Christmas Gifts Coming for Corporations, Pranks for Taxpayers

Turkey time is not over, folks. Oh, you may be stuffed with Thanksgiving turkey, but you’ve still got a big Christmas turkey to swallow. That’s the wonderful turkey Congressional Republicans hope to cook up for you in time for Christmas called the “Tax Cut and Jobs Act.”

It’s an act alright.

Why do you suppose Republicans in the House will start taxing grad students who get tuition waivers? Put a new 1.4% excise tax on large private college endowments? Or eliminate the tax exempt status of private activity municipal bonds used to finance hospitals, airports, and museums?

Why would House Republicans eliminate the deduction for medical expenses altogether? And deductions for state taxes and personal property taxes? And all personal and dependent exemptions?

You get a hint as to why when you look at the turkey getting basted by Senate Republicans. It’s a slightly different bird from the House bill. It blatantly makes its individual tax cuts temporary while making corporate cuts permanent.

Even this turkey can see what’s happening. A gigantic, painstakingly wrapped, Christmas tax gift is coming for corporations and most businesses. Corporate tax rates will fall from 35% to 20% and the max rate on pass-through businesses (sole proprietorships, S corps, MLPs, LLPs, LLCs) will generally fall from 39.6% to a range between 25% and 35% depending on the type of income.

Prank tax cuts, offset with newly taxable income and reduced deductions, will stuff stockings for individual taxpayers.

The House bill even eliminates the $250 deduction for teachers to buy supplies for their students!

Such antics result from Republican leaders scrambling to lessen the wallop their gifts to businesses and corporations will have on the national debt. They gave themselves permission up the debt by $1.5 trillion. But that’s not enough. They’ve got to zap struggling teachers, grad students, and ordinary taxpayers to make the numbers work.

Oh yeah, the $1.5 trillion debt cap they’re working with is just for the first ten years. Projected additions to the national debt after that range from astronomical to stupendous, like in the $4 trillion range.

Guess what? If they cut the corporate tax rate to 25%, still internationally competitive, and put the top rate for pass-through businesses at 35%, the top proposed rate for most individuals, the hit to the national debt would go away, individual cuts could be permanent, and the zaps on teachers, grad students, and ordinary taxpayers could be eliminated.

Why are no Republicans fighting for this?

Well, there’s Trump’s insistence. But many are scared or committed to pay the piper.

You see, corporate titans like the Koch brothers have invested millions to develop grassroots organizations (Freedom Partners, Americans for Prosperity, Americans for Tax Reform, etc.) geared up to go after any Republican who doesn’t support their interests. Lots of Republicans are scared they will be primaried if they don’t toe the line. Others owe their political success either directly or indirectly to corporate titans.

This is real, hardball politics at work.

Ole Abe had it wrong. What shall not perish from the earth is debt-ridden government on the people, by the politicians, and for the corporations.

PS – They recommend swallowing this turkey whole, not chewing it up.

Advertisements
Posted in Politics | Leave a comment

Stark Health Needs Get Little Attention from State Leaders

Have Mississippi leaders become so accustomed to bottom national rankings that they don’t care anymore?

Take health rankings for example. Mississippi has ranked among the bottom three since 1990. You know it’s bad when the Mississippi State Department of Health posts on its web site, “Mississippi ranks last, or close to last, in almost every leading health outcome.”

Few state leaders probably spend any time trolling through health stats. Here’s a quick look. The stats are stark.

Consider death rates. Mississippi has the worst rate for infant mortality and ranks in the bottom three in death rates for heart disease, stroke, diabetes, septicemia, flu/pneumonia, kidney disease, cancer, and Alzheimer’s disease according to the National Center for Health Statistics at the Centers for Disease Control and Prevention (www.cdc.gov/nchs/index.htm).

Consider other health factors. America’s Health Rankings (www.americashealthrankings.org) puts Mississippi 50th in health for seniors and for physical inactivity, 49th in overall health, primary care physicians, and salmonella, 47th in obesity and infectious disease, 46th in chlamydia, and 45th in smoking. The National Center for Health Statistics shows Mississippi ranks worst in low birthweight and births to unmarried mothers.

