Wednesday, December 13, 2023

Taxing Political Committees

WM Oversight: Growth of the Tax-Exempt Sector and the Impact on the American Political Landscape, December 13, 2023

Finance, Taxation and IRS Oversight: Laws and Enforcement Governing the Political Activities of Tax Exempt Entities, May 4, 2022

There are two questions for the taxation of charitable contributions. The first is where the money comes from. The second is how the outgo should be taxed.

Under our proposed asset value added tax, assets would be marked to market at initial public offering, option exercise and the first sale after inheritance, gift and donation. When assets are donated to charities and nonprofits, no tax will be paid. When these institutions sell these assets, taxes will be collected in full. Whether endowment income is taxed is an open question, although usually the asset value added tax would be levied.  

Sales to employee-owned or cooperative firms will be zero rated, just as they are when a single owner sells out to an ESOP when transitioning out. We propose expanding this privilege to all asset sales. Note that as long as a business or family farm is kept in the family or sold to a cooperative, no tax is levied.

Political organizations and committees would also pay S-VAT (or I-VAT) on their payroll and their purchases would not be I-VAT exempt in the long term. These collections would be administered by state governments. 

Committees that give little to candidates should not be tax exempt, as they are essentially corporations whose high salaries are essentially partnership income in disguise, without the corresponding risk. As such, they should pay the asset value added tax on such distributions.

Asset VAT collections would be to the Securities and Exchange Commission for liquid assets and states and localities for real property. States and localities would keep these proceeds.

See the second attachment for more information on how taxes are administered under these proposals.

Attachment: Tax Reform (with videos)

Wednesday, December 06, 2023

Economic Growth Through Tax Policy

WM Tax: Tax Policies to Expand Economic Growth and Increase Prosperity for American Families, December 6, 2023

I have been hoping that the Subcommittee would hold hearings on the Fair Tax and other potential tax reforms.  I will review the testimonies of the invited witnesses and then describe my own proposal. I am available  at your convenience to discuss this proposal with members and staff.

Consumption-Based Taxation in an International Setting, Alan J. Auerbach

Professor Auerbach provides a good summary of consumption based taxes, but then describes the Destination Based Cash Flow Tax, which he favors. This proposal leaves the current tax system which forces most households to file income tax - where a shift to an employer paid tax with deductions for family support and a goods and services tax would take the trash out of the tax system. His proposal assumes the continuation of the corporate income tax, both in the United States and abroad. The employer-paid subtraction VAT, adopted by our trading partners, would tax locally to provide services to families while exempting these services from border adjustment - thus ending the incentive to avoid these taxes and the associated benefits. 

In summary, the DBCFT is a small ball solution that keeps the complexity of corporate profits taxes intact - and adds to it.

Addressing the Long-Term Fiscal Imbalance with a Value-Added Tax, Alan Viard

Mr. Viard provides a textbook explanation of Value Added Taxation, but leaves adjustments to the income tax system that everyone must file intact. His assumption that income tax increases are impossible is short sighted, especially as these taxes are about to increase automatically if nothing is done. Indeed, the baseline for calculating income tax revenue must be the permanent rate, not the current rate which is soon to expire. Tax Reform MUST NOT be an excuse to leave income tax rates at their current level.

Adding a value added tax must be part of a more comprehensive solution - including levying income taxes solely on the highest one percent (although the top 20 percent would have subtraction VAT surtaxes paid for them by their employers on wages and dividends - with capital gains taxes being repealed in favor of a different tax). The remaining income tax would range between 6.5% and 26% - which is also the range for the VAT Surtax. As discussed below, the remaining personal income tax would go toward paying interest on the national debt and paying down a portion of the principal.

Americans for Tax Reform, Grover Norquist

Mr. Norquist is opposed to any revenue measure, despite the fact that when taxes are more progressive, the economy improves. This is shown by historic data included in our May comments to the House Budget Committee which demonstrated that when progressive income taxes are reduced, deficit spending must occur to avoid or recover from a recession (or worse). The reduction in growth that occurred before the Pandemic was one point lower than before the Tax and Job Cuts Act (not a typo) was enacted - this includes a one-year lag for investors to pocket their tax cuts and invest in the latest investment scam, such as crypto currency and single family home rental mortgage backed securities - while household consumption (and income) similarly declines.

Revenue is at historic lows as a percentage of Gross Domestic Product. Letting the TCJA expire as scheduled will be healthy for the economy, for households and does not violate the precedent that letting tax cuts expire does not trigger Mr. Norquist’s pledge, which was set in 2013.  Member conformity to Mr. Norquist’s will is no longer the standard for most far-right Republicans. It is now supporting former President Trump and excusing or minimizing the events of January 6, 2021 (which will have no impact on future criminal proceeding for Mr. Trump or any who assisted in the planning of that day’s events).

I propose actual tax reform - reform that simplifies the tax system while distributing burden equitably.

Americans for Fair Taxation, Stephen L. Hayes

Mr. Hayes begins his testimony claiming he is not a tax economist. Given the impact of his proposal on low income households and the boon his proposal is to high income households, I agree with his assessment. The idea of a national consumption tax is meritorious, as long as it is not a single tax. 

Unless he includes gambling at the Wall Street Casino as a consumable good covered under the Fair Tax, while retaining some kind of surtax for very high income individuals (one as part of the Fair Tax that employers remit - as Lawrence B. Lindsey suggested - and the second as residual high income tax that can be remitted early as a tax prepayment bond, thus reducing interest on the debt), his suggestion is profoundly unfair.

The Fair Tax proposal includes incentives for tax avoidance that a value added tax removes. There are already tax breaks for individuals and firms who collect income taxes - as such taxes are a deduction. With a VAT, such taxes are a CREDIT that is fully refundable. If I were selling a product, I would much rather have the full credit and not have to look over my shoulder for auditors looking to see if I am misusing the exclusion of wholesale goods.

The Fair Tax replaces income distributed to families through the child tax credit with a prebate that only covers the Fair Tax - a substantial income loss that would either force more people into very low wage jobs - those akin to slavery - or force the government to restore Aid for Families with Dependent Children (welfare) and Food Stamps to levels higher than when President Clinton reformed welfare as we knew it.

The subtraction VAT we propose takes the government out of redistribution almost entirely - save for payments of child tax credits to families receiving disability or unemployment benefits - with employers receiving tax benefits to provide adequate, family size sensitive, wages instead. Such a proposal would both benefit families, make work pay (along with increases to the minimum wage) and increase economic growth and household savings.

