Reading a book by Scott Galloway: Adrift, America in 100 Charts.
He has a chart showing the increase in the amount of corporate earning which are booked in tax havens. It's gone from 0% in the 1960's to 50% in 2016.
I wonder what it means. If we see a figure that corporations pay x% of their income as taxes, is their real tax rate considering total income x/2 %
And the audit rate has declined from the good old days of 1960 of 3 percent to less than .5%.
NYTimes has an article on how social issues and the deficit play with Republican voters. The point is the Tea Party was very concerned about spending; now voters are less concerned. (I'd quibble a bit with Cohn's analysis: I think a lot of the Tea Party emotion was over the idea of socialism, specifically pushed by a black president, not so much a concern for fiscal conservatism.)
Anyhow, I find myself not in the mainstream of Democrats--I'm much more concerned about deficits and the rising cost of interest on the debt than the average elephant, and much more in favor of raising taxes as a way of handling it than most anyone. I wholeheartedly support boosting the IRS budget to collect taxes, but I'd also raise taxes on those above $100K.
I feel conflicted about the possible release of Trump's tax returns. It's a slippery slope; release his and pretty soon you're releasing returns of all candidates, even for dog catcher. The system BT (before Trump) was pretty good; candidates released tax information but they could fudge a bit around the edges. As long as they paid obeisance to the idea of public knowledge, they could get away with the fudges. (No, I don't have cases to cite, but just a vague memory of some candidates in primaries doing so.)
On the other hand, my great grandfather's taxable income was released back in Civil War days and published in the local paper, along with everyone else's. Why should we be different.
[Had an interruption to blogging because of house problems.]
The Times had an article yesterday on the lawsuit against the Trump organization. As I understand it, two employees have pled guilty for fraud--not reporting as income benefits they got from company, like tuition for kids, cars, etc. But the suit is against the organization so the government must prove that their manipulations of the accounts to provide these unreported benefits were "in behalf of" the organization. Apparently it's a big issue.
With my bias against TFG it seems clear to me. It was a "win, win" deal for the two employees--they got more compensation from the company through the manipulation without doing anything more for it. What did the company gain? Presumably the employees were providing services worth their total compensation.
For example, assume the employee got $500K in taxable income, making $350K after taxes. He also got $250K in benefits under the table, the taxes on which would have been $75K So the employee nets $600 K, the company pays $750K, and the US gets $150K The US should have gotten $75K more. So it's a win, win for the two employees, a loss for the US taxpayer.
How about the company? It's simple accounting, if someone loses, someone must gain. So who gained the $75K--I say the company, assuming a free market for the employee's services. In such a market to hire the employee they'd have to pony up $825 in taxable gross salary and benefits.
Matt Yglesias has a discussion here. I like it.
A note on a related issue: as I understand the Inflation Reduction Act it raises much of its revenue by taking really big corporations on their profits as shown by their public accounting, what they show to their stockholders. I've always resisted the idea that people could have two different sets of accounts, one for stockholders, one for the tax collector. I understand--whenever we mess with the tax code to allow special deductions in order to push something we like (such as investing in low-income areas of a city, etc), we deviate from my ideal.
I've reservations about the Democratic spin on the "87,000 agents" in IRA, as described here, specifically the idea that the new hires are, in part, replacing present employees who will retire over the next 10 years. I haven't seen the IRS report which is the basis for the 87,000 claim, but normally I'd think the baseline for an agency for the next 10 years would include funding for employees at the current level.
If the IRS has currently 100,000 employes (this Post piece says 80,000) and half will retire over 10 years, that would mean to me that IRS employment would increase by 37,000 because of IRA.
I've reservations on the CBC's estimates of their added collections as well. I bet the first thing the Republicans do when they gain the House, Senate, or Presidency is to use that leverage to negotiate a cut in IRS employment. (Of course, CBC can't be that cynical.)
It's not procreastination, really, or so I tell myself. But we finished our Federal and VA taxes today and filed them. Our tax rate isn't as high as the Bidens or Harris/Emhoff but we're close. What we pay for civilization.
There's been maneuvering in the House over how to handle the estate tax, particularly with regard to farms. The argument is that increasing the estate tax (has the term "death tax" been obsoleted?) means that heirs of farmers will be forced to sell out to pay the tax, rather than continue to farm the family's heritage. This is regarded as obviously wrong and evil, especially by farmers.
