IRS Whistleblower Investigation

WM: Meeting on Documents Protected Under Internal Revenue Code Section 6103, June 22, 2023

June 28, 2023

Hon. Jason B. Smith, Chairman, The Committee on Ways & Means

Re: IRS Whistleblower Investigation

I write today to urge you to end this investigation. 

As you know, enacting a Bill of Attainder is unconstitutional, so this line of inquiry can only be regarded as slander at best and at worst, abuse of power and acting as an accessory to Mr. Jordan's efforts to obstruct Special Counsel Smith's investigation into those events which took place on December 28, 2020 that were likely an element of the Insurrection.

Earlier today, Mr. Giuliani volunteered his testimony to Mr. Smith. Rudy cannot stop talking once he starts, so the involvement of members in the run up to the events of January 6th, which are public knowledge, were likely part of the conversation.

The subject hearing can only be seen as pre-taliation for any actions by Mr. Smith or an attempt to have the President order the end of the investigation. The President does not have the power or the willingness to do so. Note that he already arranged for the firing of the Ukrainian prosecutor which was protecting Burisma from prosecution. If you assume that he knew his son was in the Burisma board, this would hardly earn him father of the year honors. It is therefore unlikely that he would obstruct the January 6th investigation as part of some pride quo pro to benefit the Congressional co-conspirators.

Please do not get caught in this affair. While Hunter Biden is unable to bring suit in this matter due to the Speech and Debate Clause, such abuses of power can be examined by the Committee on Ethics. Although neither Mr. Biden or the President is likely to refer this matter to them, Mrs. Rochester may do so regardless of their silence.

cc: Hon. Lisa Blunt Rochester

Deficit Economics

To start with the obvious, the impact of the debt on the economy comes from fiscal policy (taxing and spending). The size of the national debt and the federal budget began to balloon with the passage of the Sixteenth Amendment authorizing the taxation of income. Prior to this amendment, the direct taxation provisions in the United States Constitution, which apportion direct tax liability between the several states based on population enumeration, were never used because they would fall more heavily on poorer states and less heavily on richer states. With the exception of the funding for the Civil War, which was funded by an income tax, revenue was raised from excise taxes and tariffs and the government remained small. 

The need for spending increased with World War I and became entrenched after World War II. Modern budgetary economics dates from that era. Boom and bust cycles could now be explained by what we call welfare economics. We can now measure economic growth (changes in Gross Domestic Product) and see how we are doing before catastrophe strikes.

Gross Domestic Product (GDP) is determined in theory and economic policy by the following equation. GDP=Government Purchases + Household Consumption + Investment in Plant and Equipment + Net Exports – Imports. Investment is not mean happens on Wall Street or the Commodities Markets. These deals are done with monopoly money and affect the mix of savings. Sadly, many economists and journalists conflate the two. 

The yeast in every economy is when the government buys things, pays people and transfers money to the poor and retired. This leads to household spending, leading to household spending in the non-government sector as well. All of this causes investment in plant and equipment – regardless of how it is funded. 

Government's impact comes in more than just buying stuff. It is a major contributor to household consumption through other and including the stuff it buys. It buys or creates natural resources (food, oil, land, and water), supplies, buildings, military assets, health care (military, civil service, old age, disabled, Indian, international, indigent), transportation infrastructure roads, airports, bridges, spaceports, and private capital used to make government purchases.

Government distributes current and future household income via employee salaries, military pay, government pensions, old age, survivors and disability income, interest on government trust funds, contractor pay and benefits, Temporary Assistance to needy Families, Food Stamps, supplemental security income, temporary disability income, refundable income and child credits, pays net interest to bondholders, and distribution of resource payments to tribal nations (land rentals and resource extraction). This amounts to more than half of household income resulting in consumption and savings.

Consumption from these income streams also creates private sector income, leading to consumption and savings (second and third order - which is private sector spending and savings resulting from private sector consumption). All of this leads to investment in land, plant and equipment for household consumption and exports.

Tax collections and double counting are the means by which all of this spending goes round and round. The double and triple counting is what is known as the multiplier effect.

