Indiana: America's Wal-Mart?

So I had a discussion with a family friend today who resides in Minnesota. She is quite well to do and mentioned that her tax burden is significantly higher than mine here in Indiana. She then noted that she is happy to pay her taxes because she believes that she gets the good end of that "deal": better schools, better public services, better amenities, etc.

This got me a-thinking about the "deal" that our state legislatures provide for us: They will keep our taxes as low as possible. Full stop. This mindset, I think, explains the paucity of sidewalks and street lights in the city, let alone any meaningful efforts at a robust public transportation system.

At the end of the day, what Indiana has on offer is low cost. It's cheap to live here. It's cheap to do business here. We have been led down this primrose path by our legislatures (who, almost without uniformity, will tell you that "government is the problem, not the solution" and "taxation is theft") and those who continue to vote for them (who likely will respond to this by inviting me to pay any amount of additional taxes I want).

If price is the only concern, you shop at Wal-Mart and eat at Burger King. If you're looking for something more, perhaps you shop at Nordstrom and eat at Ruth's Chris. If the finer clothing and food available at Nordstrom/Ruth's Chris is no better to you, you go back to Wal-Mart and Burger King. If it is worth it, you pay the extra amount.

I feel like our state "leaders" have continually refused to allow us a taste of what Indiana could be like if it was determined to be a desirable place to live on its merits, as opposed to continually holding onto the notion that "cost of living in Indiana is low" so people should want to live here.

Do we want to be the state where people choose to live because the state is so awesome, or do we want to be the state where people have to live because they can't afford to go anywhere else?

Border Wall "Negotiations"

As we limp into 2019 without a functioning federal government, I ask myself what the whole kerfuffle is even about. Does anyone seriously believe that building a cement (or steel) wall along the border will do anything to keep criminals from entering the country?

Let's recall that the majority of illicit drugs enter this country at points of entry, generally packed in with other cargo; the majority of illegal immigrants entered this country legally and overstayed their visas; and apprehensions at the southern border are at a 17-year low.

So, I suppose point #1 is that the wall won't "fix" the "problem" that its proponents say needs fixing, and the "problem" has gotten significantly better in recent years.

Nonetheless, if someone wants a big concrete and steel symbol to his own xenophobic ego, I suppose all things are worth negotiating. I do a lot of negotiating by virtue of my job, and I notice that you get a real feel for how much someone thinks a thing is worth by how much that person is willing to give up to get it.

Trump has demanded a border wall, and the GOP has stuck by him and echoed the demand. What have they offered for it? They continue to publicly claim that the Democrats aren't negotiating with them. So, on behalf of myself (and perhaps a significant number of liberals), here is my offer to the wall builders:

• WE appropriate your $5,600,000,000 to build your precious wall;
• In exchange:
• YOU repeal last year's tax cuts for everyone making over $500,000/year
• YOU immediately pass Medicare for All
• YOU immediately provide the votes to pass a National Right-to-Organize bill that preempts all state-level Right-to-Work bills
• YOU nominate members of the American Constitution Society to the federal bench, exclusively.

Upon satisfaction of the above conditions, the $5.6B will be appropriated. How's that for a starting point in negotiations?

Economic Development Question

I hear often about "economic development" plans from localities that are essentially subsidizing private projects via tax dollars, either directly by backing bonds or indirectly by giving tax deferrals. Either way, these subsidies amount to millions of dollars spent by localities in furtherance of private industry.

Two examples of taxpayer-subsidized projects come to mind: Lucas Oil Stadium and the Wilshaw development. I have said before that if the Town of Speedway wants public parking, it should just build a parking garage instead of borrowing the money to build one, lending that money to a developer, then leasing the garage to the developer in exchange for revenue from the garage. It's a rube goldberg device.

I also hear justification for Lucas Oil Stadium in the form of "look at how many jobs it creates" with all of the hotel, restaurant, convention, etc., traffic created by the facility.