The final flaw in Mr. Hayes’ proposal is that it always comes around when income tax rates cuts are scheduled to expire. A single tax proposal which assumes the permanent baseline could not pass. The rate would be too high. America can do better - and it would be fairer.

The Tax Policy Center, Len Burman

Professor Burman addresses wage stagnation and the prospect that technological advancement may make it worse. He would use a universal earned income tax credit to remedy this. My answer to this is increasing the minimum wage. The UEITC would solidify the two-tiered economy. 

The other factor which has led to economic inequality is bad math. By bad math, I mean the rewarding of cost of living adjustments (which are an unearned benefit) on a percentage basis, rather than an equal dollar basis. Because prices follow the 90th percentile (with one half of total adjusted growth income under that point, with the other half above - counting dollars, not people), most families do worse each year. Only product improvement and social programs, such as the Child Tax Credit, allow most families to avoid starvation. Whether this effect is  accidental or intentional is a matter for more systematic study.

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. 

Burman echoes the proposal to restore the child tax cut to pandemic era level. I would double that, but take the IRS out of the income distribution business - as previously discussed. He and I agree on the Fair Tax - although I would use the term Fair Tax for a VAT as part of a multi-tax reform. Doing so extracts money spent by heirs and plutocrats who borrow from their fortunes to buy companies and luxuries. If they buy companies or take them public, they would pay an asset value added tax (see below).  Our proposals would end tax shelters. Tax expenditures for health care, family incomes, daycare and the eventual shift to employee-ownership to replace much of the employer contribution to FICA are not shelters, they are basic reforms.

The Center for Fiscal Equity Solution

A single tax will never provide enough revenue while being politically acceptable. We propose a series of taxes, which are detailed in the appendix, which will still prove easier to collect and administer than the current income tax system.

The tax gap leaves revenue on the table. Neither a wealth tax, nor the President’s proposal to tax capital gains at death should pass. Indeed, a wealth tax simply multiplies the problems of capital gains taxation.  It is time for the nation to shift away from taxing short term capital gains taxes at nominal rates and preferred rates for long term gains...

House Budget: Reigniting American Growth and Prosperity Series: Incentivizing Economic Excellence Through Tax Policy, June 22, 2023

Excellence will come from sound tax policy, especially if the nation shifts away from taxing short term capital gains taxes at nominal rates and preferred rates for long term gains...

June and December

. . . Instead, set one rate for all transactions and shift from end of the year reconciliation to an asset value added tax for each transaction. 

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. The second tax cut would be to 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.

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.

Omitted from December:

[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 answer to long term growth, then, is to shift money to households; to not extend expiring provisions - as any attempt to do so would be vetoed, but rather to increase capital gains taxes to 25% (or 28.8% including Obamacare surtaxes on capital income and gains) as President Biden suggested. This was Senator Sinema's idea, and with the election of an additional Senator in Pennsylvania, Senator Manchin's objections to such an increase are irrelevant.

CBO and the JTC should model this scenario, which is likely once Special Prosecutor Smith pursues charges against those members of the House and Senate who participated in the planning of the insurrection and the operation of the "stop the steal" objection. While the latter cannot be charged criminally, it will likely lead to action by the Ethics Committee and likely expulsion. The 2024 election will most likely resemble the 1974 election, where the party associated with President Nixon was annihilated.

For this reason, any tax reform must be bipartisan. If you put false bravado aside, there are many things that can be done bipartisanly. If you wait, the Democrats will have their way with tax policy in 2025.

The final attachment is our latest comprehensive tax reform proposal. It replaces]

Our latest comprehensive tax reform proposal is in the attachment. We propose replacing the complexity of the Earned Income Tax Credit with a floor on FICA contributions by employees and a lower ceiling to reduce the amount of funding for high income households. The employer contribution would be shifted from employers to consumers (but not exporters) to the Fair Tax - which would also fund domestic discretionary spending and domestic military basing and operations.

This should be operated like a Value Added Tax - in other words, the deduction of sales taxes paid would be replaced with a tax credit for such payments. This change should be made, even without enactment of the Fair Tax. To not do so is to force companies to pay tax on tax - something that the uninitiated thing the VAT does, but in reality, this is what happens in the current tax system due to its extreme complexity.

Rather than providing for a prebate and shifting the more generous portions of the child tax credit (which is the most anti-abortion provision in law) to direct subsidy, expand the child tax credit and distribute it with Unemployment Insurance, Social Security old age, survivors and disability insurance and wages (including stipends paid for those in educational and work experience programs to raise them out of poverty). 

The child tax credit would be an offset to a subtraction value added tax, as well as a credit for providing employee health insurance. This will replace all Obamacare subsidies and the health insurance exclusion to corporate income taxes. Corporate income taxes would be abolished. The base level of the subtraction VAT should be a wash - with taxes fully offset by credits for the average business above 50 employees. Some firms would even get a rebate if their credits are greater than their tax obligations.

Personal income tax filing on wage and dividend income for middle income households will be replaced with a subtraction value added tax surtax for income above the ceiling for FICA employee contributions, which will be graduated from a 6.5% rate to a 26% rate for income over $425,000. 

At $500,000, an individual surtax ranging between 6.5% and 26% would fund net interest payments, debt reduction and paying down the Social Security Trust Fund. For this reason, these payments will be made to the Bureau of the Public Debt. The Asset VAT will be collected by the SEC. The subtraction VAT, any carbon added tax and the Fair Tax will be collected by the states (who will also do any auditing on tax collection issues). What would happen to the IRS? Abolition.

Thank you for the opportunity to address the committee.  Please contact us for an in person briefing or to arrange for a public hearing. 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 (rather than the abolition of both taxes, as suggested in our comments).

Attachment: Tax Cut and Jobs Act (Omitted from December)

Attachment: Settling (and Squaring) Accounts: Who Owns the National Debt? Who Owes It? (Omitted from December)

Attachment: Tax Reform Videos included

Costs and Benefits of the Federal Debt

WM Oversight: Hidden Cost: The True Price of Federal Debt to American Taxpayers, December 6, 2023

Less than full faith and credit

While my comments are usually frank, these will be on the brutal side. I will not be pulling punches, will share the raw politics of this situation and will be sharing my comments with the rating agencies.

Any downgrades we have had - and there have been two - did not come because the Democrats are spending out of control. It is because Republicans refuse to compromise until the last minute, with a significant portion of leadership not wanting to compromise at all. This unwillingness cost Mr. McCarthy his Speakership and likely drove John Boehner out of Congress. 

