Nel's New Day

June 14, 2021

GOP Helps the Wealthy Become Wealthier

Earlier this month, ProPublica broke a story about how little the wealthiest people in the U.S. pay in taxes. All but the conservatives were outraged at the inequity; conservatives are angry only about the IRS leak. The report used tax filings from the nation’s 25 richest people, including Jeff Bezos, Mark Zuckerberg, Elon Musk, and Warren Buffett. The $13.6 billion the 25 people paid in five years for taxes was compared to the growth of their wealth during the same time, called their “true tax rate.” At 3.4 percent, the percentage of the wealth growth they paid in taxes was far under the 14 percent in federal taxes paid by the median household annually earning about $70,000.

According to the tax code, people pay taxes only on income and the sale of assets such as stocks. Growing wealth isn’t taxed until assets are sold. Instead of taking salaries or selling stock, the wealthy avoid taxes by taking out loans. A 1920 Supreme Court ruling explained how the wealthy can pass along assets to a person or nonprofit foundations where the leaders can benefit from the untaxed wealth.  

About $2.7 trillion owned by wealthy people in the U.S. isn’t being taxed. The $1.1 trillion owned by the 25 billionaires equals the annual pay of 14.3 million U.S. wage earners who annually pay $143 billion on these salaries, compared to the $1.9 billion the wealthy pay in taxes. These wealthy, like Deposed Donald Trump (DDT), sometimes pay zero taxes. A multibillionaire in 2007, Amazon CEO Bezos paid no taxes that year and again in 2011 when he also received a tax credit for his children. In 2018, Tesla founder Musk, the second richest person in the world, paid no federal income taxes. Other wealthy people who paid no income tax in recent years include Michael Bloomberg, Carl Icahn, and George Soros.

Conservatives want the poor to “pay their fair share” but say nothing about the wealthy. Buffett has long called for higher income tax rates for the wealthy: he paid $23.7 million tax on his $24.3 billion increase in wealth from 2014 and 2018—0.1 percent. During the same five years, the net worth of the media household averaged an increase in net worth of $65,000, mostly from the increase of their home values, but their tax bills averaged $62,000. In 2018, the 25 billionaires reported a combined $158 million to the IRS in wages, 1.1 percent of their total incomes for the year. 

Many of the wealthy use their money to oppose legislation for non-wealthy rights. Without knowing specifics about the infrastructure bill, Charles Koch’s Americans for Prosperity (AFP) founded a multi-million dollar grassroots campaign to fight the proposed law that would create thousands of jobs. The money targets 27 U.S. House Democrats in swing districts and use social media advertising, phone calls, direct mail, and rallies in over 100 cities to denounce the plan in 38 states. The same people who use the deficit to reject the plan paid $20 million lobbying for their 2017 tax giving them billions of additional wealth. The nonprofit claims that only one-third of the people support the infrastructure plan although 71 percent of respondents want to raise taxes on corporations and the wealthy.

Oil and gas companies on the government dole benefited from subsidies, tax cuts, and government COVID assistance. CEOs of Devon Energy, ExxonMobile, and EOG Resources refused to testify at a House hearing about the industry’s subsidies, as did the president and head of government affairs of industry trade group Western Energy Alliance. The 12.5 percent royalty fee, paid for onshore leases, hasn’t increased in 100 years although the government charges 18.75 percent to offshore drillers. Fees are used for public programs, such as education, by state, local, and tribal governments. The Interior Department’s Bureau of Ocean Energy Management (BOEM) has cost the government billions of dollars by reducing or waiving offshore fees. BOEM also retroactively lowered valuations of seafloor tracts to drop bids below fair market value.

States also lost money by giving subsidies, $1 billion in the case of ExxonMobil since 1983 with almost half that sum from Texas, the company’s headquarters. Devon got $89 million in state subsidies since 2009 and EOG Resources $8.8 since 2013. The oil and gas sector also received $774 million in forgivable Paycheck Protection Program loans because of COVID. As of December 31, the Federal Reserve loaned dozens of fossil fuel companies $2.2 billion, accounting for 13 percent of the Fed’s Main Street Lending Program. Renewable energy companies received only one percent of the program’s loans. The Fed also bought $400 million worth of corporate bonds in at least 36 companies. Because of the March 2020 COVID relief bill, at least 79 oil companies, service firms, and contractors claimed almost $8 billion in tax refunds. And that’s on top of DDT’s gift of $25 billion for 17 oil and gas companies in the 2017 tax bill, $5.9 billion going to ExxonMobil. 

Another loophole in the 2017 tax law gave the oil industry $84 billion over a decade by requiring taxes from 10.5 percent to no taxes on foreign profits, encouraging offshoring of factories and jobs. The extraction exemption also allows companies to bring profits back to the U.S. without paying taxes. In addition, Congress exempted securities transactions from requirements to preserve jobs and limit dividends, leaving no restrictions on the Fed’s bond purchases. Oil and gas companies fired workers, raised executives’ salaries, and paid huge dividends to stockholders. Devon, with a $220 million tax benefit from the COVID relief bill, laid off 400 workers, 22 percent of its workforce. Its dividends increased 40 percent over 2019. Another 85 percent of oil and gas companies receiving over $100 million from the tax loophole followed suit. Twelve of the companies pay CEOs over 100 times the median salary of workers while eliminating jobs.

The American Legislative Exchange Council (ALEC), a group of global corporations and state politicians secretly gathering to create state “model” bills increasing their profits, also pushes bills to enrich the wealthy. ALEC has ranked Utah, a state with one of the worst gender pay gaps, as having the best economic outlook for the year. “Best” means low income taxes, estate taxes, and minimum wages with anti-union policies. The other three top states—Florida, Oklahoma, and Wyoming—have some of the nation’s highest gender pay gaps, poverty rates, and/or percentage of residents without health insurance.

