Paid Leave, Child Care, and an Economy that Failed Women

WM, Worker and Family Support: Universal Paid Leave and Guaranteed Access to Child Care, May 27, 2021

Among these comments are a set of solutions to the problems of paid leave and childcare.The proposals offered in these comments repeat prior submissions from last year, specifically:

• Ways and Means Subcommittee on Worker and Family Support, Combating Child Poverty in America, March 11, 2020
• Finance, Round Table on Paid Leave Proposals in the COVID Era,, June 18, 2020
• Ways and Means Subcommittee on Worker and Family Support, The Child Care Crisis and the Coronavirus Pandemic, June 23, 2020
• Ways and Means: In Their Own Words: Paid Leave, Child Care, and an Economy that Failed Women, Apr 21, 2021

In January, I commented that sick leave is especially essential to prevent the spread of disease. Unless one argues that it is ultimately good for the population to catch minor illness to build immunity, once a worker or their child falls ill, having to work while ill can be torture. With COVID19, the lack of sick leave can be a death sentence. I was an early SARS-CoV-2 adopter. I do some of my writing at the Alexandria Public Library. On the bright side, because I had been sick in 2019 and had been a stay at home Dad within the last decade, I did not die.

Not requiring sick leave has been justified by the reactionary sector that claims that in the end, the market will sort everything out. Keynes would respond that in the long run, we are all dead. Let me add that one should not have to wait to die for a day off. Marx would agree. For the market to work, there must be both perfect information and no barriers to entry or exit, no black lists, no private salary information. No such luck.

The perception that doing the right thing makes a business non-competitive is the reason we enact minimum wage laws and should require mandatory leave. Because the labor product is almost always well above wages paid, few jobs are lost when this occurs. Higher wages simply reduce what is called the labor surplus, and not only by Marx. Any CFO who cannot calculate the current productive surplus will soon be seeking a job with adequate wages and sick leave.

The requirement that this be provided ends the calculation of whether doing so makes a firm non-competitive because all competitors must provide the same benefit. This applies to businesses of all sizes. If a firm is so precarious that it cannot survive this change, it is probably not viable without it.

Childcare is best provided by the employer or the employee-owned or cooperative firm.On-site care, with separate spaces for well and sick children, as well as an on-site medical site for sick employees, will uncomplicate the morning and evening routine. Making yet another stop in an already busy schedule adds to the stress of the day. Knowing that, if problems arise, parents can be right there, will help workers focus on work.

Larger firms and government agencies can more easily provide such facilities. Indeed, in the Reeves Center of the District Government, such a site already exists. When the crisis is over, a staff visit would prove illuminating.

Smaller firms could make arrangements with the landlord of the building where offices or stores are located, including retail districts and shopping malls. For security reasons, these would only serve local workers, but not retail customers.

A tax on employers would help society share the pain for requiring paid leave. Firms that offer leave would receive a credit on their taxes (especially low wage firms. Tax rates should be set high enough so that

We have included as our usual attachment the latest version of our tax reform proposals. Please refer to the provisions for a Subtraction VAT regarding the remainder of these comments, as well as our treatment of individual payroll taxes, which explain why a child tax credit is better than an EITC. Applying for an EITC is part of why it is expensive to be poor. For most, outside help is needed to calculate it. Paying it is a cost of poverty.

Our main proposed employer-paid subtraction value added tax. This levy would be used more to channel tax expenditures to employees rather than through categorical or block grants. The most important feature is an expanded refundable child tax credit, which would be distributed with pay and set to provide income at median income levels.

The S-VAT could be levied at both the state and federal levels with a common base and tax benefits differing between the states based on their cost of living (which would be paid with the state levy). The federal tax would be the floor of support so that no state could keep any part of its population poor, including migrants. It is time to end the race to the bottom and its associated war on the poor.

Tax reform would help both low wage workers and remove the incentive to move workers who are essentially full time to the gig economy, staffing services, franchise employers and 1099 employment. Because these “vendors” would have to pay the tax and receive the breaks, client firms would have the incentive to hire them instead.

