The 2017 Tax Law and Who It Left Behind
Thank you for the opportunity to submit these comments for the record for the Committee on Ways and Means on the fallout from the Tax and Job Cuts Act (not a typo). Use of the term “Left Behind” is apt, because the tax law, if maintained, would be, like the novels, apocalyptic.
Let us first lay out who was not left behind: the wealthy, corporations and other business owners. The tax cuts on the second two were designed to promote hiring. They did not.
As we stated in to the Committee in February, there is absolutely no reason to infer that TCJA did anything for growth. Tax cuts for the wealthy might increase corporate investment, but only when interest rates are high. They are not. Only the passage of the Orwellianly named Balanced Budget Act of 2018 staved off another boom-bust cycle, which is the goal of Austrian supply-side economics.
The (il)logic of reducing tax rates on the rich is to let a million start-ups bloom until the market busts and the next new thing emerges, Devil take the hindmost. BBA2018 prevented such insanity. As long as the current tax cuts are in force, the money not collected in taxes should be made up with bond sales, else all sorts of mischief occur in the area of asset accumulation and inflation.
Such accumulations are not economic growth, they are the manufacture of speculative investment bubbles that always lead back to recessions and depressions. There is no such thing as a business cycle, only rich people who are undertaxed who invest in garbage and then sell it to the public, like any Ponzi scheme.
Growth is defined as a positive change in the Gross Domestic Product, not in the price of assets. BBA2018 is entirely responsible for increases in government purchases and consumption (by beneficiaries, government employees, contractors and secondary effects in private sector households). Exports and imports may have a change due to the trade war, not TCJA. Private sector investment in plant and equipment is on a longer time line for any recent intervention to be important.
We remind the Committee that in the long-term we face a crisis in net interest on the debt, both from increased rates and growing principle. This growth will only feasible until either China or the European Union develop tradable debt instruments backed by income taxation, which is the secret to the ability of the United States to be the world’s bond issuer. At some point, however, we need incentives to pay down the debt.
The national debt is possible because of progressive income taxation. The liability for repayment, therefore, is a function of that tax. For every dollar you pay in taxes, you owe $13 in debt. People who pay nothing owe nothing. People who pay tens of thousands of dollars a year owe hundreds of thousands. The answer is not making the poor pay more or giving them less benefits, either only slows the economy.
The first group the Trump Tax Law leaves behind is our progeny, or rather, the progeny of the wealthy. My child is becoming a social worker, an artist or a photographer. Don’t look to her to pay off the debt. The children and grandchildren of Members and those of your donors are the ones on the hook unless their parents step up and pay more. How’s that for incentive to raise taxes?
Tax preparers are doing well because tax reform did not take anyone off the tax rolls in so obvious a way that they no longer have to get help to see otherwise.
Our reforms make it obvious who does not need to file. Indeed, no one may need to. With an asset VAT in place and dividends taxed at normal rates, employers could submit salary, dividend and child tax credit data with their subtraction VAT filing (collected by the states) and have IRS calculate their tax bill automatically. Employers would withhold taxes for high-income individuals and only send a refund to anyone who had dividend withholding on total income under the standard deduction.
The alternative is to have employers simply pay a surtax for high income earners at various rates and for all dividends to be assessed at the Asset VAT rate, which is similar to the proposal discussed by Lawrence B. Lindsey in testimony to the Senate Finance Committee (sans A-VAT).
EITC payers still have to do hard calculations (keeping preparers in business). A better way is to put a floor on the Old Age and Survivor’s Employee levy and let an averaged employer contribution pick up the slack, as proposed earlier and explained. In Attachment One. A better way to give childless workers more money is a higher minimum wage.
Children lost out because the Child Credit was not made refundable or adequate. The unborn were also left behind because inadequate family income is the cause for the vast majority of abortions.
Workers were left behind because there is still no clear path to employee-ownership of the workplace assisted by tax policy changes and because taxes on the CEO class still invite the extraction of economic rent from them in terms of wages, benefits and union rights. (Also described in Attachment One). They must also still file taxes instead of their employers doing so. In general, while the wealthy got a cut, they merely got a shell game
Taxpayers in general lost out because corporate income tax payers can demand special breaks on their taxes that they could not demand under a consumption tax system, which taxes wages and profit at the same rate.
On the up side, giving both corporations and pass-throughs a tax cut lays the groundwork for shifting from individual income and corporate taxes to consumption taxes. Congratulations to the Republicans for slipping this by Chairman Hatch. This step gets us to real tax reform, as I have proposed for over 20 years and will again explain using our comprehensive four-part approach. It has recently been updated.
Our new proposed A-VAT removes the need for including heirs in the personal income surtax, other than on any direct transfer of cash or trust fund income over the standard deduction in a single year, which should still be taxed at normal income rates. The Death Tax on inherited assets will be repealed for everyone, but with the following proviso. Any asset transferred by inheritance or created by exercising stock options will be taxed at 100% of value when sold, rather than only the gain from inheritance or as a step up from when the deceased purchased them. As always, sales to a qualified broad-based ESOP are A-VAT free. We advocate tax simplification, not evasion. Tax evasion by the rich should not be considered a conservative value.
Let us first lay out who was not left behind: the wealthy, corporations and other business owners. The tax cuts on the second two were designed to promote hiring. They did not.
As we stated in to the Committee in February, there is absolutely no reason to infer that TCJA did anything for growth. Tax cuts for the wealthy might increase corporate investment, but only when interest rates are high. They are not. Only the passage of the Orwellianly named Balanced Budget Act of 2018 staved off another boom-bust cycle, which is the goal of Austrian supply-side economics.