Saw that recently about 75 acres of Iowa farmland were sold for $22K an acre, which is incredibly high. I suspect economists might say there are benefits to forcing land onto the market, rather than passing it on from parents to children. The alternative to selling would be to take a loan backed by the acreage to pay the taxes, which seems to be the strategy the billionaires use to get spending money from their stockholdings in their IRAs. Presumably an increased estate tax would cut the market value of the land.
At any rate, it seems the farmers' political power remains high, and there won't be big changes in the estate tax for farms. Here are some facts:
Under current estate tax law, $11.7 million in assets are exempt from taxes for heirs. In 2019 -- the last available year from the IRS -- the exemption was $11.18 million. That year. there were 2,570 estates that paid taxes on $77.2 billion in assets (on average about $30 million per estate). There were 269 taxable estates that reported farm assets worth $1.3 billion (on average $4.9 million per estate). With the exemption, that means those farm estates averaged about $16.1 million in value. The average overall tax rate paid that year was 17%, according to IRS statistics.
Reading "The Man Who Ran Washington, the Life and Times of James A. Baker III"
On page 250 Baker, who's just moved from chief of staff to Reagan to be Secretary of Treasury is about to work on tax reform. The authors describe the current situation in terms which sound familiar today: many big corporations not paying any taxes, effective tax rate low, multitude of loopholes etc.
As they describe the eventual 1986 tax reform act, it almost sounds as if it's something Biden could buy. Top rate 33 percent (using a surtax) with 35 percent on corporations. Eventually passed comfortably with bipartisan support.
Times have changed.
That's my reaction to this request from President Biden which was included in his 2022 budget outline:
Supports a Fair and Equitable Tax System. To ensure that all Americans are treated fairly by the Nation’s tax system, including that the wealthy and corporations comply with existing laws, the discretionary request provides $13.2 billion for the Internal Revenue Service (IRS), a $1.2 billion or 10.4-percent increase above the 2021 enacted level. With this funding, the IRS would: increase oversight of high-income and corporate tax returns to ensure compliance; provide new and improved online tools for taxpayers to communicate with the IRS easily and quickly; and improve telephone and in-person taxpayer customer service, including outreach and assistance to underserved communities. In addition to increases for base IRS enforcement funding, the 2022 discretionary request provides an additional increase of $417 million in funding for tax enforcement as part of a multiyear tax initiative that would increase tax compliance and increase revenues. Altogether, the 2022 discretionary request would increase resources for tax enforcement by $0.9 billion
I'd prefer a multi-year plan for 50 percent for more.
Prof. Somin at Volokh Conspiracy has a book and a bunch of blog posts on the theme of people voting with their feet--moving from one state to another or one country to another. As a libertarian he's all for it.
It's not new, as I discovered when reading the Anderson "Crucible of War" on the Seven Years War. Interesting bit in it--the Massachusetts legislature wrote to the British regarding the demands for more troops for 1759 campaign, recruiting for which would require paying enlistment bonuses. They complained that taxes were already so high that people were leaving Massachusetts for better places.
Of course 270 years later Massachusetts is still wealthy and still a high tax state.
Megan McArdle and this Post analysis both describe a booming real estate market in the suburbs, as the "professional" (AKA "upper middle class") take advantage of cheap money and flee the crowded cities. I can see that in my own neighborhood: in the last year or so there have been several townhouses change hands in my cluster. These would likely be entry-level houses, currently selling in the $350K range. By the old standards of 2.5 times yearly income that means household income of $140K--not likely. A two income family would, I'd assume, come close to $90-100 K (say two school teachers)
IMO the country needs some way to counter such trends. We don't need McMansions, we don't need everyone having their own private bathroom, we don't need 2.4 rooms per person, 2,700 square feet in a house, much less more than that. I write this knowing my wife and I occupy a house with 2 baths, 2 half baths. But it's less than 1500 square feet. I didn't need that big of a house when I bought; we don't use the whole house now.
When I bought I found the biggest house I thought I could afford because I figured it was a good investment. I assume that parents would buy the biggest house they can afford in the best school district they can find for similar reasons: their kids are good investments; their house is a good investment, or so they think.
The only current way of countering ever more investment in housing is real estate taxes.
business boomed in the mid-1950s as the Internal Revenue Service began discontinuing its free tax-preparation services, and the Bloch brothers began advertising their discount tax service in a local paper.
