FY25 IRS Budget/2024 Tax Season

 Finance: The President’s Fiscal Year 2025 IRS Budget and the IRS 2024 Filing Season, April 16, 2024

As I mentioned the last two  years, support contractors could be more widely used for customer and information technology services. This would identify the balance of spending to justify the budget request for FY 2025.

Additional analytical resources are required for tax reform initiatives such as a Fair Tax initiative and exploration of options due to expiration of the Trump/Ryan/Brady tax cuts. The Ways and Means Committee and the Committee for a Responsible Federal Budget are agitating for a Fiscal Commission to justify or pay for some kind of extension of the 2017 Tax Bill. 

While such an extension should be allowed to die on the vine, analytical resources should be budgeted for the debate and a consideration of alternatives, such as those presented last year to the Ways and Means Committee. My comments on those alternatives, plus a presentation of my own, are attached.

This year, the House has passed a reboot of the pandemic era child tax credit distribution. This will require more funds, although with tax reform, this could be done more cheaply. Such a change is essential in a post-Roe environment. If women must keep their pregnancies, then they must be funded adequately to raise the child to maturity.

To prevent the “stink of welfare” that Senator Manchin so objects to, CTC payments should be included with wages for all employees - not just those with three or more children. They should also be distributed through other federal and state assistance programs - some of which can be reduced to do so.

For middle income taxpayers whose increased credits are less than their annual tax obligation, a simple change in withholding tables is adequate. Procedures are already in place to deliver refundable credits to larger families. For the coming year, they merely need to be expanded to all families with children. 

Employers can work with their bankers to increase funds for payroll throughout the year while requiring less money for their quarterly tax payments (or estimated taxes) to the IRS. The main issue is working out those situations where employers owe less than they pay out. This is especially true for labor intensive industries and even more so for low wage employers. 

A higher minimum wage would make negative quarterly tax bills less likely. Indeed, no one should have to subsist mainly on their child tax payments.

As usual, we have attached the latest version of our tax reform plan, with a separate attachment on how implementation of this plan would affect IRS manpower. The answer is that the change would be drastic. It would also allow the Committee to focus more on how social welfare is being delivered in general, as well as eliminating current roadblocks to promptly filing for Social Security Disability Income.

Attachment; Tax Policy Options

Attachment: Tax Reform Videos included

Attachment: Tax Administration Video

Trade Policy 2024

WM: Biden Administration’s 2024 Trade Policy Agenda with United States Trade Representative Katherine Tai, April 16, 2024

Finance: The President’s 2024 Trade Policy Agenda, April 17, 2024

As Russian aggression in Ukraine continues, it must be a key component of our trade policy, not just including the obvious connection to our Foreign Military Sales program, which is being used to aid Ukraine directly and to backfill contributions by our NATO allies.

Europe’s energy independence is also a related issue, which means that replacing Russian energy with other sources is a relevant issue - and a reason to consider alternatives like increased support of nuclear power here and abroad (development of small modular reactors) and its use to replace gasoline with electric vehicles - either battery powered or tethered electric cars and trucks (on separate roadways. 

These changes are necessary, regardless of Ukraine, due to global climate change - particularly regarding the warming of the Barents Sea and its impact on the continued warming of the Northern Hemisphere. In short, the thermostat is broken and only drastic change, like replacing gasoline in urban areas, is required.

Replacing Ukrainian and Russian grain in the developing world is another priority - however such replacement should not rest with the United States, at least not in the long term. Instead, developing nations need help in developing nations to feed themselves. For too long, agricultural aid and trade have been predatory, designed to destroy local agriculture for the sake of our own. We need to ship know-how, not grain, whenever possible, although such know-how should respect local land ownership practices rather than imposing the Anglo-American system of ownership fee-simple arising as a grant from the British monarchy or state government.

Our comments from last year touch on still lingering issues of trade with China and the possible resurrection of something like the Trans-Pacific Partnership, immigration as a trade policy issue, consumption taxes and the issue of Tier 2 OECD corporate tax policy reforms. We have included them as an attachment, along with our usual attachments on taxation and trade policy, consumption taxes and an asset value added tax (which will include a need for a negotiated rate).

Some income taxation of the very wealthy as a way to reduce the debt is appropriate, as are the use of an income tax system (or subtraction value-added tax) to fund adequate tax support for families. Taxation for other domestic government, including contributions from employers to social insurance, should be replaced with a credit invoice value added tax or some sort of fair tax. To not do so runs counter to the spirit of the constitutional provision banning export taxes.

Attachment: 2023 Trade Policy Agenda

Attachment: Taxation and Trade Policy Video

Attachment: Consumption Taxes (Video links included)

Attachment: Asset Value Added Tax Video

The Truth About the 2017 Tax Relief Law

WM:  Expanding on the Success of the 2017 Tax Relief to Help Hardworking Americans, April 11, 2024

The 2017 personal income tax changes should not be made permanent or extended, as has been proposed. This will reward savings and speculation, rather than providing an incentive to invest in plant and equipment. The latter responds to greater levels of consumption by households funded by both the public and private sectors, including Social Security recipients. For a more detailed treatment of why this is the case, see the first attachment - which was drafted in 2017 in opposition to the Trump-Ryan-Brady tax cuts.

The second attachment, which is an excerpt from my book, Settling (and Squaring) Accounts: Who Owns the National Debt? Who Owes It? This lays out in greater detail why government spending leads to higher GDP and why speculative investment does not, as well as a history of the relationship between deficits/surpluses in one year and growth the second year - including graphs showing these relationships by tax regime.

The 2017 Act took a year to make its way through the economy. It is not included in the last graph in the second attachment, because the next point was the pandemic. The one data point we had showed that, post tax cuts, GDP declined by one percentage point. The current tax regime requires significant deficits to produce economic growth. Once the 2017 tax bill expires, the balance will begin to shift in the tax system so that growth can occur alongside declining deficits and additional spending cuts.

The 2017 cuts rewarded hard working investment managers and the denizens of Wall Street. Mortgage Backed Securities markets, this time investing in commercial and family rental units (which is how Steve Mnuchin and Wilbur Ross made their bones - and why they championed pandemic stimulus so as not to go personally bankrupt) were incentivized by the 2017 law. They received the wealth, not those who were stuck in homes where maintenance was shifted to renters - which means that the homes Mnuchin got for pennies on the dollar are deteriorating, not creating actual wealth.

If the Committee is serious about helping hardworking Americans, increase the minimum wage and continue to press the Senate to pass the committee’s increases to the Child Tax Credit. Work must pay for people to continue to work. 

In 2021, the House proposed increasing the minimum wage to $15 per hour as part of reconciliation. Until the Senate Parliamentarian ruled that this was out of order and the votes did not exist to overrule her, the Republican Minority counter-offered a $10 per hour. 

American workers would appreciate putting that counter-offer back on the table, while ending the tipped wage sub-minimum rate. American customers are not nearly generous enough for this to be at all just. Wherever either (or both) options are proposed as ballot initiatives, they pass. In some states, higher minimums have been enacted and more economic activity, rather than less, has occurred. The reason is obvious - when lower income people have more income they spend it all back into the economy. When wealthier people get a tax cut, they take it out of the economy and into Wall Street speculation. The sad irony is that it is in the so-called “Red States” where the minimum wage has not been raised where the economy lags.

