Tag Archives: tax bill

Not The Onion. Really.

A recent headline in the Washington Post read: “Taxing Churches to Help Corporations.” It really was the Post, and not the Onion.  It wasn’t Borowitz. (This assurance does prompt me to give credit to Donald Trump for providing consistent, excellent assistance to political satirists…)

E.J. Dionne explains:

You would be forgiven for thinking this is a headline from the Onion or the fantasy of some left-wing website. But it’s exactly what happenedin the big corporate tax cut the GOP passed last year.

Now — under pressure from churches, synagogues and other nonprofits — embarrassed leaders of a party that casts itself as religious liberty’s last line of defense are trying to fix a provision that is a monument to both their carelessness and their hypocrisy.

The authors of the measure apparently didn’t even understand what they were doing — or that’s their alibi to faith groups now. It’s not much of a defense. And the fact that Republicans increased the tax burden on nonprofits, including those tied to religion, so they could shower money on corporations and the wealthy shows where their priorities lie.

I do disagree with E.J. on one point. He dismisses legislators’ excuse that “they didn’t know what they were doing.” I don’t. No one who saw the recent hearing where a Congressional committee was “grilling” the CEO of Google could come away believing that our elected lawmakers have the slightest idea what they’re doing.

Evidently, the GOP’s slap-dash effort to relieve the rich from the rigors of taxation had a negative effect on houses of worship.

At stake is a provision in the $1.5 trillion Tax Cuts and Jobs Act of 2017 that directednot-for-profits of all kinds — houses of worship but also, for example, universities, museums and orchestras — to pay a 21 percent tax on certain fringe benefits for their employees, such as parking and meals.

The new levy on the “armies of compassion” former president George W. Bush liked to extol would raise an estimated $1.7 billion over a decade.

That’s a vanishingly small amount in the scheme of the GOP’s deficit-inflating tax extravaganza, but it’s revealing. To lower the price tag of their confection for the wealthy, Republicans effectively hiked taxes on all sorts of other people and entities — most controversially, by sharply curtailing deductibility of state and local taxes. This was another two-faced move from a party that regularly assails “unfunded federal mandates” and lauds the importance of state and local problem-solving.

This story provides critics with an abundance of riches: we might focus on the mounting evidence that the Grand Old Party is filled with doofuses who haven’t the faintest idea how to structure public policy. We might focus on the “bought and paid for” identity of today’s GOP, and the party’s willingness to throw its religious base under the bus if pandering to its corporate base requires that. Or we might agree with E.J.’s accusation that this was a deliberate, nasty, entirely partisan assault–yet another example of Republicans putting the interests of their party over the good of the nation.

GOP leaders have told representatives of religious organizations that they had no intention of taxing them. They were focused on what they saw as liberal bastions in the third sector: universities, foundations and the like.

But this excuse only makes the story worse. It shows how slipshod the architects of this tax bill were, and it demonstrates their deeply partisan motives. After all, limiting the state and local deduction raises taxes far more on middle-class and well-off taxpayers in Democratic states than on their counterparts in Republican states.

Calling these assholes slipshod is way too kind.

That said, I think a stronger case could be made for taxing churches than universities and non-profits….

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‘Job Creators’ and the Tax Bill

According to the Republicans pushing for its passage, the recent, massive overhaul of the tax code was a “middle-class” tax cut. Yes, they admitted that it bestowed largesse on the wealthy, and yes, they recognized that the benefits to corporate taxpayers dwarfed the pennies that the poor and middle-class will realize, but that, they assured us, was because the GOP is all about job creation. Give corporations tax “relief” (not that most of them had been paying at the going rate) and they would use those dollars to create jobs.

Right.

Opponents of the tax bill publicly doubted that corporate savings would be used to create jobs, or to raise pay levels. They predicted that the money would be used instead to buy back stock and “reward” management with bonuses. And they pointed out that the meager tax relief granted to the middle class will phase out, while the corporate cuts are permanent.

Once the bill passed–and the Koch Brothers had donated $500,000 to Paul Ryan (a contribution I’m sure was merely coincidental, despite coming a mere two weeks after the measure was approved)–there was an initial flurry of publicity suggesting that ordinary workers at several large companies had been given bonuses. (It later turned out that those payments went to far fewer workers than the original publicity had suggested.)

Now, it turns out that the cynics were right all along. I know–you’re shocked.

After President Trump signed the Republican tax cut into law, companies put out cheery announcements that they were giving workers bonuses because of their expected windfalls from the tax reductions. The president and Republican lawmakers quickly held up these news releases as vindication for their argument that cutting the top federal corporate tax rate to 21 percent, from 35 percent, would boost workers’ incomes even as it added $1.5 trillion to the debt that future generations would have to pay off.