It is time to end the two-tier economy. No one should have to work in what Michael Harrington called The Other America. With the end of welfare as we knew it, circumstances have actually gotten worse since Harrington’s seminal work. The rise of delivery services, which require drivers to earn tips, and the gig economy, which prevents easy tipping, has made things even worse in the name of progress. We are working harder for less. This Committee can start the ball rolling to fix this.

WM: In Their Own Words: Paid Leave, Child Care, and an Economy that Failed Women, Apr 21, 2021

I compliment your selection of a title, which appropriately mocks the anti-socialist fear mongering by Donagh Bracken and Terry D. Turchieo in their volume by the same name. Your witness list serves as a stinging rebuke to these effete reactionaries. 

As a former stay at home parent, I feel a bit left out. The problems of paid leave and child care entered into my calculus in returning to work as soon as I did (which I regret having to do). If I knew then what I knew now, I would have spent another year at home. I sought forbearance on the student loans I went back to work to pay down, which have since been forgiven due to my long term disability.

When I returned to the workforce in February 2006, it was through a staffing agency. There were no benefits, especially not paid sick leave. As my daughter started getting colds from her daycare, I started getting any cold that had evolved since my childhood. I was forced to bring these to work, which the client hated. Because there was no leave and no daycare, they had no leg to stand on. 

After 2006 was up, my assignment ended and I sought other assignments. During the next one, I fell and injured my elbow. I was able to work through the pain until the person I was covering for came back from maternity leave. Because I was undergoing weekly physical therapy, my agency would not assign me to another client until therapy was finished. I was not paid for my time off, nor would we take my child out of daycare (which was over $900 per month). A recently provided credit card provided spending cash, but the debt was never quite paid off until we declared bankruptcy when our condo was underwater in 2013-2014. Once we lost the house, I lost the marriage.

I was unemployed after 2011 budget cuts ended my position at Graduate School USA. I have not held a professional position since then. During that assignment, I received care from the National Institute of Health for an adrenal adenoma. The surgery was paid for, but the time off was not. 

There were a few temp assignments and a low wage job to keep food on the table, but the mortgage was not being paid. There was, of course, no leave. Indeed, although I arranged for time off, or thought I had to pack up my half of our household, I was reprimanded for missing work. Of course, there was no leave then either. I lost that job in 2015 and have been disabled ever since, with benefits starting in late 2015. Disability has allowed me to devote adequate time to submitting comments to the Revenue Committees and turning my comments to date into a series of volumes.

Attachment: Tax Reform

What is income and how to tax it

This post is a riff off of Howard Gleckman's TaxVox post Biden’s Tax Plan May Make Congress Come to Grips With The Question: What Is Income? I am posting it here so I can keep track of the response rather than digging through Facebook or TaxVox later.

Marxian economics can clarify a few points. The first is that, if capitalists can give themselves a better deal on benefits, such as health insurance, they will do so. They consider the money to do this as theirs, not the employees. If their obligations to provide benefits decrease, they will not increase salaries. They pocket the difference. Unless wage slavery is assumed in tax policy, the tax policy is incomplete if not wrong. The only scenario where changing a tax break to an income increase would occur is if the government changed withholding tables to force the employer to distribute the amount in cash.

Unrealized capital gains and undistributed shareholder equity are speculative. Indeed, there is no intrinsic value to secondary market stocks. It is literally monopoly money. If there were a wealth tax, the best way to collect (probably the only way) is to collect from the asset creator rather than the asset holder. In other words, if I own $100,000,000 in XYZ shares above the floor and the tax rate were 1%, the responsibility to self report would be may accountant (because that works so well now in paying these taxes currently - hint- sarcasm) or to have XYZ company write a check for a $1,000,000 to the IRS.

Anyone who thinks that this won't be made up for in lower wages (to the extent that this is allowed by monopsony power), higher prices (to the extent that this is allowed by monopoly power) or by stock price declines (making other shareholders eat the loss) is welcome to contact our former President. He has some land next to is resort he would like to sell you.

