their technology with China in joint ventures with Chinese companies, because that’s the price of entering the lucrative Chinese market. They still come away making lots of money.

Of course, they could make even more if the Chinese didn’t take the technology. So maybe, as with the tax cut, you just want to make big corporations richer.

But let me give you the benefit of the doubt. I’m going to assume your real concern is America’s national security, and that this whole “tariff man” blunderbuss is designed to prevent China from racing ahead of us in technologies that are critical to national defense.

John Bolton, your national security adviser, has said the real issue is “a question of power”, and the theft of intellectual property has “a major impact on China’s economic capacity and therefore on its military capacity”. Bolton advises you, right?

But if this is your real motive – and, quite frankly, I can’t come up with another reasonable one – might I suggest a better way to protect national security?

You have the authority to stop foreign corporations from buying any American corporation whose technology is critical to national security. So why not prohibit American corporations that possess such critical technology from sharing it with China, even if that’s the price of gaining access to China’s lucrative market?

Bar them from entering into joint ventures with Chinese corporations, prevent them from teaming up with Chinese state-owned companies, and demand that they guard their technology, under penalty of law.

Sure, these America corporations would have to sacrifice some profits, but so what? Your job isn’t to make them more profitable. It’s to protect the United States. And isn’t this a better way to protect American security than to impose a hugely regressive tax on average Americans and risk a global recession?

Wallethub Report on Corporate Taxes

With 2017’s tax overhaul permanently reducing the federal corporate income tax rate from 35 percent to 21 percent, the personal-finance website WalletHub today released its latest Corporate Tax Rate Report. The report provides an in-depth analysis of the 2017 federal, state and international tax rates paid by the S&P 100 companies, the largest and most established businesses in the U.S.   Companies Paying the Highest Taxes (Overall Tax Rate)   Companies Paying the Lowest Taxes (Overall Tax Rate) 1 American International Group Inc. (513.4%)   1 Charter Communications Inc. (-883.9%) 2 Halliburton Co. (165.8%)   2 The Kraft Heinz Co. (-98.7%) 3 Citigroup Inc. (129.1%)   3 AT&T Inc. (-97.2%) 4 Eli Lilly and Co. (109.3%)   4 Berkshire Hathaway Inc. (-90.3%) 5 General Motors Co. (97.2%)   5 Pfizer Inc. (-73.5%) 6 Johnson & Johnson (92.6%)   6 Comcast Corp. (-49.5%) 7 Kinder Morgan Inc. (89.7%)   7 Verizon Communications Inc.  (-48.3%) 8 Abbott Laboratories (84.2%)   8 MetLife Inc. (-41.6%) 9 The Coca-Cola Co. (82.5%)   9 Union Pacific Corp. (-40.4%) 10 Caterpillar Inc. (81.8%)   10 DowDuPont Inc. (-39.9%)   Key Stats The overall tax rate that S&P 100 companies pay is around 39 percent.   S&P 100 companies pay roughly 65 percent lower rates on international taxes than U.S. taxes.   Tech companies, including Facebook Inc., Apple Inc. and Cisco System Inc., are still paying more than 15 percent lower rates abroad, continuing the trend from 2013, 2014, 2015 and 2016.   More than ten S&P 100 companies are actually paying a negative overall tax rate and are therefore due a discrete net tax benefit: Charter Communications Inc., The Kraft Heinz Co., AT&T Inc., Berkshire Hathaway Inc., Pfizer Inc., Comcast Corp., Verizon Communications Inc., MetLife Inc., Union Pacific Corp., DowDuPont Inc., Netflix Inc., NextEra Energy Inc., Exxon Mobil Corp., Altria Group Inc., Exelon Corp. and Chevron Corp.   The average S&P 100 company pays a 77 percent higher tax rate than the top 1 percent of consumers.   For the full S&P 100 Tax Rate report, please visit: https://wallethub.com/edu/corporate-tax-rates/28330/

 

As GOP Moves to Cut Medicare and Social Security, 60% of Americans Say Repeal Trump Tax Scam Instead

Published on Friday, October 26, 2018 by Common Dreams

"Working families shouldn't have to pay for the GOP tax bill. The rich and big corporations must pay their fair share of taxes!"

by Jake Johnson, staff writer

 

45 Comments

A woman holds a sign at a protest of the "Trump tax scam" on Dec.4, 2017. (Photo: CDEL Family/Flickr/cc)

As President Donald Trump and Republican leaders make clear that they intend to enact deep cuts to Medicare, Medicaid, and Social Security after next month's midterms in a supposed effort to rein in the soaring deficit—which has ballooned largely due to Trump's $1.5 trillion tax law—a survey published on Friday found that nearly two-thirds of Americans would prefer repealing the Republican tax cuts over slashing the safety net.