The (il)logic of reducing tax rates on the rich is to let a million start-ups bloom until the market busts and the next new thing emerges, Devil take the hindmost. BBA2018 prevented such insanity. As long as the current tax cuts are in force, the money not collected in taxes should be made up with bond sales, else all sorts of mischief occur in the area of asset accumulation and inflation.
Such accumulations are not economic growth, they are the manufacture of speculative investment bubbles that always lead back to recessions and depressions. There is no such thing as a business cycle, only rich people who are undertaxed who invest in garbage and then sell it to the public, like any Ponzi scheme.
Growth is defined as a positive change in the Gross Domestic Product, not in the price of assets. BBA2018 is entirely responsible for increases in government purchases and consumption (by beneficiaries, government employees, contractors and secondary effects in private sector households). Exports and imports may have a change due to the trade war, not TCJA. Private sector investment in plant and equipment is on a longer time line for any recent intervention to be important.
We remind the Committee that in the long-term we face a crisis in net interest on the debt, both from increased rates and growing principle. This growth will only feasible until either China or the European Union develop tradable debt instruments backed by income taxation, which is the secret to the ability of the United States to be the world’s bond issuer. At some point, however, we need incentives to pay down the debt.
The national debt is possible because of progressive income taxation. The liability for repayment, therefore, is a function of that tax. For every dollar you pay in taxes, you owe $13 in debt. People who pay nothing owe nothing. People who pay tens of thousands of dollars a year owe hundreds of thousands. The answer is not making the poor pay more or giving them less benefits, either only slows the economy.
The first group the Trump Tax Law leaves behind is our progeny, or rather, the progeny of the wealthy. My child is becoming a social worker, an artist or a photographer. Don’t look to her to pay off the debt. The children and grandchildren of Members and those of your donors are the ones on the hook unless their parents step up and pay more. How’s that for incentive to raise taxes?
Tax preparers are doing well because tax reform did not take anyone off the tax rolls in so obvious a way that they no longer have to get help to see otherwise.
Our reforms make it obvious who does not need to file. Indeed, no one may need to. With an asset VAT in place and dividends taxed at normal rates, employers could submit salary, dividend and child tax credit data with their subtraction VAT filing (collected by the states) and have IRS calculate their tax bill automatically. Employers would withhold taxes for high-income individuals and only send a refund to anyone who had dividend withholding on total income under the standard deduction.
The alternative is to have employers simply pay a surtax for high income earners at various rates and for all dividends to be assessed at the Asset VAT rate, which is similar to the proposal discussed by Lawrence B. Lindsey in testimony to the Senate Finance Committee (sans A-VAT).
EITC payers still have to do hard calculations (keeping preparers in business). A better way is to put a floor on the Old Age and Survivor’s Employee levy and let an averaged employer contribution pick up the slack, as proposed earlier and explained. In Attachment One. A better way to give childless workers more money is a higher minimum wage.
Children lost out because the Child Credit was not made refundable or adequate. The unborn were also left behind because inadequate family income is the cause for the vast majority of abortions.
Workers were left behind because there is still no clear path to employee-ownership of the workplace assisted by tax policy changes and because taxes on the CEO class still invite the extraction of economic rent from them in terms of wages, benefits and union rights. (Also described in Attachment One). They must also still file taxes instead of their employers doing so. In general, while the wealthy got a cut, they merely got a shell game
Taxpayers in general lost out because corporate income tax payers can demand special breaks on their taxes that they could not demand under a consumption tax system, which taxes wages and profit at the same rate.
On the up side, giving both corporations and pass-throughs a tax cut lays the groundwork for shifting from individual income and corporate taxes to consumption taxes. Congratulations to the Republicans for slipping this by Chairman Hatch. This step gets us to real tax reform, as I have proposed for over 20 years and will again explain using our comprehensive four-part approach. It has recently been updated.
- A Value Added Tax (VAT) to fund domestic military spending and domestic discretionary spending with a rate between 10% and 13%, which makes sure very American pays something. This would include a Carbon Value Added Tax.
- Personal income surtaxes on joint and widowed filers with net annual incomes of $100,000 and single filers earning $50,000 per year to fund net interest payments, debt retirement and overseas and strategic military spending and other international spending, with graduated rates between 5% and 25%. Capital Gains Taxes will be replaced by an Asset VAT or A-VAT in long-held assets and a Tobin Tax for short term trades would fund the SEC and pay down the debt.
- Employee contributions to Old Age and Survivors Insurance (OASI) with a lower income cap, which allows for lower payment levels to wealthier retirees without making bend points more progressive.
- A VAT-like Net Business Receipts Tax (NBRT), which is essentially a subtraction VAT with additional tax expenditures for family support, health care and the private delivery of governmental services, to fund entitlement spending and replace income tax filing for most people (including people who file without paying), the corporate income tax, business tax filing through individual income taxes and the employer contribution to OASI, all payroll taxes for hospital insurance, disability insurance, unemployment insurance and survivors under age 60. Collection would be accomplished by the states, who would forward data to the IRS.
Our new proposed A-VAT removes the need for including heirs in the personal income surtax, other than on any direct transfer of cash or trust fund income over the standard deduction in a single year, which should still be taxed at normal income rates. The Death Tax on inherited assets will be repealed for everyone, but with the following proviso. Any asset transferred by inheritance or created by exercising stock options will be taxed at 100% of value when sold, rather than only the gain from inheritance or as a step up from when the deceased purchased them. As always, sales to a qualified broad-based ESOP are A-VAT free. We advocate tax simplification, not evasion. Tax evasion by the rich should not be considered a conservative value.
posted by Michael Bindner at 10:00 AM
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