By far, the biggest give away to the wealthy is not unrealized gains, it is the exception to paying taxes on gains and dividends held by mutual funds. The top 10% hold 77.5% of these assets. The top 1% hold 77.5% of that - and so it goes until you get to the top 1450 taxpayers, who own 28% of mutual fund assets. The top 0.1% hold half of these assets.

How to get the money? Tax transactions, not people. That sounds like a slogan! Current tax policy does this implicitly, but with lots of leakage. In other words, when you sell a stock, the buyer is paying you enough to pay your capital gains taxes. That is where the money comes from.

When you sell your labor, the buyer is paying your salary and payroll taxes. When you get a tax benefit, other taxpayers pay more for you to undertake a preferred activity - like feeding your children or paying a higher mortgage to the bank or a higher sales price for your house. As in the article, who actually pays the tax is a matter of perspective. The question is, which perspective is useful.

Mark first sale after inheritance, gift or donation to the Tax Policy Center (et al) unless sold to a qualified ESOP and at option exercise. That means that, instead of taxing the difference in value at exercise at income, you tax the entire purchase at market.

Going back to Marx, the point of income and inheritance taxation was not to fund social welfare. It was to change the human relationships so that workers are not wage slaves. Economics is about social relationships, not accounting. The purpose of tax policy should be to encourage better relationships and punish exploitive ones.

Back to Biden, his plan is a step backwards. It is based on who should be taxed or not taxed, not what. All capital income and gains should be taxed at the same rate - somewhere between 24% (current, when SMI and Pease are included) and 28% or 41%, depending on the asset type. That last bit is a step backwards. I like the $400,000 limit on having pay salary taxes at all, with the rest of salary taxation buried in higher tier taxes paid on salaries but collected and filed by employers. At the highest level, this amounts to a 52% tax on income over $680,000, but it eliminates income shifting.

Eliminating income shifting should be the goal of any analysis defining income. Biden's plan makes the problem worse.

Telehealth/Health Care Flexibilities

WM Health, Charting the Path Forward for Telehealth, April 28, 2021

Finance, COVID-19 Health Care Flexibilities: Perspectives, Experiences, and Lessons Learned, May 19, 2021

Flexible healthcare delivery, especially Telehealth is part of increased automation in medicine. It began with electronic charting. (Bravo on the selection of the title of the WM hearing.) The emergence of telehealth predates the pandemic. It started as a cutting edge way for experts to consult on cases. In recent years, it has included using radiologists in South Asia to read all manner of X-Rays and scans, delivering a diagnosis to emergency rooms, urgent care and doctor’s offices.

The question of taxation must be discussed at this point. Perhaps duties should be included for such off-shore medicine. They certainly must be in the event value added taxes are established in the United States. This would bring us into the OECD norm. Senator Hatch has retired, so it is now safe to talk of such things. 

If we adopt Medicare for All, such taxes would be counter-productive. Without some kind of employer-paid subtraction value added tax, it is hard to see the creation of an affordable public option , let alone Medicare for All. Part of any transition would have to include an asset value added tax, which would include ending Pease and Affordable Care Act SMI taxes on non-wage income over $200,000. See the attachment for more information on these proposals.

The pandemic has made telemedicine the new normal. I will be glad to see it go, or at least play a smaller role. It is hard to get a good medical history and list of symptoms on a videoconference or phone call. People likely died, either of complications from the pandemic (like suicide) or SARS-Cov-2. This requires explanation.

The disease occurs in five phases. In phase one, the patient experiences symptoms of a heavy cold which goes away after a week. This phase is largely ignored by the medical community because it is impossible to get to see a doctor in person. To be fair, most patients manage these symptoms with over-the-counter medication. Symptoms last for a week. Phase two is asymptotic. 

People believe they are well, even if they assume they were suffering from COVID. In reality, most of the spread of the disease happens during phases one and two. During this period, people do not have fevers, coughing and all but one of the symptoms which are used to screen for COVID.

The intense symptoms start with phase three (SARS2) or phase four (assuming individuals have some degree of immunity from pulmonary disease, or possess inhalers - especially steroids - to manage them. 