Stephen Moore, one of the report’s authors, identified the biggest economic problem in the U.S. is declining male earnings. Women in Utah make 30 percent less than men do. The poverty rate in Oklahoma is 15 percent, and the state ranks 47th in food insecurity. ALEC listed the state as having the third best economic outlook. DDT had nominated Moore to the Federal Reserve Board, but he removed his name because the public learned his history of disparaging women in sports and the workplace.

Unconcerned about the high inequity in paying taxes, Senate Finance Committee ranking member Michael D. Crapo (R-ID) focused on investigating the leak of the tax returns, concerned that Biden’s proposal reporting more taxpayer financial information to the IRS by banks would compromise privacy.

IRS Commissioner Charles Rettig confirmed an investigation into the possibility that the revealed investigation came from the IRS. He added that having financial account information readily available could reduce and shorten audits. The process “would lessen the burden on some taxpayers by having us not audit certain taxpayers,” Rettig said. He also pointed out that the IRS has been “very successful” in protecting taxpayer data with numerous oversight systems.

The committee’s chair, Ron Wyden (D-OR), called on the IRS to investigate the disclosure but addressed the need for legislative requiring the wealthiest billionaires to pay their “fair share.” He was not specific about the legislation, but his 32-page report almost two years ago proposed taxing wealth like income for those above certain income and asset levels. It also would require taxes to be annually paid on gains from tradable assets such as stocks.

Biden’s proposed changes for the IRS includes an $80 million increase in its budget, now smaller than a decade ago with 21,000 fewer employees—a loss of 35 percent. Audit rates for millionaires dropped over 70 percent in that decade, and audits of large corporations went from almost 100 percent to under 50 percent. The agency has fewer auditors than at any time since World War II while its responsibilities have expanded into administering the Affordable Care Act and distributing stimulus checks. Biden also proposes third-party reporting and information from financial services providers for greater accuracy, increasing compliance rates to above 95 percent instead of below 50 percent. Tax compliance initiatives could raise $700 billion in over a decade although experts think the amount could be twice as much, $1.4 trillion.

The IRS projected a tax gap of $441 billion a year but said it could be over $1 trillion. Treasury Secretary Janet Yellen put the amount at over $700 billion a year if everyone paid their assigned taxes. Researchers found that the top one percent of people fail to report about one-fourth of their income to the IRS and almost twice as high for the top 0.1 percent.

Biden’s proposed investment in the IRS could bring a huge profit. Republicans who worry about leaks really want only to increase assets for the wealthy.

September 27, 2020

DDT’s Financial Affairs Prove Him Liar, Cheat, Bully

Filed under: taxes — trp2011 @ 11:39 PM
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In the past, weekends were fairly peaceful in the news—just a few Friday dumps from politicians wanting to minimize a disaster. Not with Dictator Donald Trump (DDT). Today was a prime example when the New York Times released extensive information about his fraud in income tax filings. He constantly lied about not being able to release the returns while he’s being audited, but this lengthy newspaper article reveals how DDT has freeloaded on the U.S. public and used his position in the White House to make money. During over two decades: 

In 2016 and 2017, DDT, who claims to be unbelievably wealthy, paid only $750 each year in federal income taxes. (The NYT did not obtain his personal tax returns for 2018 and 2019.) Yet he paid $15,598 to Panama, $145,000 to India, and $156,824 to the Philippines.

In ten of the previous 15 years he paid zero taxes by claiming he lost more money than he made. While DDT campaigned on his statement he was “really rich” and had “built a great company,” he paid zero tax for 2014—for the fourth year.

A decade ago, he took a $72.9 million tax refund that could cost him over $100 million if it is found fraudulent. (Check the article for details.)

DDT makes more and more of his money from conflicts of interest with his position in the Oval Office.

A lawyer for the Trump Organization, Alan Garten, denied DDT didn’t pay taxes but used the term “personal taxes,” which could be taxes paid for his household employees such as Social Security and Medicare. Garten also stated DDT uses “tax credits” to pay for what he is owed, which isn’t money paid to the U.S.

The tax data shows write-offs of over $2 million in 2016 and 2017 for a criminal defense lawyer to defend DDT from the Russian investigation and problems with his fraudulent charitable foundation now determined illegal. Another tax scam deducted a mansion used as a family retreat. With no explanation, general and administrative expenses at DDT’s Bedminster golf club in New Jersey went up five times from 2016 to 2017. Other write-offs include hair stylists ($70,000), photographer ($210,000), table linens ($109,433)—anything he uses for “promotion.” He also wrote off Ivanka Trump’s $95,464 for a hair and makeup artist. The IRS requires deducted expense be “ordinary and necessary.

DDT claims that his annual financial disclosures tell the entire story about his finances, but they report only revenue, not profit. Most of his main enterprises such as his golf courses and the Washington hotel, lose tens of millions every year. Money from The Apprentice and licensing deals is disappearing, and he sold almost all his stocks. Within the next four years, over $300 million in loans come due.

DDT uses his properties to collect money from lobbyists, foreign officials, and anyone else who wants to curry favor with him. Mar-a-Lago brought him an additional $5 million a year starting in 2015, and the Billy Graham Evangelistic Association paid at least $397,602 to him for an event at the Washington hotel.

Although DDT said he would pursue no new foreign deals after he was inaugurated, he made $73 million from abroad in his first two years, several from licensing deals in authoritarian countries or places with dicey geopolitics such as Philippines, India, Turkey, and Philippines.

DDT made $2.3 million from the Moscow Miss Universe in 2016 after the Agalarov family, who helped set up the 2016 meeting seeking dirt on Hillary Clinton, underwrote the event.

In 1995, DDT declared a loss of almost $1 billion, allowing him to avoid federal income taxes for almost two decades, but in 1995 he gained $427.4 million from The Apprentice. He made another $176.5 million in profit from two office buildings. Taxes for the year should have been over $100 million.

