Tag Archives: Republican Tax Plan

The Incredible Tax Bill

For once the President* found the precise word.  The recently enacted tax bill is incredible, and so is the President*.

There are some elements of the tax plan which, indeed, are genuinely incredible.  Here are a few —

 The tax plan is predicated on what amounts to economic mythology/ideology, and it is NOT grounded in empirical evidence.  Trickle Down economics is and has always been a theory in search of some evidence, and not a result of the collection and analysis of actual economic data.  The following summation is as good a point at any to discuss the reality of this manufactured ideology:

“The harsh reality is that while this story has been told for – sometimes very eloquently for 30 years, now – we can look back to President Reagan’s tax cuts in 1981. There’s never been a documented case in which it actually worked. The problem is that every time we’ve enacted tax cuts in the last 30 years that have been based on this premise, we’ve had to backpedal as a nation. We’ve had to undo them. Sometimes, as in the case of the Bush tax cuts of 2001, it’s taken a decade of pitched battle for Congress to realize in a bipartisan way that they really had just dug the hole too deep.”

The tax plan benefits approximately 83% of the nation’s income earners, and does little to help the remainder.

“By 2027, more than half of all Americans — 53 percent — would pay more in taxes under the tax bill agreed to by House and Senate Republicans, a new analysis by the Tax Policy Center finds. That year, 82.8 percent of the bill’s benefit would go to the top 1 percent, up from 62.1 under the Senate bill.”

And even in the first years of the bill’s implementation, when it’s an across-the-board tax cut, the benefits of the law would be heavily concentrated among the upper-middle and upper-class Americans, with nearly two-thirds of the benefit going to the richest fifth of Americans in 2018.”

Let’s get realistic about this point.  Nevada has a total population of 2,998,039; with a median home owner value of $191,600.  The median household income is $53,094.  The per capita income is $27,253.   We’ve covered Nevada tax filers previously, with the following result:

1,350,730 Nevadans filed income tax returns in 2015.   27.21% of the Nevada filers reported adjusted gross income between $25,000 and $50,000.  13.5% of filers reported AGI between $50,000 and $75,000. 8.15% reported AGI between $75,000 and $100,000.  Another 10.22% reported an AGI between $100,000 and $200,000.  From this point on the percentage of filers by category drops, those reporting AGI between $200,000 and $500,000 were 2.48% of the filers; those reporting AGI between $500,000 and $1 million were 0.43%, and those reporting over $1 million AGI made up 0.26%.

It doesn’t take any form of complicated arithmetic to discover that giving tax breaks to the top tier income tax filers doesn’t apply to all that many people in the state of  Nevada (or anywhere else for that matter.)  While the definition of  “middle class” seems to vary, the most commonly accepted definition by income asserts  it is  those households  earning between $46,960 and $140,900 annually.  Nevada’s median income ($53,094) fits within that range.   The majority of the benefits included in the current tax scheme do NOT accrue to the majority of Nevada’s income tax filers.

And then there’s the CBO analysis:

“According to the CBO’s calculations, individuals in every tax bracket below $75,000 will experience a year in which they record a net loss — meaning they’ll pay more in taxes, experience diminished services, or both — by 2027.  The lowest income groups will face significant overall losses, and those making between $10,000 and $20,000 a year will face the biggest losses. The CBO estimates that in 2027, taxpayers from this bracket will see an overall loss equivalent to $788.10.”

If ever there was an example of Reverse Robin Hood, this tax scheme would serve nicely.  This is a middle class tax cut only if the middle class is defined in extremely illogical ways — as if $250,000 AGI was anywhere in the “middle.”

The tax plan make corporate tax cuts permanent and individual/family tax cuts temporary.  This is a recipe for disaster in 2027 when someone is asked to pony up the difference between realistic spending and unrealistic assumptions about economic growth.

The tax plan is underpinned by the assumption corporate tax cuts will yield increased wages and increased employment.   A common Republican argument of the moment is that our recovery from the last recession was sluggish, and tax cuts would have made it better.  Another argument could as easily be made:  The recovery was not as robust as it could have been because Republicans refused to enact the kinds of stimulus spending that would have both improved our national infrastructure and boosted consumer expenditures.  Republicans screamed “deficit spending” and “national debt” to the heavens, a tune they now seem to have forgotten as they vote in favor of a $1.4 trillion deficit.

The tax scheme also ignore the obvious.  How many times in this modest little blog have we said: There is ONE and ONLY  ONE reason for any firm to hire anyone at any time — a business only hires personnel when the staffing levels are insufficient to meet the demand for goods or services with an acceptable level of customer/client satisfaction. Regular readers should be able to recite this from memory by now.

We’ve also mused about other ways corporations spend their windfalls — mergers and acquisitions, increased dividends, stock buy-backs, increased investment in financial revenue streams, etc.  It’s not like wage increases and plant expansion are the only options.  In fact, for corporations, especially those for whom  ‘shareholder value” is the driving focus, increasing wages and capital expenditures is the last likely option.  Shareholders are focused on getting a maximum return on their investments and this is not enhanced by increasing labor costs.

The tax plan is riddled with benefits for the wealthy that defy common sense.  For example: Carried interest, increasing the estate tax exemption (Fun Fact: Of the 5,460 estates slated to pay the estate tax this year only 80 of them are small businesses or farms.)  More examples?  There’s the alternative minimum tax which was enacted  to address a concern which may be resurrected by this tax bill:

“Congress enacted the AMT in 1969 amid widespread outrage that many wealthy people paid little or nothing to Washington thanks to clever use of loopholes. But because income thresholds for being subject to the tax weren’t indexed to inflation (until 2012, which didn’t make up for the decades of lost ground), many middle-class people got sucked into paying it. ”

The tax plan is only part of an overall plan to Kill The Beast.  Or, make government so small it could be drowned in a bathtub?  Those who aren’t convinced by now that the next move by this Norquistian Congress is to go after Social Security, Medicare, and Medicaid haven’t been listening to GOP leadership.   Expect the drumbeat of commentary on “entitlements” to increase by leaps and bounds — We have a Huge Deficit! (Which they created) and now We have to cut government spending.  Remember: They are called entitlements because you are entitled to the benefits you’ve been paying for with your payroll taxes all along.

Pro Tip:  This assessment of voters was made in 2006, and not all that much has changed since –

“Regular voters also are older than those who are not registered. More than four-in-ten of those ages 50 and older (42%) are regular voters, about double the proportion of 18-29 year-olds (22%). Among those between the ages of 30 and 49, more than a third (35%) reliably go to the polls ­ a fact that is consistent with previous research that found voting is a habit acquired with age.”