The patients who eventually die do not know that they have COVID. They believe that symptoms will go away in a week, just as they did in phase one. Access to primary care at this stage, as well as vital information on the disease would have saved lives at this point. Add fear of dying of COVID in the Intensive Care Unit and this fear became a self-fulfilling prophesy.

The main feature of phase four is crushing fatigue, either from lung symptoms or the development of immunity. These symptoms are a two week version of the reaction to either the first shot (for people who have had the disease) or the booster (for people who have not been sick previously). 

Phase five is the long term healing, which includes coughing up mucus. Medications, such as Robitussin, are valuable for these symptoms. This phase takes a long time to clear.

Deaths are still declining, as the current available vectors are less likely to die. For a few weeks, they just wish they would. Younger patients are experiencing the third wave. Minnesota, Michigan and Ontario are likely still experiencing their first wave. This disease is spread by sneezing on people you know, usually at home or work. It has spread from Seattle and New York to the rest of the nation, meeting in the southwest and moving north. It is running out of places to go.

As more and more people get vaccinated or simply have the disease and recover, it likely will disappear, like magic. When it does, we can get back to normal medical practice. Quite a bit of care has been foregone during the pandemic. There is a lot of catching up to do.

Attachment: Tax Reform

Financing Infrastructure Investment

WM: Leveraging the Tax Code for Infrastructure Investment, May 19, 2021

Finance: Funding and Financing Options to Bolster American Infrastructure, May 18, 2021

Our recommendations on funding infrastructure with a motor fuel tax are still valid. We could also use a carbon value added tax to provide receipt visibility for more informed consumer choice. The key to making such taxes adequate, aside from recognizing the inelastic nature of gasoline prices, is to bring back “pork barrel” spending. 

We submitted testimony to the Energy and Water Projects Appropriation regarding fusion power and electric vehicles on dedicated roads with computer control. These are attached.

A key part of any infrastructure plan is to encourage household spending, which is helped by government action and results in industrial spending on plant and equipment. 

As we commented to Ways and Means last month regarding Trade Infrastructure:

Recent changes to the Child Tax Credit are the best (trade) infrastructure we can hope for, although a higher minimum wage is even more desirable. People need more money to buy imported goods and to go back into the labor force. There are many discouraged workers, some of which turn to less than legal means to earn an income. It is time to allow them back into the light. Work does not meet the needs of many workers. Now is the time to change this.

On the government side, the Internal Revenue Service has been tasked with distributing the CTC before the end of this tax year. July is the current goal. We can do better. Rather than relying on payments from the IRS, families who already receive some form of government benefit should receive a refundable CTC through their current benefit stream. We can start this today. Computers can be programmed and cash delivered.

Part of the need for economic infrastructure must be an immediate COLA for Social Security beneficiaries. Of late, food prices have gone through the rough. Now that stimulus payments have been spent, many of us will be very hungry, very soon. We cannot even by cola without a COLA.

Benefits to workers are even easier to set up. Simply promise employers that they can take any additional credits paid due to refundability (they can already manage adjusting normal withholding) as a credit to their quarterly payments to the Internal Revenue Service. Easy.

Last month, I told my story as a stay at home parent who had gone back to work, adding an analysis of sick leave and child care infrastructure issues.:

Not requiring sick leave has been justified by the reactionary sector that claims that in the end, the market will sort everything out. Keynes would respond that in the long run, we are all dead. Let me add that one should not have to wait to die for a day off. Marx would agree. For the market to work, there must be both perfect information and no barriers to entry or exit, no black lists, no private salary information. No such luck.

The perception that doing the right thing makes a business non-competitive is the reason we enact minimum wage laws and should require mandatory leave. Because the labor product is almost always well above wages paid, few jobs are lost when this occurs. Higher wages simply reduce what is called the labor surplus, and not only by Marx. Any CFO who cannot calculate the current productive surplus will soon be seeking a job with adequate wages and sick leave.

The requirement that this be provided ends the calculation of whether doing so makes a firm non-competitive because all competitors must provide the same benefit. This applies to businesses of all sizes. If a firm is so precarious that it cannot survive this change, it is probably not viable without it.