During The Apprentice, DDT bought 13 golf courses and transformed Washington’s Old Post Office building into a hotel, losing more money. For example, Miami’s Trump National Doral was purchased for $150 million in 2012 and lost $162.3 million in the next six years. Tax records show DDT spent $213 million and has a $125 mortgage due in three years. He reported losing over $315.6 million on his golf courses, including a loss of $63.6 for the two in Scotland and one in Ireland. The Washington hotel shows a loss of $55.5 million, and another loss of $134 million came from his real estate services company.

DDT’s supposed taxable income in 2016 and 2017 included profits from “celebrity status” ($24.8 million) and the loans he didn’t repay ($56.4 million), giving him a tax of $1 million for 2016 and $4.2 million for 2017—amounts disappearing by the time he filed his taxes because he used $9.7 million in business investment credits partly for the hotel renovation. The result was payment of $750 in taxes per year.

Between 2010 and 2018, DDT wrote off $26 million in unidentified consultants’ fees, some of them matched to payments to Ivanka Trump. The amounts were about one-fifth of his income; i.e., $1.1 million for $5 million on a failed hotel deal in Azerbaijan. The recipient was identified through Ivanka’s financial disclosures from 2017. Some businesses have paid IRS penalties for schemes avoid taxes through exorbitant fees to people who are not actually independent contractors. DDT’s father used this scheme to avoid gift taxes on millions he transferred to his children. About the Azerbaijan deal, a Trump Organization lawyer said, “We did not pay any money to anyone.” A person connected to developing two Trump towers in Tukey said it had no consultant, but tax records show consultant fees for $2 million. Ivanka Trump’s website described her role not as consultant but as a senior executive.

The NYT exposé describing DDT’s fraudulent tax practices and his incompetent business abilities follows news about Mary Trump’s lawsuit against him. People voted for DDT because they thought he was a good businessman, but his history shows him as a bully and a cheat as well as a failure. In 1990, he faced personal bankruptcy from creditors and a possible billion-dollar bill in divorcing his first wife, Ivana. DDT failed with his casino empire and the Trump Shuttle airline but got a $100 million line of credit and other money from bankers so they wouldn’t go down with him. As DDT’s debts mounted, Sr funneled $3.35 million into one of DDT’s casinos by paying for 670 gambling chips worth $5,000, but DDT still faced six corporate bankruptcies.

To salvage his financial problems, DDT sent two of his father’s trusted associates, an accountant and lawyer, to force Fred Trump, Sr, into immediately signing a codicil to his will putting DDT completely in charge. At 85, Trump Sr had hundreds of millions of dollars in real estate but faced cognitive issues. The charge is confirmed by a tape recording of DDT’s sister Maryanne Trump Barry, outraged about DDT’s efforts for a will change while his father was “in dementia.” Barry’s husband, a lawyer, said the codicil gave everything to DDT, and she persuaded her father not to follow DDT’s wishes. Mary Trump wrote the change would put his siblings “at Donald’s financial mercy, dependent on his approval for the smallest transaction.” An expert on New York estate law agreed. The codicil to the will would also protect all of DDT’s inheritance from seizure by Ivana and creditors.

The lawsuit by Mary L. Trump, Trump Sr’s granddaughter and DDT’s niece, against Sr’s estate executors DDT, Barry, and the estate of their deceased brother Robert Trump is about their lies concerning the “true value” of what she should have inherited from her grandfather. She and her brother, Fred III, went to court in 2000 to argue their grandfather was not of sound mind when he disinherited them in September 1991, alleging the will was “the product of undue influence and coercion” by DDT and his siblings. A physician wrote Sr had “significant memory impairment” and “early signs of dementia” only a month later. In another four months, a neuropsychological evaluation showed Sr’s mental state to be much worse—below the 15th percentile for a person in his age group. Yet DDT insisted in a deposition he have never seen or heard any evidence of his father’s decline throughout this time.

DDT and Robert threatened to withdraw medical care provided by the Trump Organization for the infant son of Fred III and Mary Trump’s nephew, William, who had cerebral palsy. DDT and his siblings told Fred III he should take a CPR course from the Red Cross and care for William because nursing care for the badly disabled newborn was “expensive babysitting.” Mary and Fred III settled the lawsuit with confidentiality agreements.

Mary said she is no longer bound by secrecy because she learned the estate was worth closer to $1 billion instead of the $30 million claimed by the executors. She only learned about the fraud in October 2018 when the NYT published an investigative report into DDT’s “suspect tax schemes.” New York statute of limitations requires a lawsuit within two years of discovery, making the lawsuit timely.

As Mary Trump’s lawsuit states, fraud for Donald Trump is “a way of life.”

April 15, 2019

Tax Day: ‘Cuts,’ Returns

Today is the deadline for paying 2018 taxes, and the amount of taxes that people pay has consumed conversation for over a year, ever since DDT and other Republicans gave the wealthy and big business a huge tax break that cost the United States $1.5 trillion. When Dictator Donald Trump (DDT) delivered his rally speeches, he promised that people would get an additional $4,000, but over 80 percent of taxpayers didn’t get this generous bonus. Instead 10,260,263 paid more taxes last year after DDT’s 2017 Tax Cut and Jobs Act, and raises for most people were under $1,000. The law eliminated personal and dependent exemptions, caps on state and local deductions, employee business expenses deductions, etc. The cap of $10,000 on state and local tax deductions was onerous for many people, especially those who have lived in their home for a long time or have high state income tax, although DDT claimed that only the wealthy were hurt.

Researchers found that “half the tax cuts went to the richest five percent, with about a quarter going to the richest one percent. Those among the top five percent got bigger tax cuts not just in dollar terms but even when measured as a share of their total income.” Households making between $500,000 and $1 million had their after-tax income rise by an average of 5.2 percent. Households making less than $50,000 experience only a 0.6 percent increase. In even greater income inequality, W-2 wages fell 2.0 percent in 2018. Bonuses fell $0.22 for 2018, and the average bonus for 2018 was just $0.01 higher than in 2017. Most bonuses came from recruiting because of low unemployment instead of production from company tax cuts.