I suppose my big question is this: Why don't we just directly invest in those jobs by doing things like hiring teachers? Paying for their health insurance? Hiring construction workers to build better roads? (the NW corner of 465 comes to mind, but that's just because I commute past that area every day).

In a nutshell, it appears that there is a bipartisan consensus that government spending to create jobs is OK. In that instance, why settle for low-wage ALICE ("asset limited income constrained employed") jobs? Why not go for good middle-class jobs with benefits? It seems that we could do so if we cut out the middle man, i.e. Jim Irsay or Loftus/Robinson.

Just a thought.

One (of many) Problems with Vouchers

A beloved commenter recently suggested that perhaps those who send their children to Catholic schools should get a property tax break, since they are paying for their own private school tuition and not utilizing the public schools. This, of course, presupposes that the parents of private school children are not being subsidized by the public, which we know not to be the case. See: Indiana Voucher Program.

While I can nit-pick about whether the public currently subsidizes religious schools (by vouchers, not to mention tax abatements, etc.), I think my bigger problem is the fundamental misunderstanding of the term "public."

If I don't use the public park, do I get a tax break?

If I don't drive on the public streets very much, do I get a tax break?

If I don't ever call the police, do I get a tax break?

If I don't have children, period, do I get a tax break?

The answer to all four of those questions is a resounding NO. Why should I get a tax break if I don't use the park. It's still there for me, and the choice not to use it is mine. I would say the same thing as to the public streets. Just because I don't drive on them (and no, they're not funded entirely by gasoline taxes, and even if they were, I still buy gasoline for my lawnmower) doesn't mean that I'm not on the hook to pay for them.

Why do people continually view education so differently from public safety? 

For the record, I've never, in my entire life, required the services (to take a few random examples) of the Indiana Civil Rights Commission, the Indiana Horse Racing Commission, the IN Office of Tourism Development, or the IN Dept. of Veterans Affairs, yet I still get to pay taxes to support their budgets, don't I? Why do people rail on and on about public schools yet utterly forget about essentially everything else that our government does?

If I want to protect my own home with a .45 magnum, can I just buy one, show my proof of purchase to the state and federal governments, and get my tax money refunded that would otherwise support the military and the police? For some reason, I doubt it.

Classic Indiana "Legislation"

My first law job was in Chicago, and it dawned on me that the dynamic in Illinois is essentially reversed from that in Indiana. In Illinois, Chicago essentially makes all decisions for the rest of the state, and the rest of the state just has to deal with it.

Contrarily, in Indiana, it has always seemed to me that the rural portions of the state make the decisions that the people of Indianapolis (and to lesser extents, Ft. Wayne, Evansville, South Bend, etc.) just have to deal with it.

Well, today I got an email from my state Senator Mike Young (boooo!). The notable portion of the legislation he touts:

Through the program, the Indiana Department of Transportation matches up to $1 million when localities invest in road and bridge repairs. Counties with populations below 50,000 and cities and towns with populations below 10,000 receive a 75/25 percent match, while counties with populations greater than 50,000 and cities and towns with populations greater than 10,000 receive a 50/50 percent match. 

So, to be clear, our Senator pushed through and now touts legislation that he presumably voted for that punishes his own constituents for having the temerity to live in a populated area, that he represents.

This is classic "kids gloving" the rural areas. Are they unable to pick up the tab for their own roads? I thought they were supposed to be "real Americans" who wanted the government to "leave them alone." I thought that Indianapolis was full of takers, per our state representatives? Why is it that the state picks up considerably more, proportionately, for roads in small counties? Add to that the fact that there are fewer people in such small counties, and we have a state government that spends considerably more per person who uses a road on rural routes than on urban ones.

Of course, it's not as though Indianapolis needs the money or anything, as anyone who's driven our pothole-riven roads will aver.

Will someone please run against this empty suit, Mike Young, and give us some real representation?