Childcare is best provided by the employer or the employee-owned or cooperative firm.On-site care, with separate spaces for well and sick children, as well as an on-site medical site for sick employees, will uncomplicate the morning and evening routine. Making yet another stop in an already busy schedule adds to the stress of the day. Knowing that, if problems arise, parents can be right there, will help workers focus on work.

Larger firms and government agencies can more easily provide such facilities. Indeed, in the Reeves Center of the District Government, such a site already exists. When the crisis is over, a staff visit would prove illuminating.

Smaller firms could make arrangements with the landlord of the building where offices or stores are located, including retail districts and shopping malls. For security reasons, these would only serve local workers, but not retail customers.

A tax on employers would help society share the pain for requiring paid leave. Firms that offer leave would receive a credit on their taxes (especially low wage firms. Tax rates should be set high enough so that

From January 2020 Comments to the House Budget Committee: 

Our main tool in providing for human services is an employer-paid subtraction value added tax. This levy would be used more to channel tax expenditures to employees rather than through categorical or block grants. The most important feature is an expanded refundable child tax credit, which would be distributed with pay and set to provide income at middle class levels. 

The S-VAT could be levied at both the state and federal levels with a common base and tax benefits differing between the states based on their cost of living (which would be paid with the state levy). The federal tax would be the floor of support so that no state could keep any part of its population poor, including migrants. It is time to end the race to the bottom and its associated war on the poor.

The S-VAT will also facilitate human capital expenditures, with credits to support tuition, wages and benefits for low-skill workers from ESL and remedial education to apprenticeship. These benefits can be used in cooperation with existing workforce investment boards, community colleges and economic development agencies. 

Private education providers should also be included in the mix, including and especially the Catholic education system. Blaine Amendments need repeal, opposition to unions ended and a focus on non-college bound students encouraged.

Medicaid for senior citizens and the disabled is a huge contingent liability for some states. In his New Federalism proposals, President Reagan offered to assume these costs in exchange for state funding of all other federal support. The first half of this proposal should be implemented in the form of a new Medicare Part E with no requirement for local funding. 

The remainder of health costs would be paid through employer subsidies to low-wage trainees, as described above through an S-VAT, with state goods and services taxes (invoice VAT) covering cash, food and health benefits for unattached non-workers until they can be placed in the appropriate employment or disability program (including substance abuse intervention).

Increasing the general wage level, through higher minimum wages, will remove workers from poverty. The concept of being a member of the working poor should be banished from the national conversation with an eventual $18 (changed from $20) minimum wage for both employment and training program participation, starting with $10 changed from $15) immediately. This wage level should adjust for inflation automatically. The best support for state budgets is to make sure that everyone is trained up to their potential.

Tax credit support for families is a better recession circuit breaker than waiting for the Congress and state legislatures to act, although increasing the child tax credit (which should be inflation adjusted) is the best way to provide immediate stimulus, as do higher Food Stamps (which would be mostly repealed by a higher CTC). 

The other circuit breaker in a recession is increased income taxation on the wealthy. Recessions do not happen, as Marx and Schumpeter posited, from overproduction or a business cycle. They come about because the wealthy have received tax breaks which encourage asset inflation and questionable investment (often with an assist from the Federal Reserve so that such investments may be migrated to Main Street). Higher income tax rates take money from the savings sector so that the consumption sector can recover (even without government subsidies).

Higher taxes on the wealthy are beneficial to the economy, now and in the next recession, because they take money out of asset inflation in the savings sector and can then be used to increase spending on the elements of GDP: government purchases, household consumption, net exports and plant and equipment investment (which is not part of asset speculation, as supply side economists falsely assert). 

We submitted testimony on the Financial Services and General Government Appropriation regarding our proposed asset value added tax, which includes ending the exemption for mutual funds, and our current analysis on an upcoming recession and how to deal with it. This is also attached. Most of what we said in January 2020 is still current more than a year later, including that a new financial panic and recession is pending. The pandemic response by the federal reserve was a life preserver for the speculation sector. This time, we need to go beyond Wall Street.

