The Progressive Ensign

insights and analytics to build an economy that works for all

Category: Democracy

IRS Takes Care of Wealthy in Pass-Through Tax Policy

(Editor Note: Insight Bytes focus on key economic issues and solutions for all of us, on Thursdays we spotlight in more depth Solutions to issues we have identified. Fridays we focus on how to build the Common Good. Please right click on images to see them larger in a separate tab.)

Photo: calwatchdog.com

The IRS was tasked after passage of the Tax Bill last winter with defining which businesses and owners would qualify for a special 20 % deduction on pass through income.  Interpretations of the pass through 20 % deductions where announced yesterday.  As maybe expected the law favors the rich, and even gives the Trump Organization new benefits which the president can take advantage of as he still holds title to his businesses and properties while in office.

Half of all U.S. businesses use pass-through income structures with 70 % of the income flowing through to the top 1 % in wealth.

Sources: Joint Committee on Taxation, Center on Budget and Policy Priorities – 5/10/18

The tax bill provision for pass through deductions builds on a tax law that is already biased toward the wealthy who own businesses structured to maximize tax benefits. The Center on Budget and Policy Priorities (CBPC) notes due to a byzantine design opportunities for gaming are rampant, “ it could wind up being even more expensive and delivering larger tax cuts to high-income filers than current estimates show because it creates a significant gaming opportunity:  high-income individuals may now be able to secure very large tax savings by converting their labor income into pass-through income to take advantage of the new deduction.”

The CBPC estimates that over $50 billion will be lost in tax revenue each year for the nine years the law is in effect for a total of $450 billion of the $1.5 trillion deficit from the bill. When the law was written arbitrary winners and losers were chosen for example excluding architects and engineers.  New York University law professor David Kamin observed in recent congressional testimony, “This pass-through deduction represents the very worst kind of tax policy, picking winners and losers haphazardly in a complex tax provision, and then generating significant incentives for people to rearrange their businesses to try to get on the right side of the line.”

Next Steps

We have consistently noted that the Tax Bill of 2017 favoring the rich with 80 % of the tax benefits will torch taxpayers to the tune of $1.5 trillion deficit to be financed by bonds. This abusive blatant giveaway to the rich is a disaster both in terms of income equality and economics.  Our generation and many generations to come will be paying off bond interest instead of investing funds in education, infrastructure projects, job training, Heartland initiatives, medical care and apprenticeship programs.  The bill needs to be repealed, applying taxes to corporations and the wealthy to invest in programs that benefit the 80 % not the top 1 % in income.

US Steel and Nucor Use Tariffs To Monopolize Markets

 

Image: vice.com

Two major steel companies, US Steel and Nucor, last March lobbied the Trump Administration to post tariffs on imported steel at 25 %. They are now pressuring the Administration to deny any requests for waivers from the tariffs.  Over 1,600 applications have been filed for exclusion from the tariff provisions which blanketed the world including the European Union, Mexico, Canada, Japan and China.  The two steel giants are in fact creating a monopoly for their steel products in the U.S.

In order to protect about 33,000 steel worker jobs, several million jobs in steel using industries are jeopardized by the tariffs:

Sources: U.S. Bureau of Labor Statistics, Bloomberg – 3/2/18

Nucor paid for a film by presidential advisor Peter Navarro, when he was a professor at UC Irvine on the threat of China imported steel being dumped onto U.S. markets.  Certainly, there are issues related to China trade practices but is using 25 % tariffs on all imported steel even from allies going to force China to change their export practices?

Next Steps:

Companies that use steel in their products are reeling from soaring price increases in steel and sourcing issues because U.S. steel producers do not make the products they need.  Elite corporate CEOs are running their companies via the U.S. government to pick winners (themselves) and losers over 1,600 companies being denied exemptions to run their businesses successfully and keep jobs here in the U.S. Now, many firms are planning on moving operations to countries closer to their customers to avoid the tariffs all together – thus moving jobs out of the U.S. It seems already the tariff plan has backfired, moving jobs out of the U.S. and jeopardizing millions of jobs.  We should not be tolerating this state of oligarchy, where two major companies setup tariffs to their exclusive benefit in while damaging thousands of other companies businesses and threatening millions of U.S. jobs.  It is the job of our federal government to not pick winners and losers but to establish fair markets for innovation and entrepreneurship to triumph. The tariffs need to be lifted and an intelligent trade strategy in collaboriation with our allies to end China steel dumping practices be implemented.