Franchise holders have a history of paying low wages and justifying their opposition to wage increases because their wages would be squeezed out. This is not the case because, again, sales will increase to compensate. That being said, the conditions of franchise employment and franchise agreements deserve attention, as well as the tactic of using the franchise system to avoid unionization and paying for such things as health insurance. If the onus on providing health care and voting for representation is shifted to the franchisor, some firms will decide that turning franchise and gig  employment into full-time employment is better. That would be a socially desirable outcome.

Any tax reform should regularize how capital gains are taxed. Our tax reform plan contains a proposal for an asset value added tax, which will tax transactions, not people or their end of the year balance sheets. At initial public offering, option exercise and the first sale after inheritance, gift or donation, the sale would logically be marked to market. If a family keeps the stock or company, there will be no tax until someone else buys it. To avoid heirs having to pay the asset value added tax altogether, expand the ESOP tax exemption to all sales of public stock, rather than just private stock. Maximizing employee-ownership will bring a new level of motivation and excellence to the economy.

In March of this year, the Budget Committee held a “Markup” of the FY25 Budget, concurrent with the President’s submission. As I stated then, the economic monster that was the 2017 Tax Law will take care of itself next year by sunsetting automatically. The March Budget Resolution was beyond Dead on Arrival. It was Buried on Passage. It did not make a dent in the news of the day.

The motivation for keeping the Trump Cuts alive is obvious. It is an attempt to bring Republican donors back to the Majority Party. Since the Insurrection, donations have not only fallen flat, they have all but disappeared. As long as the Party is tainted with Trumpism, not even preservation of these undesirable tax cuts will save it. Hopefully, the donor class is also aware of the underlying economics, which demands higher tax rates to function correctly.

Thank you for the opportunity to address the committee.  Please contact us for an in person briefing or to arrange for a public hearing on our tax reform proposals. Remember, given the involvement of members in the sad events of January 6th, there should be no delay in shifting from grandstanding to seeking actual compromise. The alternative is a 28.8% capital gains tax rate and a matching corporate income tax rate as proposed by President Biden with passage assured by soon to be Speaker Jeffries. 

Attachment: Tax Cuts and Jobs Act

Attachment: Economic Excellence Through Tax Policy

Attachment: Tax Reform Videos included

Treating Substance Abuse in Federal Health Programs

Finance Healthcare: Closing Gaps in the Care Continuum: Opportunities to Improve Substance Use Disorder Care in the Federal Health Programs, April 9, 2024

The way to improve care, such that patients cannot slip through the cracks of addiction (and mental health) care is to pay them for ongoing participation in partial hospitalization and other psychiatric rehabilitation programs. 

This should be a part of a program, funded by a subtraction value added tax, to participate in remedial education from ESL to literacy at the tenth grade level, followed by either technical education or completion of secondary education and advancement to the completion of an associate's degree.

During paid education (at a minimum wage that has at least doubled), healthcare must be an included component, with failure to pursue both sobriety and education as needed leading to some form of rehospitalization.

This must apply to drug court participants as well. Simply dumping people into half-way houses or into the Oxford system, with no concern for their educational development and a bias to low wage labor is a guarantee of relapse and recidivism. The prison industrial complex needs to close its revolving door and be replaced with real care.

Veterans healthcare is also incomplete. Again, some form of paid psychiatric rehabilitation with continued medical care and payment for participation is a key to keep people engaged in their recoveries.

Veterans and parolees, as well as other addicts, mentally ill individuals and the chronically poor have opportunity costs that must be met so that they can put recovery ahead of engaging in low wage work (aka wage slavery).

Please see the attached comments from 2021 before this committee and Ways and Means from February, where we propose that mental healthcare and addiction in the criminal justice system be shifted to mandatory hospitalization, the need to hold patients longer and deal with either alcoholic relapse or medication noncompliance are discussed.

Attachment: Mental Healthcare in America Video

POTUS Budget FY25

HBUD, Finance, House Appropriations, March 21, 2024

General Approach

For obvious reasons, this year will be more hectic than the last. The budget and appropriations process needs to be simple. To do this, please just pass a consensus caretaker budget with two draft partisan supplemental bills, one of which can be enacted during the Lame Duck Session or at the beginning of the next Congress for the President-Elect to sign upon taking office, depending on who wins. Details are provided in our comments to the full Ways and Means Committee on the HHS budget.

If such a budget is enacted, use it as the basis for spending caps for a new Budget Control Act. Make the targets realistic and self-enforcing for purposes of Appropriations Committee allocations. 

Contingencies

In the event the majority in the House shits due to early retirements or insurrection indictments, the Senate majority and the House minority should have legislation ready to enact a Public Option, including reconciliation instructions for the FY24 budget year. Please see the second attachment for details. 

Any change in control will only last through the special election cycle, this should be the second priority. The first must be amending the Electoral Count Act and the jurisdiction of the Ethics Committees to provide for the enforcement of the Fourteenth and Twentieth Amendments, including provisions for removing and related disability for members and the president-elect.

THE PRESIDENT’S BUDGET

The President’s budget priorities have not changed to a great extent.  We will address these proposals in the order presented by OMB.

Lowers Costs for the American People

The title was more a preamble than a set of proposals. Regardless, please see these comments from last year, which have been repeated several times in the interim, on what drives inflation and how to stop it.

Households making under the 90th percentile have been losing ground for almost half a century,while incomes above that amount have increased on a regular basis.

The source of inequality, aside from abandoning the 91% top marginal tax rate, is granting raises at an equal percentage rather than by an equal amount. When the 91% rate was repealed, incomes were fairly equal, so it was not an issue. 

The federal government plays an outsized role in how salaries are determined through percentage based cost of living adjustments to government workers, beneficiaries, government contractors. The government can change this with the stroke of a pen.  The private sector will follow suit with a higher minimum wage, adequate child tax credits (as described below) and paying individuals in training from ESL to community college the minimum wage to purse their studies.

From here on in, adjust for cost of living on a per dollar an hour rather than on a percentage basis (or dollars per month or week for federal beneficiaries). Calculate the dollar amount based on inflation at the median income level. No one gets more dollars an hour raise, no one gets less dollars per hour in increases. Increase the minimum wage as above and consider decreasing high end salaries paid to government employees and contractors. Even without decreases, simply equalizing raises will soon reduce inequality. Why is this necessary?

Prices chaise the median dollar. The median dollar of income is actually at the 90th percentile, rather than the 77th percentile (which is about where the median is). This strategy will reduce inflation in both the long and short terms as prices adjust to decreases in higher salaried income.. Let me repeat this - prices chase income dollars, not income earners. 

Increasing stock market values in the speculative sector are 100% inflationary, according to how inflation is defined in economics: higher prices for the same goods. When such speculation is extreme, bad things can happen. Adopting an ASSET VALUE ADDED TAX (see the attachment) will control such nonsense. 