Reminder - Education is Underfunded

School is getting ready to start, and we are about to be hit with a gaggle of stories about how teachers are spending their own money on school supplies for their students. I generally know these stories to be true, as I am a former school teacher. Every late July or August for 7 long years, I would go to Target or United Arts & Education to load up on school supplies for my students. My meager $16XX/month, give or take, after taxes, insurance, etc., was expected to cover the supplies without reimbursement. Generally, I'd spend between $100 and $200. This was a small amount compared to many of my co-workers.

Please understand that $16XX/month doesn't go far when rent was $550, car payment was $400, cell phone was nearly $100, power was $100, gas was $50, etc. Taking between a hundred and two hundred bucks out was a major expenditure for me; after all, I could have taken my wife out to a nice dinner for that.

Alas, I spent the money on supplies for my students, who (often in concert with their parents) often resented my efforts to increase their literacy. And there is nothing special about me, except that I was perhaps less generous than my co-workers.

Please remember this as school starts this year, and please remember to be kind and supportive toward the teachers you encounter.

Pot Holes

The thing about "every man for himself" attitudes is that sooner or later, every man is not for himself and depends on others. Case in point:

Mayor Jim Brainard's constituents have raised a common complaint this year: It's about the wretched condition of the streets provided by Carmel's poor neighbor to the south.

. . . . .

Scott Fadness can relate. The Fishers mayor regularly fields complaints about Indianapolis' crumbling roads from his constituents who venture into Marion County for work and play. 

Well, cry me a river. Do you know why I don't have any problems, whatsoever, with the state of Fishers' streets? I don't go there. I chose not to live there and work in Indy; I chose to live somewhere that I could support with my own tax money (as opposed to expecting others to support me).

I can't help but chuckle, somewhere beneath my seething surface, when I hear people from Hamilton Co. talk about all of the "freeloaders" that want to "take" from them, the "makers."

 

Bootstraps and Ladders

I hear clueless well-intentioned members of my parents' generation (Baby Boomers) often lamenting that "the kids these days" want everything "given to them" and they're "afraid of hard work." While I point out to them that in the early 1980s, my father had one mortgage payment (our family home), most people of my generation carry three (home, health insurance, student loan). While I fully recognize that members of my parents' generation paid for health insurance through the 1980s and 1990s, the cost of same at that time was comparable to county tax withholdings, whereas it is now comparable to a mortgage payment.

In light of that, I offer this quote from a recent piece in The Atlantic:

 Drawing almost no attention, the nation crossed an ominous milestone last year that threatens more economic polarization and social division: For the first time, public colleges and universities in most states received most of their revenue from tuition rather than government appropriations.

This historic shift away from tax dollars funding the bulk of public higher education comes precisely as the nation’s youth population is crossing a succession of milestones to become more racially diverse than ever. As statisticians would say, it’s an open question whether these twin trends represent an example of causation or just correlation. But whether resources are shrinking because diversity is growing, or the two trends are proceeding independently, their convergence is still a dangerous development—not only for higher education, but also for the nation’s economic future.

I used to have a coach who would give us a similar speech before big games, the theme of which is "this is the time to define what kind of competitor you are." Similarly, I worked for a litigator who told me before a big trial that "now is the time to define what kind of a lawyer you are."

Well, with respect to funding for higher education, "this is the time for us to decide what kind of a country we are." Are we a country that believes that education is worth spending money on, or are we the kind of country that treats education like any other consumer product, i.e. you can have it if you pay for it? Do we treat education as a public good or a private indulgence?

As for me, I intend to stay on the side of history that is willing to pay taxes for education for other people's kids. As for me, I saw my property tax bill and noted that I contribute somewhere in the $550-$600 for the entire year to Speedway Public Schools. This is less than I pay for health insurance for a month and I fully intend to give generously to Speedway Public Schools going forward. I believe that education is a public good. That someone I've never met is well educated has positive spin offs for me, whether that is in the form of higher tax receipts, innovation, or simply keeping that person away from a life of crime (that would eventually involve me providing room & board, i.e. state prison).