Weaving Together a New Social Fabric for the Common Good

(Editor Note: Insight Bytes focus on key economic issues and solutions for all of us, on Thursdays we spotlight in more depth Solutions to issues we have identified. Fridays we focus on how to build the Common Good. Please right click on images to see them larger in a separate tab.)

Image: meritsolutions.com.au

One of the major problems we face in our society is isolation quite often brought on by inequality and poverty.  It is hard to be ‘in the social mainstream’ when you are out of the economic mainstream.

As we have noted we need common experiences, social connections and collaboration toward shared goals to overcome isolation.  Often for a person not moving up the economic ladder there is a lack of feeling connected to the community or a network that can assist them during a rough patch in life.

Education is a key to moving up the economic ladder. For young students in poor neighborhoods, without school resources, overworked teachers and rundown school facilities getting a good education is especially challenging. An group that is meeting the challenge of isolation head on is Thread, a social fabric weaving organization in Baltimore.  Thread connects students with up to five volunteers who do things that a family member might do. The volunteers are coached by an experienced volunteer called the Head of the Family.  The Head of the Family is coached by a Grandparent, and Grandparents are supported by Community Managers.  Community Managers are paid Thread staffers. Offering complimentary help are Collaborators who provide special assistance when needed for example in: legal help, SAT tutoring, mental health counseling etc. Thread replicates the family connections and support networks, while providing key links to volunteers who can help with connections to colleges and universities or other resources.

Thread works with 415 high school students, more than 850 volunteers and over 300 collaborators.  The results are impressive:

  • 87 % of students who have been in the program for 6 years have graduated from high school
  • 84 % of students in the program for 5 years have been accepted to college
  • 83 % of student alumni have completed a 4 or 2 year college degree or certificate program

The Thread example is one for policy makers to review, and examine in detail for the elements of what makes a social fabric weaving organization work.

Education is the Fifth Estate, an essentially building block of our democracy providing opportunities for all to move up in life.  Programs like Thread, provide insight into how to create the underlying support village for those that are isolated or have limited family support to change their life and shift into a productive path leading toward self-respect and self-esteem.  Our society benefits from adding productive citizens to our economy, while building safer and more democratic communities.  Certainly, forming organizations to rebuild the lives or our isolated young people in both cities and rural areas is critical to strenthening the Common Good.

The Truth Will Set Us Free

 

Image: Your Little Planet

It seems this Administration has a problem with facts, and the truth.  Simply the truth is what will set us all free to become all we can become and continue building this country and world. Yet, as of June 1st the Washington Post has counted 3,251 misleading or false statements by our POTUS.  As the leader of the Executive branch he sets the lead for his staff, they feel comfortable making misleading statements and creating ‘alternate facts’.  There are not ‘alternate facts’ when it comes to what is actually happening in our government.

The news media is the Fourth Estate, with special protections inscribed in the First Amendment of the Constitution declaring ‘Congress…shall make no law abridging the freedom of speech or of the press’.  We need the press to monitor government officials and ensure they are doing what they say they are doing and telling us the truth.  Without knowing how our public officials are discharging their responsibilities to serve the public’s interests and build the common good we cannot make decisions on the correctness of their behavior or who to vote for or against.  Madison and Jefferson were distrustful of a powerful federal government that was not under constant surveillance by the press, to ensure a faction or tyrant could not confuse the public and run wild over the people with their power.

The most alarming aspect of this Administration is not that it lies about policy and actions, it is that it lies constantly and changes the focus to undermining the press to new levels of bullying, intimidation and threats.  This barrage of constantly calling the mainstream press ‘false news and enemies of the people’, is to delegitimize the press to give the Administration the policy room to do whatever it wants. A guest on the PBS News Hour this past week, Peter Wehner, senior fellow at the Ethics and Public Policy Center in Washington, succulently described this unprecedented dishonesty as ‘pathological lying’ – a disease. A disease that is eating away at the foundations of our democracy.

Every major religion on this planet places a high value on honesty, truthfulness and integrity.  The truth is not a new concept – except for this Administration. Madison had great faith that when a well-educated and informed public made decisions they would be able to make the right decisions in the interest of the common good. Let’s rededicate ourselves in all our interactions with each other, our families and in our democratic institutions to be honest, truthful and transparent.  Only with consensus around the facts can we move together and solve the problems ahead for our children and future generations.