Consider health insurance. Census data shows Mississippi ranks 46th in the percentage of population with health insurance coverage (www.factfinder.census.gov).. About 12% have no insurance. Mississippi did not expand Medicaid under Obamacare and has one of the lowest thresholds for adults to qualify for Medicaid medical coverage.

Not an uplifting story.

In the face of these stark facts, what has been the response from our state leaders?

Gov. Phil Bryant has mainly focused on keeping a tight rein on Medicaid spending and eligibility, but he did call for expansion of the University of Mississippi Medical Center’s doctor training programs and health care zones. Lt. Gov. Tate Reeves and House Speaker Philip Gunn have mostly focused on keeping health related costs “within budgetary means.” They slashed funding for the State Department of Health, cut funding for the state trauma system, cut funding for Medicaid, reduced funding to hospitals for indigent care, and cut funding for the state’s tobacco-free program.

Pretty clear the low health rankings had little impact on budget decisions, huh?

Based on the rhetoric and actions of our state leaders, the solution to our low health rankings, along with our low rankings in education, infrastructure, economy, and opportunity (www.usnews.com), appears to be tax cuts.

However, tax cuts won’t address critical health needs like this one: “The state trauma system is severely underfunded,” Mississippi Hospital Association president Tim Moore told the News Mississippi network. “We know that the state doesn’t have the money to fund additional care there, but it needs to be done, so how do we do that?”

Things are likely to get worse before they get better.

PS – You can’t look into health disparities in Mississippi without noticing the significant disparities based on race. For African-Americans, infant mortality rates are 71% higher than for whites. Deaths are 24% higher for heart disease and 20% for cancer. The rate of chlamydia is six times that for whites, low birthweight 90% higher, and obesity 21% higher. The rate of uninsured persons is 13% higher. As for tax cuts, they mostly benefit non-African-Americans.

Posted in Politics | Leave a comment

Reeves’ Budget Plan Risky for Teachers and Retirees

State economist Darrin Webb projects state general fund revenues will fall for the third consecutive year. That’s unusual. According to the Northeast Mississippi Daily Journal, declines of just two years in a row “have only occurred four previous times since 1970.”

Jeff Amy with the Associated Press in an excellent analysis of Mississippi’s economy said, “State spending this year is roughly $800 million behind where it would have been if spending had kept pace with inflation since 2010.” He said some of the shortfall comes “from hundreds of millions in tax cuts.”

Lt. Gov. Tate Reeves liked that. “For us to have enacted the largest tax cut in state history and still expect that we’re actually going to collect flat revenue year-over-year,” Reeves told Amy, “I think that says an awful lot about the direction that we’re trying to send our government in being fiscally responsible and fiscally prudent.”

Uh, the historic tax cuts have yet to fully kick in. Nevertheless, Reeves’ comment is bad news for community colleges, schools, universities, and agencies hoping tight budgets will go away.

But, it is terrible news for teachers and state retirees.

No budget growth means no state pay increases for teachers. It’s already hard for many schools to attract and keep good teachers. With no state raises, they won’t, except in better off districts able to increase local property taxes.

For state retirees, no budget growth has a more indirect impact. Flat budgets for colleges, agencies, etc., will cause cuts in public employment. As inflation driven expenses eat into their stagnant budgets, agencies only option will be to cut jobs. That means fewer employees paying into the Public Employees’ Retirement System of Mississippi (PERS) over time.

Why is that bad for retirees?

Last September, PERS board chair Lynn Fitch called a special meeting to look at the long-term health of the retirement system. PERS’ unfunded pension liabilities have hovered around 40% (a funded level of 60%) for several years, drawing negative comments from national credit ratings agencies. In her role as State Treasurer, that is a concern for Fitch.

At the meeting PERS Executive Director Pat Robertson presented a new computer model that could predict future PERS funding levels based on changes in key factors such as investments, number of retirees, and number of public employees. One scenario run at the meeting included above average investment returns, current retirement trends, but a slight 0.25% annual decrease in the number of public employees. The model projected PERS’ unfunded pension liabilities would increase to near 50%.