Conducted by NPR, PBS NewsHour, and Marist, the poll found that 60 percent of Americans would rather eliminate Trump's tax cuts than gut safety net programs to reduce the federal budget deficit. Just 21 percent of Americans said they would rather slash the safety net than repeal Trump's tax cuts, which have overwhelmingly benefited the rich and corporations.

The new survey comes just over a week after Senate Majority Leader Mitch McConnell (R-Ky.) blamed the nation's rising budget deficit on Medicare, Medicaid, and Social Security and declared that these programs must be cut to bring federal spending under control. Trump echoed McConnell just 24 hours later, promising "a lot" of spending cuts after the midterm elections.

Working families shouldn't have to pay for the #GOPTaxScam's bill. The rich and big corporations must pay their fair share of taxes! https://t.co/c1O6O5TQHm

— For Tax Fairness (@4TaxFairness) October 26, 2018

As Common Dreams has reported, the GOP cuts have steadily declined in popularity since Trump signed them into law last December, and most Americans say they have seen little to no benefit from the Republican law.

Meanwhile, the rich and massive corporations have seen an enormous windfall from the Republican tax cuts, which sparked an unprecedented spree of stock buybacks and record profits for Wall Street banks and major companies.

These disproportionate rewards for the rich likely explain why Republican candidates have "barely" been mentioning the tax law with just 10 days left before the Nov. 6 midterms.

"When you vote for bunk economics," concluded Patriotic Millionaires, "don't expect it to be an electoral boon."

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Another Tax Scam for the Rich

by Robert Reich

Thursday, September 20, 2018

Hard to believe, but the Trump administration is proposing yet another massive tax windfall for the rich. 

It would be to reduce their capital gains taxes. Those are taxes on the increased value of their stocks and bonds, businesses, and other valuables, when they sell them. Trump would do this by eliminating whatever portion of that increased value was due to inflation.

Here are three reasons why reducing capital gains taxes would be another tax scam for the rich.

1. The people who’d get most of the benefits are already richer than ever and pay a lower effective tax rate than they have in decades. An estimated 63 percent of the benefits of this proposal would go to the wealthiest one-tenth of 1 percent of Americans, while the bottom 80 percent of us would get only 1 percent of its benefits, according to a University of Pennsylvania Wharton School analysis.

If anything, Congress should raise capital gains taxes, not lower them. The capital gains tax rate is already lower than the rate on ordinary income. Yet the wealthy now own most of the nation’s assets and enjoy most of the capital gains. In 2016 (the most recent date for which data are available), the richest 10 percent owned 84 percent of the entire stock market. 

2. The cost of this change would be a whopping $10 billion a year, for the next 10 years. That’s just about the yearly cost of funding free lunches for 20 million poor kids. Yet the federal debt is already ballooning. Over ten years, this proposal would increase it by an estimated $100 to $300 billion.

3. Trump and his administration say they have the power to make this change by themselves without even being authorized to do so by Congress. Rubbish. Congress has already decided that capital gains taxes should not be indexed for inflation. That’s why, when the same idea came up during the George H.W. Bush administration, the Department of Justice’s Office of Legal Counsel stopped it cold.

It’s another big handout to the wealthy, another huge increase in the federal deficit, and it’s illegal. Don’t let Trump and his enablers get away with this tax scam for the rich. 

Just Hours After Ordering Pay Cut for Millions of Public Workers, Trump Proposes $100 Billion Gift to Richest 1%

Published on Friday, August 31, 2018 by Common Dreams

"Trump wants to send another kiss to the rich—unilaterally, without any approval from Congress. He ignores the law, governs for the top one percent, and doesn't give a hoot about the rest of us."

by Jake Johnson, staff writer

 

13 Comments

"Hours after cheating millions of middle class workers, Trump wants to send another kiss to the rich—unilaterally, without any approval from Congress," Rep. Bill Pascrell (D-N.J.) wrote on Twitter late Thursday. (Photo: Chip Somodevilla/Getty Images)

Hours after he launched yet another "direct attack" on workers by canceling a modest pay raise for around two million federal employees, President Donald Trump told Bloomberg on Thursday that he is considering a regressive and possibly illegal plan to use his executive power to hand the rich another $100 billion in tax cuts by indexing capital gains to inflation.