Government spending is 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.

The deficit or surplus is a barometer of whether we are about to grow or shrink the economy. In the financial markets, when the deficit is equal to what we spend on net interest, injections and leakages from fiscal policy balance out.  When they are not equal, we can tell how the economy is likely to go. If fiscal policy is extracting money from the savings sector, the deficit goes down AND more government spending and household spending results, making GDP higher. If fiscal policy is shifting money from consumption to savings through tax policy, the economy slows unless offset with more spending or higher transfer payments.

Predicting Growth

… The real revolution happened under Reagan, however, in a three round tax cut and subsequent comprehensive tax reform. The latter changed the basic structure of tax rates in a way that has seen adjustments, but no revolutionary change, since then.  For this reason, we will demonstrate how taxing and spending interact from that point. The Reagan expansion was not due to tax cuts. It was due to high deficits that resulted from deficit spending. As this chart clearly shows, The larger the deficit, the more economic growth the next year.

After the 1990 budget deal, which reduced tax rates on the upper middle class (33%) and increased rates on the upper class (28%) to a flat 31% rate. Capital and labor rates were the same and as effective payroll tax rates decreased, the income tax rate kicked in, yielding a 30% flat tax for most taxpayers. That increase on top taxpayers shifted more savings toward consumption.

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.

President Clinton raised taxes to 36% with a 10% surtax (3.6%), further increasing growth. The resulting expansion continued until the tech boom and bust, which was triggered by a lowering of the capital gains tax rates. This made taxes lower for investing in or starting an IPO than working. 

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.

When President Bush 43 took office, tax cuts were already in the agenda. There were concerns that a balanced budget would create a shortage of federal debt to back monopoly money for the rich. The tech bust provided additional justification for tax cuts. This repeated the Reagan economy, where deficit spending was required to keep up with the tendency to shift profits from consumption and offset two rounds of tax cuts. Lower capital gains rates fueled an investment bubble. Slower consumption and income growth caused the Federal Reserve to cut interest rates and fuel an asset bubble. This gave us the Great Recession.

In reaction to the Great Recession, President Obama increased spending. Had he let the Bush Tax cuts expire on schedule, the recovery would have been more vigorous due to less saving, more consumption and higher incomes. Insisting that the Federal Reserve mark mortgage debt to market would have been more effective.

The Budget Control Act of 2011 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.  This likely added almost a point to GDP growth.

The ATRA of 2012 (passed January 2, 2013) increased tax rates on what is now the top $1.225 trillion of salary, leaving increases on those who now pay over $6 trillion on the table. Over the last six years, that left $600 billion dollars of revenue on the table. Making the upper middle class pay at Clinton rates would have let us tax enough to avoid that amount of spending cuts – or allowed less stringent collection of student loans. Without publicly financed elections, the upper middle class is more influential in some ways than the top 1433 families.

After the 2013 uptick in growth, spending increases for the Great Recession expired and were not renewed. The economy flattened in 2015, probably in response to budget cuts the prior year, slowing to an average 2% growth rate. Higher taxes would have meant more spending and less accommodation of speculation by the Federal Reserve would have kept more money out of the make-believe world of Wall Street. 

President Trump’s focus on the wealthy and the bad tax cut bill started to make matters worse. The first data point after the Tax Cut and Jobs Act is a full point of GDP below his first year in office (which was due to Obama’s tax policy (and therefore, his economy). After that, the COVID recession and recovery are outliers, because it was a designed recession, not one that was the result of fiscal policy.  

Cattle and Deforestation of the Amazon

Finance: Cattle Supply Chains and Deforestation of the Amazon, June 22, 2023

On June 21st, approval was granted to two firms to manufacture lab grown meat. A video describing how this is done and what it tastes like (hint: chicken) can be found at https://youtu.be/08nHuUbt8SQ The first approval was for chicken, but lab grown beef is in the pipeline. In the future, especially for restaurants, this innovation will replace all imported beef and much of the domestic variety. Until then, the best way to deter bad actors in the import supply chain is to enact consumption taxes, which has huge advantages for trade. Please see the first two attachments for more about each topic.