Big benefits went to Fortune 500 companies: at least 60 profitable corporations will pay nothing—some of them getting back extra money from the government. That number is double from previous years. Instead of paying $16.4 billion in taxes on their $79 billion of pretax income, the companies got rebates of $4.3 billion—a GOP gift of over $20 billion used to buy up stock and sock away in hidden offshore accounts. A few corporations with this advantage: Amazon, Chevron. Deere, Delta Air Lines, General Motors, Halliburton, Honeywell International, Molson Coors, and Prudential Financial. Another 51 companies with zero or minus taxes.

Jamie Dimon, J.P. Morgan’s CEO, bragged to shareholders that tax cuts for the bank add “$3.7 billion to net income.” But the increase “will be erased” so that shareholders won’t expect to get higher profits. The justification for the company’s spending $55 billion in stock buybacks? You have to buy back your own stock at “tangible book value.” And then at “two times tangible book value.” So buy back stock at any price, according to Dimonomics.

DDT surely gained millions—perhaps hundreds of millions of dollars—from DDT’s tax cuts for the wealth as did people he chose for his officials. Education Secretary Betsy DeVos testified in support of $6.7 billion in education cuts at a congressional hearing, but she saved at least $10 million in taxes for 2018. Amway, her family’s company structured as an S-corporation, dropped its taxes from 39.6 percent to 29.6 percent in what Republicans called a small business cut. The education cut comes from the tax cuts’ failure to continue revenue for the government; instead revenue is plummeting. DeVos’ $10 million in taxes would have supported work-study funding for 5,600 students, Nevada’s entire share of the 21st Century Community Learning Center after school program, or funding for Full Service Community Schools academic and social services at schools in 20 communities—programs that DeVos wants to eliminate because of no revenue. DDT wants to make his tax cuts for the wealthy permanent with a conservative addition to the deficit of $1 trillion over a decade.

In their effort to convince people that they are paying lower taxes, Republicans have decided to make the withholding form so complicated that they can just say that people aren’t being ripped off. Past forms asked for the number of allowances based on exemptions. The new form requires annual dollar amounts for nonwage income, such as interest and dividends; itemized and other deductions; income tax credits expected for the tax year; and total annual taxable wages for all lower-paying jobs in the household for people with multiple jobs. The new form references 12 IRS publications for its completion and looks like the 1040 for final taxes instead of a simple W-4. The former year’s 1099, pay stubs, or 1040 returns are necessary for making the withholding calculations.

People are required to tell the “primary” employee about all their other income as well as that of their family and will probably need training to fill it out. Productivity will shrink and privacy goes out the window. And states may also require a new withholding form instead of the current W-4. Remember when Republicans said that people could fill out their tax return information on a postcard? It’s not happening.

Polling indicates that only 17 percent of people think that they got any tax cut even if they did. This perception comes from most taxpayers getting only a small cut. Only one-third of people approve of the legislation that DDT saw as his signature legislative achievement. Economic growth, a talking point around tax cuts, is slightly worse than in 2015, and job growth has slowed. Senate Majority Leader Mitch McConnell (R-KY) said about the tax cut when it was passed:

“If we can’t sell this to the American people, we ought to go into another line of work.”

The 77-year-old man is up for re-election next year. He may have the chance for “another line of work.”

Presidential candidate Sen. Elizabeth Warren (D-MA)’s tax reform proposal, “Real Corporate Profits Tax,” might force a modicum of honesty on huge corporations. She recommends that companies reporting more than $100 million in worldwide profits pay seven percent on every dollar above the first $100 million claimed in profits to their investors. After CEO’s like Dimon brag about their tremendous profits, companies currently convince the IRS that they make no profits and thus pay no taxes. J.P. Morgan made over $131 billion in 2018 but paid less than $10 million in taxes. Warren maintains that raising the corporate tax rate does no good because the tax code is “so littered” with loopholes. She estimates that charging 1,200 companies subject to this tax would give “smaller” businesses “a fighting chance.” Companies paying no taxes would pay some taxes—Amazon would pay $698 million in taxes and Occidental Petroleum, $280 million. Last year, Amazon got a tax refund of $129 million plus paying no taxes.

For people who complain about costs of Social Security and healthcare, consider another destination for tax money. Of every dollar in taxes, 24 cents go to the military. Of those 24 cents, only 5 cents go to our troops while 12 cents go to corporate military contractors. The average taxpayer gave $1,704 to Pentagon contractors last year but only $683 for military pay, housing, and other benefits except $833 to military health care. The average U.S. taxpayer gave $225 to Lockheed’s executives and shareholders. Its CEO Marillyn Hewson got over $20 million for 2017, but the top pay for a four-star general or admiral is $189,600. The lowest-rank enlisted soldiers make just $20,172. Boeing got $100 from the average taxpayer, the same amount as all of education received.

And a shout out to DDT’s tax returns. Writing that concerns from Treasury Secretary Steve Mnuchin “lack merit,” House Ways and Means Committee Chair Richard E. Neal (D-MA) has given IRS Commissioner Charles Rettig a firm deadline of April 23 to turn over six years of DDT’s tax returns. Two days later, DDT’s personal lawyer wrote the Treasury Department to stop the tax returns from being handed over to House Democrats.

DDT’s tax preparer Mazars USA told House Oversight Committee Chair Elijah Cummings (D-MD) that it would turn over ten years of DDT’s tax returns if the company received a subpoena. In an attempt to hide the returns, DDT’s lawyers have threatened the firm with legal action if it follows the law. The letter accused Cummings of wanting the returns only for political reasons, basically accusing a member of Congress of being a liar.  calling it a politically motivated scheme to take down the president. Reps. Jim Jordan (R-OH) and Mark Meadows (R-NC), members of the Oversight Committee, also accused Democrats of requesting DDT tax returns “solely to embarrass President Trump.”