Anyone who has read this blog knows my feelings about public education, that I am a supporter. My question is, though, what is the argument against funding public education? Surely there are those who believe that we as a society should not do so. What is the line of reasoning for that?

"A Blinding Glimpse of the Obvious"

This was a phrase my father used to use: a blinding glimpse of the obvious. Essentially, it meant that for anyone paying attention, the answer to whatever question being posed was right in front of you the entire time.

In light of that phrase, I present this article from The Atlantic. A few notable quotes:

The most basic criticism of the GOP’s tax cut was that the boons for corporations and their shareholders would far outweigh the benefits for ordinary workers. That’s exactly what seems to be happening. Stock buybacks announced between January 1st and February 15th reached historically high levels, totaling about $170 billion in that period. That’s 28 times larger than the total value of end-of-year bonuses that were credited to the corporate tax bill—some of which had been announced months earlier and had nothing to do with the tax cuts. Companies might be advertising new bonuses. But they’re quietly reaping the benefits of higher profits.

Well, for those who actually believed all of the noise about trickle-down economics, notwithstanding the absolute absence of any evidence to support the conservative-predicted effects of this tax cut; for those who slept through the Bush era, perhaps this is news.

I remember the Bush tax cuts; I remember the predicted wave of American awesomeness. Funny thing is, this economic BOOM that was predicted . . . I don't remember it. 

However, being the liberal I am (as they say, liberals refuse to even take their own side in an argument), it's only fair to also present this quote:

Nothing like this has happened before—a massive, deficit-busting tax cut on capital during a period of steady growth and nearly full employment.

Economic historians can’t easily predict what’s going to happen because big rich countries practically never do what Republicans just did. 

Well, in sum:

It all adds up to this: The GOP law was always an enduring corporate tax cut advertised as fast middle-class tax relief. But because it represents a novel fiscal experiment, it’s not entirely clear what the short-term or long-term implications of the plan will be. If I wrote, “The GOP tax cut is essentially a discount coupon for technology that will raise corporate profits at the expense of labor in the long run,” I’d be telling a reasonable story. If I wrote, “The GOP tax cut is an inflation machine that will raise the price of goods and labor and encourage the Fed to raise rates accordingly, thus punishing corporate profits,” I’d also be telling a reasonable story.

Maybe I've been the naive one. Perhaps the GOP repeatedly cuts taxes on the wealthy and on corporations not because they want to help the non-wealthy and actual human beings, but because they earnestly believe that the most pressing problem in America is that wealthy people and corporations are taxed too little. I guess when someone shows you who he is, you should believe him.

Accounting

In legalese, the term "accounting" means that somebody entrusted with funds must provide an explanation as to how those funds were used. In other words, the entrustee must "account" for all of the money. It's a pretty simple concept once you think it through.

In light of that, I will quote a blog post from Indy Tax Dollars, in full:

A little over a month ago it was announced that a move was afoot to establish a downtown Economic Improvement District which would tax property owners in the Mile Square (area bounded by East, West, North and South streets).  The funds would be used for problems not being adequately handled by current municipal budgets.

The subject is brought to mind again by an on-line IBJ story about VisitIndy (VI), and that organization’s fiscal boast.  For 2016, according to a report commissioned by VI, visitors to the city had an economic impact of $5.2 billion, and $719 million in additional state and local taxes.  (No division given as to state and local.)  This following substantial increases in previous years.

We know nothing about the report authors but we admit to a visceral suspicion about the accuracy of such glowing essays when they are being paid for by the subjects of said essays.  But let us assume the numbers are accurate.

Then, does not the question arise, "Where do all those dollars go?"  How do these figures connect with the need for downtown property owners to volunteer a heavier tax burden on themselves?  Why did the original story about the EID refer to the city as "cash-strapped?"

Why would it not be reasonable to be able to check on the amounts of dollars, and at the same time place a significant part of the burden on the most direct recipients of those revenues?