Downgrades came for the same reason - brinkmanship on the debt limit in an attempt to force temporary tax cuts to be made permanent. The irresponsible strategy and the end goal alarm the bond markets because they indicate that one major party has no commitment to fiscal responsibility - play politics instead in fear of Grover Norquist - who no longer has skin in the game. Donald Trump took all of the radical oxygen away from the Republican fringe.

I am going to assume that leadership, especially among members of the Freedom Caucus, as well as their staffs are truly ignorant of how the national debt actually works. In short, it is the reason capitalism can exist at all. This is why, when the debt was paid off and the national bank was closed by Andrew Jackson, the economy collapsed. 

Historic perspectives

In the 1960s, the debt from World War II was quickly being paid down. By the end of the decade, there was no federal debt to leverage other liquid investments. This eventually led to tax cuts, but President Reagan overshot the mark and then codified it in the 1986 tax reform. Presidents Bush and Clinton found the growing deficits unsustainable and adjusted tax reform at the margins. Doing so reduced the debt while fueling economic growth. 

The Clinton cuts to capital gains taxes put too much money into the hands of speculators, which led to the tech boom and bust. It had nothing to do with technology and everything to do with IPOs. Even then, as budget balance was a real possibility, Alan Greenspan sounded the alarm about abolishing the debt. Many thought that this was to preserve the ability to maintain a fractional reserve currency, but the real motivation was to continue to provide the leverage on which capitalism depends.

The title of this hearing indicates that this history is new to the majority and staff. Either that or it is pandering to public ignorance. Regardless, please consider the current circumstances further.

Federal Debt Ownership

According to the Treasury Bulletin, the national debt is owned by the Federal Reserve System and its member banks (about a third), long term investment, insurance and retirement funds - both public and private - as well as Savings Bonds (another third). Using figures from the 2019 Federal Reserve Survey of Consumer Finance, I estimate that the top 10% of households own around 54% of these funds, with the bottom 90% owning the remainder (although the bottom three quintiles own essentially nothing - nor do they owe it - as will be described below.

The last third is owned by mutual and bond funds, as well as offshore investors. The top 10% of households own 77% of these funds. If the majority continues to dance on the edge of default, these are the investments that are at risk. The top 1% own the same percentages as of what the top 10% hold. This means that from the second to the tenth percentages own 25% of deposits retirement and mutual funds backed by Treasuries. 

The top 1% hold one quarter of debt assets held through deposits and long-term investment funds and half of what is held by mutual and bond funds. There are better ways to increase interest rates for these borrowers than messing with the Full Faith and Credit of the United States, which is essentially what the Freedom Caucus led assault on the status quo is doing.

Let us add that of the debt held overseas, roughly two thirds are held by foreign governments who, by doing so, facilitate international capitalism - especially the import of consumer goods from Japan and China. Messing with these funds put WalMart shopping at risk, as well as the entire chain. Much of the remainder of foreign bond holdings are in the Caymans, Ireland, Switzerland and Luxembourg. In other words, they are held in tax shelters for very wealthy Republican donors.

These investors know exactly where their debt assets are being held. It seems as if members of the Freedom Caucus do not. Unless there is a plot to destroy capitalism that I have not yet heard about, we suggest that the debt limit be abolished and the 2018 tax cuts allowed to expire on schedule. This will restore the confidence of both rating agencies and investors at home and abroad.

Continuing on the current path, where a major portion of the Republican Party acts against the interests of investors and the nation at large and sustains unsustainable tax cuts could have drastic consequences. The entire economy could collapse again, but this time for real. If the Federal Reserve loses its international leverage because the debt has become worthless, there will be no bailouts for questionable investments in mortgage backed securities - investments that have shifted from owner-occupied housing to single-family rentals. The bill to ban hedge fund ownership of these properties will reduce risk overall, but will not save the nation from the risk of losing its good credit.

Who Owes the Debt?

Debt obligation is a function of income tax paid (FICA tax paid to create assets held in trust by the government, not debt obligation). The current factor is 19 dollars of debt owed for every dollar paid in tax. 

Ownership of Social Security assets is realized when households are in the bottom quintiles who, at that time (because only 20% have income beside Social Security), own almost all FICA trust fund assets. The bottom quintiles hold more than their obligation.

The next three quintiles owe more than they own until we get to the top 0.1%. Because half of their income is earned through asset ownership taxed at preferred rates and their high share of ownership of debt, they break even. They own what they owe. In other words, when interest rates go up due to downgrades, their wealth expands in terms of debt owned compared to debt owed. This should guide how the debt should be reduced responsibly.

Please see the first attachment for more information on how debt is owned and owed. See the second attachment for our tax reform proposals that will responsibly bring down the federal debt.

Possible scenarios

It is now time to speculate on what may happen next. Let us assume rational actors who are capable of changing their behavior. Again, we will be pulling no punches.

Business as usual would be for an agreement between leadership, neo-liberal Republicans and neo-liberal Democrats to enact a reasonable set of spending bills, with the usual dissenters in the Freedom Caucus never coming around to do their duty as members of Congress in the majority party to keep government open.

A variation of that option is for those who have been voting with Democrats to simply switch parties, or at least enough of them to end the drama for the rest of this Congress.

Another change in leadership may, and probably will, occur when Roger Stone and his associates in the Willard Hotel War Room, including members of Congress who were part of the planning process, are indicted by Jack Smith. At this point, from the time these members resign or are expelled and until they are replaced by special elections, Minority Leader Hakim Jefferies becomes the Speaker and enacts a menu of tax, spending and budget process reforms. 

The same variation is possible as above, which is for some number of current Republican members to permanently change parties - especially if they wish to remove the taint of having been in a party which had a majority of its members vote as if they had helped plan the Insurrection on January 7, 2021, because they realize that an elector bloodbath rivaling 1974 is likely.

The worst case scenario is Republican solidarity, allowing the debt to go into default and leading to permanent damage to the economy, including that portion of trade that occurs between China and the United States which is more akin to the internal operations of Wal-Mart. This would include the collapse of the Federal Reserve. If this occurs, it will be before the election, so that no Trumpian tyranny will result.

The least likely option is the challenge made in these comments - a return to bipartisanship without the kind of rhetoric used in naming this hearing - which has infected what was the status quo of this Committee. Under that option, Congress returns to business as usual and quietly passes the required legislation to keep the government running through the middle of 2025.

The fantasy option is for Jack Smith to do nothing related to Congress, with Trump returning to power with strong Republican majorities - strong enough so that he can turn aside any 14th Amendment challenges to taking office again. Anyone who thinks this is at all likely needs both psychiatric and legal advice.