Now, who is most likely to be quite concerned with saving Social Security and Medicare? There’s a reason  Social Security and Medicare form the third rail of American politics.

A final point.  The Republicans have given away their cards.  When Democrats called for increased spending on health programs, Republicans pointed to the deficit. When Democrats called for increased infrastructure spending, Republicans pointed to the deficit.  Now, the deficit (all $1.4 trillion of it) is the responsibility of the Republicans.  They’ve given away the revenue.  Now the Democrats have the Tax the Corporations card in hand.  And who among the GOP wants to run on a platform of saving those cash-hoarding multi-national corporations?  Good luck with that.

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Filed under Economy, Nevada economy, Politics, Taxation

What Big Victory?

There’s a steady drum beat of pundits and politicians telling me the passage of the TaxScam is a great, wonderful, awesome, fabulous, stupendous, magnificent piece  of legislative action.   Okay, I am certainly not the brightest bulb in the great chandelier, but I’m no dim candle either, and I can tell the difference between tax reform and a tax heist giveaway, handout, bequest, benefaction, and contribution to the top income earners when I see it.  Further, I am truly tired of pounding out the fact-of-life:  Trickle Down Economics is a HOAX.

What the Congress is voting on today isn’t a tax reform bill, it is purely and simply the enaction of economic mythology and political ideology.  There is much economic theorizing asserting the efficacy of tax cuts toward encouraging economic growth, but the numbers (those pesky facts) haven’t substantiated the claim, and the recent example of Kansas offers a real time look at some very dismal prospects.

Making the tax system more rational isn’t best served by a code that includes the Corker Kickback, exceptions for private airplanes,  golf courses, and doesn’t incorporate provisions for exempting state and local taxes.   And, we’ve covered the Carried Interest issue before.   The advice from the EPI back in January 2014 still holds:

“These investment advisors and hedge fund managers can take advantage of this tax structure because they are often compensated through a scheme that, in part, pays them according to the returns on the fund. The industry standard for hedge fund managers is “two and twenty,” which is shorthand for an “overhead” fee of 2% of capital under management plus carried interest (often called a “carry”) of 20% of the returns on the fund. Thus a $100 million fund earning 20% would pay its fund manager $2 million for overhead and $4 million in carry. The carry portion of their compensation is treated under the tax code as capital gains for the fund manager and is taxable at the much lower capital gains tax rate of 15%.” [EPI] (emphasis added)

However, rest assured Nevada’s Republican members of the 15th Congress will vote in favor of retaining the carried interest loophole, and other egregious portions of the Trump Family Property and Legacy Protection Act.  Paris Hilton’s wealth will be preserved.  And for this we may now expect an onslaught on “spending” as in Republican attempts to dismantle Social Security, Medicare, and Medicaid.

As the Republicans hiss out “entitlements” as if the word was a synonym for undeserved welfare, most Americans are quite aware they’ve been paying into Social Security — yes,  to restate the obvious, people are entitled to receive their Social Security benefits — they’ve been paying for them all along.

The point will come when the GOP will cry out, “Oh, we have to cut government spending, because Social Security is going broke! Medicare is out of control.  Medicaid will bankrupt the nation — look at the national debt!”   Really — the way to fix these issues is to re-visit and revise the mess made in the 15th Congress, repeal the TaxScam, and do some revisions targeted at helping middle income Americans.

Some suggestions:

Enact tax cuts 80+% of the benefits go to working middle and lower income Americans who will actually go out and spend the benefits on washing machines, cars, groceries, rent or home mortgages, and who support our economy.

Close the carried interest loophole.  It was never a good idea and it certainly isn’t now.

Enact tax reforms that address the modern economy — not the horse and buggy days.  Support solar, wind, and alternative energy sources and research.  One of the fastest growing jobs in the US today is “wind turbine technician.”  Continuing to subsidize fossil fuels is tantamount to protecting the buggy whip factory owners.   Just to hammer the point a bit further:  “Increases in Job Opportunities:”  Solar Photovoltaic installers  — 105% increase; Wind Turbine Technicians — 98%; Home health aides — 47%; Personal Care aides — 37%; Physician Assistants — 37%; Nurse Practitioners — 36%; and interestingly enough Bicycle Repair Specialists — 29%.

Forget the territorial tax regime — all that does is incentivize corporations to move their operations overseas.

This would be a start.  There’s nothing simple about a tax code — there never was and there never will be.  Piling up stacks of paper to illustrate the density of the code isn’t instructive, all it demonstrates is that we have an extremely complex economy.  We use taxation as a lever to encourage or discourage certain decisions.   In this instance we are encouraging the behavior of hedge fund managers (notoriously short term thinkers) and multi-national corporations.  This didn’t work so well in 2007-2008 and it surpasses all reason why anyone would think a repetition would have any different result.

But we can count on Senator Dean Heller and Representative Mark Amodei to march right in line with the GOP leadership…straight into the next bubble, the next crisis, and the next recession — only this time the resources of the federal government will be depleted in the face of adversity.  In slightly less modest terms, it’s a recipe for more debt which will eventually lead to the necessity of incurring even more debt.

And they’re still coming after Social Security and Medicare.  Be prepared.

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Filed under Economy, Politics, Taxation

Representative Government?

Not that popular polling is always the best way to govern, but the current capacity of the Republican controlled federal government to ignore public opinion is amazing.  For example, the Republican tax plan has a 26% approval rating [PR] 91% of Democrats, and perhaps more importantly, 61% of independent voters disapprove of the plan.  66% of Republicans approve of the plan, but we have to remember 37% of the American public identifies with the GOP. [HP]

While we’re remembering the horror at the Sandy Hook Elementary School five years ago (and not forgetting the massacre at the Las Vegas music concert) we know that 32% of Republicans, 83% of Democrats, and 62% of independents support stronger guns laws in this country. Overall support for stricter control of firearms stands at 60%. [PR]

The FCC decision to eliminate the net neutrality rules, some of which go back to the less than golden age of dial up, isn’t popular either.  Polling found that 83% of registered voters disliked the idea, 75% of whom were Republican and 89% of Democrats.  86% of registered voters who were independent didn’t like the idea either.   However, the FCC marched on with a 17% approval rating for its new “light touch” policy.

