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.
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.