Moving forward to a higher minimum wage

1. A minimum wage raises wages for everyone but executives, who because of low marginal tax rates, have an incentive to cut labor costs (and fund campaigns appropriately) in order to earn bonuses from captive boards and shareholders. Shareholders get a normal return, regardless.

2. Minimum wages counteract monopsony labor markets, including oligopsony or monopsonistic competition (and attendant discrimination), so that wage increases do not mean job loss.

3. The cure for job loss is not low wages, it is government paid training (ESL, GED, Elementary to Associates, Apprenticeship/Vocational) or paid training as an offset to an employer paid subtraction VAT (SVAT). Payment should be at minimum wage levels to offset opportunity cost.

4. Advanced education should carry a service commitment, ideally in an ESOP or cooperative, with a government or industry association backstop if employment does not work out and to avoid peonshe. From each according to their ability. 

5. A living wage should be in addition to minimum (and all other) wages. In order to keep workers with family empoyable, the government must pay such benefits at median wage levels as an offset to the SVAT. To each according to their need.

6. ESOP/COOP voting and preferred shares could be an offset to employer-paid FICA or SVAT, with a third of the funds invested in an insurance fund held by industry associations or successor to Federal Reserve. That fraction gives a quarter of employees the means to call for intervention against executive malfeasance or incompetence. CEOs would bid for job in open auction with employers voting among lowest 2 bidders.

7.  An EITC paid as an offset to a subtraction VAT would simply be a minimum wage. A floor on FICA (or minimum wage) is possible if employer FICA is credited on an equal dollar basis. A ceiling keeps entitlements low.

8. A credit invoice (IVAT), receipt visible Carbon VAT (CVAT) and an Asset VAT (AVAT) fund discretionary; overseas and sea deployments; and r&d/direct environmental enforcement and passive enforcement respectively.

9. ESOP/COOP workers would give overseas subsidiary/supply chain worker pay high enough for same standard of living and ownership to end need for militaries.

10. Second/Third tier SVAT or income surtax would eventually stop wage theft and be offset by tax prepayment bonds to pay FICA trust, Net Interest and debt reduction in fairly short term.

11. This is not Sanders' social democracy, which absorbed DSA

12. This is what socialism looks like. It starts with indexed minimum wage and tax reform. No one likes Tax Day.

TPC: Sanders Proposes A $23 Trillion Tax Increase, Mostly On High-Income Households And Businesses

TPC: Sanders Proposes A $23 Trillion Tax Increase, Mostly On High-Income Households And Businesses

MGB: Increasing taxes on the CEO/Donor/Direct Shareholder class has a pergovian effect on rent seeking. As taxes go up, the incentive to put profits before people goes down, resistance to minimum wage hikes go away and unions thrive. Wages go up, as do consumption and revenue from workers. Working class households save more as the speculation sector shrinks.

Ending high velocity trading is essentially stopping a rigged game based on advance information. Even if SEC funding decreases, it will again have the incentive to stop such abuses. Currently, it benefits from them.

Wealth taxes magnify the problems inherent in capital gains taxation. Scrapping the SEC fee and cap gains tax and replacing them with an asset tax (which would also be a levy on pass through, dividend, interest and rental income) at point of sale or distribution stops evasion.

Retain the exemption for ESOP sales and mark to market at option exercise or at sale after gift or inheritance and the purpose of such taxes - increasing worker ownership and control, is realized. In the end, most high income wealth from dividends and gains will end because they will dump the assets. The tax must also stay in the 21 to 25 percent range because it will not be income specific.

Warren is out and Biden is the effective nominee. The discussion of taxing wealth is good, but it also shows how Sanders is more social democrat than Democratic socialist.

M4A is total social democracy. The reason that it must rely on more from the rich is because the plan is really Medicaid for All. This would be good for the states, because their share of Medicaid eventually goes away.