Now corporate announcements and analyst reports confirm what honest observers always said — this claim is pure fantasy. As executives tell investors what they intend to do with their tax savings and their spending plans are tabulated into neat charts and graphs, the reports jibe with what most experts said would happen: Companies are rewarding their stockholders.

Businesses are buying back shares, which creates demand for the stocks, boosts share prices and benefits investors. Some of the cash is going to increase dividends. And a chunk will go to acquiring other businesses, creating larger corporations that face less competition.

It isn’t just liberal pundits making these claims. Morgan Stanley analysts have estimated that 43 percent of the savings realized by corporations will be used for buybacks and dividends and another 19 percent will fund mergers and acquisitions. They calculate that  17 percent will go into capital investments, and a mere 13 percent will be used for bonuses and raises. CNBC reports that stock buy-backs are at a record pace.  Axios  has reported that nine pharmaceutical companies have announced $50 billion in buybacks since the tax law was passed.

The open question is whether voters whose paychecks are marginally fatter under the new withholding tables will believe they were the beneficiaries of this “reform,” and whether that belief will influence their votes in November.

As Lincoln said, you can fool some of the people some of the time….

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Bread and Circuses

“Bread and circuses” used to be a fairly common reference to the Roman government’s practice of distracting the masses by providing food (bread) and circuses (contests between lions and Christians, etc.) in order to keep them occupied. The term–used far less frequently these days– is a reference to superficial perks used to appease popular passions, a tactic to generate public approval through diversion and distraction.

I’ve been thinking about that tactic in connection with the GOP’s “middle class tax cut.” (I love GOP titles–remember George W. Bush’s “Clear Skies” moniker for a bill permitting more pollution? This time it’s a “middle class tax cut” for a measure that is anything but.) My specific question goes beyond the dishonesty of the bill’s title, however: I wonder whether the lower withholding requirements, which will initially allow workers to take home a somewhat larger portion of their paychecks, will be enough to distract Americans from the other, less pleasant and less immediate consequences of that bill.

Will it obscure the fact that tax “reform” will further enrich the already wealthy without stemming the job losses that are accelerating as companies increasingly automate, and as retailing faces enormous challenges? After all, this tax “reform” was hyped as a (trickle-down) measure that would incentivize those “job creators” to do their thing–to create jobs and raise the pay of their workers.

How’s that working out so far?

Harley-Davidson just closed a plant in Kansas City, laying off 800 workers. Managers blamed both a provision of the tax bill and Trump’s decision to pull out of the Trans-Pacific Partnership.

Passage of the tax bill didn’t affect or delay the decision of Toys-R-Us to close 180 stores–nor the closing of 63 Sears locations. Kmart has closed 45 stores; Macy’s has closed 68. Walmart made a big deal out of its response to passage of the tax bill, announcing $1000 bonuses (the company made less noise about the fact that only employees who’d been with the company for 20 years would actually get a thousand dollars), and immediately followed up that PR blitz by closing 63 of its Sam’s Club stores and throwing thousands of people out of work. (Given Walmart’s turnover rate, I’d guess there weren’t a lot of 20-year veterans getting the full bonus amount, either.)

Industry publications are filled with layoff announcements: Pfizer announced it will eliminate 300 research jobs in New England; another 4,000 are expected to lose their jobs with AT&T. Kimberly-Clark is using its tax windfall to reward shareholders, while laying off between 5,000 and 5,500 workers. Comcast said the $1,000 bonus it splashed across the news would serve as severance for 500 terminated employees. Microsoft, Coca-Cola and a host of lesser-known brands have also fired hundreds of workers.

The tax cut didn’t change any of these decisions, and other policies of the Trump Administration are only accelerating the job losses.

Those of us in Indiana know that Carrier has now completed its move to Mexico, despite Trump’s much-hyped “intervention.”

Meanwhile, the President’s love affair with coal led him to impose stiff tariffs on solar panels–a move that will not only depress sales and increase prices for environmentally-conscious consumers, but will cost a predicted 23,000 workers their jobs. Meanwhile, although coal is not coming back, the tariffs will slow the replacement of fossil fuels with clean energy–further enriching the Koch brothers, who demonstrated their gratitude to Paul Ryan for passage of tax “reform” by giving him $500,000 a mere two weeks after the bill was signed. (Estimates are it will save them a cool billion a year, so they could afford a paltry half-million to their House puppet. Quid Pro Quo much?)

American workers aren’t even getting bread and circuses–unless you count the circus that is Washington, D.C. And that one isn’t entertaining; it’s terrifying.

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Talk About Cutting The Safety Net….

When you elect people who have very limited knowledge of government or the legal system, you get a lot of unanticipated and unfortunate consequences.