"Trump himself has pocketed millions over the years grifting off of taxpayers, but now he wants to make it harder for workers to get ahead."
—Sen. Bernie Sanders

"Trump himself has pocketed millions over the years grifting off of taxpayers, but now he wants to make it harder for workers to get ahead."
—Sen. Bernie Sanders"There are a lot of people that love it and some people that don't," Trump said of the plan, which would disproportionately reward the top 0.01 percent of Americans. "But I'm thinking about it very strongly."

Trump's Oval Office interview with Bloomberg came shortly after the president announced in a letter to congressional leaders that he is freezing a planned 2.1 percent pay increase for federal workers just ahead of Labor Day, claiming that "federal agency budgets cannot sustain such increases."

But for Trump and the Republican Party, concerns for "fiscal sustainability" are quickly dropped when it comes time to deliver major gifts to the rich, Wall Street, and the Pentagon.

Stagnant wages for working people. Tax cuts for billionaires. https://t.co/vTw3tTJBnT

— Our Revolution (@OurRevolution) August 30, 2018

Today Donald Trump announced that he was instituting a real pay cut for 635,000 veterans, including 260,000 veterans with disabilities.

He also announced that he was considering giving another tax break to the richest 1 percent of Americans.

SAME DAY.

— Michael Linden (@MichaelSLinden) August 30, 2018

"Hours after cheating millions of middle class workers, Trump wants to send another kiss to the rich—unilaterally, without any approval from Congress," Rep. Bill Pascrell (D-N.J.) wrote on Twitter late Thursday. "He ignores the law, governs for the top one percent, and doesn't give a hoot about the rest of us."

In a Facebook post responding to Trump's decision to cancel federal employees' pay raise—which was set to take effect in 2019—Sen. Bernie Sanders (I-Vt.) wrote that Trump is once again "making it clear he has no interest in supporting working people."

"Trump himself has pocketed millions over the years grifting off of taxpayers, but now he wants to make it harder for workers to get ahead," Sanders added. "Trump and his Republican friends in Congress didn't have any problem finding $1.5 trillion in tax giveaways for the wealthiest people and hugely profitable corporations, but suddenly they don't have enough money to pay fair salaries to hardworking public servants."

Indexing capital gains to inflation—a move that the Trump White House has been considering for weeks—would primarily benefit the richest Americans, given that millionaires pay the vast majority of capital gains taxes. According to the New York Times, 86 percent of the benefits of this change in tax policy would go to the top one percent.

In a Twitter thread on Thursday, Seth Hanlon, a senior fellow at the Center for American Progress, detailed why indexing capital gains to inflation is "both terrible policy and illegal":

Here, tax economist Len Burman explains why indexing capital gains would worsen inequality (since millionaires pay 77% of cap gains taxes), would add to budget deficits, and open up new tax shelters for the wealthy. 2/https://t.co/JHS3ROyIq9 pic.twitter.com/F7xAMJDEoa

— Seth Hanlon (@SethHanlon) August 30, 2018

My colleagues @schwartzandrewp and @GgrHendricks here provide an overview of why indexing cap gains will rig the economy against workers, showing how cap gains indexing is even more skewed to the wealthy than the Trump-GOP tax law (TCJA). 3/https://t.co/4Ia3RP8UpY pic.twitter.com/4MeQoQiXeg

— Seth Hanlon (@SethHanlon) August 30, 2018

Economists at Penn-Wharton found that indexing capital gains does nothing for economic growth. https://t.co/hmSUN8VlbY

(I guess @realDonaldTrump slept through that class.) 4/

— Seth Hanlon (@SethHanlon) August 30, 2018

The Penn-Wharton team also found that the proposal would cost up to $102 billion, with a stunning 63% of the tax benefit going to the top 0.1%, 86% going to the top 1%, and 95% going to the top 5%.https://t.co/xPKFKCQOdD 5/

— Seth Hanlon (@SethHanlon) August 30, 2018

Indexing capital gains by executive fiat is also totally illegal, as George H.W. Bush's Treasury Department and his Justice Department's Office of Legal Counsel determined in 1992:https://t.co/TIdgqLV3Sa 6/

— Seth Hanlon (@SethHanlon) August 30, 2018

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The Tax-Cut Con Goes On

Why Social Security and Medicare are on the ballot.