The problem is that the rich won't sit still for such an expansion. M4A or a public option (which must be heavily or entirely subsidized because market reform will not fully fund it) need to be paid for with a broad based consumption tax. Because employers must be given the option to provide insurance, it must be an employer filed tax. Regardless, the customer is the end payer.

The rich will fund debt reduction because it relieves their heirs if responsibility to pay future taxes. Most of the assets holding debt instruments are help by the people who owe the debt. It is time to unwind thus pile of yarn.

Separating income, consumption, social insurance and asset taxation into separate levies INCREASES taxes on the rich and effectively extracts much if their wealth. Employers pay salaries and returns from capital with after employer tax money.

Assets are purchased with after salary tax money and are taxed at sale and return. When spent, they are taxed again. The effective rate for the wealthy is near 90% under the rates I propose (most families would get $1000 per child per month from employers, free healthcare and pay no salary tax).

If salary taxes can be prepaid with no return bonds, none will be collected and at some point, high salaries will no longer be paid. This plan does what Sanders wanted to do, except that he and his followers want free stuff more than ownership. Call it a revolution wasted.

What I propose is more evolution than revolution. The TCJA actually puts us closer as asset tax rates converge. It is also in everyone's interest to go down this road, even the wealthy and especially their progeny.

GAO 2020 Report on Fiscal Health

Senate Budget, March 12, 2021

The mere existence and size of the national debt does not harm the economy at all, at least not until the European Union consolidates the debt of its members and supports it with a joint progressive income tax. Then the party is over. The real impact of the debt on the economy comes from other aspects of fiscal policy.  

Spending aggregates are fairly stable over time, which is why it is so hard to cut the budget by following this path. Most of the volatility is in tax policy. When taxes are increased, the budget deficit goes down. When they are cut, the budget deficit increases. Revenues are usually about 18% of GDP. Currently, they are 16.5%. Unless you are funded by rich donors or their foundations, this is a real problem. Apologists for Wall Street justify tax cuts as a boon to the economy. It is not unless you make your money on inflating asset prices. My response to such nonsense can be found in Attachment One, which examines the impact of the Tax Cut and Jobs Act. 

Inflation is an increase in prices chasing the same goods, which also increases the supply of goods of lesser quality, such as Cryptocurrency and private equity financing of mortgage backed securities. These are the next asset crisis. The money has already been sucked out of these ventures, so a crash is imminent. Please see Attachment Two for more on our upcoming recession. 

If any witness ever comes before this committee and claims that the problem is entitlement spending (I can think of a few who do), inquire about who their donors are after swearing them in. 

When Republicans control tax policy, tax cuts result in higher savings and lower wages for the non-CEO class (again, as explained in Attachment One). The only way to keep consumption going is to keep the economy moving is to borrow as much as taxes are cut, plus the cost of net interest rolled over into further debt. After this point, increased spending is necessary for increased growth.  

The reason the economy continues to grow is increased spending. The Budget Control Act of 2011 marks were designed to be so low that action must occur. The result has been underspending and late appropriations. to spur action. It has taken place, although usually late. Fiscal sanity dictates amending the Act permanently to increase these levels and tie them to automatic appropriations should no budget resolution or appropriation bills pass.  

In 2017, the Tax Cut and Jobs Act was passed with no concern for long term balance, which was reinforced by the Balanced Budget Act of 2018.  The TCJA expires, in part, in 2025. BBA 2018 expires at the end of FY 2019. The Bipartisan Budget Act of 2019 extends sanity for two more years. Further reform should either extend the higher marks to 2025 or hasten the expiration of the Ryan-Brady tax cuts.  

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. 

Insisting on spending cuts, as the Mulvaney Budget submission does, harms the general population, leading to a slower economy. Indeed, any spending cuts must be avoided. If anything, secular stagnation is an endemic issue because low marginal rates on high income CEOs invites the rent-seeking we warned about in 2017. This can be remedied by tax increases, a higher minimum wage and increased transfer payments and salary levels. 

