Tag Archives: lobbyist

A Progressive Argument for a Flat Tax

"The Destruction of Tea at Boston Harbor", lithograph depicting the Boston Tea PartyDemocrats and Republicans will only agree to changes in the tax codes if forced to by their caucus or in exchange for tax contributions. The debt default is looming, so let’s strike a deal.

  • A deal that requires no passage of a debt extension – now, or ever again.
  • A deal that protects social programs while creating incentives to make them more efficient.
  • A deal that allows a Democrat in the White House and a Democrat majority in the Senate to pass a series of core Republican initiatives – how’s that for reaching across the aisle?
  • A deal that will make the business lobby happy and create millions of new jobs for unemployed and under-employed Americans.

Tax subsidies without representation is tyranny.

The US tax code is more than 50,000 pages. Few among us have any idea of what is really in there. Much of the tax code was written decades ago to correct wrongs, incentivize or favor one economic group, investor, industry or corporation. Rather than even attempting to fix something politically impossible to fix, I propose that in exchange for striking all current tax regulation1, we:

  • Pass a balanced budget amendment requirement with tax rates to be set each year based on the CBO estimate of authorized spending and projected emergencies (war, for instance) requiring only a conference committee finding and a simple majority vote not subject to Senate filibuster rules to pass:
    • A flat personal income tax – the same tax rate paid for every individual with:
      • An exemption of $6,0002 for each person or a standard deduction of $15,000;
      • An exemption for charitable contributions up to $2,0003 to incent personal investment in important personal causes that help us all;
      • A continued exemption for contributions to a retirement, education or health savings account;
  • End all corporate taxes with a requirement that corporate income, no matter where in the world it is earned, be dispersed as dividends to shareholders4;
  • End payroll taxes for Social Security, Medicare and Medicaid getting the fiction that there are “trust funds” and removing those intra-governmental holdings from the national debt – which, by the way, would end the need to pass an extension of the national debt.

Yes, it would mean that any special break would have to be a direct subsidy including businesses or groups, energy initiatives, capital gains and home ownership2.

Yes, it would mean the payroll tax income limit capped at $106,800 in income (2010), would end, but so would the employer share of payroll taxes.

Yes, it would end double taxation of corporate profits by their shareholders.

Yes, inheritance, beyond the tax household, would also be subject to the flat tax. However, existing trust and charitable exemptions should continue to apply.

Yes, it would end an industry of the more than 1.2 million Americans employed as tax preparers and have negative economic impact on the US Postal service, the IRS, tax attorneys and the printing and paper industries. (Perhaps, at some time, if they have friends in Congress, they could receive a subsidy to be reeducated.)

Yes, a zero tax rate would be a huge benefit to business, especially small business. Large corporations simply do not pay at rates anywhere near the tax rates anymore. Small businesses do. Millions of new jobs would be created. Companies now sheltered in off-shore tax havens could finally be repatriated.

Yes, it would directly impact foreign investment in the US. Investors who earn money here would be required to pay taxes. Seems fair.

Yes, this plan, at least on paper, unfairly benefits the higher income taxpayers and is inherently unprogressive. However, that does not pass the real life test. The earnings of the very rich earn are deferred, unearned, sheltered and buried in million dollar losses – their effective rates would go up. If future Congresses want to address this, let them.

Yes, it would absolutely make each Federal expenditure have direct political consequences in its direct impact on the tax rate – that includes war, corn ethanol and new office buildings.

Yes, there would be huge incentive for our politicians to get as many people working as possible since each would be figured into the tax rate.

No, it would have little direct impact on state taxes. Each state would have to decide. Sure, there would be less competition for industry displacement using tax incentives, but we can all live with that.

What would the rate be? Nobody knows. I believe it would likely be about 25%.