If Reeves’ fiscal plan is for built-in tax cuts over the next 10 years to keep state spending flat, this scenario will become a reality. Then, any bad investment year(s) or surge in retirees (likely with flat spending) would put PERS and retirees’ pensions in jeopardy.

Note: Few board members publicly express concerns about PERS financial health. But at this meeting the newest member, former State Insurance Commissioner George Dale, spoke up saying he has concerns. Dale spent 11 years in the Moss Point school system before his 32 years as insurance commissioner so he knows how government works. If he has concerns, retirees should pay attention.

Posted in Politics | Leave a comment

Put the Spotlight on Big Business to Grow U.S. Jobs

President Trump and Republican leaders in Congress should add one small thing to the tax reform bill to truly help make American great again.

In case you haven’t noticed, corporate earnings are driving the stock market to record highs. Across the board, earnings are up; earnings are strong.

When the corporate tax cut House Republican leaders revealed last week hits and knocks rates from 35% to 20% or so, earnings will go up even more. (Many think the market is up in anticipation of this earnings bump.)

Of course, one of the ways big business has maximized earnings, and thereby stock valuations, has been through employee layoffs and offshoring jobs to foreign countries.

Major companies with big layoffs in 2017 included Microsoft, Wal-Mart, Nike, Lowe’s, Union Pacific, Caterpillar, Hershey, Kellogg, State Farm, Oracle, Macy’s, J.C. Penney, and more.

Major companies that rely on offshoring jobs include Apple, Wal-Mart, Nike, IBM, and Cisco.

Now, big business is licking its chops over a new way to dump jobs and pump up earnings.

“Wall Street’s robot revolution has begun,” Bloomberg Businessweek reported in September. “JPMorgan Chase & Co. is rolling out a program called LOXM that executes equities trades so well, it’s replacing the humans who used to do that.” The article added that Management consultant Opimas LLC predicts “90,000 people in asset management will be replaced by machines by 2025.”

“The forces that trump all others are human capital and technology, man and machine, and we’re at an inflection point with them, in the midst of a structural change that will impact the labor market globally,” Vanguard’s chief economist Joe Davis said at Morningstar’s annual ETF conference last month. “The trend that will define our lives is how work changes for all of us. I can’t think of a more seminal issue that will face the economy in the years ahead.”

In reporting Davis’ comments, MarketWatch noted that the impact of automation and artificial intelligence (AI) could be massive, particularly as new technologies—such as driverless cars and “bot” programs that can mimic human speech patterns—mature and disrupt ever-larger segments of the economy. The article cited recent research claiming that every industrial robot takes up to six jobs, with some six million jobs at risk of being lost to automation over the coming decade.

“Tech is always moving faster and getting smarter,” said Davis. “Work has always been an arms race between education and technology, but the pace of change, and the scale of the change, are different this time.”

In October CBS Money Watch reported as many as 10 million U.S. jobs could disappear “as companies deploy machines that can learn and perform tasks.” Jobs at risk included cooks, cleaners, movers, truckers, nurses, and retail sales.

Disappearing jobs, layoffs, and offshoring will not make America great again. More and better jobs will.

So, the simple thing President Trump and Republican leaders in Congress should add to the tax cut bill is this – require public corporations to announce their U.S. based job totals at the same time they announce earnings each quarter.

Put the spotlight on big business so Americans can easily see if the tax cut really does grow U.S. jobs, not just earnings.

Posted in Politics | Leave a comment

Big Contributors Aggressively Pursuing (Buying?) Tax Cuts

Steve Bannon recently met with mega Republican political contributor Bernie Marcus and heard him complain “for hours about the lack of return on his investment,” reported Politico.com.

A decade before becoming Secretary of Education, Betsy DeVos, whose family has helped bankroll Republican issues and candidates, wrote in Roll Call, “I have decided to stop taking offense at the suggestion that we are buying influence. Now I simply concede the point. They are right. We do expect something in return.”