When Democrats control fiscal policy, taxes on the wealthy go up. This not only fuels the economy with increased spending, but it extracts money from savings for consumption directly, rather than through bond markets (at interest). Because spending is mostly stable (most increases are simply catch up spending), a GDP growth rate of around 3% results.  

The way to increase growth beyond average is to increase federal and contractor wages and transfer payments, especially the latter. The recipients spend most of the money. Eliminating welfare as we know it under President Clinton helped balance the budget, but cutting capital gains taxes created the tech bubble and the resulting recession. Lower transfer payments made the recovery that much harder. 

The answer cannot be shifting liability down or claiming that we owe debt on a per capita basis. It is raising taxes enough so that the debt is reduced and incomes for most households are increased.  

To sell a tax increase on high incomes (or wealth, for that matter), we must make the wealthy want to pay more. They won’t do so to fund Medicare for All, the Green New Deal or to decrease abortion by increasing the Child Tax Credit. They will do so to get their children and grandchildren out of hock.  Attachment Three details why it is the wealthy who should be concerned that their tax rates are too low. 

Attachment One – The Tax and Job Cuts Act

Attachment Two – Recession 2020 

Attachment Three – Excerpts from Squaring (and Settling) Accounts: Who Really Owns the National Debt? Who Owes It? - December 2019 

Protecting Congress’ Power of the Purse and the Rule of Law

After the Imperial Presidency of Richard Nixon, the Congress enacted the Budget and Impoundment Control Act of 1974 over his veto. It has been largely self-enforcing, although the requirements in current law holding budget certifiers personally responsible for signing off on purchase requisitions provides additional protection. It is why they look so thoroughly on each package before it is sent to the agency procurement activity. They must also certify the legality of the purchase. 

The attempt to violate the Act in the Ukraine manner came to light and protests by members of the permanent government eventually had the funds released. Without such bravery, the money may never have been delivered. We still have questions as to whether this incident was really about election interference, if only because at most the Ukranian appearance desired on CNN would have changed no minds. The questions that remain are whether the President was an audience of one feeding his own paranoia or had darker intentions having to do with his dual allegiances to his Moscow Project (which realistically would never have been added to the Onion Domes in the Moscow Skyline) or personal loyalty to President Putin.  

Events in the immediate future have an impact on how this will all play out. In the very near future, the Supreme Court will hear Trump v. Vance, et al, with the President’s claims of absolute immunity being part of the arguments and eventual ruling. Worries about partisanship among the Justices are overblown. The current Court will rule as they did in U.S. v. Nixon.   

If the Court remands the issue of presidential indictment (and with it arrest) back to the District Court for further consideration, BICA 74 violations which, like the Foreign Gifts and Declarations Act, contain no criminal penalties, will be the least of Citizen Trump’s worries. That being said, it would be good to enact criminal penalties for violating these statutes directed at appointed, rather than career, officials.  

Whether even these can be used on an urgent basis is in doubt. Enforcement of laws requiring that any and all tax returns be delivered to the Ways and Means and Finance Committees, which have criminal penalties, has been delayed. While the chain of command from the IRS General Counsel to the President’s Chief of Staff (and possibly the President himself) will certainly be subject to prosecution and likely conviction, the reluctance to enforce the appearance of Don McGahn does not bode well if partisanship overcomes duty in the Senate.  

In the end, the voters will decide. That Northern Virginia suburbs had record turnout for the former Vice President shows that many Republicans may have found a new home. This does not bode well for Trump defenders. 

FY2021 DoD Budget

House Budget, March 10, 2021

The staff summary was, as usual, an apt description of the issues before the committee and the Nation. As we have said in all of our comments and was said in the committee staff paper, staying within the agreement in the Bipartisan Budget Act of 2019 is essential and can be used to ignore what has been received. 

The current budget submission is not serious. It is Mick Mulvaney’s last shot to spout partisan nonsense to raise money for the President’s reelection campaign or to show his bona fides for his own possible Senate run or a job running a conservative think tank. It is as dead as any budget from the mid 1980s. It is not only dead on arrival, it has already been embalmed. 