Here are some examples based on a family of four (not retired), comparing current tax rates that include self-employment taxes (Social Security, 10.4% and Medicare, 2.9% taxes up to $106,800) with a 25% flat rate:

Income

Subject to Tax

Total Tax

Effective Tax Rate

Subject to Tax

Total Tax

Effective Tax Rate

$17,000

$5,400

$3,961

23.3%

$0

$0

0.0%

$69,000

$57,400

$19,527

28.3%

$45,000

$11,250

16.3%

$139,350

$127,750

$49,042

35.2%

$115,350

$28,838

20.7%

$212,300

$200,700

$73,648

34.7%

$188,300

$47,075

22.2%

$379,150

$367,550

$139,324

36.7%

$355,150

$88,788

23.4%

$1,000,000

$988,400

$364,204

36.4%

$976,000

$244,000

24.4%

This is a serious outside-the-box suggestion to an extraordinarily complicated problem (click here for my suggestion for solving the immigration issue). I encourage you to ask your questions and express your concerns in the comment box. It is not perfect, but far better than status quo. If you like it, please send it to someone who can make a difference – a Congresperson, or a lobbyist.
___________

 

1 Allowable business expenses would need to be defined for such things as charity and political contributions, allowable travel and entertainment; employee benefits and executive compensation; deferred options; etc. Specialized taxes and fees for service (toxic waste clean up, FDA approval) would need to be reviewed separately.

2 $6,000 is an example. A balance would need to be struck between a progressive figure and one that simply recognizes the cost, including health insurance of non-income earning household members (BKA: children, disabled, retired, etc.) and the minimum cost of a residence. In large part, this deduction is intended to minimize the loss of the homeownership tax deduction for taxpayers who itemize and progressively address tax rates for middle to lower income taxpayers.

3 This limit is intended to incent charity without unfairly benefitting an economic group or a specific charity. I’m flexible here.

4 The requirement should allow for some retained income and reserves, and should be averaged over a number of years. Shareholders, including holding companies off-shore would be required to file tax US tax returns subject to the Federal tax rate.

Managing for Peace

52nd Infantry Regiment Teaches the Peace SignYesterday, President Obama announced planned changes to his security team. CIA Director Leon Panetta will be nominated for Secretary of Defense. General David Petraeus, now head of operations in Afghanistan will be nominated to run the CIA. Lt. General John Allen will replace Petraeus in Afghanistan. Ryan Crocker will be nominated to be the next US ambassador to Afghanistan.Secretary of Defense Robert Gates, a holdover from the Bush administration kept around to protect Obama from typical first-term weak-on-the-military attacks by the opposing party, is stepping down and will likely enter the revolving door into the defense industry boardroom – or several of them.

There is nothing unusual in changes. The President is running for reelection and it is smart politics to announce changes prior to the campaign. The President continues to manage government well. None of the changes will be abrupt. Gates will step down June 30 and Panetta, assuming confirmation, will take over July 1st. All are non-controversial defense insiders and should get an easy confirmation and even a few Republican votes.

Nothing unusual, except for why Obama’s really doing it — Obama’s planning to end the war in Afghanistan, and with it, cut back on military spending. You didn’t hear it here first. Obama has been saying it for two years. He could not do it with the team he had. He can do it with the new team.

Gates, has been dead-set against Pentagon budget cuts, now he won’t have to make them. Petraeus has an unfinished job and wasn’t about to tell the President to draw down troops or tarnish his reputation or ego. Now he can continue fighting in Afghanistan using the CIA and trust Allen to be a good soldier. Panetta will do what he’s always done — manage well and make the Commander-in-Chief look good. Ryan Crocker, with his experience in Iraq and Pakistan is the person to manage Karzai and his corrupt government. This is the team to end the war before election day 2012. You did hear that here first.

Things could change, but it seems perfectly aligned to happen. We’ve been at war since 2003. The men and women in service deserve to come home. Our reserve units need to be retooled. Our allies are tired and have had enough. Voters stopped paying attention when they lost their jobs and their homes.

So what’s next? How will the corporate side of our military react? Just how much clout do their lobbyists for war have? Will our private contractor army stand down? Will the neocons give up on invading Iran until after the election? How will Israel react to the idea that we would not be actively making enemies on their behalf? Could Libya or Syria heat up and be next? Have the oil sheiks enough guns, tanks and jets to fight off revolution without us?

It is all part of the plan. The political plan. If America is truly ready for peace, as defined by good poll numbers for Obama fall a year from now, we’ll finally have peace. If not, well, whatever it takes to get elected. Please tell your pollster you are ready for peace when they call.

Buying Washington with our money

$3.8 billion. That’s how much the people you elected to Congress and the Senate took from finance, insurance and real estate lobbyists in the past 10 years. That’s right, billion.