By Paul Krugman

Opinion Columnist, New York Times

• Aug. 23, 2018
• • 570

Image

CreditStephen Maturen/Getty Images

What will happen if the blue wave in the midterm elections falls short? Clearly, at this point it still might: Democrats will surely receive more votes than Republicans, but thanks to gerrymandering and population geography, the U.S. electoral system gives excess weight to rural, white voters who still have faith in President Trump. What if, thanks to that excess weight, the minority prevails?

One answer, obviously, is that the unindicted co-conspirator in chief will continue to be protected from the law. And for those concerned with the survival of American democracy, that has to be the most important issue at stake in November. But if the G.O.P. hangs on, there will also be other, bread-and-butter consequences for ordinary Americans.

First of all, there is every reason to believe that a Republican Congress, freed from the immediate threat of elections, would do what it narrowly failed to do last year, and repeal the Affordable Care Act. This would cause tens of millions of Americans to lose health insurance and would in particular hit those with pre-existing conditions. There’s a reason health care, not Trump, is the central theme of Democratic campaigns this year.

But the attack on the social safety net probably wouldn’t stop with a rollback of Obama-era expansion: Longstanding programs, very much including Social Security and Medicare, would also be on the chopping block. Who says so? Republicans themselves.

In a recent interview with CNBC’s John Harwood, Representative Steve Stivers, the chairman of the National Republican Congressional Committee — in effect, the man charged with containing the blue wave — declared that, given the size of the budget deficit, the federal government needs to save money by cutting spending on social programs. When pressed about whether that included Social Security and Medicare, he admitted that it did.

And he’s not alone in seeing major cuts in core programs for older Americans as the next step if Republicans win in November. Many major figures in the G.O.P., including the departing speaker of the House, Paul Ryan, and multiple senators, have said the same thing. (Meanwhile, groups tied to Ryan have been running attack ads accusing Democrats of planning to cut Medicare funding — but hey, consistency is the hobgoblin of little minds. So, apparently, is honesty.)

 Now, Republicans who call for cuts in social spending to balance the budget are showing extraordinary chutzpah, which is traditionally defined as what you exhibit when you kill your parents, then plead for mercy because you’re an orphan. After all, the same Republicans now wringing their hands over budget deficits just blew up that same deficit by enacting a huge tax cut for corporations and the wealthy.

So it might seem shocking that only a few months later they’re once again posing as deficit hawks and calling for spending cuts. That is, it might seem shocking if it weren’t for the fact that this has been the G.O.P.’s budget strategy for decades. First, cut taxes. Then, bemoan the deficit created by those tax cuts and demand cuts in social spending. Lather, rinse, repeat.

This strategy, known as “starve the beast,” has been around since the 1970s, when Republican economists like Alan Greenspan and Milton Friedman began declaring that the role of tax cuts in worsening budget deficits was a feature, not a bug. As Greenspan openly put it in 1978, the goal was to rein in spending with tax cuts that reduce revenue, then “trust that there is a political limit to deficit spending.”

It’s true that when tax cuts are on the table their proponents tend to deny that they’ll increase the deficit, claiming that they’ll provide a miraculous boost to the economy and that tax receipts will actually rise. But there’s not a shred of evidence to support this claim, and it has never been clear whether anyone with real political power has ever believed it. For the most part it’s just a smoke screen to help conceal the G.O.P.’s true intentions.

The puzzle is why Republicans keep getting away with this bait-and-switch.

Fifteen years ago I wrote a long piece titled “The Tax-Cut Con,” describing what was even then a time-honored scam; it reads almost word for word as a description of Republican strategy in 2017-18. Yet I keep reading news analyses expressing puzzlement that men who were strident deficit hawks in the Obama years so cheerfully signed on to a budget-busting tax cut under Trump. To say the obvious: These men were never deficit hawks; it was always a pose.

And the gullibility both of the news media and self-proclaimed centrists remains a remarkable story. Remember, Ryan, who was utterly orthodox in his determination to cut taxes on the rich while savaging programs for the poor and the middle class, even received an award for fiscal responsibility.

Which brings us back to the midterm elections. Rule of law is definitely on the ballot. So is health care. But voters should realize that the threat to programs they count on is much broader: If the G.O.P. holds its majority, Social Security and Medicare as we know them will be very much in danger.

