Tuesday, November 21, 2017

NY Times Outs Itself

If you wonder what drives a newspaper like the NY Times to such absurd policy positions and such poor journalism, look no further than today's editorial: "The Climate Crisis?  It's Capitalism, Stupid."

This absurd editorial argues that the problems of the environment are all due to capitalism, even though capitalist countries are in the forefront of reducing their carbon imprints.  Mainly, non-capitalist countries have emerged as the biggest polluters, totally unable to do anything at all but talk about what they plan to do.  What socialist countries do is pollute?  What capitalist countries do is reduce carbon imprints.  Those are the facts that the NY Times has no interest in reporting.

So, who penned this editorial?  Someone with knowledge of economics or climate science?  Of course not.  That would confuse the subject.  The NY Times does not want to cloud its judgment by any facts.  Instead a "faculty fellow" at Arizona State University whose education is almost exclusively in philosophy is the source of this enlightenment about economics and climate science.

"Don't confuse us with facts" seems to be the motto of the NY Times.  These folks are on a mission, but truth and facts are not part of that mission.  It is all about political propaganda, undiluted with any factual basis.

Monday, November 13, 2017

400 Millionaires Don't Want a Tax Cut! A Simple Solution

The Washington Post has a story today by Heather Long about a letter written to Congress signed by 400 millionaires who do not want their taxes cut.  Why are they writing Congress about this?  The remedy to their dilemna is very, very simple.  Just pay more taxes voluntarily.  There is a line on the 1040 Form that permits such generous taxpayers to pay more than required.  Since they want to pay more, they should simply pay more.  A simple solution.

What their letter doesn't say is that tax rates are largely irrelevant for millionaires, since they are free to choose what income they want to show the IRS.  Such people can usually just borrow what they need to live on and show little or no income at all.  So, what difference does it make to these hypocrites what the rate of taxation happens to be.  You have to have income to pay income taxes.  They know that.  They are experts at avoiding taxation.

That's what the current law allows.  I call this the "Warren Buffett strategem." Opine that you want higher taxes and then shelter your own personal income in such a way as to reduce the amount of income subject to tax to almost nothing.  Then rates don't matter.  These folks are all hypocrites.

Sunday, November 12, 2017

The Economy and the News Media

Silly me.  I tuned in to Meet the Press this morning in order to hear about the GOP tax proposals and the economy generally.  What did I hear? I heard nothing other than bashing the President!  Why?  Mostly because the President recently made nice with Vladimir Putin, something Obama and Clinton clambered over themselves to do when they were in power (remember the 'reset').

Where was the discussion about the tax proposals that have now been introduced in the House and Senate?  Scarcely a word.  The only comment was Chuck Todd's complaints, mostly reflecting the fact that his multi-million dollar compensation package doesn't provide him with as big a tax cut as folks making $ 64,000 in his town of residence.  Boo hoo, Chuck.  Chuck was also very critical of the fact that the House and Senate bills aren't identical.  It is not clear why that is a bad thing, but Chuck doesn't like it.  Too bad Chuck.

But is the media covering the tax proposals?  The answer is no.  To the extent there is coverage, it is almost completely based upon a lack of knowledge or understanding about either the House of Senate bill.

It is worth noting, given the President's trip this week to Asia, that there was also absolutely no mention whatsoever of the Korean nuclear issue or the trade issues with Asia.  I guess Meet the Press doesn't see these matters of any significance.  Certainly not enough to mention them.

Mostly, Meet the Press was primarily devoted to a discussion of the allegations against Republican candidate for Senate, Roy Moore in Alabama.  Interesting. What Chuck Todd and Meet the Press think are important never seems to include an intelligent reporting and discussion of financial or economic matters or issues that relate to war and peace.  Instead, allegations of potential criminal activity by Republicans seems to be the only issue that the media has an interest in.

{The years of bizarre and potentially illegal activity by longtime Democrat fund raiser and close ally of Hillary and Bill Clinton, Harvey Weinstein, was, we know now, systematically covered up by the main stream media.  Quite a double standard by Chuck Todd and Meet the Press}. You can't make this stuff up.

Saturday, November 11, 2017

Please Define the Middle Class

The median family income in New York State in 2015 was $ 60,580.  Manhattan is higher, approximately $ 67,000.

How do you define middle class?  How about using the word "middle."  If that is the case, you can rest assured that zero 'middle class' families in either New York State or New York city are facing a tax hike in the GOP tax bills, House or Senate version.  No one with the median family income in NY State or New York City utilizes itemized deductions, so the elimination of deductability of this or that is completely irrelevant to middle class taxpayers in New York City or New York State.