What did they buy? Protection from regulation that would protect consumers and investors. Protection from laws that would stop the outrageous risks, self-dealing, market making, collusion and investor deception. Protection from paying ordinary taxes on their extraordinary incomes. And protection from failure to the tune of more taxpayer money than, according to The Intelligence Daily,

“… the cost of all US wars (including such events as the American Revolution, the War of 1812, the Civil War, the Spanish American War, World War I, World War II, Korea, Vietnam, Iraq and Afghanistan, the invasion of Panama, the Kosovo War and numerous other small conflicts), the Louisiana Purchase, the New Deal, the Marshall Plan and the NASA Space Program combined.”

With Congress safely in their vest pockets, the financial sector has thrived and is expected this week to announce record bonus payments – “… expected to be 30 to 40 percent higher than 2008’s.” Wall Street and the mega-banks profits have so bloated during this period that, according to Robert Creamer,

“of every 12.5 dollars earned in the United States, one goes to the financial sector, much of which, let us recall, produces nothing.”

What wait, you must be thinking, what about the regulation and reforms we were promised to keep from having to save all the firms too big to fail from failing again? Surely voters won’t stand for more of the same. The tough votes will have to be made, right? We’re going to re-regulate these companies, get transparency, watch them and enforce our laws, right?

Hate to get your hopes up. On December 11, 2009, the House passed H.R. 4173, the Wall Street Reform and Consumer Protection Act of 2009 – according to the DNC, the bill is the  “most sweeping financial regulation since the Great Depression.” DNC Communications Director Brad Woodhouse, said,

“One year after nearly the worst financial collapse in our nation’s history — a collapse brought on by the excessive greed and risk taking of Wall Street and by the anything goes regulatory environment put in place by Republicans — not one Republican in the House thinks that consumers deserve additional protections or that the practices of Wall Street should be curbed.”

The Dems writing the bill, apparently, don’t think so either. The fix was in. To get the 1,300 page bill to a vote, they caved on the enforcement provisions so that the bill falls somewhere between a tediously long suggestion and a PR stunt. Sound tough to voters, but make sure the market sees the secret wink and the nod. Sure, the bill would shuffle the regulators, asks the Treasury to report stuff to Congress, requires a lot more forms to be filled out, and adds some councils and boards. It prohibits a few new things, but also repeals some regulation on the books that could make things worse. Dennis Kucinich (D-OH) voted against the bill, believing the legislation does not go far enough. On his website, Kucinich noted the loopholes in the bill “that sophisticated financial industry insiders will exploit with ease.”

But hey, the Senate just got a hold of it. Don’t expect it to be better, shorter, or even get to a vote until spring, if then.


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Why Breast Cancer?

breastfeedinglargeWhy make curing breast cancer a priority when only 1% of the cases affect men? Fair question.

Irony.

Cancer of the most beautiful and natural symbol of unconditional love, the source of mother’s milk, is caused by the chemical pollution man dumped on mother earth during the last century. That’s right, man. With hubris and ignorance, driven unabashed by greed toward  innovation without regard for risk, we poisoned our wives, our children and ourselves.

The last century’s men also invented industrial poisons that have, and continue to contribute to, many other deadly cancers. I could pause now and list how the innovation also led to improvement to lives, but that is well known. I could pause now and list the toxic chemicals or cite the proof – document links follow for you to come to your own conclusions.

These self-inflected toxins are still in the water we drink, the foods we eat and the air we breathe. For the generations alive right now, it is too late to simply remove them. Just as it is too late to reverse the effects of damage to our ozone that causes skin cancer. While we owe it to earth’s future to stop and begin to undo the damage we caused, the only way to save ourselves is to find the cures.

Let me say that again, the ONLY way we can save ourselves is to find the cures.

Much good work is being done. Governments around the planet fund most of the research – by a huge margin. But, as you might suspect, most of the research funding decisions by government involves politics. In what district is the research facility? Which pharmaceutical company will profit from the research, and how much did they contribute to my campaign? Will the findings be bad for business? Does the university have a proven (code for conservative that follow private patents) approach? Did we fund it last year and did I get any grief?