As for JBS, no one is surprised that they would engage in greenwashing. The reason this becomes attractive, however, is the confused nature of development policy. To be truly fair, invitations to testify should have been extended to the United Nations Development Program, the Government of Brazil and the International Monetary Fund, as well as those critics of the status quo of sustainable development.

What you will learn, if you ask the right questions, is that it is often development agencies that encourage developing nations to clear land and plant crops or pasture cattle for export. The new trend is to try to make sure this is done in an environmentally friendly manner - but when development loans must be paid back to the International Monetary Fund, it is most likely that forests will be cleared.

I am one of those people who believes that the current development program should be reformed, starting with forgiving loans that mostly fund aid professionals rather than their target populations. Please see the third attachment for what I would put in the place of the current regime - and why it is essential to do so (hint: China).

In April 2021, I provided comments to this committee on Climate Change. The first part of these comments are repeated in the fourth attachment. I say this to establish my credibility on the topic. Part of credibility is truth telling. The truth is that trees grow like weeds. If they are not prevented from doing so by intensive agriculture, trees will grow where the climate allows them to. Look in the environs of Mount St. Helens to see how forests respond to being left alone. Deforestation is never permanent. In development, planting trees is how land is taken back from the desert. Switching to lab grown beef and better development practices will allow the Amazon to heal itself with no effort on our parts.

Attachment: Consumption Taxes Video Links Included

Attachment: Trade Policy Video

Attachment: Sustainable Development for Inner Cities & the Developing World

Attachment: Climate Challenges and the Tax Code

Economic Excellence through Tax Policy

HBUD: 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.. 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.

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. (Italics signifies text not included in the 2024 comments.

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 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.

Attachment: Tax and Job Cuts Act (not a typo)

Attachment: Deficit Economics

Attachment: Tax Reform Videos included

Anti-poverty and family support v work requirements

Finance: Anti-Poverty and Family Support Provisions in the Tax Code, June 14, 2023

These comments restate those made to the Ways and Means Work and Welfare Committee in March regarding work requirements. As you might guess from our prior comments from the record, we challenged the main assumption of the hearing.

WM Work and Welfare: Welfare is Broken: Restoring Work Requirements to Lift Americans Out of Poverty, March 29, 2023

The short answer to using work to lift families out of poverty is to make work pay, which sounds like a good topic for a hearing before this Subcommittee. Indeed, there is a term for making people go to work for inadequate pay: slavery.

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

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

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

The second way to make work pay is to increase the already existing Child Tax Credit. To increase the incentive to work and grow the economy, the credit must be made fully refundable. People do not seek out low wage jobs because the credit is too generous. Just the opposite is true. When family wages are adequate, people make investments in themselves, like further education and skills training, so that they can move up the economic ladder.

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.

Please see the attachment for the latest details of our tax reform plan. This approach is superior to the prebate mechanism proposed for the Fair Tax and for the same reason. The government should not be the national paymaster for every family.

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.

Poor people need to work longer hours to make ends meet. Their opportunity costs to seek education are, therefore, high because education cost is competing with food and shelter (both of which are inadequate for workers and their families at current wage levels). If the Subcommittee is serious about getting people to work their way out of poverty, it must give them the tools to do so, which means paid educational opportunity. 

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.

Paid training must not only make failed students whole, but advance all students to either vocational training or the completion of the first two years of college (both community and residential). Students with families would also receive the child tax credit. In either case, wages, the CTC payment, health insurance (rather than Medicaid) and any social services, should be delivered through the training provider.

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.

Technical training should be covered as well at both public and accredited private schools, including religious schools. In Espinoza v. Montana, prohibitions on funding private schools (Blaine Amendments) were found to be unconstitutional. New (and existing) funding should reflect that fact.

The homeless find it impossible to get jobs and hard to get benefits. This is why the “housing first” approach is essential to getting people back into the workforce or to channel them into the appropriate educational program - including those associated with drug court and disability insurance. Such individuals should be required to attend either long term recovery programs, occupational therapy or psychiatric rehabilitation programs - but be paid to do so.