Press Secretary Sarah Huckabee Sanders passed along the DDT party line of smears and threats about Democrats requesting DDT’s his tax returns when she claimed that Democrats aren’t “smart enough” to look through his returns and that they are on a “dangerous, dangerous road.” DDT was tried twice for civil tax fraud, criticized by judges in both cases, and faced his own tax lawyer testifying against him.

Protesters brought an inflatable figure to the steps of the IRS when they asked for DDT to release his tax returns. The group uses the figure because DDT is “too chicken” to release his tax returns. The first “chicken bearing a resemblance to DDT was 23 feet tall and complete with golden hair pompadour and preening gestures. It arrived at a Chinese mall less than a month before DDT’s inauguration in preparation for the Year of the Rooster in the Chinese lunar calendar.

Questions: If there is nothing wrong with DDT’s tax returns, why would he be embarrassed? If there is something wrong, why isn’t a look at them not warranted?


February 13, 2019

Tax Cuts Go to Wealthiest, Others Angry

Almost 14 months ago, Dictator Donald Trump (DDT) promised people would pay $4,000 less on their taxes this year and “have a nice, simple form.” Neither is true. An additional ten percent of tax filers will owe the IRS money since the “tax reform,” and average refunds were 8.4 percent smaller, down to $1,865 because of the same “tax reform.” And that’s from a week ago. In addition, filing taxes is as complicated as in the past. IRS refunds sent out are also down about 24 percent because of the shutdown.

People hoping to pay for their cars will be disappointed. Seven million people are at least 90 days behind on their car loans, a record and a red flag for the economy. Auto loans are the first payment that people make; delinquencies show serious economic problems for low-income and working-class people in the U.S. The nation suffers from more than a million more “troubled borrowers” now than in 2010 when unemployment hit ten percent and the car loan delinquency rate peaked. After George W. Bush’s recession, the government restricted mortgages so that people could make the monthly payments, but car financers could continue predatory practices because they have few restrictions . Subprime borrowers with low credit scores, increasing from 28 percent of the market in 2009 to 39 percent in 2015, may pay interest rates between 14.5 and 20 percent.

Howard Gleckman, a senior fellow at the Tax Policy Center, wrote about people plan buying big purchases or paying off large debts with their refunds. Some are so desperate that they pay extra to get advance lending on their refunds. Last year, 102 million taxpayers received an average of $2,778 in tax refunds, and most people spent this money, helping the U.S. economy. Lower refunds mean less spending and a shrinking economy. If people use their refunds for necessities, problems are worse than a slowing economy.

Fox & Friends told their watchers to stop whining about owing money to the government because they should have taken out more withholding—for a tax cut. The government’s guidelines did provide for less withdrawals from wages to get people to vote for Republicans in the midterm elections, a ploy that failed for many House members. But the reference to everyone’s “fatter paychecks” by Fox & Friends’ hosts applies primarily to higher income earners: most people didn’t see a significant increase in their paychecks.

Rep. Kevin Brady (R-TX), lead author of the tax bill, told taxpayers to be grateful for much smaller or no refunds because they have nothing to do with their overall tax bill. He falsely claimed that 90 percent of the middle class got a $2,100 average tax cut. Another tax cut backer, Rep. Warren Davidson (R-OH), tried to convince people that refunds are less because most people “owed less income tax.” The Tax Policy Center estimated that earners in the bottom 20 percent might each see a total of $60 less tax for the year, and the next 20 percent might expect a $380 total cut. The top 0.1 percent of people in the U.S. saved an average of more than $190,000—each.

Meanwhile, the government ran a $14 billion deficit in December—just one month—as we lost revenues because of the “tax reform” law. The U.S. has run into the red by $319 since the beginning of the fiscal year in October, up 41 percent from the $225 deficit of the same time period last fiscal year. Corporate taxes fell 17 percent, and those from individuals dropped by 4 percent. We’re not spending more: we just aren’t collecting money partly because of the tax cuts for the wealthy and big businesses, ending in a larger deficit for the previous fiscal year—almost $900 billion added to the debt. Budget Director Mick Mulvaney said that “nobody cares” about the debt.

DDT’s supporters are learning that the Democratic position on the failure of tax cuts was right and that Republicans lied. Most of the people aren’t getting any extra $4,000, businesses haven’t changed their capital investment and hiring, and tax breaks for the wealthy and big businesses aren’t paying for themselves. In addition, the economic growth is slowing instead of building. The GOP promised that corporate tax breaks wouldn’t go into stock buybacks; they did, which is the only reason that the stock market has not gone much below its level a year ago.

Instead of putting their tax breaks into higher wages for employees, companies in the S&P 500 spent almost $800 billion of their tax windfall on buybacks for the 2018 fiscal year that started nearly three months before the tax “reform” bill passed into law. The Dow Jones spiked until it went back to the same level as the beginning of 2018. The 2019 buyback projection is about $900 billion, almost all one third of all corporate cash spending and up 25 percent from 2017.

Senate Minority Leader Chuck Schumer (D-NY) co-authored an op-ed for the New York Times with former presidential candidate Sen. Bernie Sanders (I-VT) that criticized the tax law and suggested the prohibition of a public company from buy back shares “unless it invests in workers and communities first, including things like paying all workers at least $15 an hour, providing seven days of paid sick leave, and offering decent pensions and more reliable health benefits.” They also suggested other ways to require companies to invest in workers, including a change in tax rates on dividends.