This is where organizations such as Susan G. Komen Foundation come in. Funded only by contributions and non-pharma sponsors, they have invested more than a billion dollars in research and training researchers since 1982. Their decisions, under the direction of Komen’s Chief Scientific Advisor, Dr Eric Winer and a Scientific Advisory Board, to fund research is non-political. While they support many established programs of research, they also look, and often fund, emerging research that has promise outside the mainstream. This includes smaller research programs that don’t have the political clout to gain favor in Washington. Programs that innovate in ways that don’t always involve patents lasting long enough for Wall Street.

It may well be that these boutique programs find the magic to un-do what we’ve done to ourselves. Programs that allow some of our most brilliant researchers to follow paths that may lead to the cure instead of giving in to the financial realities of entrenched research paths. Programs that sustain paths of research that would be otherwise abandoned. Programs that don’t just sustain lives, but cure cancer (there will be a story in a few days about those who profit by sustaining lives, but for marketing reasons don’t want a cure).

This is National Breast Cancer Awareness month. For those of you reading the Dew who may wonder why we care, this is why: I want my wife to live, my daughter cured and I don’t want my granddaughters poisoned. Irony. Hard to appreciate, but real. Volunteer. Donate. Care. Support. Get involved. But don’t just stand there complacent. You’ve been poisoned already.

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Mutant capitalism

x-men-groupWe have been warned for decades about the risks of playing God (or subverting evolution) through genetics. Take a gene from one thing. Splice with another. And, voilà!  You’ve either got a cure for cancer or a cow that tastes like tofu.

Our Congress, bless their teensy-tiny little hearts, have always known what was in our best interests – particularly when it came to genetics. Now they are really on to something. They have let the mad social scientists over on K Street do a little economic gene splicing. While the actual process must be way too complicated for wee voters/taxpayers to understand, they have taken the nucleus from the capitalism genome (patent pending) and isolated a faulty hereditary gene which causes the natural death of industries who have outlived their usefulness and replaced the faulty helix with a gene from a leech found on one of Stalin’s hemorrhoids.

“The trick really wasn’t finding the leech,” a spokesperson attracted to the camera lights like a bug on a Southern night said, “we had long know that would be a big part of the solution. No, the trick was splicing the genes in total darkness. Even the smallest amount of light would have ruined the result.” This new, mutant form of capitalism, called,“Antisocialism” (scientific name: thelmaandlouisism), is believed by members of both parties to be the answer to our heath insurance crisis and will require every one to purchase health insurance from private companies.

This really solves the long, thought-to-be-impossible-to-overcome-problem of how to appear to have universal heath care coverage while still preserving what was most important to Congress – the political contributions provided by the health insurance industry that would no longer have any valid reason to exist.

Congressional leaders, basking in the glow of bi-partisanship, are now planning to use Antisocialism to solve the economic crisis and are planning to introduce legislation that would require all Americans to buy cars, stocks and consumer products from companies who contribute to their campaigns.

Suggested reading: Politco

Eating Dog is Bad for You

dogs_in_cageThis is especially true if the dog is eating you at the same time. Yet, the canine-ibalistic metaphor, dog eat dog, is the basis of our modern form of capitalism. Devour or be devoured.

On paper, some mergers may seem sufficiently benign as to benefit society. For example, it might be argued that the consolidation of our cell phone industry so that we can talk anywhere, is a good thing even though the costs are not going down. It might be argued that allowing media companies to buy other media companies created a scale of business which could simultaneously improve service, choice and lower cost, and that’s a good thing, if it happened that way. It might be argued that allowing Arthur Daniels Midland to gobble up the grains and seed producers has led to increased yield, more efficiency and a more dependable food supply, if we hadn’t let them corner the markets, drive up costs and wipe out most of the small farms around the world. Ditto oil companies. Ditto consumer products companies. Ditto the retailers. It might be argued that allowing our banks to merge across state lines and offer sophisticated financial products allowed them to compete in global markets and that was a good thing. Okay, you get the point, we’ve lived through consolidation of virtually every American industry.

What were the downsides to the chien du jour? When an acquisition or merger is pending, there is a lot at stake: stock prices and option value, interest rates on the borrowed money, poison pill benefits for management, risk of a bidding war, commissions on the transaction, etc. Most companies hire public relations counsel and equip lobbyists with unlimited campaign contributions to ensure the spin stays positive and the deals always are approved by the regulators. This results in a minimum of downside discussion. But let us look back at just one.