With a higher minimum wage, payment for training and rehabilitation and a decent sized child tax credit, housing will be affordable without additional subsidies (save possibly for those with permanent disability - but even they should be paid to attend training and such training should not be time limited by payment through Medicaid).

What will society gain for all of this generosity, aside from higher economic growth? This should be obvious - indeed, it has even been proposed by the Senator from Utah - albeit clumsily. Food Stamps, TANF and even Medicaid for the non-elderly poor, as well as governmentally provided case management could be abolished in the vast majority of cases. Dependency would not only end - it would be both impossible and unnecessary.

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

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

Lastly, to make work pay better for everyone, quit overpaying the few through inflation adjustments. Households making under the 90th percentile have been losing ground for almost half a century,while incomes above that amount have increased on a regular basis.

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

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

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

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

Attachment: Tax Reform Videos included

Corporate Ownership in Healthcare

Finance: Consolidation and Corporate Ownership in Health Care: Trends and Impacts on Access, Quality, and Costs, June 8, 2023

The turn of the Millennium saw the destruction of public hospitals and their consolidation into conglomerates. This has hit the DC area hard. INOVA has taken over most of Northern Virginia, Montgomery General has been absorbed into MedStar and DC General has closed. In rural areas, Catholic Health Association hospitals have taken on almost monopoly status, which as the appendix underlines, has a major impact on reproductive health.

With the decrease in vocations, CHA hospitals have had to resort to executive management, with all of its flaws. In other words, they have been corporatized in all but name.This is a shame, but that is a problem for the Church, not Congress.

While we could seize for-profit hospitals under eminent domain, that would merely reward bad actors.  As the Minority points out, the best way to fix the economy is competition. For both rural and urban areas, this competition must be from a renewal of public hospitals. 

In the past, these hospitals were the responsibility of religious orders or city governments To renew the public and charitable systems, federal funding is needed. State governments simply do not have the resources to otherwise compete - nor do they have the moral courage to disregard corporate campaign donations to keep public hospitals out.

Please see the second attachment for more on dealing with the demand side of medicine through single-payer. A single-payer scheme, either through Medicare for All or a Public Option (which is favored by the President and would be enacted given the votes), will not help the supply side. There are other options, however. 

Public hospitals can be built with either grants to the states or by establishing hospitals within the U.S. Public Health Service (or expanding the Veterans’ Health System. That is a detail that can be worked out on a state by state basis, provided the funding is there. 

The actual buildings are the easy part. Staffing is a bigger concern, although not at all insurmountable. Simply expand the Uniformed Public Health Service, both in terms of numbers and in providing training. There are certainly more people who are qualified to go into medicine than there are medical school slots. Funding these slots so that schools can expand or creating a UPHS medical school(s), where the price of tuition is made up with the requirements of residency in urban and rural areas, solves that problem - especially if overseas doctors are given an easier path toward licensing. 

The biggest problem is political will - or rather - political ill-will by some who would put ideology ahead of the availability of adequate rural medicine options. Making that point would help with passage, as well as coming up with the kind of national compromise on abortion that would actually encourage support by Catholic Health USA members (who would balk at providing fetal hospice but secretly support it).

Finally, allow me to remind the Committee of our position on controlling drug prices while providing for enhanced research.

A significant driver of drug prices is the question of funding orphan drugs. The answer is easy. Keep control of orphan drug intellectual property in the hands of the National Institutes of Health. Let them, and other agencies such as the National Science Foundation, fund grants and research contracts to generate breakthroughs, as well as to manage clinical trials for FDA approval (if appropriate for the population that needs the drug). When the drug is approved, NIH can then contract for its manufacture and distribution. 

This methodology will get more done faster, without relying on profiteering to do what is necessary to help our most vulnerable patients.

Attachment: Tax Exempt Hospitals Rural Healthcare

Attachment: Single Payer discussion from HHS Budget FY 2022

Tackling Tax Complexity: The Small Business Perspective

Finance & Small Business: Tackling Tax Complexity: The Small Business Perspective, June 7, 2023

The first question to consider is how is a small business defined? The Small Business Administration standard is 500 employees or less. Of the 33.2 million small businesses, Twenty-seven million are sole proprietorships with no employees. 