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Paul Krugman has been an Opinion columnist since 2000 and is also a Distinguished Professor at the City University of New York Graduate Center. He won the 2008 Nobel Memorial Prize in Economic Sciences for his work on international trade and economic geography. @PaulKrugman

Off the Top of My Head

Trump's Tax Cut for the Rich Cost $1.5 Trillion

by John Lawrence, August 17, 2018

Most of that money went to rich people. What if you turned it around and gave most of that money to the poor and middle class. With Republican tax cuts the logic is that since rich people pay proportionately more taxes than the poor, they should get proportionately a larger tax cut. That leaves the poorest of the poor, who pay no taxes, with no tax cut at all. But what if you took that trillion and a half dollars and used it for supplements instead of cuts? Then the poorest people would get the largest supplement and rich people, who don't need the money, would get the least. It would still cost the government $1.5 trillion, but the most needy would be helped the most and the least needy would be helped the least.

The New York Times reported:

Senate Republicans’ $1.5 trillion tax cut would not pay for itself, according to a report released on Thursday by the nonpartisan Joint Committee on Taxation. The report is a significant setback for Republicans, who have asserted that the tax cuts would grow the economy enough to cover the cost of the plan.

The report of the committee, Congress’s official tax scorekeeper, is the latest in a number of analyses that have found that the cuts could add a significant chunk to federal budget deficits, a move that would seem counter to years of Republican criticism of the deficits accumulated under the Obama administration.

In the Congressional Budget Office’s analysis of the Senate tax bill, the cuts would add $1.414 trillion to the deficit by 2027. That estimate does not include the amount that would be offset by the economic growth spurred by tax cuts.

This money going mainly to the rich does not take into account that most rich people park their money offshore in places like the Cayman Islands so that they pay no taxes at all. In fact rich corporations use loopholes and highly paid accountants to figure out how they get tax refunds from the government. Or they pay taxes in Europe where the tax rate is cheaper. They can book their profits anywhere so why not book them where they pay little or no taxes. That wouldn't be in the US.

Forbes reported:

The biggest taxpayer was the most profitable: Apple, which reserved $15.8 billion for income taxes on $59 billion in operating income. Apple reports its effective tax rate as 25.8%, which is quite a bit lower than the statutory 35% rate. The iPhone giant (like many tech companies with a lot of intellectual property) has become famous over the years for deploying legions of accountants to devise offshore tax avoidance mechanisms with names like “double Irish with a Dutch sandwich.” Why book profits in the U.S. if you don’t have to? Unfortunately for Apple, its pot of Irish gold appears to have evaporated. Last year the European Commission presented Apple with a $13 billion tax bill, payable to Dublin, on the grounds that Apple's tax structure had benefited from "state aid," a no-no. CEO Tim Cook has called it "total political crap."

These tax avoidance schemes serve to make the rich richer and to run up the national debt which is now over $20 trillion. Some day the chickens will come home to roost.

 

 

 

Our Missing $10 Trillion

Published on Thursday, July 19, 2018 by OtherWords

Tax cuts from the Bush, Obama, and Trump years have left a massive gap in the public coffers. This hurts everyone

by Josh Hoxie

 

2 Comments

A trillion dollars, a figure with twelve zeros after a one, is by any measure a ton of money. It’s near impossible to comprehend how much a trillion is.

So, it’s admittedly hard to comprehend a new report that tallies the combined tax cuts of the Bush, Obama, and Trump administrations from the year 2000 to the time they’re fully implemented in 2025 at over $10 trillion. Of that $10 trillion, the Institute on Taxation and Economic Policy found, a whopping $2 trillion will have gone exclusively to the top 1 percent.

Sounds like big numbers, huh?

The Endowment for Human Development offers some tidy tips for visualizing a trillion. They point out that if you took a trillion one-dollar bills and laid them end-to-end, it would measure longer than the distance from the earth to the sun.

Of that $10 trillion, the Institute on Taxation and Economic Policy, found, a whopping $2 trillion will have gone exclusively to the top 1 percent.

Spending a trillion dollars, at a rapid-fire clip of $20 per second, would take more than 1,500 years before you ran out of money.

So yes, when we’re talking about trillions, we’re talking about a lot, a lot, a lot of money. And what this new report really shows is a metric-crap-ton of cash going to the already exceptionally wealthy. That’s a problem.