In the case of labor pull inflation, lower tax rates on executives were effective in 1982. These cuts, and their setting in stone in the 1986 tax reform, were an overcorrection. The 2013 tax bill by President Obama showed that increasing taxes on the wealthy is the most effective way to correct any economic slowdown. Then Vice President Biden should have let taxes increase in 2010, as doing so lengthened the slowdown caused by the Great Recession. 

The idea that tax increases should be limited to income over $400,000 is not supported by economics. The system should have everyone pay more, especially for broad based programs like healthcare.

Cuts Taxes for Families with Children and American Workers

Increase Child Tax Credit

We agree with increasing the CTC to at least American Rescue Plan Act levels and adding refundability. Further, we applaud the House for passing compromise legislation addressing this issue.

This is still not enough, but is a start. We would make it at least $800 per month and phase it out from the median income to the 90th percentile. 

The opposition from a retiring Senator in the last Congress, as well as among a current Senate Committee Ranking Member comes  from those who consider direct subsidies from the IRS to have the “stink of welfare.”  The proposal to distribute refundable payments on a monthly basis has not changed. If the minimum wage were increased, no one would use receipt of the child credit to avoid work. To better distribute the credit (at full value rather than as an advance) distribute it with wages or other benefits, such as Unemployment Insurance and Survivors Insurance. 

UI  and disability insurance should match increased minimum wage levels on a full-time basis (but assuming  26 hour work week), while payments to dependent children for survivors and the disabled should be abolished and replaced with an enhanced CTC at the $1,000 per month level

For middle income taxpayers whose increased credits are less than their annual tax obligation, a simple change in withholding tables is adequate. Procedures are already in place to deliver refundable credits to larger families. 

Employers can work with their bankers to increase funds for payroll throughout the year while requiring less money for their quarterly tax payments (or estimated taxes) to the IRS. The main issue is working out those situations where employers owe less than they pay out. This is especially true for labor intensive industries and even more so for low wage employers. A higher minimum wage would make negative quarterly tax bills less likely. Again, no one should have to subsist mainly on their child tax payments.

This approach is superior to the prebate mechanism proposed for the Fair Tax and for the same reason. The government should not be the national paymaster for every family.

Strengthen the Earned Income Tax Credit for low-paid workers who aren’t raising a child in their home

There should be no such thing as low-paid work. Raising the minimum wage (and mandating that franchise agreements provide for higher returns to franchisees when - not if - this increase occurs) and making this increase automatic will assure that all workers can make ends meet

Lowers Child Care Costs for Hard-Working Families, Universal Pre-K and Head Start

Childcare arrangements should be the responsibility of the employer. Tax incentives should thus be an offset to an employer-paid tax, preferably one on total value added (both labor and capital),  with either neighborhood care or care at or near the workplace financed by the employer rather than through creating new federal program, such as $8.5 billion for the Child Care and Development Block Grant (CCDBG). See our attached Tax Reform proposal details on the elements of this tax. 

Increases Affordable Housing Supply to Reduce Housing Costs

We disagree with the President’s proposed subsidies. The best cure for housing affordability is higher income. The President’s budget is on the right track regarding the Child Tax Credit. I would treble down on his amounts and distribute these funds through Old Age, Survivors, Disability and Unemployment Insurance payouts or with wages. 

Urban renewal, which relocates poor and largely non-white people, leads to redevelopment that chases the 90th percentile. The tax incentives in the President’s budget are exactly the wrong approach. Instead, reform the entire tax system so that most families do not have to file income taxes. By most, I mean 99%. 

Reduces the Cost of College

The President’s Budget includes funding the first two years of education at community college. The same level of funding should be provided to students in technical training after grade ten and should be available to students at both public and accredited private schools, including religious schools. In Espinoza v. Montana, prohibitions on funding private schools (Blaine Amendments) were found to be unconstitutional. New (and existing) funding should reflect that fact.

A main problem with current training regimes is that potential students have opportunity costs that are not covered by training. TANF is simply too narrowly tailored and directs too many people to low wage work, especially in the dirtiest jobs in the medical field. The woke among us do not have to look hard for the intrinsic sexism and racism in this scheme.

Payments for tuition, stipends and family support would be funded by employer-paid subtraction value added taxes. Ideally, both state and federal subtraction VAT will be enacted. A federal VAT would be levied to assure that a minimum amount of funding is available should states underfund their programs, which some will.

Lifts the Burden of Student Debt

The President is feeling guilty for using student debt revenue as an offset to baseline for passage of the Affordable Care Act. New and prior borrowers should not bear this burden. The best way to do this is to forgive all capitalized interest and eliminate this provision. Any forbearance or deferral should stop further interest from accumulating.

Lowers Health Care Costs, making permanent the expanded premium tax credits that the Inflation Reduction Act extended, providing Medicaid-like coverage to individuals in States that have not adopted Medicaid expansion, paired with financial incentives to ensure States maintain their existing expansions.

The President is forgetting his promise to create a  Public Option. It is time to at least study how this would work. Our analysis is provided in our comments on the HHS Budget.

Protects and Strengthens Medicare,  extending the solvency of the Medicare Hospital Insurance (HI) trust fund indefinitely by modestly increasing the Medicare tax rate on incomes above $400,000, closing loopholes in existing Medicare taxes, and directing revenue from the Net Investment Income Tax into the HI trust fund as was originally intended. 

We disagree. All healthcare should be funded through broad based tax reform, as specified in our attached proposals. HI and the public option (which replaces Medicaid for the poor and those with pre-existing conditions) should be funded by a credit invoice VAT, premium reforms funded by the employer-paid subtraction VAT. Again, see the HHS budget proposal.

Protects the Social Security Benefits:  strengthens Social Security in a way that ensures no benefit cuts; extends solvency by asking the highest-income Americans to pay their fair share; and improves financial security for seniors and people with disabilities. Please see our comments to the testimony of Director O’Malley.

Requires Billionaires to Pay at Least 25 Percent of Income in Taxes

Our tax reform plan specifies a high income surtax for income wage, dividend and interest income above $400,000 per year (while incorporating taxes for this income at lower levels, ranging from 6.5% to 26% into a subtraction VAT surtax), which could be remitted through a tax prepayment bond program and the enactment of a 26% ASSET VALUE ADDED TAX to replace capital gains, inheritance and gift taxes.

Raises Tax Rates for Large Corporations

Eliminate Corporate Profits taxes and taxation of business income on Form 1040 with a Subtraction VAT (with offsets for employee and retiree healthcare) and a credit invoice tax on both labor and profit. The combined rates of these taxes will burden both profits and labor costs, raising much more money.

This tax will be levied for all income earned in the country of production (for subtraction VAT) and of sale (Credit Invoice VAT). A new agreement on rate uniformity for our proposed Asset VAT will prevent rate shopping for stock trading. 

Provides National, Comprehensive Paid Family and Medical Leave and Calls for Paid Sick Days. Both programs should be offsets to the proposed subtraction VAT, with SVAT rates set accordingly. Sick leave should be ten days.

Empowers, Protects, and Invests in Workers. Workers power America’s economic prosperity. Absolutely. This should be funded by the national credit invoice VAT.