In the background of this budget is a desire to float tax cuts, both in the short term and as a campaign promise. Any such cuts would be madness given the likelihood of a recession in the near future caused, not by Covad-19, but by the latest round of speculation fueled by Federal Reserve rate cuts and the Tax and Job Cuts Act. As we stated earlier this month, the current effort to market Exchange Traded Funds containing toxic single-family rental bonds sell more widely is necessary before Wall Street gets caught holding the bag. Their attempt to do so is both against the national interest and politically tone deaf, given the current composition of the House. 

A recession should be met with more spending and higher taxes on the wealthy. Moving money from the Speculation Sector to the real economy always works. Cutting taxes never does, especially in absence of out of control spending. Bidding up the price of secondary market assets is inflation, not investment. Investment in plant and equipment is only done in anticipation of public and household spending. 

Detailed plans from the 2020 budget proposal are certainly a better source in drafting this year’s appropriation and authorization legislation. In that spirit, we will also repeat excerpts from our comments from last year, leaving out those portions having to do with regional government and tax reform (with regional consumption taxes requiring a constitutional amendment).  In Attachment One, we will reuse the summary table based on last year’s service department submissions, which likely has better data than the current President’s Budget. 

Last year, the National Priorities published a pie chart of discretionary spending which lumped the entire defense budget into a 57% slice. This is consistent with the remarks in the Staff Paper highlighting how Defense Spending in this year’s budget is crowding out spending in the civil government. Attachment Two repeats our exhibit from last year on how much the Defense Budget makes up of the total government. 

Impact of the Tax Code on Native American Nations

Ways and Means Subcommittee on Select Revenue Measures, Examining the Impact of the Tax Code on Native American Nations, March 4, 2020

Allow us to provide a new perspective to both the Congress and to tribal governments. Our premise is inflammatory. Native American Nations need to be paying much higher taxes. Indeed, they should pay in the ball park of the Walton Family in Arkansas. The reason they are not doing so is the nature of their protected relationship with the United States Government. The problem is that the wrong people are being protected.

Incompetent administration is being protected. Those who should be delivering Native Nations their fair share have a history of failing to deliver the money owed to the tribes. The checks should be bigger. Who are they protecting?

Let's start small. Ranchers with grazing permits are insulated from their landlords. Tribes could get a better deal on their own, including having the option to evict their tenants and either preserve or repurpose land held for them by the United States.

The next level is forestry. The owners of the land are competent to protect or extract these resources. Neither environmentalists nor extraction and wood products companies deserve the final say.

The biggest piece is oil, water and mineral extraction. As independent nations, American tribes should be getting returns on their resources at OPEC levels. While they get a share, others get the lion's share and, more importantly, make the decisions on how resources should be extracted and transported.

That others are allowed a say is racist in all of these aspects. As usual, such racism is rooted in the Capitalist desire to control and exploit. The sun must set on such abuse. The result would be higher income and tax obligations for Tribes and lower (and less sheltered) income for those who profit from the current state of affairs.

One obstacle is the racists belief that Tribes would waste the money. The reality is that they can buy the same level of stewardship used by the Walton heirs, or could develop it locally. They can certainly do better for themselves than the U.S. Government.

I do have some suggestions on how to best allocate the proceeds. The first attachment details our proposals for tax reform. These are as useful for tribal, state and local government as for the nation as a whole. The second attachment details how human services can be developed within these revenue proposals.

Native Nations already receive large monies that are invested. There are a few investment trends that they should resist that will take down the economy. The most obvious is cryptocurrency. The less obvious one is Exchange Traded Funds laden with junk housing bonds, thus time with overly leveraged single-family rentals. See the third attachment.

The final attachment is about employee ownership. Simply substitute tribe for company and member for employee and Nations may find this useful.