Koch brothers ally Doug Deason told OpenSecrets.org in September that “he and other big-donor Texans are fed up and have stopped hosting high-dollar fundraisers until Republicans make good on the money.”

The major make good return these and other billionaire contributors want most of all appears to be tax cuts.

“The powerful political network overseen by conservative billionaire Charles Koch is launching a multimillion-dollar campaign to drive Trump’s tax plan through Congress,” USA Today reported earlier this year. In early October the news organization said the Koch network, “already has spent more than $10 million this year on its campaign to pass the tax plan” and is “sending activists door-to-door in key states and having donors dial Republicans on the Capitol Hill, pressuring them to speed a tax plan through Congress this year.”

So, are these and many other billionaires spending big because tax cuts will be good for America, or because tax cuts will be especially good for them?

Buying influence is common to American politics. Buying direct government benefits is something most conservatives have strenuously opposed.

The biggest benefit in the pending Republican tax plan, $1.5 trillion, comes from the proposed corporate tax rate reduction from 35% to 20%. (Trump wants 15%.)

There is near universal agreement that the current corporate tax rate is too high, anti-competitive, and should be reduced.  However, the rate at which U.S. taxes become internationally competitive is different from the rate at which major corporations receive an excessive windfall.

Experts suggest a corporate tax rate of 24% to 25% would make U.S. rates competitive. The average rate for the 35-nation Organization for Economic Co-operation and Development (OECD), of which the U.S. is a member, is 24.7%. China’s rate is 25%.

So, pushing for 20% or lower rates does open the door to arguments the big contributors are trying to buy a huge benefit.

Additional proposals to eliminate the inheritance tax, eliminate the alternative minimum tax, provide a 25% pass-through rate for partnerships and sole proprietorships, and lower the top personal income tax rate – all beneficial to the wealthy – only make the arguments stronger.

Meanwhile, average taxpayers will be asked to help pay the tab.  Republican tax writers are looking at changes to 401(k) plans, eliminating mortgage interest and state and local tax deductions, eliminating personal exemptions and raising the low-end tax rate from 10% to 12% (somewhat offset by doubling the standard deduction). There is also a provision that the national debt may be increased up to $1.5 trillion, an indirect but real cost to average taxpayers.

“Wall Street is expecting to see a tax reform package by the end of the year,” reported CNBC.

Big contributors are demanding it.

Posted in Politics | Leave a comment

Real Conservative Leaders Get Things Done

Lots of political yammer about who’s a real conservative and who’s not.

So, how do you tell?

Lee Edwards of the Heritage Foundation’s B. Kenneth Simon Center for American Studies calls the late William F. Buckley, Jr. “the St. Paul of the modern conservative movement in America.” So, what did Buckley have to say about it?

The essence of conservatism is the “proper balance between freedom, order, justice, and tradition,” said Buckley. To achieve such balance, Buckley called for persistent opposition to the growth of government, social engineering, intellectual conformity, the elimination of the market economy, and world government.

Buckley’s “National Review” magazine aggressively championed this conservative ideology in the face of growing liberalism. At the same time, Edwards writes, Buckley argued that “if conservative politics wanted to be successful, it had to steer a middle course between the ideal and the prudential.”

Appropriately, Buckley became a champion of Ronald Reagan’s pragmatic conservatism. He admired Reagan’s stand on conservative values and accepted his pragmatic compromises as necessary to nudge conservative policies ahead.

What did Reagan say about conservatism? “The common sense and common decency of ordinary men and women, working out their own lives in their own way—this is the heart of American conservatism today,” he said.

But, according to Dr. Paul Kengor, author of 11 Principles of a Reagan Conservative, it was “his willingness to compromise and engage in horse-trading” that made him “the most successful conservative president in American history.”

Edwards notes that “during his presidency, Ronald Reagan would often say that he would accept 70 or 80 percent of what he wanted if he could come back for the other 20 or 30 percent later.”