It seems that whenever the President* starts feeling the heat from Congressional, popular, or media sources he retreats to his anti-immigration rhetoric.  The Wall seems either literally or metaphorically important to him, but it isn’t all that much in the eyes of the nation he’s supposed to be leading.  36% of registered voters support The Wall, while 62% oppose it. [PR]   Voters were given three choices about Dreamers, stay and apply for citizenship, stay but not as citizens, or leave the country.  The December Marist poll found 58% supporting the stay/citizenship option, 23% supported stay but not as citizens, and only 15% supported deportation.   As of the week of December 6th the Quinnipiac Poll found 77% supporting the stay/citizenship application option, 7% supported the stay with no citizenship option, and only 12% supporting the deportation option.

It’s been a while since we’ve seen polling about Vladimir Putin, the other half of the Trump-Putin bromance.  There was some polling done last Summer which might be instructive.  Last July only 15% of Americans had a positive feeling about Putin, and as of late June 2017 approximately 50% of Americans felt the President* was too friendly with the Russian leader. [PR]

A person might think that a leader who isn’t stone deaf to public sentiment or stonewalling to protect his self image might want to consider how best to reach toward a broader audience, and to cultivate something more than a 32% approval rating.  Apparently that consideration isn’t getting much traction in the current White House.

Nor does it seem like the first session of the 115th Congress is paying much attention either.  In fact, it looks like the GOP is doing the drafting of the Democratic Platform for 2018 — Net Neutrality, DACA, common sense gun regulation, immigration reform, and real tax reform for working Americans.  The 32% President and his 37% party are perhaps doing the best they can to elevate the Democratic Party in the mid term elections?

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Filed under Gun Issues, Immigration, Net Neutrality, Politics, Taxation

Nevada and the Tax Scam: Debts Debts and More Debts

The Bureau of Economic Analysis has some important numbers for the state of Nevada.  As of September 26, 2017 the agency reports Nevada’s per capita personal income was $43,567 ranking 32nd in the US and 88% of the national average.  However, the numbers don’t signify as much as they could without looking at the trends in which they occur.

“The 2016 PCPI reflected an increase of 1.0 percent from 2015. The 2015-2016 national change was 1.6 percent. In 2006, the PCPI of Nevada was $39,930 and ranked 15th in the United States. The 2006-2016 compound annual growth rate of PCPI was 0.9 percent. The compound annual growth rate for the nation was 2.6 percent.”

There are at least two things to unpack from this. First, it’s evident Nevada took a wallop from the Great Recession in the wake of the Housing Bubble and Wall Street Casino collapse. Secondly, Nevada’s per capita personal income isn’t growing at a pace which would make anyone too confident of increased disposable income for Nevada consumers.   In fact, it makes one think we’re going to be looking at increased levels of household indebtedness — again.

Another number to toss into this mix is the inflation rate, ranging in 2017 from about 1.6% to 2.7%.  And now we come to the inflated promises of the President* and the members of the 115th Congress who claim that their tax plan will “put more money into consumers’ pockets.”  Not. So. Fast.

It’s no secret the Tax Bill benefits those in the upper income brackets far more than it does those in the lower quintiles of the tax brackets.  Nor is it any surprise that the pass through benefits inserted into the bill are a windfall for a select group of businesses which in most circumstances don’t really qualify for the brand “small business.”  Therefore, it’s hard to visualize how this plan truly benefits the “average” Nevada taxpayer.

It’s even harder to see how the bill would create the kind of growth necessary for the bill to “pay for itself.”  The conclusion of the Tax Policy Center isn’t exactly comforting:

TPC has also released an analysis of the macroeconomic effects of the Tax Cuts and Jobs Act as passed by the Senate on December 2, 2017. We find the legislation would boost US gross domestic product (GDP) 0.7 percent in 2018, have little effect on GDP in 2027, and boost GDP 0.1 percent in 2037.

If you’re thinking this isn’t enough to boost the per capita personal income level in Nevada, except for a chosen few, you’re probably right on target. Nor is there much reason to believe the Growth Fairy will wave her wand more strenuously anywhere else in the country.  What do people do when wages and salaries don’t increase by all that much, inflation creeps up, and those people want to maintain their standards of living? The borrow.  And this is where DB starts jumping up and down again sounding alarms.

Look, for example, at the NY Fed Report from February 2017: (pdf)

Aggregate household debt balances increased substantially in the fourth quarter of 2016. As of December 31, 2016, total household indebtedness was $12.58 trillion, a $226 billion (1.8%) increase from the third quarter of 2016. Overall household debt remains just 0.8% below its 2008Q3 peak of $12.68 trillion, but is now 12.8% above the 2013Q2 trough.

Yes, this dry as dust account is saying that levels of household debt are perilously close to what they were just before the Bubble splattered all over our economy in 2008.  There are a couple of reasons not to panic — quite yet.  The level of debt delinquencies hasn’t approached the 2008 level, and we’re seeing fewer bankruptcy filings.  [CNN Money]  There are a few more dessicated sentences from the Fed of note:

“…while comparable in nominal aggregate size, the composition of current household debt is very different from that in 2008. We pointed out in a recent press briefing that debt balances are evolving; mortgages now have a much smaller share than in 2008, auto and student loans have increased in their share, and balances are increasingly shifting towards more creditworthy and older borrowers.”

Read: Mortgage debt is down, student and automobile debt is up. Banks are lending to older borrowers with better credit.  This situation is fine for the banks and those who invest in them, it isn’t exactly cause for young people to rejoice.

At the risk of sounding alarmist — we do need to watch the effects of those automobile loans on the financial sector because those loans (like the mortgages before them) are sold into secondary markets (securitized) and there are some initial warning signs.

One industry analysis doesn’t provide all the comfort I’d care to feel at the moment:

In fact, S&P Global Ratings has issued 881 upgrades and no defaults or downgrades on the subprime auto ABS deals it’s rated from 2004 to present. However, the company ran a stress test simulating what another financial crisis-like event would look like today and found that subprime losses would rise 1.67 times higher than S&P’s baseline expectations for the economy. So while the markets are stable, there are certainly economic factors to watch for.  “Yes, losses are going up from 2015 and 2016, and are even approaching recessionary levels,” Amy Martin, S&P’s senior director, told Auto Finance News. “But you have to look at it relative to what’s happening with the ratings, and the ratings are very stable.”

Yes, auto loans are up, increasing the transactions in the secondary market, but we should all relax because the ratings are stable? The last time we put our faith in the ratings agencies every investment bank on Wall Street fell into its own sink hole.