Confronts the Climate Crisis While Spurring Clean Energy Innovation, Increasing Resilience, and Protecting Natural Resources

Enforcement of pollution, as well as research into new energy sources (such as small nuclear reactors), development of tethered electric vehicles in urban areas and stepped up enforcement of all point-source pollution - both past and present, should be funded by a Carbon-Added tax, as well as fines.

Rural areas should receive Rural Electrification Administration style subsidies for investing in renewable energy, however for areas outside of urban and suburban areas, use of gasoline and biodiesel are practical where tethered electric vehicles are not.

Supports a Strong Nutrition Safety Net

The best safety net for families is paying adequate minimum wages, child tax credits and possibly converting disability programs into Long Term Unemployment Insurance for those for whom additional education is not practical.

Protects Americans at Home and Abroad

Active denial systems, such as the microwave radiation system developed by Raytheon, are superior to any border wall, but installing such a system should only happen if existing immigrants are granted amnesty, with eligibility the program most applicable (permanent residency, student visa, H-1B) without residency restrictions.

Tackles Crime, Reduces Gun Violence, and Makes America’s Communities Safer

The DFAR (Defense Federal Acquisition Regulations) and FAR should specify that any firm that sells ammunition to the public cannot provide services to defense or police agencies, nor can any of their licensees. 

Salva Ukraini and hold any members who refuse to do so out of support for Insurrectionist Trump be held accountable by the Ethics Committee if they also participated in organizing the actions of January 6, 2021.

Feed Gaza, regardless of funding or permission from Israel

Treasury Funding

See the second attachment regarding sunsetting funding for the IRS.

Attachment: Tax Reform Videos included

Attachment: Tax Administration Video

Social Security FY25

WM: Joint Social Security and Work & Welfare Subcommittee Hearing with the Commissioner of Social Security, Martin O’Malley, March 21, 2024

Finance: The President’s Fiscal Year 2025 Social Security Administration Budget, March 20, 2024.

General Approach

For obvious reasons, this year will be more hectic than the last. The budget and appropriations process needs to be simple. To do this, please just pass a consensus caretaker budget with two draft partisan supplemental bills, one of which can be enacted during the Lame Duck Session or at the beginning of the next Congress for the President-Elect to sign upon taking office, depending on who wins. Details are provided in our comments to the full Ways and Means Committee on the HHS budget.

If such a budget is enacted, use it as the basis for spending caps for a new Budget Control Act. Make the targets realistic and self-enforcing for purposes of Appropriations Committee allocations. 

Contingencies

In the event the majority in the House shifts due to early retirements or insurrection indictments, the Senate majority and the House minority should have legislation ready to enact a Public Option, including reconciliation instructions for the FY24 budget year. Details are provided in our comments to the full Ways and Means Committee on the HHS budget.

Any change in control will only last through the special election cycle, this should be the second priority. The first must be amending the Electoral Count Act and the jurisdiction of the Ethics Committees to provide for the enforcement of the Fourteenth and Twentieth Amendments, including provisions for removing any such disability for members and/or the president-elect.

The President’s Budget

The submitted budget strengthens Social Security in a way that ensures no benefit cuts; extends solvency by asking the highest-income Americans to pay their fair share; and improves financial security for seniors and people with disabilities. These priorities have not changed to a great extent.  We will address these proposals in the order presented by OMB.

Social Security 2100 is the current “school solution'' proposed by the Democrats. I hope that it clears both chambers, preferably on a bipartisan basis. However, as I mentioned in my 2019 comments to the Social Security Subcommittee, we can not stop because we have made the numbers work.

America Needs a Raise

Too many of the retired and disabled Americans (myself included) find it hard to make ends meet. The savaging of pension rights has made a decent retirement a rarity, as it is impossible for workers to both save and feed their families. 

More is needed than simply reinforcing the status quo. Work must pay enough for workers to put money away, as the three-tooled retirement model requires. Note that an employee-ownership model would restore pensions and end the need for such furniture.

The President’s proposal to restore the Child Tax Credit, which has already been passed by the House, is a major step in that direction. It is one of the two things that must be continued to meet our sacred trust for their retirement, as well as their present well being. 

So that no one will simply use fecundity for their incomes, minimum wages must be increased for present workers. Current retirement, survivors, disability and unemployment insurance and minimum wage levels are inadequate. America needs a raise, which should be adjusted for inflation on an annual basis. Twice the current level, but with a shorter work week (and work day) would eliminate the incentive to cut work hours for lower wage employees to avoid paying benefits (as well as improvements to how healthcare is funded, which is a whole other subject).

Unemployment, retirement  and disability insurance should at least match increased minimum wage levels on a full-time basis (but assuming  26 hour work week). This means that the minimum benefit, not the average, should be at least $1,600 per month. 

The median benefit needs to be high enough so that no one who is disabled or retired requires either Food Stamps or housing subsidies to meet basic needs. Upwards of $2000 per month is necessary, especially as the vast majority of retirees do not bring large retirement funds with them into old age, and certainly not into disability.

Payments to dependent children for survivors and the disabled should be abolished and replaced with an enhanced CTC at the $1,000 per month level.

To increase benefits for retirees and the disabled, consider the higher minimum wage rates as wage inflation and readjust all prior work experience by this inflation. Combined with some of the tax rate adjustments in the proposed Act, raising the minimum wage will increase future revenues enough to pay for higher benefits. 

The Federal Role in Causing Inflation and Inequality

Households making under the 90th percentile have been losing ground for almost half a century,while incomes above that amount have increased on a regular basis.

The source of inequality, aside from abandoning the 91% top marginal tax rate, is granting raises at an equal percentage rather than by an equal amount. When the 91% rate was repealed, incomes were fairly equal, so it was not an issue. 

The federal government plays an outsized role in how salaries are determined through percentage based cost of living adjustments to government workers, beneficiaries, government contractors. The government can change this with the stroke of a pen.  The private sector will follow suit with a higher minimum wage, adequate child tax credits (as described below) and paying individuals in training from ESL to community college the minimum wage to pursue their studies.

From here on in, adjust for cost of living for federal employees and contractors on a per dollar an hour rather than on a percentage basis (or dollars per month or week for federal beneficiaries). Calculate the dollar amount based on inflation at the median income level. No one gets more dollars an hour raise, no one gets less dollars per hour in increases. Increase the minimum wage as above and consider decreasing high end salaries paid to government employees and contractors. Even without decreases, simply equalizing raises will soon reduce inequality. Why is this necessary?

Prices chaise the median dollar. The median dollar of income is actually at the 90th percentile, rather than the 77th percentile (which is about where the median is). This strategy will reduce inflation in both the long and short terms as prices adjust to decreases in higher salaried income.. Let me repeat this - prices chase income dollars, not income earners. 

Raising Adequate Revenue

The President proposes that we raise the income ceiling to collect more money even though this would increase benefits to the wealthy. I propose that Congress lower the OASI tax ceiling so as to lower benefits with less drastic bend points, move Survivors Insurance for non-retirees, Health/Affordable Care Act payroll taxes and Disability Insurance entirely to a Subtraction VAT or Credit Invoice VAT as described in Attachment One - Tax Reform. A floor is also added so that EITC payments are no longer necessary. 