According to the NAICS Association, there are more than 18 million firms with employees. Thirteen million of these have between one and four. Three million have between 5 and 49 (or 16 million from 1 to 49 - or 43 million businesses counting sole proprietors). There are about 276 thousand firms with between 50 and 500 and 43 thousand with over 500 employees. 

What kind of businesses exist in the sole-proprietor/small business community? Sole proprietors include hobbyists who do home based sales or small book volume publishing (I am the latter), gig workers and consultants. There are two-types of consultants or gig workers. One kind takes small or large contracts from a variety of sources. The other kind is tied to a single client or gig platform. These employees have a job by any other name.

Small businesses fall along the same lines. Some are simply open for business and have the power to negotiate each contract. Others exist in a franchise system - such as a car dealership or fast food chain - or a single supplier - for example, Monsanto. 

The key question for both enterprises is how tax and economic policy interacts with the well-being of these business owners and their employees. Any tax reform should help small firms and consultants which are not captive of a larger firm continue to do business, while ending the incentives that larger businesses use to exploit workers and business owners who are essentially employees, but without the benefits of employment.

We have several concerns (we being both the Center and those who work in the small business sector): minimum wages, benefits - especially healthcare and childcare, family support for both owners and employees, union rights, equal employment and business opportunity, costs of tax compliance and the ability to exit a bad job or contract.

Minimum wage, benefit and family support are best served with some form of government action. This stops bad actors from undercutting those who would do the right thing by their families. 

Benefits (both health and childcare) and family support are currently provided through a confusing patchwork of programs, from the Earned Income Tax Credit, Child and Dependent Care Credit and Child Tax Credit to the Affordable Care Act and health insurance exclusion to corporate income taxes. We can do better (this time we are the policy community, both in and out of government and Congress).

Please see the attachment for our current tax reform proposals. We propose that benefits and family support be provided as an offset to a subtraction value added (or net business receipts) tax with offsets for these benefits. 

The average firm should mostly break even - paying out most of what would otherwise be paid in tax and then supporting a bureaucracy to administer both tax benefits and government programs. This is where our proposal is better than the Fair Tax (or should hijack the term) - as the Fair Tax requires government infrastructure and underperforms in distributing income (and thus reducing the need for abortions). 

These reforms will change some of the calculus behind whether a larger enterprise abuses employees (both 1099 and franchise) by shedding them from the enterprise (often illegally) or brings them on as full-time employees in order to claim the tax advantages of doing so. 

If tax rates are high enough and benefits generous enough, this may move some firms to end their battle with organized labor and their practice of shunting managers of color to franchisee or subcontractor status. A related reform would be to reduce small business contracting requirements as long as fair opportunity exists in the prime contracting firm (for example, hiring and promotion of all qualified workers by random selection). 

The tax compliance questions boil down to how complicated tax forms and transaction reporting are in comparison to the current regime. For some small businesses, little can be done to improve things without automation - however most firms with any kind of revenue likely already use advanced data processing. 

These tools can be designed to output data files, such as value added tax paid for the proposed (credit) invoice goods and services tax and family support payment information which would be provided to prevent fraudulent reporting by both workers and employers. The vast majority of employees in both small and large businesses would no longer be required to file individual income taxes (those employees or shareholders receiving less than $500,000 per year). 

Capital gains taxes and estate taxes would be replaced by an asset value added tax, while graduated income tax payments from 6.5% to 26% would be paid by employers as a surtax to their subtract VAT filing.

The asset VAT would expand benefits for selling assets to employee-owned firms to public stock sales (rather than limiting them to private corporations), thus encouraging more employee-ownership. Employee-owned firms can expand their operations to pull in franchise holders and farmers who are reduced to virtual peonage, thus ending their bondage. Our proposed no-fault unemployment reforms would also help workers to leave bad jobs.

Attachment: Tax Reform Videos included