The ideal option, which is also unlikely, is for bipartisanship to result in the reforms detailed in the second attachment. This would actually settle most controversy over taxes for the long-term, which is what makes it unlikely. A lot of money is spent on going back and forth on tax policy, sadly putting our nation at continued risk of financial collapse.

Budget Process Reform 2023

 HBUD: Budget Process Reform Member Day Hearing December 6, 2023

I know that I am intruding on Member’s day, however having members of Congress propose solutions to the budget process, to of all places an overly politicized Budget Committee, is like asking the local pack of foxes to consult on chicken house security.

The Process is Broken

The budget process has been badly broken for the last 49 years - since the passage of the Budget and Impoundment Control Act of 1974, which created the Budget Committees.

The sad truth is that the more hands are in the kitchen, the more opportunities multiply for members of Congress and the Senate to grandstand and stop the process. Exhibit A is this hearing. Were it not for the budget process, the Appropriations Committee could set its own spending targets for the various Subcommittees to hit, with the House going low and the Senate restoring cuts made by the House. 

Procurements that should be made throughout the fiscal year can only begin in February of most years. This frustrates the work of program offices and government contractors and requires overstaffing of contract and budget activities for the time between the passage of the budget and the end of the fiscal year. Congressional dysfunction costs huge amounts of money.

Tax and entitlement policy can be made by the revenue committees without help, especially since Reconciliation has been used to bypass normal procedure and cut taxes in a manner that can only be regarded as reckless. 

Let Tax Cuts Expire

Prior to the Pandemic, the Tax Cuts and Jobs Act had reduced revenues and increased speculation on Wall Street, which resulted in a reduction in economic growth by one percent in the fiscal year following the passage of the Act. 

Funds that had been going to households through pay went to the CEO/donor sector and its “financial innovations,” i.e. garbage such as mortgage backed securities for single family home rentals and crypto currency, all conveniently buried in Exchange Traded Funds. Now that the pandemic is over, such flawed paper is coming due and may just lead us into a recession yet. COVID bailouts to the financial sector by the Federal Reserve hid the damage - but it will not stay hidden.

Luckily for the nation,  the TCJA cuts for individuals will expire in 2025. This will take money out of the speculative investment sector and, because of greater consumption, will result in more real investment in plant and equipment. Any tax reform (and I am in favor of reforms such as the Fair Tax - but in the form of a value added tax and a net business receipts tax, as well as an asset value added tax) should be pegged to the 2025 revenue laws, not those of the current year.

Enact a reasonable budget control act

Aside from nature taking its course, how do we solve the problem of a dysfunctional budget process which results in a bloated bureaucracy? First, do another Budget Control Act, which will include spending caps that can also function as a budget resolution should no resolution be enacted on schedule. This time, however, the caps should be realistic rather than punitive. Realistic caps will result in lower spending. The recent caps simply forced compromises which drove spending up. 

Second is to either enact a budget resolution (which should be joint rather than concurrent) or use the new budget act levels to trigger automatic appropriations derived from the Current Services Budget at the start of the new fiscal year should they not pass by October First. While Congress could still pass supplemental appropriations, it could not withhold money for either pet projects or to grandstand about cutting spending.

Joint Budget Committee

Another option is to replace both budget committees with an ex officio joint committee made up of the chairs of Ways and Means, Finance and Appropriations in each house who would agree to budget allocations and any tax and entitlement changes, inviting ranking members only when the chambers are controlled by different parties. In other words, turn back the clock to when the system actually worked. 

Try bipartisanship

The final option is for the Budget Committees to do their jobs, which in this case would be for members and staff from this committee to sit down with their opposite numbers in the Senate to work out a realistic compromise. It is the only way the House Budget Committee can really be relevant and allow the bloat to be taken out of government procurement in all sectors (including government contractors whose workloads are held hostage to the congressional calendar).

Would the Appropriations Committee allow the Budget Committees to actually do this? I am doubtful. It is why Budget Committee leadership is always given to the most partisan members. These committees are expected to fail, which preserves the power of the older committees.

Hyper-partisanship is not a good career move. Members of the House generally run for leadership, seek state office or run for the Senate. It used to be that leadership would compromise. Now, not so much. Serving in the Senate, as Governor or working on K Street require the ability to reach across the aisle.  Grandstanding on wokeness is not a good resume item. There is a lot for the Budget Committee to do if it gave up grandstanding. I have already suggested some of these options.

  • It could remedy inflation in the public sector by awarding COLAs on an equal dollar basis rather than as a percentage of current salary. It could even do so based on a lower average percentage than inflation. This would still make most civil servants better off. Only the overpaid would suffer. This limit should also apply in Congress.
  • Cut back on federal leave entitlements, but balance this with closing the government between Christmas and New Years, as many other professional offices - especially government contractors, do.
  • Cut the budget by one percent under the inflation adjustment, rather than one percent over current spending (which is a huge cut).
  • Cut Defense spending, but increase spending by some lesser amount for NASA, with the Defense Appropriations Subcommittee responsible for the agency. This would keep funds in the same sector (aerospace) rather than having NASA fight with the National Science Foundation, the Department of Commerce and the Department of Justice for funding.
  • Make the Affordable Care Act actually work using a public option, but ending pre-existing condition reforms and subsidizing the public option with an employer-paid subtraction value added tax (which it could offset partially by providing insurance or direct health services to employees - including those who now function as contractors).
  • Lead a serious discussion of the Fair Tax (but as a series of consumption taxes as I suggest - including an employer paid subtraction VAT designed to be offset by a generous child tax credit and health insurance coverage of employees. The option of having the IRS distribute the Child Tax Credit as it did under the American Recovery Plan Act or through Social Security as currently proposed turns the federal government into a paymaster for too many people.
  • Reorganize budget line items and appropriations committee jurisdictions to make programmatic sense, rather than codify old personality disputes between chairs. A proposal for doing so is attached.

Budget Act Line Item/Appropriations Subcommittee Reorganization

Agriculture
Add consumer protection functions performed by Consumer Product Safety Commission and Federal Communications Commission. Transfer the Commodity Futures Trading Commission to the Commerce, Financial Services and the Treasury Subcommittee. 