Finally, we have attached our analysis of who owes and owns the national debt as a form of class warfare. Claims that the deficit is a vital issue are true, but the solution is not foregoing infrastructure, it is taxing the holders of the debt. Interestingly enough, President Biden identifies correctly those who are in that class. Their taxes should go up, but not to fund infrastructure. We will get more traction from the donor class once we demonstrate both who owns and who owes the national debt.

Attachment - Our Nation’s Crumbling Infrastructure

Attachment - FY 2022 Energy and Water Development Appropriation

Attachment - FY 2022 Financial Services Appropriation

Attachment - Debt Ownership as Class Warfare

COVID-19 Mental Health and Addiction Services

Finance:The COVID-19 Pandemic and Beyond: Improving Mental Health and Addiction Services in Our Communities, May 12, 2021

Mental health care and addiction services have actually stood up rather well during the pandemic. Zoom, and similar platforms, have stepped in nicely to continue face to face care where needed. Phone appointments and video calls have also worked in family practice settings where medication management is the only task. 

Managing m prescriptions and assisting my housemate in managing his contacts with his are much easier than a trip to our respective mental health providers.

Detox and rehabilitative services for alcohol and drug abuse are still active, although sometimes bringing in outside speakers is not possible if there are glitches in electronic media or in the event a facility is moving to a new location. This is the exception, not the rule.

In Montgomery County, housing of Drug Court clients has been moved from our Pre-Release Center to contracted half-way houses. The system has kept up with COVID.

Regular Twelve Step meetings are occurring remotely as well. Some new members have never been to an in-person meeting, although clubhouses and church basement meetings are now opening up and outdoor meetings (both masked and unmasked) have been occurring throughout the pandemic. 

Coronavirus and SARS2 infections occurred in the recovery community even when meetings were not held in person. People have mostly gotten sick in other places. Last year, older members got sick. This year, it is our younger members who suffer from the second wave. Older members have not been ill, having already recovered.

For many, including me, the virus spreads by being sneezed on in private during the first phase of the illness, which occurs before the asymptotic phase and the more serious symptoms).  

The first phase is largely attributed to seasonal allergies or bad colds. People die in the more serious phase because they expect it to go away as the first did. The CDC has either not detected this pattern or has not informed the nation of it, for whatever reason. This is more of a factor in causing death than masking ever was.

While I might have been infected at a public event last February, it is as or more likely that infection occurred as I was typing Comments for the Record at the local library or by having coffee or a meal or seeing a movie during that period. I infected others during the first period. During the later part of the asymptotic period, no one I breathed on took ill.

There is one area of major concern that must be addressed, although I am not sure how we can go about it.  During this crisis, before there was vaccine hesitancy, there was Zoom hesitancy. Some of our older members simply could not figure out or declined to use video calls to attend meetings. 

I experienced this reticence myself, not wanting to download software to my phone that was unknown to me. In the beginning, I was also too ill to do much more than eat, be tired from eating, rest and then go back to bed. It was only the usual miracles experienced by those who are spiritually awake that had me download the software and attend a midnight meeting.

My housemate is not technically savvy. Without my help, and the use of my Chromebook, he would still be visiting his psychiatrist in person, where he would be taken into a room for a teleconference with his doctor. 

He is a victim of the digital divide. It inhibits him (as well as the lack of a computer of his own) to seek English as a Second Language courses, which are free at Montgomery College (our local community college). His disability, which is matched by his lack of education and equipment hamper both his treatment and his ability to improve his skills. 

This is where improvement is necessary. As I have stated in previous comments for the record, paying a stipend to undertake both computer and basic literacy training is an essential incentive to seek it. Such stipends should not count against his disability payments. If they did, they would be a disincentive toward learning. It is a conservative meme that poverty leads to self-improvement. Research has shown that the opposite is the case. It certainly is for him.

And yes, better broadband in some areas of the country would be helpful, although this would not solve the problem of digital illiteracy, especially among vulnerable populations. Most people have access to the Internet through their cable companies, although those that do not should be given free access paid for by higher cable fees. 