We believe this could be done by adopting something similar to our earlier suggestion of a Revenue Increment Tax - RIF. A huge proportion of that $5.2 billion comes into the city via members of the hospitality industry - food, beverage and lodging operations.

Surely the increase in revenues, at the time of a Super Bowl, an NBA All Star Game or a convention of thousands for instance, could be compared to revenues of a like period in other times for the application of an RIF plan.

Should we not make a more direct connection between revenues generated by sports franchises and the dollars handed back to them as incentives to remain here?

Very important points in a discussion that we, as a community, are notably NOT having.

53/47

I remember a few years ago when a favorite talking point among my conservative friends was that 47% of Americans "don't even pay any taxes." As discussed yesterday a bit, that is not remotely true. All Americans that work pay payroll taxes. All Americans that drive pay fuel taxes. All Americans who buy things pay sales taxes. The "any taxes" that my conservative friends liked to reference was confined solely to federal income taxes.

Now, calling something the "federal income tax" is a bit misleading because, as we know, the payroll tax is levied on your income as well, it's just called something different.

Anyway, I just got my W-2 for 2017 and thought it would be enlightening to discuss the distribution of all taxes I paid on my income in 2017.

My W-2 taxes, which of course does not capture sales taxes, property taxes, etc. (including health insurance) amount to approximately 26% of my income.

Of the total W-2 taxes paid, the breakdown is as follows:

• 49% in Federal Income tax
• 25% in Social Security Tax 
• 13% in State of IN tax
• 7% local income tax
• 6% in Medicare tax

I consider myself fortunate to have an income large enough to create a federal income tax liability. I also expect to get a refund, as I generally choose to have more withheld so that I can get a refund, as opposed to having less withheld so that I get a bill. Nonetheless, take a look at that distribution and recognize that when people don't pay federal income taxes, they still pay a lot of other taxes; and this is only the taxes that are withheld. Again, this does not include taxes that are paid on the spot, such as sales taxes.

One final point: If you include what I spent on health insurance premiums in the past year, I paid an income tax rate of 34%. If you include both health insurance premiums and deductibles, I paid 42% on income taxes. Note, this amount does not include the amount that my law firm has paid for my health insurance; this is simply the amount that I pay in cash to insure my wife and children. By that math, you could rather easily increase the deductive taxation on me from 26% - 42% and give me public instead of private health insurance, and the only thing that would change for me would be that I no longer need to worry that my coverage will be rescinded.

Middle Class Tax Reform

A simple idea: If we want to cut taxes on middle class wage earners, why don't we simply cut the taxes of middle class wage earners? The payroll tax is currently set at 16% of the first roughly $120,000 of your income. Your income thereafter is not subject to the payroll tax.

Here:

The top line is the combined payroll tax. The green shaded area rising on the left is the maximum amount of money that is subject to the payroll tax.

In all of the recent debate about cutting taxes and the massive cut in corporate income taxes, cutting the payroll tax was never even brought up. Just think about that the next time you hear Mike Pence or some equally obnoxious a$$bag talk about how they delivered "middle class tax relief."

Again, if you want to cut taxes on the middle class, it seems that a good place to start would be by CUTTING TAXES ON THE MIDDLE CLASS.

For the record, when I say that the payroll tax is a "regressive" tax, I mean that it hurts those who make less than the threshold a lot more than those who make more than the threshold. If I earn $100,000/year, my entire income is subjected to this. However, if I make $400,000/year, only the income I make through roughly mid-April is subjected to this.

A data point:

Note that this chart is dated 2010, when we reduced the payroll tax temporarily as part of Obama's "stimulus." I think the chart speaks for itself and leads me to say, one final time for this post:

If you want to reduce taxes on the middle class, a good way to start would be by reducing taxes on the middle class. If you want to reduce taxes on the wealthy, you reduce taxes on the wealthy. If you want to reduce taxes on the wealthy and get re-elected, you reduce taxes on the wealthy and then cite some discredited economic theory (i.e. trickle down economics) to justify it.