Commerce, Financial Services and the Treasury 
  • Add the Department of the Treasury; Financial Service agencies, including CFTC,  Federal Trade Commission, Federal Deposit Insurance Corporation (Office of the Inspector General), the National Credit Union Administration, (Community Development Revolving Loan Fund), the Securities and Exchange Commission, Small Business Administration and the United States Tax Court. 
  • Transfer the Department of Justice and related agencies to the  Justice and General Government Subcommittee. 
  • Transfer NASA and the National Space Council from CSJ to the Defense Subcommittee so that reductions to defense research and procurement would be offset with increased budget for space exploration.

Energy, Water Development, Transportation and Related Agencies
Add the Department of Transportation to create synergies between energy and transportation activities, especially research.

Homeland Security - No change unless some agencies are spun off to Justice and General Government.

Justice and General Government
  • Add the Department of Justice and related agencies from CSJ. Transfer Treasury to CSJ. Transfer Financial Services agencies to CSJ. 
  • The following general government agencies are included: Administrative Conference of the United States, Federal Labor Relations Authority, Federal Permitting Improvement Steering Council, General Services Administration, Merit Systems Protection Board, National Archives and Records Administration, Office of Government Ethics, Office of Personnel Management and Related Trust Funds, Office of Special Counsel, Privacy and Civil Liberties Oversight Board, Public Buildings Reform Board, Selective Service System, United States Postal Service, Payment to the Postal Service Fund and Office of Inspector General, General Provisions, Government-wide.
  • Transfer District of Columbia, the Executive Office of the President and the Judiciary to the Legislative Branch Subcommittee so that the DC budget will be passed by the start of its fiscal year without interference, the White House is funded with the same staff levels as the Congress in case of government shutdown and the Judiciary is respected as a co-equal branch whose salaries may not be reduced (or unsupported) by Congress. Add D.C. related agencies now funded by the Interior and Environment Subcommittee to Legislative Branch.
Labor, Education, Housing and Related Agencies
  • Add Housing and Urban Development and Veterans Affairs Housing functions to reinforce synergies between housing, education and workforce development.  
  • Transfer out Health and Human Services to decrease the size of the LHHSE Appropriation package.

Health and Human Services and Veterans Affairs
Create synergies between human services and veterans health and other DVA functions.

Military Construction and Veterans Affairs
Remove Veterans Affairs

State, Foreign Operations, and Related Programs - no change

Transportation, Housing and Urban Development and Related Agencies 
Disband. Sever the link between developing freeways and warehousing the poor.

Wednesday, November 29, 2023

Child Support for States and Tribes

WM Welfare & Oversight: Strengthening the Child Support Enforcement Program for States and Tribes , November 29, 2023

The question of child support magnifies the issue that causes most divorces, the financial stress faced by most families. Rather than using governmental hard power to force such support on largely poor families, use soft power to provide higher incomes to both existing and broken families, ending the cycle of poverty. 

In May and October, we discussed raising minimum wages, reforming TANF and increasing the child tax credit. We will continue our comments to the last point. 

An adequate and fully refundable child tax credit ends the need for child support enforcement, Supplemental Aid to Needy Families, dependent care benefits under Social Security survivors and disabled benefits programs, thus securing the program’s long term health, and the paperwork intensive Earned Income Tax Credit.

The President’s Budget proposes that the Child Tax Credits enacted as part of the American Recovery Plan Act be restored. During that period, payment of the child tax credit was 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. 

We agree with increasing the CTC to at least American Rescue Plan Act levels and refundability. We would make it $1,000 per month and phase it out from the median income to the 90th percentile. During the pandemic, the IRS managed payments. This had the “stink of welfare” that even some Democratic Senators objected to, which led to its discontinuance. 

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. 

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. 

Tax reform can be used to facilitate this process. Instead of having each family file to collect their child tax credits and EITC (as an end of the year bonus), enact an employer paid subtraction value added tax and make child tax credits and health insurance tax benefits an offset to the payment of this tax and remove most families from having to file at all. Tax offsets could also be created to fund paid family medical leave, sick leave and childcare provided through employers.

Thursday, November 09, 2023

High Income Individuals

Finance: Examining How the Tax Code Affects High-Income Individuals and Tax Planning Strategies, November 9, 2023

How do the wealthy game the system? Let me count the ways:

  • Borrowing from accumulated shares at favorable terms for additional acquisitions or to fund new enterprises and to fund lavish personal spending.
  • Using Life Insurance so that heirs avoid taxation of intergenerational wealth.
  • Using duty free zones to hide investment assets, such as art for investment.
  • Using gifts, inheritance and donations to avoid capital gains taxation.
  • The ability to offset financial losses to reduce the taxation of wages and salaries.
  • Tax Cuts whenever a Republican is in the White House and controls one or both chambers.
  • Leveraging these tax cuts into ownership of the national debt, which is the leverage that allows capitalism to go off the rails into speculation.

For the first four bullets, see our tax reform plan in the first attachment for more detail.

The solution to the first two bullets is to enact a (credit) invoice value added tax, as well as an asset value added tax.  We propose that subsidies to families be paid through an employer-paid subtraction VAT, so that they may be distributed with wages or alternatively with other government benefits under the Social Security Act, including Unemployment Insurance.

The invoice VAT will hit every dollar spent, including when goods, services and assets are purchased abroad and brought home. Duty Free zone exemptions on paying such taxes must be abolished above $100. Consumption taxes cannot be avoided by taking funds out of investments or insurance policies, including that portion of the subtraction VAT that is channeled to workers and their families.

The next to bullets are fixed by repealing capital gains taxes entirely and replacing them with an asset value added tax. There should only be one rate for asset VAT, which should be set at the rate for long-term capital gains. This would also be the rate for every short term transaction. This would technically be a tax cut, which will force Republicans to support it or be called out by Mr. Norquist.

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. 

The second tax cut would be to 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.

There is no hiding from a value added tax taken at each transaction. Any increased value added would be paid immediately rather than being part of a portfolio which allows offsets from business losses to reduce taxes on wages and salaries.

While requiring the taking of capital gains at death is emotionally satisfying, it has no chance of passage, especially if this breaks up family businesses. While we are in favor of breaking up such fortunes as a general principle, it simply cannot be done until inherited firms or shares in public companies are sold. Zero-rating ESOP sales fulfills the promise of wealth redistribution to workers. Simply forcing the sale of assets keeps them in the capitalist sector, doing nothing for the working class.

Personal income tax filing on wage and dividend income for middle income households will be replaced with a subtraction value added tax surtax for income above the ceiling for FICA employee contributions, which will be graduated from a 6.5% rate to a 26% rate for income over $425,000.  Again, without capital gains taxation, there is no way to offset dividend and salary income. Using an employer collected surtax with capital gains taxes exported to the asset VAT makes it possible to end filing for all but the top 1% of households.