How about California?  The median family income in California in 2015 was $ 64,000, lower than Manhattan, but higher than NY State.  No one at this income level itemizes deductions, so they aren't going to miss the deductability of anything.

So, who does lose in the high tax states?  The answer is that folks with income above $ 1,000,000 -- the one percenters, even in NY State and California -- whose income is primarily from personal services rendered (meaning actors, actresses, football players, singers, comedians, University presidents, etc.), could see their taxes rise modestly.

But, no one remotely called 'middle class' will see anything but a tax break from the GOP proposals.

It is ludicrous for newscasters on CNN, ABC, CBS, Fox News (Trish Regan, for example) to decry that their own seven figure salaries may get taxed at a higher rate.  Boo hoo.

Anyone remotely middle class in New York and California will get a major tax cut from either of the GOP tax cut proposals.  Middle class folks, properly defined, do not itemize deductions on their federal tax return, even in high tax states. 

Only the truly wealthy and very, very high income taxpayers get a slight gouge from the deduction limitations of these proposals.  But, these rich folks have a loud megaphone to spread misinformation.

Friday, November 10, 2017

The Multiple Agendae of the Tax Code

The purpose of taxation should be to raise revenue to pay for public expenditures.  If the tax system were designed solely for that purpose, you probably would have a very, very low flat rate tax with little or no complexity.

But, unfortunately, the US tax code has other agendae in play.  Notably, to reward friends and punish enemies.

Things like the mortgage interest deduction, teacher deductions for school supplies, deduction of state and local taxes paid, medical expense deduction, student loan interest deduction, $ 7,500 tax credit for (extremely wealthy) buyers of electric cars are gimmicks inserted to help one group of taxpayers, while hurting other groups of taxpayers.  They are not designed to provide revenue for public expenditures.  They are what are known as "tax expenditures," a way to insert politics into the process of taxation.

These things should all go away, no matter how "worthy" any one of them may or may not be.  It is not possible to reform the tax code if you want to protect some gimmick that you think is particularly worthy.  Maybe it is worthy, but so are lots of things.

Sometimes "virtue is its own reward" and does not need subsidization from the US tax code.

End all of the deductions and credits and provide for reasonable income definitions (including nailing the hedge funds and private equity funds who currently game the system).

Only then will it be possible to have a fair tax system that the citizenry can accept as fair without all of the special interest trinkets that make current law incomprehensible.

Thursday, November 9, 2017

Hedge Funds & Private Equity Should Be Taxed on Compensation

It is completely inexcusable that compensation income for hedge funds and private equity funds, using an LLC structure, should get favorable tax treatment, unavailable to ordinary businesses and individuals.

This compensation should be taxed as ordinary income as it is earned....period.  No deferrals.  It is a tax event at the time it is earned and should be taxed as such.

Republicans should be ashamed of their efforts to continue this abuse -- an abuse available only to the most extremes of wealth.

Trump is Wrong on Trade

The President seems to think that getting a better balance of payments can be achieved by hectoring China and Japan on trade policy.  That is complete nonsense.

The reason we have a trade imbalance is merely a mirror reflection of our savings rate versus savings rates in China, Japan and the rest of the world.  If a country doesn't save, and since the mid-1970s, the US does not have a positive savings rate, except briefly now and then, then, by definition, savings must be imported from countries that have high savings rates -- e.g. China and Japan.

Regardless of trade policy, as long our as our savings rate is zero and China's saving rates exceed 20 percent, we will import savings from China.  That importation of savings is the balance of payments deficit.  What China doesn't buy from us, they invest.  That money finds its way to the US in the form of investments.  After all, the US continues to have relatively high rates of investment.  The savings that fund that investment must come from somewhere.  If not from the US, then it will be imported.

Until the US returns to its historic rates of a 9 to 10 percent savings rate, there will be no relief from the balance of payments deficit.  The trade deficit will continue indefinitely regardless of trade policies with China and/or Japan.  These trade policies are irrelevant, if one's concern is the balance of trade.

What happened in the 1970s to crash the US savings rate?  (i) the expansion of Social Security from a "supplemental" program to a major retirement entitlement and (2) the expansion of medicare from a minor government subsidy to a major health care entitlement program.  After that, who needs to save?  Savings plummeted and has never recovered in the US.  The balance of trade deficit widened dramatically after that.  It won't end through blustering rhetoric.