The S-VAT will pay for increasing the Child Tax Credit beyond what the President proposes, to be distributed with pay rather than at the end of the year, and the higher minimum wage will end the need to subsidize low wage employers at the public trough.

The most important points are that, rather than raising income caps on payroll taxes, all value added for an employer is taxed, both labor and profit and, because there is no way to separate out individual income contributions to the tax, each employee will be credited the same amount – which allows for higher benefits without bend points. Such taxes also have no ceilings, so the S-VAT rate can be lower than both current law and the proposed legislation.

In 1998, when I participated in on-line discussions on Social Security personal accounts, I brought up the necessity of doing this. This idea raised the hackles of the privatizers much more than their desire to take advantage of riskier investment strategies. The best way to kill talk of private accounts is to introduce redistribution on the front end and give organized labor proxies to vote worker shares. 

Finally, a word on Section 204 of Social Security 2100 regarding the Social Security Trust Fund. This is simply window dressing. The reality is that any trust fund balances must still be loaned to the Treasury and reimbursed with general income tax revenues or additional borrowing.

In our first submission to Congress in May of 2010, we addressed Trust Fund reimbursement issues. They are particularly applicable given the proposed funding increases in the subject legislation (which, if passed, would continue to have workers subsidize lower income tax rates for the few). They remain especially true today.

When Social Security was saved in the early 1980s, payroll taxes were increased to build up a Trust Fund for the retirement of the Baby Boom generation. The building of this allowed the government to use these revenues to finance current operations, allowing the President and his allies in Congress to honor their commitment to preserving the last increment of his signature tax cut.

This trust fund is now coming due, so it is entirely appropriate to rely on increased income tax revenue to redeem them. It would be entirely inappropriate to renege on these promises by further extending the retirement age, cutting promised Medicare benefits or by enacting an across the board increase to the OASI payroll tax as a way to subsidize current spending or tax cuts.  

Increasing Affordable Housing Supply to Reduce Housing Costs

We disagree with the President’s proposed subsidies. The best cure for housing affordability is higher income. The President’s budget is on the right track regarding the Child Tax Credit. I would treble down on his amounts and distribute these funds through Old Age, Survivors, Disability and Unemployment Insurance payouts or with wages. 

Urban renewal, which relocates poor and largely non-white people, leads to redevelopment that chases the 90th percentile. The tax incentives in the President’s budget are exactly the wrong approach. Instead, reform the entire tax system so that most families do not have to file income taxes. By most, I mean 99%. 

A Radical Change to Entitlement Spending

This is a new idea that deserves mention, just to think about for the future. There are many proposals to maintain incomes as technology eats jobs (although ChatGPT is not the demon we thought it was). Among them are a social credit payment, Kelso and Adler’s Two Factor theory and Len Burman’s proposal for a Universal Earned Income Tax Credit. The last makes the second tier economy permanent where now it is simply an ad hoc affair. It also does nothing for those with inadequate training.

Disability Insurance is hard to get and this dissuades getting off, regardless of programs such as the Ticket to Work. Making it easier to get some kind of benefit after normal unemployment without a disability filing and the associated lawsuit will encourage work and end reporting requirements to claim extra income. When income appears in the system above a certain level, give notice that benefits will stop - and an added bonus for doing so.

There is a large leaky bucket in social services at large and for disability insurance in particular, employing an army of social workers who would rather be doing client care than pushing paper and making determinations of whether the employer or employer was responsible for job loss and whether a family is entitled to benefits or not. There is another army of lawyers who fight disability claim denials and tax preparers (and revenue agents) that process earned income tax credit claims.

There is another army of tax avoidance professionals whose main product is tax minimization for upper middle class and wealthy families by selling retirement accounts and whole life policies (on commission).

There is yet another army fighting a losing battle against homelessness with public housing and hard to get subsidies ,with another who capitalize on these programs by offering substandard housing.

These armies include taxpayers in their battle plans. We can redirect these efforts with a few simple changes.

Unemployment and disability insurance can be "no fault" and paid automatically with a few simple steps to minimize fraud (multiple collections). They also need to pay more, as does baseline Social Security (which eighty percent of retirees rely on as their soul income).

Children can be provided for without Food Stamps or EITC paperwork or a parent on disability, or by being diagnosed themselves.

The system can also end the exploitation of the "working poor" who, with remedial education can learn themselves out of poverty to the extent that they are able, and who require a low tier economy that provides cheap goods and convenience food. The thing that gets in the way is the opportunity cost of not working to go to school. Including taking ESL.

Long-term unemployment insurance is offered as an option. There should not be an end date and should equal what is paid for a full-time, minimum wage job. This rate can be set at the level paid to retirees, as this level of income is at about that level anyway. 

A stipend at this level can also be paid to students who are old enough to work through college or technical training - with all such training and education provided free of charge, ending the need for student loans and other grants and the process for administering them.

A refundable child tax credit, paid with wages, stipends or benefits ends the need for the EITC, SNAP, TANF and disability and survivors payments funded through Social Security.

Unemployment benefits are intended as an incentive to keep staff, although avoiding them has resulted in a wasteful system of punitive human resource policies to fire people for cause. Giving employers a refundable offset mitigates these incentives and results in their referral to other payers, especially schools, who would take over plan administration (rather than having government do so).

The main question is  always how to pay for high Social Security, disability and unemployment benefits? The most appropriate way to pay some of it is an employer-paid subtraction VAT or net business receipts tax at the federal and state levels, with offsets to fund education and stipends for current and potential employees, as well as their children and the children of current employees. Ideally, what is collected by the government and redistributed will be zero. 

The other part of the funding is a goods and services (value added) tax to take over funding the employer contribution for Social Security, as well as long term unemployment insurance.

The state level SVAT would fund education and related stipends and child credits (again, with offsets).

Individual employee FICA taxes will fund additional payments to retirees over and above long term unemployment insurance levels.

Personal and corporate income taxes will be abolished for all but the top 1% as part of the deal. To replace capital gains taxes, an asset value added tax will be levied for each transaction (explained elsewhere).

To avoid the abuse of keeping people on payroll who do nothing, refundable portions (paid by government) of offsets will be limited to SVAT + GST collections.

To review the bidding, the list of government functions abolished in a radical reform include punitive (rather than no-fault) unemployment insurance, temporary assistance to needy families (and its replacement with real education), disability insurance, the complicated earned income tax credit, supplemental nutrition assistance, inheritance taxes, employer paid FICA and personal and corporate taxation, as well as the associated private sector costs, housing subsidies and the need to lobby for services for the poor.

Attachment: Tax Reform Videos included

HHS FY25

WM: Hearing with Health and Human Services Secretary Becerra, March 20, 2024

General Approach

For obvious reasons, this year will be more hectic than the last. The budget and appropriations process needs to be simple. To do this, pass a consensus caretaker budget with two draft partisan supplemental bills, one of which can be enacted during the Lame Duck Session or at the beginning of the next Congress for the President-Elect to sign upon taking office, depending on who wins. 

If such a budget is enacted, use it as the basis for spending caps for a new Budget Control Act. Make the targets realistic and self-enforcing for purposes of Appropriations Committee allocations. 