At $500,000, an individual surtax ranging between 6.5% and 26% would fund net interest payments, debt reduction and paying down the Social Security Trust Fund. For this reason, these payments will be made to the Bureau of the Public Debt. The Asset VAT will be collected by the SEC. 

The subtraction VAT, any carbon added tax and the Invoice VAT, which you can call a Fair Tax will be collected by the states (who will also do any auditing on tax collection issues).  It is an offer that Republican members cannot refuse. 

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 second attachment - which was drafted in 2017 in opposition to the Trump-Ryan-Brady tax cuts. The third attachment explains why any Fiscal Commission should use repeal of these tax cuts as its baseline assumption.

The last attachment, which is an excerpt from my book, Settling (and Squaring) Accounts: Who Owns the National Debt? Who Owes It? It shows who really benefits from deficit spending. It is time for the Republicans to wipe their crocodile tears on this issue.

Attachment: Tax Reform
Attachment: TCJA
Attachment: Fiscal Commission

Tuesday, November 07, 2023

Woke Investing

WM: Ensuring that “Woke” Doesn’t Leave Americans Broke: Protecting Seniors and Savers from ESG Activism, November 7, 2023

First, we would like to associate ourselves with the testimony of the AFL-CIO regarding the ability of most Americans to save for retirement. Without adequate income, they simply cannot. This can be changed.  We have proposals to raise wages generally, most especially for the working poor and disadvantaged.

  • Raise the minimum wage to its purchasing power in 1965, which is somewhere in the neighborhood of $12 to $13 per hour for a 40 hour work week, or to a dollar more if the work week is shortened to four days at seven hours per day prior to overtime pay.
  • Increase the Child Tax Credit, starting at post-pandemic level and increasing it to enough of an extent that Supplemental Aid for Needy Families can be safely abolished.
  • Reestablish temporary disability for those who cannot work, including released inmates, alcoholics, addicts and those with mental illness who must focus on their recovery and who face stigma in returning to work. 
  • Provide these individuals with educational programs to address any deficits, intensive outpatient services and psychiatric rehabilitation services. Pay participants the minimum wage for doing so - with program administration and health benefits managed by the educational provider, such as the Catholic school system.
  • Increase Social Security benefits below the first bend point by 40%, as for most retirees and almost all of the disabled have little or no retirement savings. Starving retirees or forcing them to apply for Food Stamps is not a reasonable incentive to save more.
  • For the future, shift the employer contribution to FICA to a credit invoice value added tax, with equal dollar crediting to each worker in any quarter.

Please see our attached tax reform plan, which will show how each item on this list would be funded.

Secondly, we entirely agree that pension funds should not be “woke.” Instead, they should allow for the active participation of fund management for the benefit of retired or soon to be retired investors. This would necessitate changes to law, including abandoning the concept of a unitary board of directors, abandon the prudent expert rule under ERISA and adjusting the thresholds in the Taft-Hartley to allow organized labor to invest more aggressively for the benefit of their members, as follows:

  • Allow up to one third of pension assets to be invested in the firms that employ members.
  • Allow up to one third to be invested in companies which provide goods and services to members, including in the banking, homebuilding, medical and retail sectors with adequate board representation in line with amounts invested, rather than simply serving as an oversight mechanism which allows Chief Executive Officers to line their pockets.
  • Allow up to one third to be invested for merger and acquisition purposes, including investment in non-union owned firms with the specific goal of changing these arrangements.

It seems we have run out of thirds, which leaves no room for ESG investment.

Attachment - Tax Reform

Monday, October 23, 2023

Measuring Poverty

WM Work & Welfare: Measuring Poverty: How the Biden Administration Plans to Redraw the Poverty Line and Rob Resources from Rural America, October 24, 2023

The time has come to end the use of the poverty line entirely. Programs and credits such as the Earned Income Tax Credit, Supplemental Aid to Needy Families and Temporary Aid to Needy Families keep poverty in place. Repeal them. We can do better. 

I addressed how to do so in May of this year and have attached those comments. Briefly:

  • Raise the minimum wage to $12 per hour and adjust it based on the increase in wages at the median wage level by that dollar amount, not by percentage increases.
  • Increase the child tax credit to twice what the President has proposed.
  • Pay people to become literate at the 10th grade level and to attend an associates degree or technical training program.

Additional reforms will increase retiree income. Because work does not pay enough, 80% do not have adequate retirement savings. Punishing them in retirement for not being paid enough to save is simply cruel. We can fix this, as follows:

  • Put a floor on FICA individual contributions, fund the employer contribution with a Fair Tax or value added tax and credit it equally for each worker.
  • Adjust Social Security benefits in line with such improvements so that they are at least $500 a month higher across the board.

Attachment: Tax Reform

Thursday, October 19, 2023

Fiscal Commission 2023

HBUD:  SOUNDING THE ALARM: Examining the Need for a Fiscal Commission, October 19, 2023

Job one for any fiscal commission is to allow the Tax Cuts and Jobs Act provisions to expire in 2025. No other baseline is appropriate. Without such a requirement, the Center for Fiscal Equity must oppose any such entity.  Fiscal commissions are often an excuse to retain tax cuts that are about to expire.

The 2017 personal income tax cuts reward savings and speculation, rather than providing an incentive to invest in plant & 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.

Please see the second attachment for our analysis of the national debt.

The reality of our fiscal policy is that income tax collected is 1.5% of GDP  too low.  In other words, they need to be increased by 9%, or more because of how long they have been inadequate. Because the ability to borrow is based on the ability and willingness to tax incomes adequately, AA+ is a gift from ratings agencies. Any other entity with this revenue to debt ratio with an unwillingness to increase revenue would be rated at junk bond levels.

Oddly, the downgrade is good for bond holders because interest rates will go up. The vast majority of bonds held benefit high income taxpayers. By my calculations, based on observations from the 2019 Survey on Consumer Finance, the top 10% of households own 54% of public debt held by long term asset accounts (insurance policies, savings bonds, retirement accounts) and bank deposits  (and therefore assets held by Federal Reserve Banks) and 77% of debt held by mutual fund accounts and direct bond holdings. Applying the same share ratios to the top 1% (which is supported by IRS AGI figures show holdings of 29% of long term debt and Fed held assets and 59% of high yield assets. The top 0.1% hold 45.6% of debt held by high yield assets.

Debt obligation is a function of income tax paid (FICA tax paid to create assets held in trust by the government, not debt obligation). The current factor is 19 dollars of debt owed for every dollar paid in tax. 

