Employee Retention Credit

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

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

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

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

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

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

During the pandemic, it was $3,000 per year, or $3,600 for younger children. The President’s Budget proposes that the Child Tax Credits enacted as part of the American Recovery Plan Act be restored. During that period, payment of the child tax credit was in advance of the annual tax filing. This is appropriate and will change the culture of such credits, which should be for continuing support, not an annual bonus. 

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

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

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

For middle income taxpayers whose increased credits are less than their annual tax obligation, a simple change in withholding tables is adequate. Procedures are already in place to deliver refundable credits to larger families. 

Employers can work with their bankers to increase funds for payroll throughout the year while requiring less money for their quarterly tax payments (or estimated taxes) to the IRS. The main issue is working out those situations where employers owe less than they pay out. This is especially true for labor intensive industries and even more so for low wage employers. A higher minimum wage would make negative quarterly tax bills less likely. 

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

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

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

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

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

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

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

Attachment: Consumption (Fair) Taxes video links included

Abolish TANF

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

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

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

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

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

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

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

The President’s Budget also includes funding the first two years of education at community college. The same level of funding should be provided to students in technical training after grade ten and should be available to students at both public and accredited private schools, including religious schools. In Espinoza v. Montana, prohibitions on funding private schools (Blaine Amendments) were found to be unconstitutional. New (and existing) funding should reflect that fact.

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

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

In 2021, the House proposed increasing the minimum wage to $15 per hour as part of reconciliation. Until the Senate Parliamentarian ruled that this was out of order and the votes did not exist to overrule her, the Republican Minority counter-offered a $10 per hour.  An $11 wage makes up for cutting hours from 40 a week to 32. For training program participants, 30 hours per week is more than enough.

A main problem with current training regimes is that potential students have opportunity costs that are not covered by training. TANF is simply too narrowly tailored and directs too many people to low wage work, especially in the dirtiest jobs in the medical field. The woke among us do not have to look hard for the intrinsic sexism and racism in this scheme.

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

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

English as a Second Language should not only be free, but workers should be paid to attend, irrespective of immigration status. Part-time workers should also be eligible for this benefit.

Payments for tuition, stipends and family support would be funded by employer-paid subtraction value added taxes. Ideally, both state and federal subtraction VAT will be enacted. A federal VAT would be levied to assure that a minimum amount of funding is available should states underfund their programs, which some will. 

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

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

Attachment: Consumption Taxes (Video links included)

Organ transplants and cloned organs

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

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

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

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

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

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

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

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

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

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

Prescription Drug Price Inflation Video

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

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

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

Attachment: Single Payer Video 

Attachment: Tax Reform Subtraction VAT Video

VIDEO of these comments

Why Inequality Starts Becoming A Problem Now | Economics Explained

The issue is not just who holds the money, but the control it buys them over other people. The distribution of things is not as important. Social Democracy can fix that piece. Without social democracy, however, capitalism is as fragile as the business cycle - or rather -the fiscal policy driven cycle of speculation and bailout.  

Government spending is the yeast of any society. In social democracy, people getting benefits for education and retirement, as well as household spending by government employees and contractors spread the money out in fairly equal chunks. No business assets are ever acquired without the prospect of household or government consumption (or exports). 

Financing, however, is not the same as investment. When taxes are cut, there is a financial boom, but it may not be in any way linked to actual investment in plant and equipment. Indeed, it probably is not. Financial booms take money out of consumption and put it into speculation. Making a deal becomes more important than making a product. Until this is absolutely clear in our economic discussion, we will continue to make the same mistakes decade after decade.

The Child Tax Credit at 25 Years

Finance Taxation and IRS Oversight: Assessing 25 Years of the Child Tax Credit (1997-2022), July 13, 2023

I comment today not to praise the Child Tax Credit, but to reform it.

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

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. Again, 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. Some of the bipartisan opposition in the Senate came from those who consider direct subsidies from the IRS to have the “stink of welfare” that the Gentleman from West Virginia so objects to.” I advise such Senators in both parties to raise the minimum wage so that no one is having to work just to receive this credit and that the best way to distribute the credit is with 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. 

Students with families in government funded training programs, from ESL to the last two years of high school to an associates degree, with families would also receive the child tax credit. The credit in these cases, along with training stipends, should receive their credits through the training institution.

Additionally, for people receiving Unemployment Insurance, there should be just one check and it should include the Child Tax Credit. The Credit should also replace dependent payments under Social Security Survivors and Disability Insurance programs, which will increase their solvency. 

Tax reform can be used to facilitate the reform 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.

One of the central proposals in this plan is the creation of a Subtraction Value Added Tax (Net Business Receipts Tax), which would replace the corporate income tax and filing of business taxes as part of the personal income tax.  The difference between changing quarterly withholding and enacting a subtraction VAT  is six of one and a half dozen of the other. 

The reason for this is that the proposed subtraction VAT is based on the notion that employers would be responsible for paying and reconciling the taxes now filed by employees. This would add little additional burden to employers (especially the self-employed) but end the burden of filing taxes for all but the highest salaried employees.

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. Again, the government should not be the national paymaster for every family.

These reforms MUST be scored as pro-life legislation and be funded more broadly than the President has promised. We are all for raising taxes on the wealthy, but these funds should be targeted to national defense, net interest payments  and debt reduction (starting with the Social Security Trust Fund). An asset value added tax (which is described below with our employer-paid subtraction VAT) should be the primary way the wealthy are taxed - along with surtaxes on middle ($85,000 - $200,000) and upper income salaries ($200,000+)..

Having served on the staff of a major abortion rights organization in the past, I can assure you that no such organization WOULD EVER OPPOSE HIGHER LIVING STANDARDS FOR WOMEN AND THEIR FAMILIES!

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

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

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

Catholic members of Congress and the President should also lead on this effort. It is time to stop grandstanding on this issue. The movement got what it wanted in Dobbs (although to speak frankly, the states which banned abortion were not friendly to it to begin with). Eventually, some form of compromise between a national ban and nationally guaranteed rights must take place in Congress. This was always inevitable. For the present, however, the primary pro-life issue must be to assure that, now that abortion is now illegal in some places, it must be made rare by adequate support of families with children. 

Attachment: Tax Reform (Video links included)