Trump is hardly the only self-proclaimed “genius” who is actually clueless; in fact, voters need to recognize that the real villain of this surreal moment we’re experiencing isn’t Trump–who is arguably too far out of it to even know what he’s doing–but the current in-over-their-heads gang of Congressional Republicans who are protecting and enabling him.

A recent, glaring example is in the combined impact of their much-touted tax “reform” bill and their proposals to dramatically cut America’s social safety net.

Republicans love to talk about the negative consequences of social welfare programs–the purported encouragement of “dependency,” the “unfairness” of taxing working folks to support laggards who are sitting at home eating bon-bons (and while they rarely say it out loud, there is usually a “wink wink” suggesting  that those laggards are disproportionately black or brown). Data and evidence–things foreign to their comprehension–dispel all of this, of course. For example, most adult food stamp recipients work full time, as do most non-disabled adults on Medicaid. There is absolutely no research supporting accusations that receipt of welfare produces dependency, and most people on welfare are white.

Even more irritating is Republicans’ repeated insistence that, if government would just get out of the way, poor people’s needs could be met by private and/or nonprofit charities, especially religious charities. When George W. Bush called on the “armies of compassion” to replace much of the welfare system as part of his “Faith-Based Initiative,” researchers (I was among them) pointed out that private charities didn’t have the resources to even come close to his goals–and most churches were barely keeping the pastor paid and the roof fixed.

As we’ve seen, facts are pretty irrelevant to this crew. Nevertheless, given their constant lip-service to American generosity and private-sector charity, you wouldn’t expect them to pass a tax bill that threatens to cripple those same efforts. After all, they are now proposing massive cuts to Social Security, Medicare and Medicaid–cuts they evidently assume will be made up by funds from the charities their tax bill is eviscerating, if they think about it at all.

Patrick Rooney is an economist at the Lilly School of Philanthropy at IUPUI, where I teach. (Full disclosure; I am adjunct faculty at the Lilly School.) I know  Patrick and his work, and he is a first-rate scholar. Here’s his analysis of what the tax bill means for charitable giving:

The tax-code overhaul that Republican lawmakers approved and Trump signed into law will raise the price of charitable giving for millions of Americans, surely reducing how much money the nation gives.

As an economist and a scholar of philanthropy who researches how public policies shape charitable giving, I anticipate that the tax tweaks will lead Americans and U.S. companies to donate roughly US$21 billion less per year to charity.

The link will take you to the article detailing the impact of the tax bill’s various provisions on incentives for charitable giving, and those details are instructive. But the real “take away” is the utter failure of Congressional Republicans either to connect the dots– or worse, to care about the harm they are doing to millions of Americans (most of whom are elderly or children) in order to further enrich their donors.

Those who aren’t “geniuses” like our President–aka mental midgets–are something even worse. They’re moral midgets.

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I Wonder Why We Have These Agencies and Programs?

Or, more accurately, why we had them.

A few days ago, The Hill came out with a list of 66 agencies that the tax “reform” bill simply eliminates. They include everything from Agriculture’s Economic Development agencies to the Commerce Department’s National Oceanic and Atmospheric Administration Grants and Education to the Education Department’s Grants for Comprehensive Literacy Development  and Effective Instruction.

At a time when our infrastructure is crumbling around us, the bill eliminates the Transportation Department’s National Infrastructure Investments (TIGER).

The list includes many other programs that would seem important, as well as a number of initiatives with puzzling names and obscure purposes.

I would be the last person to argue against pruning the mystifying thicket of federal programs and agencies. I’m sure many of them have outlived whatever usefulness they may have once had–and it wouldn’t shock me to discover that some of them didn’t ever have much justification for their existence. That said, the process through which they are being terminated is simply indefensible.

There has not been a single hearing held to determine the continued utility of any of these agencies. To the best of my knowledge, no notices were sent out to affected constituencies, no publication in the Federal Register invited public comment. Like the rest of this monstrous bill, these decisions were made hastily, in back rooms to which neither Democrats nor more moderate Republicans were invited.

This is not the way a democratic system works. In a representative government that honors due process and the rule of law, how decisions are made is ultimately more important than the substance of the decisions themselves.

The decision to terminate a program or agency should be made in daylight, with people familiar with the purposes and operation; those making the determination should hear from critics and defenders of the program, and from proponents and opponents of its termination. There should be some version of a cost/benefit analysis upon which a final decision is made.

These 66 programs were created for a reason. There should be a principled reason for their discontinuance.

Right now, America is being ruled–not governed, but ruled–by an illegitimate cabal empowered by vote suppression and gerrymandering and answerable not to the citizens who (theoretically) elected them, but to their donors and to a much lesser extent, their rabid and uneducated base.

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