Ownership of Social Security assets is realized when households are in the bottom quintiles who, at that time (because only 20% have income beside Social Security), own almost all FICA trust fund assets. The bottom quintiles hold more than their obligation.

The next three quintiles owe more than they own until we get to the top 0.1%. Because half of their income is earned through asset ownership taxed at preferred rates and their high share of ownership of debt, they break even. They own what they owe. 

In other words, when interest rates go up due to downgrades, their wealth expands in terms of debt owned compared to debt owed. This should guide how the debt should be reduced responsibly.

As you may recall, the Center for Fiscal Equity has a tax reform plan, which is in the final attachment, that does the following:

  • Takes 99% of families off the tax roles
  • Repeals welfare, Food Stamps, and the EITC and stops using the IRS as paymaster for families with children
  • Saves Social Security
  • Rationalizes healthcare coverage
  • Stops CEOs and Wall Street from evading taxes through fancy shelters
  • Simplifies tax filing for small businesses
  • Removes incentives to treat employees as contractors
  • Repeals Corporate Income and Death Taxes and all the related tax breaks
  • Closes the tax gap
  • Protects family businesses and farms
  • Repeals capital gains taxes
  • Creates an ownership society

The Office of Tax Policy and revenue committee staff will hammer out the details as responsible actors. Again, no commission is necessary for the kind of tax reform we need to grow out of our fiscal crisis.

Attachment: TCJA
Attachment: Tax Reform

Friday, September 01, 2023

PAC Political Activities

WM Oversight: Potential Violations of Rules on Political Activities, Inappropriate Use of Charitable Funds, & Rise in Foreign Sources of Funding, August 14, 2023.

The Protect the House Super-PAC is the most notorious. It was run by Igor Fruman and Lev Parnas with oligarch money as part of their Ukraine operation. McCarthy was involved and Republicans had to give the money back or donate it when the source of funds was revealed. At least that is what they said. Lev and Igor were convicted as part of a cooperation agreement. I wonder who the targets are. No wonder more than 130 House Republicans voted on January 7th to Stop the Steal. 

Attachment : "Republicans scramble to dispose of campaign cash from Giuliani associates" in Roll Call by Bridget Bowman, October 23, 2019.

Attachment: Political Activities of Tax Exempt Entities

Attachment: Tax Reform Video included


Thursday, July 27, 2023

Employee Retention Credit

WM Oversight: The Employee Retention Tax Credit Experience: Confusion, Delays, and Fraud, July 27, 2023

The Employee Retention Tax Credit essentially picked winners and losers, as happens in Democratic Socialism (as opposed to social democracy). It favored large firms that did not need it (but demanded it anyway), as well as fake firms that used it to defraud the people. While it sounded good as a response to the pandemic, a more comprehensive reform would be better.

Another feature of the pandemic was increased unemployment benefits. If benefits were higher on a permanent basis, there would not need to be an increase. In calmer times, the nation should take care of this for the next recession or pandemic.

Unemployment insurance also needs to be reformed to be a no-fault program,particularly for younger workers. This should be the case with low wage jobs especially. Workers need to be able to walk away from a bad job and still receive benefits. This will force the free market to adjust wages for essential workers. When time runs out on benefits, beneficiaries should automatically be enrolled in some form of paid training (from ESL to GED to Associates degree or technical school) in order to maintain benefits (assuming there is no pandemic underway - then benefits should last until restrictions are ended.

With the next pandemic, closures should not occur in areas where the disease has not yet hit. The United States shut down too soon and it did not help. The disease spread in private, one sneeze at a time, not from public activity. Shutdowns should have been localized.

Unemployment insurance should also include payment of the child tax credit with benefits. When people return to work, benefits should come with wages, not from the IRS at the end of the year (or during the year during a crisis). This helps work pay.

During the pandemic, it was $3,000 per year, or $3,600 for younger children. The President’s Budget proposes that the Child Tax Credits enacted as part of the American Recovery Plan Act be restored. During that period, payment of the child tax credit was 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. 

I would make the Child Tax Credit generous enough to abolish Food Stamps for families with children. The child tax credit should provide adequate income to feed, clothe and house an additional child, which can be up to $1000 per month. The current amount, which is set to expire in 2025, is $2000 per year. It will revert to $1000 per year, or less, because it is non-refundable. The President’s Budget proposes restoration of pandemic level amounts be restored and made permanent. It is not adequate, but it's a start.

During the pandemic, the IRS managed payments. Some of the bipartisan opposition in the Senate came from those who consider direct subsidies from the IRS to have the “stink of welfare” that the Gentleman from West Virginia so objects to.” 

The government should not be the national paymaster for every family.

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. 

Tax reform can be used to facilitate this process. Instead of having each family file to collect their child tax credits and EITC (as an end of the year bonus), enact an employer paid subtraction value added tax and make child tax credits and health insurance tax benefits an offset to the payment of this tax and remove most families from having to file at all. Tax offsets could also be created to fund paid family medical leave, sick leave and childcare provided through employers.

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

These reforms MUST be scored as pro-life legislation. The chief obstacle for funding families is not the feminist movement. It is the so-called right to life movement who would rather women be penalized for having abortions than subsidized so that they are not necessary. Over the course of many decades, I have had conversations with conservative members of the pro-life community. When push comes to shove, they oppose the measures above because their objections to abortion are more about sexuality than the welfare of children.

In the pro-choice movement, many jump to the defend women’s bodies argument before first addressing the need for adequate family income. Doing so now will shame the leadership of the pro-life movement into supporting these reforms.

Many in the pro-life movement already do. Catholic Charities USA, NETWORK and the Catholic Health Association all stand with working and poor women. They must be very publicly leveraged to get the U.S. Conference of Catholic Bishops behind them as well - and to have the bishops insist that these measures be considered must-pass legislation for the computation of pro-life voting records. 

Catholic members of Congress and the President should also lead on this effort. It is time to stop grandstanding on this issue. The movement got what it wanted in Dobbs (although to speak frankly, the states which banned abortion were not friendly to it to begin with). Eventually, some form of compromise between a national ban and nationally guaranteed rights must take place in Congress. This was always inevitable. 

For the present, however, the primary pro-life issue must be to assure that, now that abortion is now illegal in some places, it must be made rare by adequate support of families with children. 