If I’m a little shaky on the subject of auto loans and their securitization, I’m even less enthusiastic about what’s been happening on the student loan front.  Again, from the NY Fed which as a good track record for keeping tabs on the student loan situation:

Interestingly, though the difference in default rates between two- and four-year private college students is not large (less than 5 percentage points at age thirty-three), this is not the case for public college students. Default rates for community college (two-year public college) students are nearly 25 percentage points higher than those for their counterparts in four-year public colleges. The chart below also shows that while for-profit students have the highest default rates, the default rates of community college students are not too different from those of for-profit students (36 percent versus 42 percent for two-year and 39 percent for four-year for-profit students, respectively, at age thirty‑three).

And now comes the trap: While the administration and GOP controlled Congress make it harder for students to escape the clutches of student loan purveyors, the default rates are ominous.  Further, once in the student loan trap it becomes harder for younger people to become those “older creditworthy” souls to whom banks want to offer mortgages. The following assessment isn’t all that encouraging for the housing market:

“At any given age, holding debt is associated with a lower rate of homeownership, irrespective of degree type. While the homeownership gap between debt-holding and non-debt-holding bachelor’s-plus students remains relatively constant, that for associate degree students expands with age. Associate degree students who take on debt buy homes at almost the same rate as those who never went to college until they reach age twenty-five, when their homeownership rate rises above that of those who never went to college. At age thirty-three, the non-college-goers are almost 4 percentage points behind their peers who enrolled in associate degree programs and took on student debt, while lagging behind debt-free bachelor’s-plus students by 25 percentage points.”

The situation isn’t immediately indicative of economic peril BUT there are some points to remember.  While home-ownership is down (banks are looking for older more creditworthy borrowers) auto loans and student debt are up, and student indebtedness is linked to a reduction in home-ownership.  Meanwhile, the per capital personal income keeps slogging upward at a pace making garden snails look swift.   If you are wondering  from whence comes the fuel for the Growth Fairy — so am I.

Thus far the only elements I see emanating from this GOP controlled Congress are an untoward enthusiasm for giving tax breaks to those who need them the least, an equally unpropitious capacity to ignore trends in household indebtedness, coupled with an almost vexatious tendency to put the burdens on younger generations of Americans for whom education is increasingly costly.

If Nevadans are suspicious of Republican claims of “fiscal responsibility” it’s because they should be.

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Filed under Economy, Nevada economy, Politics

Gobs of Goodies Tax Bill: The Potable Portion

Excuse me while I continue to rush about trying to take advantage of the benefits tucked into the Republican Tax Plan, now subject to a conference to settle differences between the Senate and House versions.  I need to start making beer.

“The tax cut legislation includes a provision that cuts taxes on beer, wine, and liquor produced or imported into the country, saving companies involved around $4.2 billion over 10 years. The provision mirrors language from the Craft Beverage Modernization and Tax Reform Act, or S. 236, introduced by Sen. Roy Blunt, a Republican from Missouri and a member of the Senate GOP leadership team. (While the legislation does benefit craft, or small breweries, it extends the cuts to larger companies and the industry as a whole.)”

There’s a bit more:

“…the Senate has a thing for craft brewing. The updated bill includes what is effectively a major new piece of alcohol legislation, cutting taxes on beer produced in the U.S.—and especially on small breweries. Taxes on the first 60,000 barrels of beer produced domestically by small brewers would be cut in half, from $7 to $3.50. The tax rate on the first 6 million barrels produced would fall from $18 to $16 per barrel. Anheuser-Busch produces tens of millions of barrels of beer a year; a small brewer like D.C. Brau produces around 15,000. The reforms also cut taxes on certain wines and make other technical changes to federal alcohol rules.”

And more become where there’s beer there’s wine:

“The first thing the new bill does is take the tax credit, currently only available to wineries making up to 250,000 gallons, and expand it to all wineries regardless of how much wine they make overall. The two tiers in current law would become three tiers: Wineries will receive a $1 credit per gallon for the first 30,000 gallons made, $0.90 for the next 100,000, and $0.535 for the next 620,000. Wineries making more than 750,000 gallons pay the full tax rate on everything over 750,000 gallons.”

There’s also a tip of the hat to the current penchant for making wine with a higher alcohol content.  We’ll need that — higher alcohol content  — to get through the Great Tax Shift from Corporate America to the Middle Class.  (There’s more info on the underlying bill for those who are interested.

Republicans seem to have a different perspective on spirits, depending on who is consuming them. Senator Grassley (R-IA) appears to approve of Upper Class Guzzling, for the other 99.8% of us, not so much.

“I think not having the estate tax recognizes the people that are investing,” Grassley told the Register. “As opposed to those that are just spending every darn penny they have, whether it’s on booze or women or movies.”

Enough said.

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The Great Bamboozle: GOP Tax Plan Targeted Right At the Middle Of The Top 1%

There are some amazing feats of verbal legerdemain going on as Republicans try to explain why their Jam It Through Tax Plan isn’t a real bag of snakes.

Oh, don’t worry about our plan…people want to see an improving economy…people want to see more in their paychecks…now 90% of the people can file a simple return…there’s a lot of wishful thinking going on here, and most of it is wrong.  The political advertising is going to write itself in 2018.

Senator Maria Cantwell (D-WA) is correct to say that “haste makes waste,” and in its haste the GOP is about to unload both barrels into their own feet.

The tax cuts will explode the debt.  Remember all the times the GOP told us that debt is a problem?  It certainly can be.  When there was a Democrat in the White House the Heritage Foundation positively screamed about the impact of increasing the national debt:

Current and projected increases in government debt, cutting into future economic growth rates, also mean slower future growth of government revenues. Even as future interest expense rises as taxpayers are called upon to service all this debt, growth in government revenues will slow, leaving less available for other priorities, such as national security and economic security, education, and innovation-driving research.

The only difference now is that the accumulated deficits will be driven by a Republican penchant for rewarding the investor class with amazing tax cuts.  Now the argument is reversed: there will supposedly be More revenue, More innovation, More funds for national security and research.  No there won’t. And we don’t need to kid ourselves, because the same basic economic elements are going to underpin the new tax/budget structure that are girding the current one. 

Nothing in the tax bill reverses the current emphasis on short term gains. The GOP is fond of pointing to gains in the stock market as “proof” of its stewardship of economic growth.  There’s an obvious problem with this, as noted by the Chicago Tribune:

Nearly half of country has $0 invested in the market, according to the Federal Reserve and numerous surveys by groups such as Gallup and Bankrate. That means people have no money in pension funds, 401(k) retirement plans, IRAs, mutual funds or ETFs. They certainly don’t own individual stocks such as Facebook or Apple.