Contingencies

In the event the majority in the House shifts due to early retirements or insurrection indictments, the Senate majority and the House minority should have legislation ready to enact a Public Option, including reconciliation instructions for the FY24 budget year. Please see the attachment for details. 

As any such change in control will only last through the special election cycle, this should be the second priority. The first must be amending the Electoral Count Act and the jurisdiction of the Ethics Committees to provide for the enforcement of the Fourteenth and Twentieth Amendments, including provisions for removing and related disability for members and the president-elect.

The President’s Budget addresses the following two top line points:

Lowers Health Care Costs, making permanent the expanded premium tax credits that the Inflation Reduction Act extended, providing Medicaid-like coverage to individuals in States that have not adopted Medicaid expansion, paired with financial incentives to ensure States maintain their existing expansions.

Protects and Strengthens Medicare,  extending the solvency of the Medicare Hospital Insurance (HI) trust fund indefinitely by modestly increasing the Medicare tax rate on incomes above $400,000, closing loopholes in existing Medicare taxes, and directing revenue from the Net Investment Income Tax into the HI trust fund as was originally intended. 

Regarding lowering healthcare costs, the President is forgetting his promise to create a  Public Option. 

We disagree with the president on how to shore up the HI trust fund and expand the Affordable Care Act.  ACA subsidies are too low and are funded by taxing the wrong people (investors). Families in the Silver Plan still have problems meeting copays and paying premiums. The funding is also unfortunate. Rather than expanding Medicaid, replace it for the non-elderly with the  Public Option proposed in 2009.  

The public option should be extended to individuals who are denied coverage under pre-existing condition rules. Such rules must be revoked as the price of passing the bill. Such a trade-off is necessary for enactment of such a proposal on a bipartisan basis. 

Developing the Public Option needs to be funded in this budget. Particularly, it should explore the impacts on coverage and cost of automatically enrolling individuals who are denied coverage under pre-existing condition rules. 

The way to fully fund healthcare is through an employer-paid subtraction value added tax.

Taxes to support Medicare should be broad based, funded either by an employer paid subtraction VAT or a border adjustable goods and services tax (credit invoice VAT). This would allow for the repeal of the ACA-SM surtax on higher income individuals enacted as part of the Affordable Care Act. Tax increases on higher income individuals should be dedicated toward fully funding net interest, eventually reducing the national debt, funding veterans healthcare and overseas military and ocean deployments. 

The President’s Budget cites PhARMA profits as a rationale for increasing business income tax rates.  He proposes raising Tax Rates for Large Corporations

Instead, we suggest eliminating Corporate Profits taxes and taxation of business income on Form 1040 with a Subtraction VAT (with offsets for employee and retiree healthcare) and a credit invoice tax on both labor and profit. The combined rates of these taxes will burden both profits and labor costs, raising much more money.

This tax will be levied for all income earned in the country of production (for subtraction VAT) and of sale (Credit Invoice VAT). A new agreement on rate uniformity for our proposed Asset VAT will prevent rate shopping for stock trading (see the second attachment).

From Tax Reform Attachment: Subtraction Value Added Taxes

Subtraction Value-Added Tax (S-VAT). Corporate income taxes and collection of business and farm income taxes will be replaced by this tax, which is an employer paid Net Business Receipts Tax. S-VAT is a vehicle for tax benefits, including

Health insurance or direct care, including veterans' health care for non-battlefield injuries and long term care. 

Employer paid educational costs in lieu of taxes are provided as either employee-directed contributions to the public or private unionized school of their choice or direct tuition payments for employee children or for workers (including ESL and remedial skills). Wages will be paid to students to meet opportunity costs.  

Most importantly, a refundable child tax credit at median income levels (with inflation adjustments)  distributed with pay. 

Subsistence level benefits force the poor into servile labor. Wages and benefits must be high enough to provide justice and human dignity. This allows the ending of state administered subsidy programs and discourages abortions, and as such enactment must be scored as a must pass in voting rankings by pro-life organizations (and feminist organizations as well). To assure child subsidies are distributed, S-VAT will not be border adjustable.

As above, S-VAT surtaxes are collected on all income distributed over $75,000, with a beginning rate of 6.25%. replace income tax levies collected on the first surtaxes in the same range. Some will use corporations to avoid these taxes, but that corporation would then pay all invoice and subtraction VAT payments (which would distribute tax benefits). Distributions from such corporations will be considered salary, not dividends.

Funding Orphan Drugs and the issue of PhARMA profits

PhARMA justifies its profits because it is burdened with high development costs for new and orphan drugs. We renew our call for a more “corporate approach” for government research and testing of new drugs.

Part of ARPA-H is the funding for research on orphan drugs and the lingering problem of their cost once research leads to product development. In comments to Senate Finance on March 16th of this year, we repeated our proposal in this area for NIH to retain ownership in any such drug and contract out its further development and manufacture. Keeping ownership in public hands ends the need for drug companies to charge extreme prices or increase prices for its existing formulary to fund development. 

PhARMA would still make reasonable profit, but the government would eat the risk and sometimes reap the rewards. NIH/FDA might even break even in the long term, especially if large volume drugs which were developed with government grants must pay back a share of basic research costs and the attached profits, as well as regulatory cost.

Attachment: Single Payer from HHS 2022 Budget

Attachment: Asset Value Added Taxes Video

OECD Pillar 1/Global Tax Surrender

WM Tax: OECD Pillar 1: Ensuring the Biden Administration Puts Americans First, March 7, 2024

Pillar 1 interferes with how firms do business by taxing profits from one asset differently than it taxes others.  I call foul. Most nations in the OECD, by most, I mean all but the United States, have value added taxes. Such taxes favor domestic workers, but are agnostic on how capital is employed to produce profit. Were it not for inertia, this regime should end the practice of corporate profit taxation entirely - although a separate employer-paid VAT to provide a platform to channel child and health benefits to employees through the employer (rather than the government) serves the same purpose.

Where international agreement is essential is in the replacement of capital gains taxation with an asset value added tax. An asset VAT moves taxation to transactions rather than portfolios. The SEC would collect the tax, not the IRS. This reform is the key to tax simplification. Agreement is necessary to prevent the gaming of rates to reward brokers in one country to attract traders from Wall Street. Wall Street will surely agree and put their PAC money to use in convincing members.

With capital gains taxes handled, the taxation of salaries, interest and dividends could be accomplished without personal income tax filing for most families, outside of business owners and the prepayment of income tax obligations to the Bureau of the Public Debt as an expiring investment (and at a discount). Tax benefits to families for child care, health care and the child tax credit could be distributed through employers. Business taxation would take only one form, regardless of ownership type, with most businesses filing returns to the states where their workers reside - which is how they remit income taxes they collect on the employees’ behalf today.

WM Tax: Biden’s Global Tax Surrender Harms American Workers and Our Economy, July 19, 2023

Our OECD trading partners provide more generous subsidies to their workers, funded in part from their corporate and value added taxes. We propose channeling a Fair Tax style subsidy through two taxes, a (credit) invoice value added tax (turning the deduction for sales taxes paid into a full credit - which is essential the difference between a VAT and income tax based collections) and a subtraction value added tax to channel subsidies for health care and the child tax credit through employers rather than the Social Security Administration (as proposed for the Fair Tax).