Interesting Take in the NY Times

I know, the "liberal" New York Times. I remember, in my youth, when most people considered the NY Times "The National Paper of Record." Of course, that was also a time when facts mattered.

Anyway, the Times had an interesting editorial today arguing that the impending shit sandwich tax bill will not only create more inequality, but it is the result of the inequality we already have. Basically, as more and more of the nation's wealth has gone to fewer and fewer people, those few people have used their enormous wealth to accrue political power, which they in turn use to steer more wealth their own way. Kind of a vicious little cycle, no?

The editorial also had a great graphic, but for some reason I'm unable to embed it. I would highly recommend reading the editorial. So as to not deprive this post of any graphics, however, I found this one online:

Strategy 101 and Revisiting Stated v. Revealed Preferences

I have inveighed repeatedly against the GOP tax bill making its way through Congress. For more reasons than I have time to lay out, I believe this is a terrible bill. The most prominent reason being that if we have an extra $1.5T to spend, perhaps there is something more worthwhile to do with the money than give it to the wealthy, i.e. universal pre-k, universal healthcare, control the cost of higher education, improve infrastructure, etc. Really, anything other than playing "loot the till, robber baron style" is preferable.

Nonetheless, if the Republican caucus could see past its own nose, it would have done this:

 [T]hey could have drafted the kind of bill they promised. A legislative text that cut taxes on the middle class while closing loopholes and avoiding giveaways to the rich would have put Democrats in a tough spot. The GOP would essentially have picked the low-hanging fruit of the revenue-raiser world (things like closing the carried interest loophole) and then expended it on something popular and hard to take away (middle-class tax cuts). That would have made it very difficult for the next Democratic administration to pursue aggressive welfare-state expansion.

If shrinking government was the goal, they would have done this, presumably. However, as noted in the previous post about stated preferences vs. revealed preferences, I tend to think that the stated preference is a giveaway to the donor class rather than having anything, whatsoever, to do with an ideological aversion to the size of the government. Could it be that all of this posturing about government debt for the past 8 years was just an excuse to complain about an otherwise good and competent president? Say it ain't so Joe! 

What they actually did was raise taxes on the middle class in the long run to cut taxes for incredibly profitable multi-national corporations, their major stockholders, and wealthy heirs (a la Eric Trump). These are easy things to undo in the future, and the smart money is on them being undone.

Stated Preference v. Revealed Preference

"Revealed Preference" is a term that psychiatrists and economists use, particularly when juxtaposing what one says he wants with that which the person shows that he wants. This is explained much easier with an example.

I say that I want to eat healthy, but I reach for the chicken wings when they're around. My stated preference is to eat healthy; by revealed preference is that I don't really want to eat healthy.

So I think it is with public policy. Our national congress says they want to cut taxes for the middle class and not the wealthy, yet has made the middle class tax cuts temporary and the corporate tax cuts and estate tax cuts permanent. Which one is the stated preference? Which one is the revealed preference?

A thought:

The big tax cut for business owners and heirs to large fortunes will, in the long run, be paid for by people who are not business owners or heirs to large fortunes.

It may be paid for through the long-term middle-class tax increases that are laid out in the bill. Or it may be paid for through large cuts to Social Security, Medicare, Medicaid and other social programs. Or it may be paid for through higher interest rates that raise the cost of new investment to deliver a tax windfall to old capital.

But there is a big tax cut coming for people who own businesses and for people who stand to inherit fortunes worth more than $11 million. And there will be a price for that.

Anyone have thoughts about this on the local level? Is there any "daylight" between Speedway's stated preferences and revealed preferences?

UPDATE:

In response to "Anonymous'" comment that the stock market will "certainly crash once the dems gain control, I submit the following graphics, without additional comment:

If it's awesome, why lie about it?

I have written before about this, but I saw that Matt Yglesias has made the exact same point on Vox with a piece entitled, "If the GOP tax plan is so good, why do they lie so much about it?"