Attachment - Tax Reform, Center for Fiscal Equity, February 21, 2020
Attachment – Why Federal Investments Matter: Human Services, January 2020
Attachment – Recession 2020

Attachment – A. Employee-Ownership, March 7, 2019

B. From Hearing on the 2016 Social Security Trustees Report

HHS FY21 Budget

Finance, HHS FY21 Budget, February 13, 2020
Ways and Means, February 27, 2020
House Budget, March 4, 2020

As we all know, the appropriations process for the next fiscal year takes place within the context of the Bipartisan Budget Act of 2019. In an election year, staying within the current parameters is the best course. Early passage makes transition easier for the next administration and Senate, regardless of electoral outcomes. Even if the President is reelected, staff turnover is to be expected in the Administration and the Committee. If changes are to be made due to changes in party, enactment before the election can always be supplemented with new legislation.

Our analysis on the level of spending has not changed in the past week. To repeat the BCA marks were devised to avoid a self-inflicted debt limit crisis and to conform to baseline requirements to fund making the tax cuts in the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Jobs and Growth Tax Relief Reconciliation Act of 2003 permanent for all but the richest 2% of households. There was no appetite for making detailed tax and spending fixes that would raise revenue from wealthier taxpayers. A quirk in baseline calculations allowed the prior tax cuts to expire and be reinstated for the bottom 98% under the American Taxpayer Relief Act of 2012. In 2017, the Tax Cut and Jobs Act was passed with no concern for long term balance, which was reinforced by the Balanced Budget Act of 2018.  The TCJA expires, in part, in 2025. BBA 2018 expires at the end of FY 2019.

In the long-term, as we have stated recently as well, debt will be a problem – but not within the next few years – as neither Europe nor China will enact the same kind of consolidated income tax, debt and monetary reserve system that allows us to be the world’s currency securitization provider. See Attachment One for our latest on the Debt.

Debt reduction must not be an excuse to cut entitlements. As we state in our debt volume, Squaring and Setting Accounts: Who Really Owns the National Debt? Who Owes It? - December 2019, the debt assets owed to the bottom 40% are sacrosanct, as they paid for it with regressive payroll taxes while they were working or by having to shift from the Civil Service Retirement System to the Federal Employee Retirement System which required savings rather than a defined benefit. Forty years ago, the decision was made to advance fund the retirement of the baby boomers, rather than immediately begin subsidies from the general fund. Doing so would have required repealing the tax cuts on the rich enacted by President Reagan, the Senate and just enough conservative Democrats in the House to do damage.  They also gave us the ill-advised 1986 tax reform.

Now that the wealthy have to pay what they owe to the trust fund (or rather, the children of the wealthy of the 80s), people are talking about means testing Social Security and were talking about making it attractive to upper classes by investing it. The latter non-sense died in 2008. The former would again make asset holders fix the debt liability of the top 10%. It would also rob the bottom two quintiles of their most effective voice – higher income taxpayers who do receive benefits. As long as they get them, the program is safe.

While we do not expect comprehensive tax reform in the last session of this Congress, we remind you it is inevitable, with our proposals detail again in Attachment One.

The answer cannot be shifting liability down or claiming that we owe debt on a per capita basis. It is raising taxes enough so that the debt is reduced and incomes for most households are increased.

To sell a tax increase on high incomes (or wealth, for that matter), we must make the wealthy want to pay more. They won’t do so to fund Medicare for All, the Green New Deal or to decrease abortion by increasing the Child Tax Credit. They will do so to get their children and grandchildren out of hock.

We are not without solutions. Our tax reform plans, which can be found in Attachment Two, provide more money to families with children, while a higher minimum wage for both work and education from ESL and adult remedial education to technical certification and junior college through our Subtraction Value Added Tax proposal.

Attachment One - Single-Payer, June 12, 2019 
Attachment Two - Tax Reform, Center for Fiscal Equity, November 13, 2019 
Attachment Three - Wealth Taxes