Banks. Once upon a time, there were state and federally charter banks in most every city in the country. Locally owned and managed. The people who ran these banks, your neighbors, made their own decisions and that made them powerful and important citizens in our little worlds. They were active in local boards and charities and were dependable contributors. They provided advice to small business. Acted as community leaders. They ran ads in their local newspapers and on their local broadcast stations. Hired local ad agencies, accountants and lawyers. Used local florist and caterers. Local printers and mailing houses. Local maintenance and janitorial firms. These banks managed their risks by lending to people they knew. This was not always fair, but it was the way it was. Each of these banks were subject to frequent audit to ensure the risks were sound.

Then along came the deregulation movement led by lobbyists for the biggest banks (more than $300 million was spent on lobbyists during the 20-years to deregulate banks) and the Depository Institutions Deregulation and Monetary Control Act of 1980 which, among other things, began the phased-repeal of the post-depression law (Glass-Steagall) that controlled speculation, forced state banks to follow the Federal rules, allowed banks to merge, cross state lines, gave all of them access to the Fed Discount Window, deregulated deposit interest, created the new rules for the second mortgages most of us have, and blurred the lines with the Savings & Loans. In 1987, overriding Fed Chairman Paul Volcker, the Federal Reserve Board voted to allow banks to join Wall Street in the securities and underwriting business. Subsequently, Reagan appointed JP Morgan director and pro-deregulation advocate Alan Greenspan as the new chairman. Add a few Bush years and a Republican Congress with a weak President Clinton and let the mergers begin.

So how’d all this turn out? Except for sign companies, not so good. The Savings & Loan industry was destroyed early on at a taxpayer cost of $160 billion. Largely as a result of mergers, the number of banks went from 15,084 in 1984 to 8,256 today. With each merger, many bank employees were either laid off or transferred. Operations centers were shuttered. 80 banks have failed. The cost to bailout troubled banks is expected to be some $4 trillion. Bank layoffs may total more than 160,000. Charity giving by banks has dried up. Bank presidents have been replaced by assistant vice-presidents on community boards. There is no local advertising to help keep the newspapers and local ad agencies afloat. Accountants, lawyers, caterers, janitors, all gone. Bank stock received in mergers is now trading in the single digits wiping out retirement and community wealth. No, not so good.

Maybe it is time we had a new leash law.

Turning an Opportunity into a Problem

mccarthy_complexshitThe storm must have seemed perfect. An issue that had matured since Nixon first introduced it in 1974. An overwhelming Democratic majority in the house. An almost filibuster-proof Democratic majority in the Senate. A Democrat in the White House with 60%+ approval ratings. And polls showing an overwhelming majority of the American people, Republicans and Democrat alike, in favor. Decades of horrific cost increases. A terrible economy. New pressures on business to be globally competitive. A new “transparency” sure to limit the influence of lobbyists. The health insurance industry must have been preparing for the worst. Not a chance.

The health insurance industry wants to turn their problem into an opportunity by turning our opportunity into a problem. The recipe is all too simple.

▪ Provide a dash of spin to the party of no that re-defines “universal healthcare” into a requirement for all Americans to buy private health insurance.
▪ Add equal amounts of cost-fear to business and decreased-benefits-fear to the wealthy, pensioners and the unions.
▪ Mix in gracious amounts of campaign money to incumbents.
▪ Chop up some populist talking heads on cable news and discard.
▪ Mix finely grated experts with talk radio.
▪ Let the mixture sit in a dark, smoke-filled room until the odor rises and forces opponents to run for cover holding their noses.
▪ Season to taste with government subsidies to states to provide their legislature’s version of coverage for their uninsured and the uninsurable.
▪ Heat and serve.
▪ Creates servings for some (the biggest portions to shareholders of the health insurance industry), but far from all. Does, however, ensure that the health insurance industry will live a long, happy and profitable life, safe from single payer universal healthcare for Americans, unlike like the short, miserable, and destitute lives of those who will never be able to afford it.

More reading on the issues involved from Wikipedia (where you can also view supporting links and citations):

The following is a listing of universal health care pros and cons as argued by supporters and opponents.