A few key quotes:

There’s a lot that’s controversial about tax policy, after all, but not everything is controversial. It’s obvious that if you cut a tax that’s only paid by married couples who’ve amassed at least $11 million that you are helping rich people. It’s obvious that if you enact a special discount tax rate for people who own LLCs then you are helping Donald Trump, who owns a ton of them. And it’s obvious that if part of your plan is permanent and part of it is temporary, and the part you made temporary is the part that helps the middle class, then helping the middle class wasn’t your priority.

I want to be fair to the conservative point of view here, and I think that this quote is necessary:

The case Republicans are making for their proposal is simple, straightforward, and perfectly reasonable — while Democrats want to have the government give people a lot of new social services, Republicans want to just give them more money instead.

I think that this encapsulates the conservative/Republican argument well. If any readers think it is an unfair characterization, please inform me as to why.

The difference is that while Democratic programs may or may not be a good idea, the bills they write that they say will expand the provision of social services in the United States really do expand the provision of social services.

I think that the above statement is true. Democrats wanted to expand access to healthcare for the lower income population, so they wrote Obamacare. Whether you think that was a good or bad piece of legislation, there is no denying that it expanded Medicaid and attempted to impose uniform rules on health insurance so as to preclude the claims avoidance practices that had/have become so prevalent among health insurers.

If the GOP wants to cut taxes on their wealthy donors, they have that right. They won the 2016 election, by all accounts. With victory comes policy prerogatives. However, it would be refreshing if they would simply own up to what they are doing, instead of continually lying about it.

I may have been born at night, but it wasn't last night.

 

Deficit Hawkery and Charlatanism

I understand the term "Deficit Hawk" to mean one who wants to avoid a budget deficit as a top-line priority. Note that deficits happen when the intake of the government is smaller than the outlays.

That is called math, notwithstanding the fact that Mike Pence and company repeat ad nauseum that we have a "spending problem" and not a "taxing problem." The fact of the matter is that deficit happen when tax collections are smaller than outlays. Full stop.

We have no deficit hawks in charge in Washington, D.C.

I saw Rep. Mark Meadows (R - N.C.), prominent member of the so-called "Freedom Caucus" destroy his own credibility on deficits this morning on ABC News w/ George Stephanopolous. He was asked directly whether he would be willing to cut taxes knowing that it would increase the federal debt by $1.5 trillion over the next decade.

Recall that Rep. Meadows spent the Obama Administration talking about the "road to serfdom" being paved with government debt.

Rep. "Road to Serfdom" Meadows replied to the $1.5T question by saying that "we know that GDP will go up" and pay for the tax cuts. "We know this will happen."

Do we?

I mean, it was 16 years ago that George W. Bush cut taxes significantly. Have we had this elusive 4% growth since then? Have those tax cuts paid for themselves and solved any deficit problems our nation may have? 

Recall that W. inherited a budget surplus from Clinton. Recall that he left Obama with annual $1T deficits as far as the eye could see, and Obama handed Trump deficits about half that size.

So, to Rep. Meadows and all the other "swashbuckling Republican taxcutters" out there who insist that cutting taxes on Corporations and wealthy Manhattanites will somehow benefit Speedway's rank and file, I say show me how well this worked the last time you did it.

The reason they all talk about Reagan, and not W, I believe, is that memories of Reagan have over the course of the past few decades become  more of a glossy caricature, and people actually remember that W's tax cuts did precisely none of the things that were promised.

So, in sum, Rep. Mark Meadows and Speaker Paul Ryan, with the full  support of Tennessee Trey, Susan Brooks, Luke Messer, and Todd Rokita (all self-proclaimed deficit hawks) are about to vote for a tax bill that will increase the deficit, will over time raise middle class taxes, gives 80% of its benefits to the wealthiest 1% of Americans, and won't boost the economy one iota.

The term "charlatan" is a strong one; sometimes it's not strong enough.