So, nearly half the population has Zilch invested in The Market. What about the others?  While people don’t generally have elephantine memories, 2008 isn’t that far in the rear view mirror, and that’s part of the reason about 54% of Americans have some sort of investments, as opposed to the 62% prior to the Big Crash of 2007-08.

Further,  there’s some recent research indicating the decline isn’t over.

Rosenthal and Austin’s main focus was the precipitous decline of taxable investment accounts. In 50 years, the amount of stock owned by individual investors and funds outside retirement and nontaxable accounts such as 529 college-savings plans has dropped off a cliff — to about 25% in 2015 from over 80% in 1965.

But wait, there’s more:

The other startling finding was the growth in foreign investment in the US stock market. What was once a small sliver of the makeup now accounts for a quarter of all stock ownership at $5.5 trillion. Part of this may be due to increasing wealth in foreign countries, but, as the researchers noted, it could also be influenced by corporate inversions, in which foreign-domiciled firms have large direct holdings of US-based stock.

So, we have a structural situation in which the percentage of individual investors is declining precipitously, the percentage of institutional investors is increasing, as is the percentage of foreign investors.   It doesn’t take much effort to perceive that the produce of stock market gains aren’t going to benefit most Americans, but should assist institutional and foreign investors.

But surely those institutional investors will be looking for long term investment prospects and will act as a curb on short term pursuits as exemplified by hedge fund operations?  Nupe.  That part of the structure hasn’t changed either.  It’s not happening:

Across the world, a clamor is rising against corporate short-termism—the undue attention to quarterly earnings at the expense of long-term sustainable growth. In one survey of chief financial officers, the majority of respondents reported that they would forgo current spending on profitable long-term projects to avoid missing earnings estimates for the upcoming quarter.1

Critics of short-termism have singled out a set of culprits—activist hedge funds that acquire 1% or 2% of a company’s stock and then push hard for measures designed to boost the stock price quickly but unsustainably. 2 The typical activist program involves raising dividends, increasing stock buybacks, or spinning off corporate divisions—usually accompanied by a request for board seats.

If corporations increase profitability I am hearing, “raising dividends, increasing stock buybacks, and mergers, acquisitions, and spin offs.  I am NOT hearing investment in plant expansion, workers’ wages, and company benefits.  And, I’m certainly not hearing anything about encouraging the promotion of taxable investment accounts, the kind that  puts revenue into the Nation’s coffers.

Nothing in the tax bill addresses wage stagnation.   And, no, this is not a myth:

“After adjusting for inflation, wages are only 10 percent higher in 2017 than they were in 1973, with annual real wage growth just below 0.2 percent.[1] The U.S. economy has experienced long-term real wage stagnation and a persistent lack of economic progress for many workers.” […] ” The portion of national income received by workers fell from 64.5 percent in 1974 Q3 to 56.8 percent in 2017 Q2.”

Ouch.  Somehow, the Growth Fairy is supposed to be so enamored of tax cuts for corporations and wealthy individuals that more greenbacks will float down and squirm into the pay packets of average American workers.  Probably not, and putting more dollars into the pockets of institutional investors — foreign and domestic — isn’t going to be all that helpful either.  So, not only does the tax plan not address short term-ism, it doesn’t really address paycheck issues either.

But Wait! How about increasing the child tax credits and standard deductions?  It’s no secret that those people earning $75,000 or less aren’t going to be the big winners in this tax bill.  “The tax bill Senate Republicans are championing would give large tax cuts to the rich while raising taxes on American families earning $10,000 to $75,000 over the next decade, according to a report released Thursday by the Joint Committee on Taxation, Congress’s official nonpartisan analysts.” [WaPo]

But, but, but…Your tax filings will be simpler!  Simple doesn’t matter if you aren’t getting your taxes cut.  And, if the tax preparation deduction is eliminated then there are going to be some mom and pop franchises in serious straits — those just happen to be local small businesses as well.

But, but, but…jobs won’t go overseas!  You can only dream.  The arguments get a bit into the economic weeds, into territorial taxation, but the bottom line is clear:

This might seem like a small difference, but the design of their global minimum tax creates perverse incentives for companies to offshore jobs and shift profits to tax havens—outcomes that a per-country minimum tax would avoid.

Perverse indeed, especially if one expects the new tax plan to provides incentives for companies to expand operations domestically.  Nothing in this plan actually and directly promotes domestic expansion in the economy — it’s all indirect and absolutely hopeful, perhaps even illusory if not downright delusional.

In the meantime, Medicare will be facing cuts of about $25 billion.  There will be calls to “reform” Social Security” in order to reduce the debt — translation: Higher requirements for fewer benefits.  There will be calls to cut SNAP programs — not a drop in the bucket needed to fill the debt hole; and, educational funding — another squeeze on programs that actually help people eventually earn higher wages.

This won’t prevent Republicans like Nevada’s Senator Dean Heller from enjoying the passage of a “great tax cut,” while he hopes to high Heaven no one in the state notices cuts to Medicare, Medicaid, Childrens’ Health Insurance, and no one talks about increased premiums in the individual health insurance market.  Perhaps no one will notice that graduate students at UNR and UNLV are supposed to pay taxes on tuition waivers while they’re actually earning minimum wages for part time jobs?  No one will notice the reduction in home mortgage interest deductions?  No one will observe the reduction or elimination of deductions for major medical expenses — much of which will be out of the pockets of the elderly.

My guess is that Nevadans will notice.  The political ads may, indeed, write themselves.

 

 

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Filed under health insurance, Heller, Nevada economy, Nevada politics, Politics, Taxation

Bubble Bubble Crash and Trouble: Gambling With Nevada’s Prosperity

A person doesn’t need an advanced degree in either economics or finance to figure out that the current versions of the Tax Bill are not good for Nevada.  We’ll begin with the premise that the Republican tax plan gives the majority of the benefits to corporations.  High income individuals would also benefit from the elimination of the Alternative Minimum Tax, and the Estate Tax.  We should also note that the individual/family tax cuts would expire in 2027 while the corporate tax cuts are made permanent.  Additionally, we should accept the proposition that because of the fluid nature of the proposals and the complexity of how middle income families may be affected, the NY Times analysis is probably one of the best generalization summaries to date.  We can say with some certainty that the vast majority of the benefits will accrue to the upper 2% of American income earners, and to corporations.