Our second attachment, concerning trade, specifies that invoice VAT payments be zero rated at the border (and fully burdened at import), while subtraction VAT payments not be - because these payments benefit families, and therefore final consumers. To make these employer provided subsidies zero rated discourages their use by firms with high exports.

Such a rule should be universal so that U.S. workers are not put at a disadvantage - both due to inadequate pay and unfair price competition. Such unfair competition occurs whenever an OECD nation funds its family and health care subsidies using VAT collections. Standardization does not diminish sovereignty - it simply regularizes trade and does not dictate rates.

Our proposal for an Asset Value Added Tax will require international cooperation, however. Please see the third attachment. Part of trade is moving money around - including financial assets. An asset VAT as a replacement for capital gains and inheritance taxes must go farther than the border. It is too easy to shift to offshore stock exchanges where such taxes do not exist. International agreements on rates and enforcement structures are vital for such a tax to work. 

The model for negotiating the CMT on a multi-national basis can be used for this effort, however it should be by treaty, not agreement, and the rate structure needs to be tighter. Again, please see the second attachment, which has been recently updated.

Taxation of dividends will be included in surtaxes to the Subtraction VAT for payments over $85,000 in taxes plus dividends in a given year, however individual filing for wage. dividend and interest income under $425,000 will not be required. Again, the capital gains tax will be abolished.

Small dollar dividend payments will not be taxed, although they will be reported so that the very wealthy do not use diversification for tax avoidance. Low dollar dividends are already taxed through the subtraction VAT base rate (which is mostly returned to employees). Having a great many diversified investments in order to avoid what would be a small tax on dividends received would cost more in brokerage fees than the taxes being avoided. 

Dividend payments to employee retirement accounts would be taxed as higher incomes, but there would be no taxation of such accounts on the other end, just as Roth IRAs are not taxed.

Attachment: Asset Value Added Tax Video

Attachment: Consumption Taxes (Video links included)

Attachment: Trade Policy Video

HBUD FY25 Budget: Buried on Passage

HBUD: The Markup of the Concurrent Resolution on the Budget for Fiscal Year 2025, March 7, 2024

Members of the Majority have been posting on X that this budget will end the scourge of debt held by this nation. Let us first examine whether this is true. Majority and Minority staff should be familiar with these data sources, so they can verify this information.

According to IRS data for calendar year 2021, 15.4 million, or 10%  of the tax returns filed accounted for half of all adjusted gross income reported, or $7.7 Trillion. The income floor for this percentile is $169,800. At this level and above, wages and salaries account for $3.6 Trillion. The remaining $4.1 Trillion is from non-wage income, including dividends and capital gains.

The 90/10 breakpoint is important in discussing debt ownership, because at this level, according to the 2020 Federal Reserve Survey of Consumer Finance. In general, the top 10% of households hold 54% of value held in transaction accounts and long-term investments (Certificates of Deposit, Retirement Accounts, Life Insurance) and 77.4% of value held in Bonds, Pooled Investment Funds, Savings Bonds and Other Managed Assets.  These are the kinds of assets that hold federal debt securities - the scourge members were referring to.

These are the most recent holdings, according to the March 2024 Treasury Bulletin tables OFS-1 and OFS-2 and SWFI. December 2023 data not yet fully allocated ($1 trillion).

Asset Owner	Amount
Federal Reserve Banks and depository institutions (transaction accounts and certificates of deposit)	$6.7 trillion
Pension funds, insurance companies	$1.7 trillion
Mutual funds, savings bonds, individual investors and non-governmental foreign accounts - including $1.4 trillion held in tax shelters (latest data)	$11.3 trillion
Overseas official accounts, which back trade	$3.7 trillion
Social Security Trust Fund	$2.9 trillion
State and local accounts (non-pension)	$1.6 trillion

Which of these asset owners holds the whip that is scourging us? Note that $8.7 trillion or more is held by the top 10% of income earners.

The other side of the ledger is the responsibility for paying this debt off, in the unlikely scenario that someone would have to write a check.  The ability to accumulate this debt coincided with the enactment of the 16th Amendment and the creation of the Federal Reserve System. In other words, the ability to create a stable money supply and create financial assets based on the national debt coincides with the establishment of progressive income taxes, especially during and after World War II. 

Put another way, which is the correct way, $34 trillion of Public Debt is backed by $2.2 trillion of annual personal income tax payments. $1.6 trillion of these receipts are paid by the top 10% of filers (who own $13.3 trillion of Treasury Securities). For each dollar of income tax paid, $15.45 is owed in debt. The top 10%, therefore, owe $24.7 trillion. The next $4.6 trillion is owed by the next 23 million taxpayers. The remaining $4 trillion are owed by the next 35% of the population. Together, these households hold $6 trillion of debt assets.

The bottom 40% pay no income tax and owe none of the national debt because they have no ability to pay it. Nor should they have to. They have been paying Social Security payroll taxes, which create an asset for them ($2.9 trillion) and a debt to income tax payers. As it is, 80% of retirees have no significant additional income.

This demonstrates that the national debt creates wealth because it leverages the creation of the assets which holding the national debt guarantees. There is a direct correlation between the booming market and the budget deficit. The question is whether the income tax paid to debt owed ratio is sustainable. It should be until there is an alternative reserve currency, however neither the Euro or the Yuan are backed directly by progressive income taxes. The only immediate threat is gamesmanship by the Majority having to do with Debt Limit legislation.

Cutting the debt is likely a good idea, although cutting it out can only be done safely when capitalism has been replaced by a cooperative economy where employees rather than investors and bankers control most financial instruments (stocks, mortgage and consumer debt) and consumption. When President’s Jackson and Eisenhower through Johnson paid down the national debt previously, financial hardship was created because all assets in the economy were speculative. When speculation is rampant, such as during the 1920s and 2000s, not even backing by the debt can keep the economy from collapsing. The risk today is of the same order, taxes are not producing adequate backing for the economy.

Cutting spending sounds good until you actually try it. Government spending buys food, shelter and Internet for government employees, government and non-government retirees and government contractors. This consumption funds the income and consumption for the private economy, as well as investment in plant and equipment to produce such goods.

This leaves taxation as the only variable available to control the size of the debt. The Laffer Curve illustrates these dynamics. Prior to the Kennedy-Johnson tax cuts, revenues were at what I call the Laffer Maximum - that is, they were high enough so that the CEO and investor class had no incentive to cut labor costs and redirect the money to themselves. The government would simply tax such savings away. 

The Reagan tax cuts brought inflation under control - because CEOs had incentives to cut costs - and to leverage the creation of financial assets by increased deficits.  The tax reform of 1986, which is the foundation of the current rate structure, went too far, leading to speculation in the Savings and Loan Market and the associated slowdown. These rates were below the Laffer Optimum, which is the point of maximum revenue generation. 