"Charitable" Donations and Tax Deductions

I understand why I would get a tax deduction if I donated, say, $500 to the Speedway Drama Dept. Like all drama/arts/music programs, it is a worthy cause and generally does not get the support that, say, the football team does (though I would still get the tax deduction if I donated to the Speedway football team).

It makes sense from a policy standpoint that we would want to encourage private actors to donate to charity. Tax deductions are a well-accepted mechanism whereby the government encourages such donations. So, if I donate $500 to the Speedway Drama Dept., I can deduct $500 from my taxable income at the end of the year. Stated another way, I don't have to pay taxes on that $500.

What if, however, my better angels were not controlling.

What if, to take a single example, I wanted to donate my $500 to "Americans for Tort Reform," a "non-profit" 501(c)(3) group that advocates for easier access to the courts in personal injury cases. As both readers of this blog know, I am a litigator. I litigate personal injury cases, generally from either side of the "v," though more often than not on the defense side.

If I am encouraging legislation, through my non-profit donation, that aids my bottom line, is that really charity? Or is that simply self-interested lobbying?

While we're at it, recall that political donations are NOT tax deductible. So, if (when) I decide to donate money to the "Re-Elect Gary Raikes for Speedway Town Council Fund," I have to pay taxes on that money. Both dollars (Sorry Gary, they haven't passed the "make it easier to sue people, rendering defense attorneys more valuable Act of 2017" yet) are taxable.

I suppose the point of this blog is that not all "charitable donations" are created equally. That is one of the problems we run into when we equate money with speech. Is some speech more "worthy" than other speech? Probably. Is the government empowered to make that determination? Maybe. Should the government make that determination. You tell me.

QOTD 10-24-17

Here it is:

The stakes in delivering big tax cuts to corporations and investors could be equally plain if, ultimately, Republicans decided to fully offset their cost by raising other taxes or cutting spending on government programs. But it seems much more likely that tax cuts will, ultimately, end up being financed by a mix of new borrowing and wishful thinking on economic growth just the way Reagan and Bush did it.

Don't Say You Weren't Told

I've stated before how frustrating it is when I hear people say something to the effect of "Who could have predicted that X would have had Y consequences?" It's frustrating for me when I predicted that this action would have those consequences. Not to toot my own horn too much, but I predicted:

• That the War in Iraq would go poorly
• That deregulating financial markets would result in a financial crisis
• That Obama's policies would not create runaway inflation, at least not in the short-to-medium term (we still don't know if/whether Obama's policies, if continued for 50 years, will create runaway inflation; however, 50 years from now, it's hard to continue to characterize them as "Obama's policies")
• That "Obamacare" would not result in the end of freedom and a 1,000-year reign of socialist terror (or whatever the nightmare scenarios being pushed on Hannity are at the time)

Of course, it is easy in hindsight to sit around and say, "I told you so." 

So, given that, I will tell you this up front:

•  The Republican Party's "tax reform" is anything but reform, though it will be
•  An enormous tax giveaway to the already wealthy that will
• Explode the national debt and
• Explode the annual deficit and will
• Not achieve the stated goal of increasing economic growth

With respect to the growth, here is a chart of American growth over the years:

Note that Ronald Reagan cut taxes in 1981 and 1986, and George W. Bush cut taxes dramatically in 2001 and 2003. Do you see the dramatic and lasting leaps in GDP growth? I don't. This idea that cutting taxes on the wealthy will kickstart economic growth is simply not supported by the facts.

As a litigator, I know that if I have to argue my theory of the case despite the facts, I'm in for a bad day. Perhaps someday, the median Republican voter will realize that she has been sold a bill of goods on this "trickle down" theory of economic prosperity.

In closing, by way of regurgitating that I am telling you right now what the results of this tax "reform" will be, I leave you with a quote from Paul Krugman:

I very much doubt that additional facts or analysis are going to matter much for the fate of the Trump tax cuts. It’s obvious to pretty much everyone – I suspect even those pushing the cuts – that they will confer huge benefits on the wealthy, do little if anything for the middle class, and greatly increase the deficit.