A divided Congress with a Republican president can’t pass these laws, but the ideas have generated discussion. Lloyd Blankfein, former head of Goldman Sachs, tweeted that money doesn’t vanish with stock buybacks, that money “gets reinvested in higher growth businesses that boost the economy and jobs.” Sanders retorted that Blankfein was right in his claim that money “doesn’t vanish” but it Mr. Sanders quickly responded on Twitter that Mr. Blankfein was correct that the money buybacks “doesn’t vanish” but it “increases the wealth of billionaires” like Blankfein.

Republican leaders who financially benefit from the buybacks lambasted the buyback proposals as “socialism.”  The GOP case against “socialism” ignores the difference between pure socialism and “Democratic socialism.” Republicans plan to use the term as a one-word meme slamming Democrats during the 2020 election campaign after they failed with “witch hunt.” Today, the White House blared the headline, “Not one more person should suffer under socialism.” Republicans’ definition for socialism may be anything that doesn’t benefit themselves. [In the chart to the left, you could add flood protection, sports coliseum, “freedom of religion,” a 40-hour work week, child labor laws, Social Security, Medicare–the list is quite long.]

Axios chief financial correspondent Felix Salmon asserts that the tax cuts will never pay for themselves and no one ever believed that they would. The increase in the national debt is faster than pessimists predicted at the time the GOP pushed through the cuts, and the CBO estimates that the annual deficit will top $1 trillion beginning in 2022. It’s almost there now. DDT campaigned with the promise that he would immediately eliminate the deficit, but in two years, he’s increased the national debt from under $20 trillion to $22 trillion. Salmon added that the nation is “awash in debt” with trillions in student loans, credit card debts, and car loans. Asked about the debt, DDT said that he’ll “get rid of” the entire debt “fairly quickly,” “over a period of eight years,” “paying off that debt like water.”

DDT plans to unleash predatory payday lenders on the majority of people receive less in tax refunds by gutting rules from President Obama’s era that shield people from “easy” loans with interests over 400 percent. If people borrow the money for the two weeks between paychecks, they pay $75 for a $500 loan. Over 60 percent of 12 million borrowers took out seven or more consecutive, digging themselves deeper and deeper into debt, and a majority of borrowers paid more in interest than the money borrowed.

In charge of making these changes is the Consumer Financial Protection Bureau (CFPB), which Budget Director Mick Mulvaney destroyed before he moved on to help DDT spike the national debt and works at failing as acting chief of staff. Vanita Gupta, president and CEO of the Leadership Conference on Civil and Human Rights, described the result of the change in rules for payday loans:

“This decision will put already struggling families in a cycle of debt and leave them in an even worse financial position. This administration has moved the CFPB away from protecting consumers to protecting the very companies abusing them.”

Almost 80 percent of people in the U.S. live from one paycheck to the next, and wages remain stagnant when inflation is taken into consideration, even dropping in the second quarter of 2018. Almost all the gains in the country go to the top—chief executives of big companies, financiers, and creators in the digital world. If the average wages go up at all this year, it will be due to the 18 states that raised the minimum wage although the increases in almost half these states were $.20 or lower—about 2 percent.  The GOP system makes the vast majority of people in the United States more and more desperate.

January 2, 2019

Shutdown,Tax Law Disadvantages for Most

Filed under: taxes — trp2011 @ 8:32 PM
Tags: ,

Day 12 of government shutdown: Dictator Donald Trump (DDT) failed to make progress in today’s White House “briefing” about border security with congressional leaders, but he told a lot of whoppers. After saying that he was lonely without going to Mar-a-Lago over the holidays, he spent over 90 minutes repeating lies and flip-flopping.

Syria: Instead of his previous comments that the U.S. had won, DDT said, “Syria was lost long ago.” He compared the country with Iraq’ oil reserves, “We’re not talking about fast wealth…. Iran an do what they want there. It’s not my fault.”

Former Defense Secretary James Mattis: “What’s he done for me?” DDT said and claimed that he fired Mattis. He didn’t: Mattis resigned.

Stock market: DDT called the huge losses of last year “a little glitch.”

Immigration: There are “probably 30-35 million” immigrants in the U.S. illegally, according to DDT, although a non-partisan group said that 10.7 million undocumented immigrants lived in the U.S. in 2016. The number has decreased since that time.

Wall: DDT said that he just waited in the White House for “people [who] wanted to come and negotiate the border security.” He cited the Vatican that “has the biggest wall of them all.”

Mitt Romney: Addressing the criticism from Utah’s new GOP senator, he bragged that he “got rid of” former Sens. Jeff Flake (R-AZ) and Bob Corker (R-TN) dhow didn’t run for re-election in the midterms. DDT said that Flake would be looking for a job as a paid cable news contributor or “selling real estate.” (DDT worked in the media and sold real estate.)

DDT said that he won’t open the government until he gets money for his wall, but his tweets in December indicate that he doesn’t need the money:

“Mexico is paying for the Wall through the new USMCA Trade Deal. Much of the Wall has already been fully renovated or built. We have done a lot of work.”

“Our Southern Border is now Secure and will remain that way…….

“….People do not yet realize how much of the Wall, including really effective renovation, has already been built. If the Democrats do not give us the votes to secure our Country, the Military will build the remaining sections of the Wall.”

According to DDT, he already has his wall, but he couldn’t accept the Democrats’ offer because “I would look foolish if I did that.”

With the advent of 2019, people will begin filing their taxes, hoping for the magical tax cut passed on December 22, 2017. Republicans promised that the law primarily benefiting the super wealthy and big business would not cause any annual debt and would do wonders for the economy, yet the deficit will increase $1.3 trillion in one year. Analysts’ view of the law’s effects:

The stock market wildly boomeranged since DDT signed his signature bill, despite big increases in after-taxes profits for those who made the most money. DDT combined his signature with a U.S.-China trade war and government shutdown to create serious economic problems.