Another point often overlooked in the various summations is what the bill will not do.  This element should not be ignored as we try to imagine what the ramifications will be for Nevada and its citizens.  First, a reminder of the obvious —

Nevada depends on the leisure and hospitality sector — our way of saying gaming, which is our way of saying gambling and the hotels that provide the entertainment.  In hard cold stats — the BLS reports employment as follows:  Leisure and Hospitality – 353.8 yoy +2.0; Trade, Transport, Utilities – 242.6 yoy -0.5; Professional and Business Services 191.1 yoy +5.9; Government – 163.0 yoy +2.3; Education and Health Services – 134.4 yoy +2.9.  Little wonder most people are employed in the “Hospitality” sector, the Las Vegas Convention and Visitors Authority reports some 32,108,552 visitors as of the end of September 2017.   Each visitor averaged about $619 spent on “gaming.” [LVRJ]

And now to state the obvious — that $619.00 spent at the tables or playing the slots is literally disposable income.  We intend for our visitors to dispose of it during the time they spend in Las Vegas.  Not to mince words,  anything that restricts disposable income has a direct impact on the total taxable gross revenue generated by our “hospitality.”  For example, in 2007 Las Vegas (Clark County) enjoyed gaming revenue totaling $10,868,464,000. As the housing bubble burst in 2008 the number declined to $9,796,749,000.  As of 2009 with the Recession deepening, the number fell to $8,838,261,000.  The last report, issued in 2016 reported gaming revenue in Clark County of $9,712,796,000, a good number, but still below the halcyon days before the Bubble and Crash.

If Nevadans had adopted the notion that gaming is a “recession proof” industry before the Wall Street Casino wiped out the Housing Market, we were disabused of the idea in the wake of the last debacle.  There was, obviously, a limit to the capacity of our visitors to save our bacon.

And now, we have a Republican tax plan which gives most of its benefits to upper income earners, and corporations, and eventually leaves middle income earners (those earning between $30,000 and $100,000) holding the bag awaiting immediate or eventual increases.  What happens to that average $619 budgeted for the tables and slots when a family has to adjust to higher health insurance premiums?  When a family is no longer able to deduct major medical expenses?  When a family can no longer deduct interest payments on student loans?  When a family finds it can’t deduct state and local taxes?

Years ago Nevadans would sing the praises of the “$60 bettor.”  High rollers are, of course, always welcome, but those $60 bettors were the prime rib in the Nevada casino buffet — the staple, the predictable, the profitable.  Decades later the $60 increased to $619, and these vacationers and tourists are still the staple, the predictable, and the profitable.  Make inroads into their disposable income and they will have less of it to dispose of at the tables and slots.

An economic policy which further rewards the already successful at the expense of the middle class, that would add a return to financial institution deregulation, and would compound the problems by eliminating or reducing the deduction of mortgage interest, is a recipe almost strategically designed to have a negative impact — another negative impact — on Nevada’s economy.

Going a step further, someone is going to have to make up the massive $1.5 trillion hole created by the Tax Plan.  What will Nevadans have to sacrifice?  Their Social Security? Their Medicare?  Their Medicaid?  What then of the now increasing education and health care services sector in Nevada?  What of the construction trades in Nevada, the builders and the contractors?  They’ve seen this movie before and it didn’t end well.

And yet we have one Senator who appears to have purchased the Trickle Down Hoax hook, line, and sinker; who appears to believe the Growth Fairy will wave her magic want and make all things whole — including that $1.5 trillion gap — and one who believes that balanced budgets are paramount except when it’s the GOP blowing the deficits into the stratosphere.   It is time to tell Senator Heller that we have all seen this script play out, and instead of buying into the Trickle Down Hoax he’d do better to purchase some chips from the cashier and donate his $619 to the Nevada economy.  Otherwise we’re looking at more Bubble Bubble Crash and Trouble.

Senator Heller’s office: 202-224-6244.

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Filed under Economy, Nevada economy, Politics, Taxation

GOP Dances With The Growth Fairy

The Toxic Mix

Once a national political party cheered the ascendance of “movement conservatives,” religiously radical, ranging from Dominionist to single issue anti-abortion — and the decision in Citizens United — “corporations are people my friend,” — and white disaffection, “we are under assault,” “They” are taking our jobs… And then the stew became toxic. The fumes threaten to overtake the atmosphere in which a national political party can function.   The disarray is NOT on the Democratic side of the ballot this time, the Grand Old Party is in trouble.  There is nothing new about this perspective,  Outside the Beltway published its analysis back in 2009. However, the Republicans of 2017 aren’t merely a regional party of the American south, as Jonathan Ernst opined in 2013, there are five Republican Parties:

“The House and Southern Republican parties are more concerned with ideological purity and tribal politics than they are with building a durable, competitive national party base to win presidential and Senate majorities. In most cases, they are in no danger of losing their House seats or their hegemony in their states. They will be resistant to changes in social policy that reflect broad national opinion; resistant to any policies or rhetoric, including but not limited to immigration, that would appeal to Hispanics, African-Americans, or Asian-Americans; and resistant to policies like Medicaid expansion or Head Start that would ameliorate the plight of the poor. They also will be more inclined to use voter-suppression methods to reduce the share of votes cast by those population groups than to find ways to appeal to them.”

Ernst missed the Trump surge in 2016, but he’s accurately described the political atmosphere.  The House and Senate Republican parties have ossified, more inclined to use vote suppression methods than outreach; more aligned with the Donor Class in terms of determining the legislative agenda.

Politics of the Donor Class

Money doesn’t care.  Money doesn’t care if a child has medical insurance.  It doesn’t care if a Dreamer is deported. It doesn’t care if banks are allowed to engage in unethical and even illegal activities.  Money doesn’t care if a student is saddled with debt in the course of a four year academic program.  Money doesn’t care if a homeowner can pay property taxes.  Money cares about money.  Thus, why are we the least bit surprised that given the toxic atmosphere and the primary emphasis of the donor class, we are looking at a tax cut bill which is written by the donor class, for the donor class?

Why else would Republicans, so long advocates for lower debt, adopt a plan which will add approximately $1.4 trillion to our indebtedness?  Why else would Republicans, long advocates for home ownership, promote a plan which removes or reduces the deduction for home mortgage interest?  Why else would Republicans, long champions of individual responsibility, accept a plan to give 2/3rds of its tax benefits to corporations?  Why else would Republicans, for decades the voice of local government, advocate removing the deductions for state and local taxes?