Make America A Democracy Again

 

Image: civicsacademy.co.za

Memo

To: Oli Garchy, CEO, The Elite

Subject: Meeting – Make America a Democracy Again

Time: Lunch

Place: The Lawn in Front of the Lincoln Memorial, Washington DC (It helps to have Honest Abe watching over the mixed group)

Date: Soon…before it’s too late.

Oli,

Ok, we recognize you and your team since Ronald Reagan have built an Oligarchy that stands out (not outstanding for the 90 %) as a model for the history books, based on government statistics:

1. President is a billionaire (first one) – and holds title to all his properties while in office, making money while in office (first time)
2. Cabinet of largest number of billionaires in history of U.S.
3. Corporate tax rate lowest in 50 years
4. Corporations have the most cash ever sitting in banks and offshore shelters at over $1 trillion
5. Top 1 % taxes are the lowest in 50 years
6. Top 1 % received 90 % of income gained since the Great Recession
7. The 80 % working class real wages have declined in the last 30 years – while CEO pay is 300 times the average worker’s
8. Home ownership is at lowest level in 40 yrs – renting at the highest level in 15 yrs (you’ll own more residential real estate than ever)
9. Student debt highest ever at $1.5 trillion – because:
10. Spending by state and federal government on public education secondary thru higher education is the lowest ever as per cent of GDP
12. Healthcare services costs more per person in US than anywhere in the world with life expectancy lowest of all developed countries – due to all the built in middle profit layers of insurance, drug price gauging and stock buybacks                              13. Stock buy backs were at the highest level ever last quarter $431 billion, not one dime to employees or workers directly in wage increases
14. Last year had the highest average global temperature, yet the administration wants to end car emissions standards by California, drill for more oil on the coasts – fossil fuel executives are getting what they want and more                                           15. Tax receipts from U.S. corporations hit a 75 year low                                      16. The Top 1 % have 40 % of all U.S. wealth, the highest concentration since 1929

You’ve wrapped Congress around your little finger with the Tax Cut bill where 70 % of the tax cut proceeds went to executive salaries, stock buybacks, and dividends, very little into research and development, increasing productivity or job training.  You promised to raise wages and very few companies did.

The American people care more about the environment and its stewardship then you’re team, 60 % in a recent Pew Research poll say that preserving the environment is more important, even if there is an economic cost.  Oli, think about it, your profits won’t last long if your customers are unhealthy or dying due to pollution of the water, air or land.

Professors Gilens and Page at Princeton and Northwestern reviewed opinion polls versus legislation passed over the past 30 years and found of 1779 laws passed 90 % did not support popular opinion, seems you own Congress.

Your 30 year old oligarchy has come at great cost, look at the debt increased by a magnitude from the Tax Cut you wanted and the public did not:

Sources: The Congressional Budget Office, The Wall Street Journal, The Daily Shot – 7/23/18

You’ve just mortgaged your children and our children’s future for good jobs, owning a home and good health care just to give you and your friends a huge tax cut.  You and your team have the lowest corporate tax cut on record, but at great cost!

Oli, here is the issue for your team; without a thriving Working Class the value of your assets will go down.  Consumer spending will spiral down unless the Working Class get a fair piece of the economic pie.  When consumer spending goes down, your businesses begin losing money, their value drops and if the spiral keeps going like it did after 1929, you could lose everything.

The way to build a Working Class that you need is via a democracy – remember that from your textbooks.  It looks like this: a government ‘by the people, for the people and of the people’ – Lincoln had it right.

Think about it Oli, meet with us before it is too late.   In the future, there maybe hostility with the wealthy elite, but there is still time.

Next steps:

How about lunch?  How about our people meeting with your people? Our folks; Senators – Warren, Sanders, Booker and Harris, Representative Pramila Jayapal, Nick Hanauer, and Robert Reich.

Let me know who on your team you would like to invite, maybe the Koch Brothers, The Devos – as couple, Steve Mnuchin, Wilbur Ross, and five more would be a good size group.

Our luncheon wrap up takes place in the Jefferson Memorial where on the south east portico Jefferson observed we must make progress together:

“I am not an advocate for frequent changes in laws and constitutions, but laws and institutions must go hand in hand with the progress of the human mind.”

Please read our posts on the Common Good in a Democracy as a refresher on what it is and how we all need to build it again. Frankly, Oli, the Common Good seems lost right now, yet it provides the beacon to keep the ship of state on course for all the people. We need to work together to build the Common Good. Let’s – Make America A Democracy Again.

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