After a tax cut dropped the corporate tax rate from 35 to 21 percent and reduced taxes on private businesses by 20 percent, workers received an average extra $.02 per hour wage increase from the much-touted $1,000 bonuses. That’s $41.60 for a year of 40-hour weeks. Companies are not required to report how they used their tax savings, but an estimate shows that only 4.4 percent of U.S. workers received a wage increase or bonus from the legislation. The corporations spent their gains in buying back their shares to inflate value for shareholders, using $1 trillion for this purpose in a 64-percent increase from 2017.  Companies spent 117 times more in these buybacks than on worker pay hikes. Of the Fortune 500, 34 companies said they invested in U.S. operations. Average hourly earnings rose about 0.9 percent last year after considering inflation.

Money isn’t going into reinvestments, as promised. Instead it’s going into dividends as corporations own more and more of the stock.

The loss of taxes is shooting up the annual debt—this year to about $1.3 trillion. One of DDT’s promises was to eliminate the annual debt; instead he doubled it in his second year with his tax cuts.

The promised jobs from tax cuts are outside the United States. GM plans to close four plants in the U.S., lay off almost 15,000 workers, and build the Chevrolet Blazer in Mexico because the tax cut charges corporations only half the tax rate on foreign profits that it does on domestic earnings. GM used $100 million of its tax cut of over $150 million to buy back their own shares and nothing on workers. Chief executive Mary Barra got $22 million last year.

So-called “U.S. corporations” are owned by foreigners, either through foreign subsidiaries or foreigner-owned U.S. stocks. One-third of U.S. corporate profits go to foreign nations—and that includes one-third of the tax cuts—leaving people in the U.S. to raise other taxes or cut spending on programs that people want. that the people in the U.S. must compensate for, making almost all the people in the U.S. poorer instead of richer. Because 84 percent of stocks are held by the wealthiest 10 percent of the population, no one else will see the benefit. The tax cut makes most people in the U.S. poorer, not richer.

Sen. Marco Rubio (R-FL) tweeted:

“When corporation uses profits for stock buy back it’s deciding that returning capital to shareholders is better for business than investing in their products or workers. Tax code encourages this. No surprise we have work life that is unstable & low paying.”

Rubio also wrote an essay for The Atlantic in which he argued:

 “Trusting in a corporate tax cut alone to generate innovation and boost productivity is the thinking of the past. A corporate tax-rate cut makes all corporate assets more valuable, causing a bigger return to investment no matter how it is used. In our globalized and financialized economy, though, it’s as likely to induce stock buybacks as it is to spur the construction of new American factories.”

For Rubio, “the past” may be December 2017 when he pushed the passage of the tax cut law that he now lambasts. Sen. Bob Corker (R-TN) now leaving the Senate said his vote for the law was the worst of his career, but that was after he added his “yes” vote to the other Republicans.

DDT’s tax cut law does have a grand bonus for himself, members of Congress, and their real estate development friends with governors permitted to select “opportunity zones” in supposedly economically distressed areas. By putting profits into a fund designated for these zones, they can defer or eliminate capital gains. Amazon is moving one of its two headquarters into an “opportunity zone,” getting a $225 million tax break added to the $1.7 billion New York is already giving Amazon. Anyone building apartments for the tech workers, office parks, or grocery stores will make a huge profit from U.S. taxpayers. Profits for congressional members from the law can be seen here. The tax incentives cost $1.5 billion a year for the first eight years—all going to wealthy people. In the 1980s, Margaret Thatcher did the same thing in the U.K., costing taxpayers $35,000 to $45,000 for each job that didn’t benefit taxpayers. Those areas are still home to the poorest people in the UK.

DDT found a way to give big banks even more money with his tax cuts. Corker created the “Corker Kickback” which excluded banking from “financial services,” giving them the same lower pass-through tax cuts as real estate magnates. Banks will put away about $2.5 billion over a decade. DDT benefits from the new regulation because it narrows the definition of excluded businesses that rely primarily on the “reputation or skill” of their owners to earn money. DDT’s business doesn’t apply.

Since the tax cut law passed, half the huge 32 corporations in a coalition to slash the corporate rate with over $48 million in lobbying has laid off employees. These companies include AT&T, Capital One, Ford, General Dynamics, Intel, Kimberly-Clark, Lockheed Martin, Macy’s, T-Mobile, Verizon, Viacom, Walmart, Walt Disney, and National Retail Federation. The group is now working on retaining the tax cuts so that “the American people will not be deprived of their meaningful tax reform wins.” Almost all of these people had no “wins.” In addition, at least 16 large retail companies declared bankruptcy this year including Nine West, Sears, Bon-Ton, Toys R Us, and Brookstone.

When the Heritage Foundation wrote the new tax law passed last year, Republicans didn’t bother to read it. Now churches have discovered that they will be required to pay “a 21 percent tax on some types of fringe benefits they provide their employees” such as parking, meals, and entertaining clients. Churches receive $82.5 billion in exempt taxes, and DOJ justifies the separation of migrant children from their parents with a bible verse out of context that requires people to abjectly obey their government’s laws. Republicans still haven’t figured out how to reverse their mistake. Meanwhile, the aides who actually prepared the law have moved on to work as lobbyists.

DDT promised that everyone would now be $4,000 richer because of his 2017 tax law. I’m still waiting.

March 29, 2018

Did Your Pay Check Go Up?

Filed under: taxes — trp2011 @ 8:45 PM
Tags: ,

Republicans will be running for re-election this year on their signature legislation of the first two years—a tax cut for the wealthy and big business. How’s that working out?

CNBC’s All American Economic Survey from last week found one-third of respondents with more money in their paychecks from the law that will crank up the deficit by $1.5 trillion. Over half—52 percent—found no difference. Of the one-third with more money, under 40 percent—that’s about 13 percent of the respondents–said that the increase improved their finances “a great deal” or “a fair amount.” The remainder of the one-third said that the increase helps a small amount or not at all.