The Dance of the Growth Fairy

Why would a political party, long associated with small business, vote in favor of a bill that will do significant damage to most small businesses? [Forbes]  If the 1% are driving the Republican agenda, and are the flesh and blood of the Donor Class — from whence comes their money? Spoiler: It’s NOT from paychecks.

“The results show a stark contrast between the 1 percent and the rest. The population as a whole earns 64 percent of its expanded cash income from so-called “compensation,” basically a paycheck from a company. But the top 1 percent earns only 39 percent from compensation. It gets 24 percent from business income and 29 percent from investments.” [CNBC]

Somehow or another, increased corporate profits are supposed to generate enough growth to cover that $1.4 trillion whole in the can.  This might work IF the profits were piled back into corporate expansion, but as we’ve noted before — corporations can and do have other options (mergers, acquisitions, stock buybacks, executive compensation) and these options are far more likely than plant expansion.  When the Growth Fairy waves her wand, if the growth is associated with increased investment income then there is less incentive for plant expansion, and more for short term financial profit making. (And taking)

However, when trying to conjure up the Growth Fairy in order to justify more income for investors (read: donors) one can always try esoteric arguments predicated on “scoring” issues — static scoring vs. dynamic scoring.  The problem is that neither version of scoring yields enough “growth” to cover that whopping gap!

Nothing in the Growth Fairy’s repertoire can disguise the fact that the Senate version of the tax bill will raise taxes on average for every income group below $75,000 and 72% of the tax cuts go to the top 5%. (Those earning $200,000 annually or more)  Or we could describe it as giving 98% of the households with annual earnings of $5 million or more a tax cut, while only 27% of households making between $30,000 and $100,000 can expect a tax cut.  Not to put too fine a point to it — but, the GOP tax plan is a recipe for disaster.

Home construction is up?  Why not spike it by eliminating or reducing the home mortgage deduction?  Health care services sector is doing well?  We can spike that too by eliminating health care insurance for some 13 million people by removing the Individual Mandate.  How the plan is supposed to narrow the income inequality gap and put more money into the hands of those most likely to spend it on goods and services remains a mystery.

However, this is what happens when in the midst of a toxic mix of partisanship, a donor class emerges as the driving force behind a once principled political party, and that party attempts to paper over the demands of its donor class beneath the gossamer wings of the Growth Fairy.

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Filed under Economy, Politics, Taxation

To Do List In Preparation For A Post GOP Tax Plan Life

I’d write a longer post today, but I feel the need to get started on my Post GOP Tax Plan financial life.  First, I need to get cracking on the purchase of my private jet.  I’ve been thinking of a Gulfstream G650,  but I may have to settle for a Dassault Falcon 900.  Either way I am assured that I can deduct the expenses involved in this purchase.  So, some public school teachers have to dig into their pockets for paper, and other school supplies, for someone else’s children? So. What.  If those needy-greedies will just have some patience I might get around to hiring someone who lives in their district who might pay property taxes.  But, maybe not.

Speaking of education,  I should get on the horn and let younger relatives who are in graduate school know that the tax plan benefiting the Rich will mean that they will be liable for taxes on their tuition waivers — that they’re actually earning some sub-minimal pittance for slaving away on research which will never bear their names is of no consequence.  Well, at least they can file their returns on one sheet of paper.

Meanwhile, I ought to look into getting my offspring into some pricier private schools. Why? Because I can deduct the costs of their pricey-private-tuition while those silly grad students, especially the ones in STEM subjects, will be paying on their tuition waivers and  won’t be able to deduct the interest on their student loans. They could be looking at 400% increases in their taxes. Bad for them. So nice for me!

This means I will be able to focus on the important things in my life, like managing my tax deductible golf courses.  After all, golf is relaxing, relaxed people are more productive, and more productive people earn more. Therefore, they are of greater good to society.  Greater, that is, in comparison to those little drones who manicure the greens and keep the landscaping trimmed.

And, what a lovely gift to the Middle Class that they will not have to deduct the interest on their home mortgages on properties costing more than $500K.  They shouldn’t be shopping in those districts anyway.  So, housing prices are a little creepy in some areas? Pretty high in some parts of the country?  Just stay away from high market homes in areas with high paying jobs! Problem solved.

Okay, there might be some security issues — like disallowing deductions for state and local property taxes means that police, fire, and emergency services will get pinched. But, this is a small price to pay for Freedom from Big Government. Or little government. Or, any government.   There could be some quality of life issues too.  Eliminating deductions for SALT could mean further pressure on budgets for public hospitals, schools, parks, and libraries.  Oh well, nothing the Gotrocks Family has to deal with.

The bills could, however hurt my accountant — if the inheritance tax is eliminated and the AMT is gone, then I don’t have to worry about creating elaborate tax dodging schemes to prevent paying “more than I should,” meaning — more than I want to.  However, this doesn’t necessarily mean my accountant should be all that worried. After all, I can still ask him to find ways to further protect my gains — like turning the Gotrocks Family into the Gotrocks Family LLC so we get the benefits of the Pass Through Loophole.

The House version of the Great Tax Shift (Did I mean to type “Shaft?”) eliminates deductions for major medical expenses.  Perhaps my accountant’s employees should hope for the Senate version, in case I give them heart attacks with my continual demands that they find more ways to hide more of my money.  Only old people have big medical expenses anyway.  Ah, the good old days when Grandpa died in his bed at home, surrounded by family.  Why should he go to a hospital for palliative care when it would be cheaper to pass away on the sofa?  The House version also eliminates the deduction for alimony payments — now, this could be an issue!

Too much alimony and I might have to head to a foreign country?  No problem.  The tax plan could help.  Remember that major short term tax breaks go to corporations.  Foreign investors own about 35% of all shares, thus when the short term benefits of the tax plan go to shareholders — Shazaam! — of the $200 billion in savings expected by the corporations 35% will go to foreign investors.  That could be something like $70 billion?

So, as I gaze upon the picture of the Secretary of the Treasury and his bride proudly displaying a whole sheet of wonderful Money, I remember that the Tax Plan is meant for the Gotrocks (LLC) — who benefit from university research but don’t want to pay for it, who benefit from local police, fire, and emergency services, but don’t want to pay for it, who benefit from schools, parks, and libraries, but don’t want to pay for them.

Happy the Gotrocks will be when there is no AMT to insure we pay at least Something. When there is no inheritance tax!  When those Little People Out There In The Dark will be paying to support the services I enjoy!  On behalf of the Gotrocks Family LLC: God Bless America!