The past four decades have seen a dramatic increase in income and wealth inequality as the rich have continued to get richer while the rest of the economy has stagnated. The lopsided tilt of the tax code plays no small part.

As this new report points out, it’s not just the Trump tax cuts. Bush cut taxes too, especially for the rich, and Obama extended many of the Bush tax cuts.

And at last the results have arrived. Put very simply, the top 1 percent of households will pay $111 billion less this year alone in federal taxes combined than they would have if the laws had remained unchanged since 2000.

The wealthiest households and most profitable corporations have gotten big tax breaks while everyone else remains relatively stagnant.

The Trump tax cuts have rightfully generated a tremendous amount of press coverage. A lot of that press coverage has accurately pointed out that the tax cuts overwhelmingly benefit the rich. Trump’s claims that his tax package would usher in wage and job growth have been proven utterly false. Instead, the wealthiest households and most profitable corporations have gotten big tax breaks while everyone else remains relatively stagnant.

Why should you care about the tax status of the ultra-wealthy?

Consider what gets lost when funds are diverted from the public good to private fortunes.

Since the Trump cuts were passed last December, Congress has debated a budget that includes major cuts to Medicaid, Medicare, and Social Security. They’ve considered cuts to programs families depend on to live — like Supplemental Nutrition Assistance Program (SNAP) and the Women, Infants, and Children (WIC) program, which provides nutrition assistance to half the babies born in the United States.

It’s not an exaggeration to say that choosing to cut taxes on the rich while cutting vital programs is taking food out of babies’ mouths.

It’s not an exaggeration to say that choosing to cut taxes on the rich while cutting vital programs is taking food out of babies’ mouths.

Meanwhile, our nation’s transportation infrastructure is in shambles. The American Society of Civil Engineers gives the country’s infrastructure a D+ and calls for $2 trillion in increased investment over ten years to get back up to a passing grade. That number sounds familiar doesn’t it?

So, ask yourself, would you rather have the wealthiest 1 percent be $2 trillion wealthier, or would you rather have safe and sound roads and bridges?

Hindsight is helpful, but only if we put its lessons into practice. Will we repeat our mistakes of the past 20 years and head further towards extreme inequality? Or will we invest in our public good and ask those at the top pay their fair share?

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'Despicable on Every Level': After Massive Gift to Rich, Trump Demands $7 Billion Cut to Child Health Insurance

Published on Tuesday, May 08, 2018 by Common Dreams

"This proposal is a shameful betrayal of children. This administration and congressional Republicans passed a massive tax giveaway to their donors and big corporations, and now they want vulnerable children to pay for it."

by Jake Johnson, staff writer

 

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President Donald Trump, flanked by House Ways and Means Committee Chairman Rep. Kevin Brady (R-Texas) and House Speaker Paul Ryan applaud in the Rose Garden of the White House. (Photo: Evan Vucci/AP)

Months after ramming through deficit-exploding tax cuts for billionaires and large corporations, President Donald Trump and the GOP are now looking for programs to slash to make up the difference—and they're starting with children's healthcare.

According to a Washington Post report late Monday, Trump is "sending a plan to Congress that calls for stripping more than $15 billion in previously approved spending," $7 billion of which would come from the broadly popular Children's Health Insurance Program (CHIP).

"Not much surprises me anymore in American politics. But this is despicable on every level," wrote Rep. Barbara Lee in response to Trump's proposed cuts. "But this is despicable on every level."

The #GOPTaxScam gave a trillion dollars to billionaires & massive corporations. Now, Republicans want to gut the Children’s Health Insurance Program to pay for it.

Not much surprises me anymore in American politics. But this is despicable on every level. https://t.co/8KhY2xz4OM

— Rep. Barbara Lee (@RepBarbaraLee) May 7, 2018

Described by one Trump administration official as "the biggest rescission request that has ever been sent to Congress," the proposal needs a mere majority in both the House and Senate to pass.

Speaking with the Post on Monday, Rep. Mark Walker (R-N.C.) said the Trump administration has assured Republicans that this package of spending cuts is just the first of many.

As the Post reported, CHIP and is just one over over 30 programs the White House is moving to slash.

"This proposal is a shameful betrayal of children," Sen. Bob Casey (D-Penn.) wrote in response to reports of Trump's proposal. "This administration and congressional Republicans passed a massive tax giveaway to their donors and big corporations, and now they want vulnerable children to pay for it."

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