Corporations, however, are having a great time with all their extra money. Sen. Susan Collins (R-ME) defended her vote to pass the bill by saying:

“The purpose of lowering the corporate rate is to encourage job creation here. It is not to encourage stock buybacks.”

Immediately after the bill was signed into law, a few corporations announced $1,000 bonuses. (That gives workers less than $.28 per day.) Raises are planned by 13.2 percent of companies, and tax savings for 44 percent of businesses will go to acquisitions and new equipment, including robots to replace workers. The rest goes for stock buybacks and dividends, causing the stock market to go up almost 2,000 points before it dropped almost 3,000 points. Workers may have seen little extra money in their paychecks, but the average banker bonus on Wall Street last year was $184,220, the highest since before the financial crisis.

By the beginning of March, just two and a half months after the bill became law, retail companies gave employees bonuses about $3 million while spending $200 billion for stock buybacks, inflating the value of shares by reducing their supply. Executive pay is tied to stock performance, accounting for 82 percent of their pay in 2015. Sen. Ron Wyden (D-OR) said in a Senate floor speech:

“Stock buybacks are windfalls that drive up the value of investment portfolios for CEOs and high-flyers, and they’re coming in at a rate 30 times greater than worker bonuses—30 to one! They’re on pace to double the amount from the first quarter of last year.”

The richest 10 percent of stock owners owned 84 percent of all stock in 2016 while one in four jobs pays below the federal poverty level.

Almost 37 percent of households in the nation are “liquid asset poor,” lacking enough savings to support their families for three months at the federal poverty level if they lose their jobs. The cost of houses has gone up 4.1 percent to $8,000 since last year while the median household income has increased by only 2 percent. Despite workers searching for temporary employment and jobs to supplement their other jobs, 40 percent of households have difficulty paying bills. And the tax cuts have given a pittance—if anything—to these people, less than $60 to families earning under $25,000.

DDT told workers in Ohio that they would receive between $2,000 and $4,000 from the Tax Cuts and Jobs Act and that more than 300 companies delivered bonuses, raises, or 401(k) investments to over three million people. DDT’s chief economic adviser Gary Cohn announced that with another $1,000, a family “can renovate their kitchen, they can buy a new car, they can take a family vacation.” Twitter took on Cohn’s statements; the most accurate one stated, “To Cohn’s credit, he’d be right if this were the 1930’s.”

Republican legislators did well with the new tax law. House Speaker Paul Ryan (R-WI) got $500,000 from the Koch brothers and another $500,000 from just five wealthy donors for his tax bill. The bill also gave Ryan a $19,000 tax break with his bill, far more than the $78 that Ryan bragged that a school worker received. The new law threatens affordable health insurance and Social Security, costing people far more than any extra they now receive.

Over 12,000 retail stores are expected to close in 2018, up from the 9,000 that closed in 2017. Two-dozen major chains including Walgreens, Gap, and Gymboree are planning to close over 3,600 stores this year. Last year 50 retail chains filed for bankruptcy. Among 25 major retailers likely to file for bankruptcy are Sears, Bon-Ton Stores, Bebe Stores, Destination Maternity Corp., and Stein Mart. Almost one-fourth of U.S. malls, approximately 310 of 1,300 shopping malls, may lose its anchor tenants, causing other retail stores to flee.

Even the bonuses come with strings such as longevity of service, and they are attached to firings and store closures, like those at AT&T, Lowe’s, Walmart, Pepsi, Carrier, Kimberly Clark, etc.

The new GOP tax law causes huge problems for almost every state. Some blue states are examining the reclassification of state property and income state taxes as charitable contributions because that’s the biggest hit for places such as California, New York, and New Jersey. But almost all 41 states with personal income tax use either federal adjusted gross income or federal taxable income as their starting points for the state income tax. The federal shift can cause big swings in state revenue, causing losses of tax income. The almost-double standard deduction and giveaway to pass-through entities blows up the deficit on both the federal and state levels, and states will hurt even more with cuts in entitlement and safety net funding. Plus states’ responsibility for 80 percent of infrastructure funding will cause more problems. The federal government is taking taxes to give to the wealthy and big corporations leaving states in serious debt to take up the losses. And almost every state must meet a balanced-budget requirement, meaning no deficit from one year to the next the way that the federal government operates. One solution is to “decouple” from the federal code which means trickle-down complexity.

The tax bill was based on lies, such as the one that the tax cuts will pay for themselves and not raise the deficit. Treasury Secretary Steve Mnuchin made the claim that his department had run the numbers and found no deficit, but he even lied about the existence of this study. Then Republicans will use the deficit to take away the safety net, including Social Security and Medicare.

Not happy with everything that they have given to the wealthy and large corporations, Republicans are planning another tax cut bill. In the first one they passed last year, cuts for individuals expire in ten years; now the GOP plans to force a vote to make them permanent. If Democrats oppose the bill, the GOP will call them opponents of the middle class.

The GOP plan to corner Democrats with Tax Cut Bill II may turn on them. Making the taxes permanent will add at least another $1.5 trillion to the deficit in the decade after 2025 while reminding people that the GOP favored corporations over them by making taxes permanent for businesses. Another problem for Republicans is that they need at least nine Democrats this time around because of different Senate rules, and they still won’t let Democrats be involved in talks about the bill.

To pass the tax cut law, Republicans promised that everyone would get $1,000 or $2,000 or $4,000 during the next year depending on who was talking and when. People are beginning to figure out that the Republicans lied. The next arguments might not get swallowed as easily. Sen. Thom Tillis (R-NC) said, “The proof is in the paycheck. That’s a message we can run on.” It might be easier to use this for an election argument if the paycheck showed more money.

Republicans are still planning to take Social Security and Medicare to pay for the deficit caused by tax cuts for the wealthy and big business. House Speaker Paul Ryan (R-WI) said last week, “The name of the game in debt and deficits is entitlements.” The GOP needs older voters who may not vote for candidates who take their living expenses and health care.


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