Trade Policy 2021

 WM: The Biden Administration’s 2021 Trade Policy Agenda, May 13, 2021

Finance: The President’s 2021 Trade Policy Agenda, May 12, 2021

The last four years have shown us an extreme example of how not to use tariffs. The prior administration used economic policy as gunboat diplomacy, but without having a navy. We trust that from now on, trade policy will be handled by professionals, leading to a return to normalcy.

This is not to say that change is not needed. Donald Trump was originally elected by voters who saw the impact that bipartisan trade policy on their lives. Trump did not help, but for them, he at least tried something. In the long run, employee ownership is the solution for worker wellbeing on both sides of the border or ocean. Tax reform, including a border adjustable credit invoice VAT, a subtraction VAT to distribute benefits to workers and their families and an Asset VAT to close the tax gap, channel more ownership shares to employees and a negotiated rate to establish better international cooperation on business taxation.

The United States leaves millions of dollars on the table because we do not have a value added tax that is zero rated at the border, while applying to all goods and services imported. Please see the attachment, distilled from prior year comments, which explains how we propose to do this. Note that adding border-adjustable goods and services taxes allows the removal of other trade barriers with no loss of jobs. 

We do not agree with the Administration’s resolve to not raise taxes on anyone making under $400,000 per year. This proposal led to constant attempts to repeal the Affordable Care Act, not because of any flaw in the Act, but because of how it was funded with surtaxes on unearned income over $200,000. It is almost as if the Majority was setting a future Republcian Majority up (which happened rather quickly) to make itself look bad by having these votes. The constant repeal votes, however, provided no electoral advantage. 

Still, we agree that initially, VAT should not make some people poorer. When subtraction and a credit invoice VAT is first implemented, we propose doubling the child tax credit again so that families with children are not affected. A higher minimum wage ($10 now, $12 soon - or $11 with a 32 work week - and eventually $15) will indemnify the rest. 

During the transition, income tax withholding will be adjusted to increase net income by 13%. The additional 6.5% invoice VAT rate comes from eliminating employer payments for FICA (which has the effect of eliminating the cap (and crediting each worker with the same amount. 

All in all, our proposals are better for most of the working class than the status quo, although not everyone. Some people deserve to pay more. Please see our attachment on Tax Reform for more information.

We also propose a Carbon VAT, which is necessary for people to make spending decisions on the health of the planet (which is why carbon levies will be receipt visible rather than simply changing the price).

We propose an asset value tax with a compromise 26% rate (halfway between the current 24% and the Biden 28%. The asset VAT would mark option exercise and the first sale after inheritance, gift or donation, with zero rating for sales to Employee Stock Ownership Plans.

The first attachment on trade policy and the VAT includes how expanding employee ownership is the best trade policy for workers. Briefly, employee owners in the United States have an incentive to give foreign subsidiary and supply chain workers the same ownership rights and standard of living they receive. In order to do this, however, amendments to ERISA are necessary, as on paper owners will be paying more for the same products than they are paying now.

Attachment: Trade Policy

Attachment: Tax Reform

Legislative Branch FY 2022

House: Legislative Branch Appropriation, May 8, 2021

Thank you for the opportunity to submit testimony on the Legislative Branch Appropriation for FY 2022. I will also address the budget process itself, the need for increased professional staffing to prepare more detailed committee reports, and the District of Columbia Appropriation.

The most important issue in enacting this appropriation is that it should be passed last. Doing this would give both houses an incentive to get their work done prior to the end of the fiscal year, or if supplemental appropriations are necessary, then this would be an incentive to move with alacrity.

Appropriations Testimony - Report Language

Funding of the District of Columbia, by which I mean funds for the residual area not included in the Washington, Douglass Commonwealth or federal appropriations proving additional funds to the current District of Columbia government and those state functions which have been assumed by the federal government (although these will be addressed as well.

The Home Rule Act dictated that a single Administrator should be appointed by the President to submit an annual request for reimbursement for services provided to the District in its role as the national capital. The Administrator would also serve as the supervisor for all police forces serving the National Capital Service Area.