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Filed under Economy, Politics, Taxation

Amodei’s Wonderland: Wherein Economic Vision Becomes Hallucination

One of the more confusing statements from Representative Mark Amodei (R-NV2) concerns how the Republican Tax Scam will affect the economy:

(Part A) “With respect to the effect on businesses, Main Street job creators will see their tax rates reduced through the lowering of the maximum tax rate on business income to no more than 25%. (Part B) Additionally, federal tax rates on corporate taxable income will see a decrease from the highest rate of 35% to a flat corporate tax rate of 20%. (Part C) Each of these changes will help businesses and corporations expand, hire new employees, increase wages, and also give them the resources they need to stay competitive in the global marketplace.”  [Amodei] (“parts” added for discussion)

Let’s begin with Part A, those “main street job creators” are the high income earners discussed yesterday as be beneficiaries of the Pass Through Loophole.   It really doesn’t matter if the firm’s address is Main Street, 5th Avenue, or Wall Street, the result is essentially the same.  After telling Nevadans not to worry about losing their most popular deductions because not all that many people use them and the new standard deductions will take care of them,  Amodei doesn’t apply the same test to the business and corporate deductions.  That Pass Through Loophole, by any and all other names, has resulted in massive revenue losses in Kansas, the state which imprudently serves as a laboratory for the GOP’s ideological economics.  Let’s not confuse Mom and Pop’s Midtown Market with the capital management firm of Grabbem, Gouggem, & Howe.   Both may “create jobs” but there’s no comparison in terms of how much of a tax break each will receive for having essentially the same number of employees.

Moving along to Part B:  Yes.  At present there’s a plethora of corporate accountants employed to create a situation in which a top rate of 39.1% becomes an effective rate far below that maximum rate.  One study of Fortune 500 companies reached the following conclusions:

  • As a group, the 258 corporations paid an effective federal income tax rate of 21.2 percent over the eight-year period, slightly over half the statutory 35 percent tax rate.

  • Eighteen of the corporations, including General Electric, International Paper, Priceline.com and PG&E, paid no federal income tax at all over the eight-year period. A fifth of the corporations (48) paid an effective tax rate of less than 10 percent over that period.
  • Of those corporations in our sample with significant offshore profits, more than half paid higher corporate tax rates to foreign governments where they operate than they paid in the United States on their U.S. profits.

Now, if they’re starting at 39.1% and getting their taxes down by half or even more at present — imagine what they can do when they start from 20-25% and work their way down?  For example, the “intangible drilling costs” loophole seems not to have closed up at all in the House version, and this while it’s acknowledged that seismic testing has significantly reduced the prospect of drilling dry holes.  The old Depletion Allowance survives as it always does, even if other deductions for mere mortals do not.

Or, consider the creative ways corporations use depreciation.  The House Ways and Means Committee version allows corporations to write off the depreciation for new equipment immediately.  Nice, if one is looking for a way to get from 20% down to a 10% tax rate or less.  [WaPo]  Not to put too fine a point to it, but while mere mortals are expected to absorb the elimination of student loan interest deductions, home mortgage interest deductions, and major medical expense deductions — the corporations go almost untouched.

Part C is unalloyed wishful thinking.  Walter Isaacson observes in his new book about Da Vinci that “vision without implementation is hallucination,” and this GOP canard is an almost perfect example.   Where the Tax Cut Fairy Waves Her Magic Wand wonders ensue — commerce increases, new employees will be hired, employees will have higher wages, and we will be “more competitive.”

Let’s step back from the hallucinations and observe what happens in the real world of employment:

“Service businesses, in which payroll is the major cost of providing the service, can take on higher payroll percentages since the payroll is, in fact, producing the revenue. There is likely to be no other significant cost of services to be provided. In such situations, payroll can reach the 50% mark without destroying profitability. Manufacturers, however, must maintain a payroll figure closer to 30% or less as the business must endure the cost of manufacturing the widget plus the payroll. Same with restaurants, given the high cost of food the payroll must stay under thirty percent.”

In order to lend any credence to the overblown rhetoric of GOP apologists for reducing corporate taxes and enacting pass-through loopholes, we have to merge all hiring from all sectors into one grand lump.  No matter the tax rate, what really matters is that the widget factory can keep its payroll allocations to 30% or less of its costs.  Nor can we argue that the sector with the highest payroll allocation, “service,” is all created equal.  This tertiary sector includes everything from health care to banking to education, to media and communications.   At the risk of continuous redundancy, the tax rate doesn’t determine payroll allocation — no one will be hired to do anything unless there is a demand for the goods or services beyond the capability of current staffing levels to deliver an acceptable level of consumer or client satisfaction.

Employees will have higher wages if the corporation gets a tax cut?  Probably not.  We can wade into the deeply arcane economic theoretical weeds and talk about the relationship between labor costs and tax liabilities, but let’s keep our feet on the ground instead.

Nevada has a fairly unique economy given one of our major sectors is “hospitality,” (or how to house, feed, and amuse people whom we want to leave behind large sums of money) establishments.  Therefore, there’s nothing surprising about finding out that we’ll need about 191,141 people working in food service in 2018; a growth rate of 2.8% with about 5,048 new positions expected. [DETR download]  The mean wage for food service workers is $12.74 per hour.  Most dealers are earning about $8.57 plus tips.  What will drive up food service and dealers’ wages?  Which is more likely to drive increases in food services wages: (a) more customers or (b) a bigger tax cut for corporate headquarters?

If you answered “b” then you are willing to wait for the calculations to be completed concerning how much the corporation should allocate for payroll expenditures, and then try to bank the results from this theory:

“Why would anyone think slashing corporate tax rates would increase workers’ wages in the first place? The theory endorsed by the CEA relies on three steps to get from corporate tax cuts to higher wages. First, the corporate tax cut increases companies’ after-tax returns on investment. As a result, firms will make more investments in plant and equipment than they would in a higher-tax-rate environment. Second, greater investment by firms leads to higher productivity by the workers who put those investments to work. Third and finally, workers will receive increased wages in line with those productivity gains.” [vox]

And, if you believe this I have a lovely bridge over the Humboldt River to sell you.  Why? Because corporations can do lots of other things with those savings — higher executive compensation, mergers and acquisitions, stock buy backs, and dividend payments.

Short Form:  Representative Amodei’s analysis requires redefining “job creators,” as those titans of the financial system who don’t necessarily become those doing the hiring; and requires disconnecting wages and salaries from the accepted wisdom about payroll allocation; and, means a person has to roll the dice and hope that the corporation trickles the money down to the counter-man.  In Isaacson’s parlance:  It’s vision without implementation.

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