Common arguments forwarded by supporters of universal health care systems include:

▪ Universal health care systems, in an effort to control costs by gaining or enforcing monopsony power, sometimes outlaw medical care paid for by private, individual funds.

▪ Health care is a basic human right or entitlement.

▪ Ensuring the health of all citizens benefits a nation economically.

▪ About 59% of the U.S. health care system is already publicly financed with federal and state taxes, property taxes, and tax subsidies – a universal health care system would merely replace private/employer spending with taxes. Total spending would go down for individuals and employers.

▪ A single payer system could save $286 billion a year in overhead and paperwork. Administrative costs in the U.S. health care system are substantially higher than those in other countries and than in the public sector in the US: one estimate put the total administrative costs at 24 percent of U.S. health care spending.

▪ Several studies have shown a majority of taxpayers and citizens across the political divide would prefer a universal health care system over the current U.S. system.

▪ Universal health care would provide for uninsured adults who may forgo treatment needed for chronic health conditions.

▪ Wastefulness and inefficiency in the delivery of health care would be reduced.

▪ America spends a far higher percentage of GDP on health care than any other country but has worse ratings on such criteria as quality of care, efficiency of care, access to care, safe care, equity, and wait times, according to the Commonwealth Fund.

▪ A universal system would align incentives for investment in long term health-care productivity, preventive care, and better management of chronic conditions.

▪ Universal health care could act as a subsidy to business, at no cost thereto. (Indeed, the Big Three of U.S. car manufacturers cite health-care provision as a reason for their ongoing financial travails. The cost of health insurance to U.S. car manufacturers adds between USD 900 and USD 1,400 to each car made in the U.S.A.)

▪ The profit motive adversely affects the cost and quality of health care. If managed care programs and their concomitant provider networks are abolished, then doctors would no longer be guaranteed patients solely on the basis of their membership in a provider group and regardless of the quality of care they provide. Theoretically, quality of care would increase as true competition for patients is restored.

▪ A 2008 opinion poll of 2,000 US doctors found support for a universal health care plan at 59%-32%, which is up from the 49%-40% opinion of physicians in 2002. These numbers include 83% of psychiatrists, 69% of emergency medicine specialists, 65% of pediatricians, 64% of internists, 60% of family physicians and 55% of general surgeons. The reasons given are an inability of doctors to decide patient care and patients who are unable to afford care.

▪ According to an estimate by Dr. Marcia Angell roughly 50% of health care dollars are spent on health care, the rest go to various middlepersons and intermediaries. A streamlined, non-profit, universal system would increase the efficiency with which money is spent on health care.

▪ In countries in Western Europe with public universal health care, private health care is also available, and one may choose to use it if desired. Most of the advantages of private health care continue to be present, see also two-tier health care.

▪ Universal health care and public doctors would protect the right to privacy between insurance companies and patients.

▪ Public health care system can be used as independent third party in disputes between employer and employee.

▪ Libertarians and conservatives can favor universal health care, because in countries with universal health care, the government spends less tax money per person on health care than the U.S. For example, in France, the government spends $569 less per person on health care than in the United States. This would allow the U.S. to adopt universal health care, while simultaneously cutting government spending and cutting taxes.

Common arguments forwarded by opponents of universal health care systems include:

▪ Health care is not a right. As such, it is not the responsibility of government to provide health care.

▪ Universal health care would result in increased wait times, which could result in unnecessary deaths.

▪ Unequal access and health disparities still exist in universal health care systems.

▪ The performance of administrative duties by doctors results from medical centralization and over-regulation, and may reduce charitable provision of medical services by doctors.

▪ Many problems that universal health insurance is meant to solve are presumed caused by limitations on the free market. As such, free market solutions have greater potential to improve care and coverage.

▪ The widely quoted health care system ranking by the World Health Organization, in which the US system ranked below other countries’ universal health care systems, used biased criteria, giving a false sense of those systems’ superiority.

▪ Empirical evidence on the Medicare single payer-insurance program demonstrates that the cost exceeds the expectations of advocates. As an open-ended entitlement, Medicare does not weigh the benefits of technologies against their costs. Paying physicians on a fee-for-service basis also leads to spending increases. As a result, it is difficult to predict or control Medicare’s spending. Large market-based public program such as the Federal Employees Health Benefits Program and CalPERS can provide better coverage than Medicare while still controlling costs as well.