This position was never filled. Over the last 44 years, the federal government has incurred quite a large bill. The federal payment was only meant to compensate the District for funds that would have otherwise been collected from a non-resident income tax. As a former staff member in the Office of the City Administrator, I can assure you that no invoice has ever been submitted, largely because there was no one to submit it to.

Likewise, the desire to maintain turf has kept the Federal Protective Service, the National Park Service, the Capitol Police and numerous other forces from being united as a single force, which also doomed the appointment of a single administrator. Currently, the Metropolitan Police take on coordination and incident command when events occur within the NCSA. 

They do an outstanding job of keeping order, as was demonstrated in response to the January 6th insurrection. Had they been deployed earlier, along with the DC National Guard, events may have been controlled sooner. They do this without direct compensation from the Federal Government, essentially offloading such costs to District taxpayers. Indeed, amendments to the Home Rule Act have specifically banned reimbursement for services provided to presidential motorcades. 

The original purpose of having a separate national capital was to see to the protection of the government, which was a reaction to the “Insult in Philadelphia.” The truth of the matter is that members of the Pennsylvania Militia came to the city to demand payment from the government of the state. The United States Congress (of the Confederation) was considered a non-entity, which is the insult that cut most deeply. That for a century, little payment was made to the City (and then Territory) of Washington. This was largely because members had no electoral incentive to do so. 

Aside from public safety, the major expense faced by the District Government, which will likely be born by the 51st State, is the warping of roads caused by buried steam pipes from the congressional heating plant.

With the advent of statehood, and until it is finally achieved, a separate funding stream must be established for services rendered. The ideal vehicle for doing so is this appropriation. In short, Congress wanted a District it could control. It must pay for the costs of services provided to it.

A separate matter is the size of the residual D.C. Government. It should only include the grounds of the Capitol and of the Supreme Court. Other portions of the NCSA, if excluded from the new state would make any non-resident income untouchable for tax purposes. I suspect that this was part of the price for support for statehood by neighboring jurisdictions. 

This deal was made so long ago that it has been lost to memory. Only Delegate Norton is left. Her partners in any such arrangement, with the exception of the Majority Leader, have long ago left the Congress and their service will likely end as well in the not so distant future. H.R. 51 should be amended to allow for establishment of a regional non-resident income tax. 

The desire to preserve the ban on such taxes has led to an imbalance of funds between Maryland and Virginia. Commuting from Tyson’s Corner to Montgomery County features slow traffic all the way from I-66 to the American Legion Bridge. The FY 2000 budget was to include a study of commuter patterns and their impact on all jurisdictions until Mr. Davis had it removed. This was short sighted of him. 

Any non-resident income tax could be dedicated to paying for mental health and corrections expenses for the new state to be provided by the neighboring state. When the Recovery Act was enacted in 1997, federal funds were used to house D.C. felons in Maryland and Virginia while federal arrangements were being made. It is time to bring these inmates back to the area. 

In 1998, I assisted Mayor Barry in preparing remarks to the federal government to assume mental health services, which are generally a state function. As police reform moves forward, corrections reform must follow as I outlined in my testimony to the Commerce, Justice, Science and Related Agencies Subcommittee of April 29th.

These arrangements will be negotiated in the transition to statehood, but there is no reason not to begin work on them now as doing so removes objections to passing H.R. 51. 

These arrangements will be negotiated in the transition to statehood, but there is no reason not to begin work on them now as doing so removes objections to passing H.R. 51. 

Tax reform, which we have long advocated, would include an employer-paid subtraction VAT. The first tier of this VAT would fund services to families, such as a permanent child tax credit, daycare and sick leave. 

On the state level, such a tax would fund services provided to workers and their families, especially education and social services (including those provided to non-workers. Workers in the current national capital service area would fund services to the new state. In this case, some form of non-resident income tax would be required to fund services to non-resident workers in the District. In essence, the shoes would be on the other feet (Maryland and Virginia).  Again, making these arrangements now would make such arrangements easier to justify in the future.