Attachment: Consumption (Fair) Taxes video links included

Wednesday, July 26, 2023

Abolish TANF

WM Welfare and Work: Where is all the Welfare Money Going? Reclaiming TANF Non-Assistance Dollars to Lift Americans Out of Poverty, July 12, 2023

TANF should be abolished. It is designed to train poor people with limited literacy and skills to do dirty, lower wage work in hospitality or medical assistance. It is one stage below computer systems training at community college through what was once the H-1B technical skills training program (which I staffed in the Department of Labor, although at the time, we also trained medical assistants).

Almost thirty years into the program, its main success is pruning the welfare rolls because of the penalties it put in place for non-compliance. Suc non-compliance is easy to fall into for those who are less than fully literate.

The focus of human services spending, which is best provided through the private, charitable or cooperative economy, is to keep people in training or transition them to disability in however much time it takes to do so.  There should be no weeding out of the non-compliant.

When I graduated from Loras College and began graduate studies at the American University, the Washington Area Consortium of Universities held a conference on poverty. Every speaker in every topic area cited education as the key avenue to upward mobility.

For those who are homeless or families in bad housing, the first goal should be decent housing at public expense, although such situations should be supervised to make sure that program beneficiaries know how to run their own households. Program housing should be available until participants are able to find a job or long term educational placement which either pays enough to attain or offers through a longer term educational setting.

Food Stamps should also be abolished and replaced with a child tax credit that provides income which is adequate to feed, clothe and house an additional child, which can be up to $1000 per month. The current amount, which is set to expire in 2025, is $2000 per year. It will revert to $1000 per year, or less, because it is non-refundable. During the pandemic, it was $3,000 per year, or $3,600 for younger children. The President’s Budget proposes this amount be restored and made permanent. It is not adequate, but it's a start.

The President’s Budget also 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.

Local public, charitable (including religious) and private social welfare and educational providers should provide both case management and housing, as stated above.

Participants should be paid a stipend of at least the minimum wage (which also needs to be increased to $11 per hour with a 30 hour week. For those unable to work or study, that amount should be paid to fund temporary disability. Again, SNAP would be discontinued. Participants in drug court with unmet literacy needs and the disabled in need of either psychiatric rehabilitation services or occupational therapy would be paid to attend education and rehabilitation activities.

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.  An $11 wage makes up for cutting hours from 40 a week to 32. For training program participants, 30 hours per week is more than enough.

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.

Providing minimum wage pay to attend school will assure that, when the wage is increased, those without skills will not be priced out of the economy - as some fear when opposing raising the wage. One reason to raise the minimum wage is precisely so no one lives only on their child tax credit proceeds.  There are some in both parties who believe that the child tax credit should have a work requirement. I agree if that work includes being paid to go to school.

Paid training must be provided to those whom the education system and the former culture of dependency has failed. The caricature of the welfare cheat was never reality, however those who were and are trapped in poverty usually have educational deficits, as well as a history of family incarceration due to the war on drugs and its disproportionate penalties for Black and Hispanic men.

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.

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. 

Our attachment on Consumption Taxes provides information on how this tax would work. These proposals are what the Fair Tax would look like if it was designed to work effectively and provide family benefits without making the Social Security Administration and state government the paymaster for delivering prebates. The proposed (Credit) Invoice VAT replaces the current deduction for sales taxes paid with full crediting of the same amount (and then adding the federal portion).

Tax reform undertaken during this process would end tax filing for most families (and certainly all poor ones). The more generous child tax credit and higher minimum wage (including for training) allows for the abolition of the EITC.

Attachment: Consumption Taxes (Video links included)

Thursday, July 20, 2023

Organ transplants and cloned organs

Finance: The Cost of Inaction and the Urgent Need to Reform the U.S. Transplant System, July 20, 2023

Finance: A System in Need of Repair: Addressing Organizational Failures of the U.S.’s Organ Procurement and Transplantation NetworkAugust 3, 2022

2024: I made comments on A System in Need of Repair: Addressing Organizational Failures of the U.S.’s Organ Procurement and Transplantation Network in August of 2022, which I am resubmitting to keep on the record. While the need is urgent, the solution will take time. As we used to say on the Air Staff, if you want it bad, you get it bad.

2022: At first blush, the consideration of this issue by the Committee is puzzling until one draws the connection between Medicare and organ transplants, including establishing universal healthcare and funding it. Please see the following attachments, as well as the second part of this submission, for discussion of these topics.

Other than its impact on Medicare and affordable care, we are leery of any congressional involvement in this issue. Ideally, it is based on science and best regulated by medical professionals. Even without intervention, putting pressure on the system is ill-advised. With political pressure often comes pressure from donors. The beauty of the current process is that the ability to pay is not part of it. Of course, if there are abuses on this front in the current system, they should be looked into and dealt with by the Congress and this Committee.

Even with the best of motives, adjusting the process (even if flawed) does not resolve the issues facing organ transplantation. There are simply not enough organ donors and the system, which relies on voluntary donation for its legitimacy, would not be helped with economic incentives - especially as these would be more attractive to the poor. This borders on abuse. Not only do we exploit them in life, incentives would continue this exploitation in death. 

Ultimately, the solution is better science. This is where government involvement can help and where issues of fiscal equity come in. Any treatment must be provided to all, regardless of the ability to pay. While the private sector may be helpful in developing treatments, government funded research would help the process and assure equity.  

A promising solution is the use of  retargeted stem cells, either grown on cartilage or injected into the sick organ. Both would render donation and its possibility of rejection to the realm of temporary solutions, as would artificial organs.

Research in this process can always be sped up with more government money for NIH. To make sure everyone can benefit from advancements, such as using 3D printing to create cartilage on which to grow stem cells both outside and inside the body, research and actual organ generation can be publicly funded. Public organ manufacture, because of its expense in every case, is likely better than relying on for profit medicine.

As we have stated before, most recently in March of this year, but also in 2019 and 2020, orphan drug research and manufacture should be owned and managed by the federal government. The same path can be taken for the development of cloned organs. If the government owned the process, profiteering would be minimized. To facilitate cooperation and speed the process, creation of a quasi-governmental enterprise would be useful. It would combine NIH, NSF, FDA. To repeat our previous comments on drug pricing:

Prescription Drug Price Inflation Video

A main problem with high cost drugs, especially orphan drugs, is the high development costs and the cost of small batch manufacturing... as well as regulatory cost.

Another way to assure equity in the growth and distribution of cloned organs, health care reform is essential. Again, to repeat our comments from March:

Universal coverage... THE ISSUE IS PRICE, NOT COST!

Attachment: Single Payer Video 

Attachment: Tax Reform Subtraction VAT Video

VIDEO of these comments