The Tax Policy Center cited the 60% range as that level. During the Bush-Clinton years, tax rates were increased in such a way as to increase government revenue. Federal Reserve Chairman Greenspan cautioned against reducing the deficit for its effect on leveraging capitalism, although there was little danger of getting to that level of austerity in the immediate future. The capital gains tax cuts under both Clinton and Bush pushed us into a series of booms and busts in technology and housing finance, culminating in the Great Recession. When Obama allowed tax rates on the wealthy to return to Clinton era levels for high income earners, the economy began to grow, largely because tax rates were low enough to prevent wage concessions.

The Trump-Ryan-Brady cuts began to slow the economy prior to the pandemic, meaning they were much below the Laffer Optimum - with labor cost cuts and increased speculation hurting growth. The Pandemic hid this problem. The Trump and Biden tax benefits to working families have rebalanced the equation temporarily. The booming stock market is a danger signal.

This problem will take care of itself next year, as the tax cuts that this budget seeks to preserve are sunsetting, while the increased child tax cuts enacted by the House and stalled in the Senate will also improve the economy for households and the productive (rather than the speculative) sector.

My question to the Majority is whether your members and staff know this information and are deliberately misleading the voters or are entirely in the dark. I am not sure which is worse.

This Budget Resolution is beyond Dead on Arrival. It is Buried on Passage. It will not make a dent in the news of the day.

The motivation for keeping the Trump Cuts alive is obvious. It is an attempt to bring Republican donors back to the Majority Party. Since the Insurrection, donations have not only fallen flat, they have all but disappeared. As long as the Party is tainted with Trumpism, not even preservation of these undesirable tax cuts will save it. Hopefully, the donor class is also aware of the underlying economics, which demands higher tax rates to function correctly.

Pathways to Independence/Making a Difference for Families and Foster Youth

WM Work and Welfare: Pathways to Independence: Supporting Youth Aging Out of Foster Care, January 17, 2024

First, to better meet the needs of the non-college bound, expand the Job Corps program, especially those centers with residential facilities. The program has been a demonstration project for long enough. It needs to be expanded and devolved to the states, but with sufficient block grant support.  

Students on an academic track should be enrolled at a four-year university or college (including private colleges) for the semester during which they age out.

....How the public and private sectors compensate for inflation must be reformed. It contributed to price inflation because prices chase the median dollar if adjusted gross income, which is paid to families in the 90th percentile. Equal dollar per hour wage and equal monthly COLAs for Social Security will control inflation while reducing inequality.

WM, Worker and Family Support: Making a Difference for Families and Foster Youth, May 12, 2021

First of all, no one should be “aged out” of the foster care system. While youth should be able to leave or stay, any funding should continue until the student graduates from high school with some sort of credential, either traditional or non-traditional. 

Second, students should be paid to attend school, in other words, they should be compensated for the opportunity costs they incur for not working, although they are eligible to do so after their sixteenth birthday. Such payments should be distributed by the school at the statutory minimum wage. 

All workers should have easy access to paid training, especially those with educational deficits, including linguistic ones. English as a Second Language should not only be free, but workers should be paid to attend, irrespective of immigration status. Part-time workers should also be eligible for this benefit.

This plan assumes passage of the President's proposal to provide funding through community college, although it is recommended that funding should include the freshman and sophomore year at four-year institutions as well. Technical training should be covered as well at both public and accredited private schools, including religious schools. In Espinoza v. Montana, prohibitions on funding private schools (Blaine Amendments) were found to be unconstitutional. New (and existing) funding should reflect that fact.

This is also the perfect time to reorganize the grade structures in education. Frankly, for some students, time spent in general education is wasted. College credits, where applicable, should be granted for advanced high school work so that graduation can occur earlier. Community college or technical high school could start after grade 10. 

As an aside, it is past time for the Catholic School system to join the non-college bound sector, rather than focusing mostly on college prep. Grades 8-10 would be combined, with middle school from grades 5-7. Neither of these would include full-contact football. 

Third, foster youth with children themselves would receive a refundable child tax credit for each. The current COVID level is $300 per month for young children and $250 per month for others. This should not only be made permanent, it should be doubled. Foster parents would receive payments for foster-grandchildren and foster children. States can either supplement the payment for all parents with an additional stipend for their service as foster parents.

Foster youth should be allowed to leave early (and foster siblings) if their affairs are in order (including receipt of child tax credits as parents) and be provided with continued help if their affairs are not, especially those with emotional or cognitive challenges. For such individuals, different funding streams and supervision will be made available.

Fourth, the foster care system must not be used to destroy the families of addicted parents. Rather, specially trained foster parents should foster the addict (including alcoholics) and their child or children. Addicts should not be pressured to give up permanent custody, nor should providers expect them too. This is not to say that they cannot be allowed to use without concern. 

Once diagnosed, relapse should be grounds for readmission in a longer term setting, but with the understanding that seeking recovery will not mean permanent loss of custody. Too many addicts use the desire to maintain relationships with children to not work on themselves adequately. Taking permanent loss of custody off the table takes that excuse away.

Fifth payments for tuition, stipends and family support would be funded by employer-paid subtraction value added taxes (please see the attachment).  Ideally, both state and federal subtraction VAT will be enacted. A federal VAT would be levied to assure that a minimum amount of funding is available should states underfund their programs, which some will.

The American Recovery Plan Act requires payment of the child tax credit in advance of the annual tax filing. This is appropriate and will change the culture of such credits, which should be for continuing support, not an annual bonus. 

The current plan is for the IRS to manage payments. I submit that, over the long-term, it would be more acceptable to distribute them either through other government subsidies, such as Unemployment Insurance, Disability Insurance, or a training stipend OR through wages. In the latter case, until a subtraction value added tax is in place, the credit would be paid in advance by employers and then deducted from their quarterly tax payment.

Sixth, wages must be increased for all workers, including foster youth, whether within the system or exiting it. Aging out or early exit from foster care, even if education is not pursued, would be much easier with a higher minimum wage By higher minimum wage, an increase to $10 per hour should be immediate and indexed to inflation. 

It is the poor job indeed where the physical productivity of workers in comparison with other factors is under this level, especially when child tax credits are excluded from the equation. The intermediate goal should be either a $12 minimum wage (so that it is comparable to the buying power experienced in 1965) or an $11 wage with a 32 hour work week. Over time, the minimum wage should reach $16 (before indexing).

As an aside, that such a wage increase would drive other wages up is an additional reason to support a higher wage, especially when the difference between worker pay and the pay of “middle management” is glaring. 

SEE BOLD ABOVE FROM 2024

The conditions of franchise employment and agreement deserve attention as well in terms of agreed to standards, payment of franchise owners in low wage industries and the ability of workers to organize. If some firms decide that turning franchise employment into full-time employment, so much the better.

Lastly, the unemployment insurance must be less punitive, particularly where younger workers are concerned. In lower wage jobs, the preference is to find potential supervisors (whose compensation is usually subpar as well) and keep a file of infractions to justify firing workers who do not work out. A punitive work environment that does not exactly make any kind of work attractive. 

In certain circumstances, unemployment compensation should be available on a no-fault basis. Better still, employees should be allowed to voluntarily leave firms with a history of quickly dismissing employees without penalty. There should be no expendable jobs or workers. 

Attachment: Tax Reform Videos included