Reagan also felt a traditional conservative’s sense of responsibility. Thus, while he passed the largest tax cut (1981) and the most significant tax reform (1986), he also raised Social Security taxes and corporate taxes to be fiscally responsible.

So, there’s conservative ideology, then there’s effective conservative leadership.

The yammerers about who’s a real conservative and who’s not don’t seem to get the difference.

“What are the characteristics of a ‘real man’ in God’s eyes?” posed the pastor. “Compassionate, faithful, selfless, committed, and courageous,” he answered. Buckley and Reagan saw real conservatives in a similar virtuous light.

Unfortunately, the yammerers have twisted pursuit of virtuous conservative ideology into a shameful political paradigm where it’s better to lose than get a partial win through compromise; where ideologues who get nothing done get accolades, while leaders trying to follow Reagan’s example of horse-trading to move a conservative agenda ahead get primaried; and where casting blame counts for more than winning concessions.

This new paradigm is the antithesis of the “proper balance between freedom, order, justice, and tradition” that Buckley fought for and the “common sense” that Reagan stood for. Indeed, key results among conservatives in Washington are the lack of order and blame game nonsense.

Perhaps nothing personifies the question of who’s a real conservative and who’s not than effusive blamer, President Donald Trump, and ebullient doer, President Ronald Reagan.

“He that is good for making excuses is seldom good for anything else.”  ― Benjamin Franklin.

Posted in Politics | Leave a comment

Is Amazon Becoming the New Local Job Killer?

Rural communities just thought Wal-Mart was the great job killer. Now comes Amazon.

“If Amazon continues to grow its business by $20 billion a year, the annual toll of lost jobs for merchants, buyers and cashiers will be in the tens of thousands by my calculations,” is the spin on Amazon by Scott Galloway, professor of marketing at the NYU Stern School of Business, in a recent Wall Street Journal article. “Disruption in the U.S. labor force is nothing new—we have just never dealt with a company that is so ruthless and single-minded about it.”

At least Wal-Mart hires local folks and pays local and state taxes.

According to Galloway, Amazon “has replaced the expectation for profits with a focus on vision and growth, managing its business to break even while investors bid up its stock price.” Amazon’s efficient business model, what Galloway calls “a search engine with a warehouse attached to it,” minimizes employment and taxes.

“Because Amazon is more efficient than other retailers, it is able to transact the same amount of business with half the employees,” wrote Galloway.

He also said things are “deeply amiss” when “the fifth most valuable firm in the world” can get away “without paying any meaningful income tax:”

“Since 2008, Wal-Mart has paid $64 billion in federal income taxes, while Amazon has paid just $1.4 billion. Yet, while paying low taxes, Amazon has added $220 billion in value to the stock held by its shareholders over the past 24 months—equivalent to the entire market capitalization of Wal-Mart.”

The Amazon story becomes particularly important as Congress and our Legislature move to revamp tax laws. We can only wonder if our tax writers even understand the vast changes in worldwide business models, much less how to levy taxes fairly.

Who’s gonna pay how much towards our $4 trillion federal budget and our $6 billion state budget are top-of-the-mind questions for most Americans.

“If a giant firm pays less than the average 24% in income taxes that the companies of the S&P 500 pay, it logically means that less-successful firms pay more,” noted Galloway. “In this way, Amazon further adds to the winner-take-all tendencies plaguing our economy.”

If the biggies avoid taxes we know who’s left to pick up the difference.

In Washington, politicians are trying to spin big tax cuts for corporations and the wealthy as a good thing for the average guy. The spin is so intense it’s got conservative Republicans saying it’s okay for tax cuts to increase the national debt. Huh?

Down here in Mississippi the spin on tax collections is positive. For the first quarter of fiscal year 2018 tax collections are up say news stories – 2.6% over last year. Further down in the stories you see that tax collections were up the first two months but dipped for September – 4.5% below last year. The dip, which should be of concern, was downplayed.

Meanwhile, lack of jobs and declining state and federal spending play havoc with our rural communities. They need a Rumpelstiltskin who can spin all this into gold.

 

Posted in Politics | Leave a comment