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Truth about taxes.


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    lonely bird, if we cut the payroll tax we can direct Treasury to make our payments to the Soc Sec and Medicare Trust Funds. That's what was done with the Obama payroll tax cuts that were phased out. There's probably a better way to fund Soc Sec and Medicare without all the budget shenanigans, but that's for another post. For more info on this topic, please check out Stephanie Kelton's short but sweet article at the link below. She was a Sanders appointee as Chief Budget Economist for the Minority on the Senate Budget Committee and now she is a principle economic adviser for the Sanders' presidential campaign. I urge all Democrats to vote for Senator Sanders on the basis of his allies and economic advisers which include Kelton, Bill Black, and Randall Wray, all prominent progressive MMT activists. Under a Sanders presidency, we could have a Revolution for Public Purpose.

    neweconomicperspectives.org/2011/04/4-t...

    The government is always the price monopolist at the margin for its currency. So the prices it pays inexorably sets or validates the price level for things that we buy or sell, including our own labor.

    Simple game theory shows that labor is not a fair game, as workers must work to eat, but business will only hire when it is profitable to do so. - Warren Mosler (one of the most successful hedge fund managers in American history on the basis of returns to customers and a former Democratic candidate for the U.S. Senate in Connecticut and whom I invited to speak with Occupy Dallas in 2012).

    Without support (from the government) wages will trend to very low subsistence levels. Set at a living wage, the ELR would provide the support to prevent wages in the private sector from trending below that living wage level. Meanwhile, it adds and improves upon the quality and quantity of our labor force, eliminates many societal evils, and provides the macro economy a self-regulating mechanism.

    With an ELR in place, taxes regulate the size of the pool of workers in ELR jobs. We always would have full employment. The question then and what taxes would regulate is the composition of the total employment.

    You are correct in recognizing a problem with cutting taxes forever; but theoretically, you could have negative taxes, provided you required people to present a tax payment that they were subsequently reimbursed for; and some other conditions. So if I'm the government and I say if you give me $10, I will give you $15, you need to get the $10 from somewhere to get the $15 from me. So the "demand" for the currency created by the tax is still there; but in order for that to work or be required to regulate demand higher, we would need ridiculous demand leakages, i.e. propensities to save, or there would be massive inflation that would hyperinflate the currency and necessitate larger taxes or end in some revolt against the government.

    When you cut taxes on working people with high propensities to spend in the first instance, the resulting economy activity is going to generate new tax revenues that replace some of the revenues from the taxes cut. If it did not, then the tax cut would have all been saved and not spent by definition. This is why tax cuts and tax increases on the wealthy don't work that well to regulate aggregate demand; because so much of their earnings is devoted to savings. The tax cuts or increases on the rich have to be more dramatic. Ideally, we don't have to use taxes to regulate rich people (prevent massive build up funds used to buy elected officials, etc); but we regulate how people become rich in the first place and stop all the government support for rich people that is for no public purpose.

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    Chet, there is too much to unpack here.

    All I'm talking about is that as a matter of logic, scorekeepers have to distribute "points" first before they can collect them from players. When you play the game Monopoly, the "Monopoly Bank" cannot receive any funds from you, until it has distributed those funds first. The funds come from the "Monopoly Bank" which is analogous to a consolidated central bank-government treasury department. The "Monopoly Bank" has a monopoly over the "Monopoly" currency. It's the same with the U.S. currency; the government has to spend or lend the currency first, before any players can pay their taxes or purchase government securities (government debt).

    So any talk that taxes need to go up in order for the government to acquire funding for more government spending is completely counterproductive and false. Schmidt recognizes that, but struggles with reconciling this into Democratic politics.

    In any event, if you are interested in what I'm saying but have questions: please read Warren Mosler's 2010 book first. It's free. It's short. It's written for a lay audience. Warren has a gift for keeping it simple. I can help you with specific questions, but you first need to read the book.

    moslereconomics.com/wp-content/powerpoi...

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    Carlitos, My proposal about taxes is two fold. Use it or lose it. First I ppropose very high deductions even 100% for money used to capitalize old or new long term product producing jobs and iideas along that line. Then I would put corresponding high taxes and immunity from deduction laws on speculative third party trsnsactions. All the tax changes would be aligned to award production jobs and penalize gambling. Formulate the effort toward stable hard products. This would produce a massive resurgence in jobs, community income and income tax revenue. The net effect on wealth would be lateral but wealth would be ownership of jobs producing industries instead of balance sheets. Inflation would have no major effect because prosperity would increase at an increasing rate the spending and spending power of a huge segment denied discretionary money for over 3 decades. Money woulf have real value and utility because of the increase in velocity .

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    That's kind of the design already. Businesses are taxed on net-income. If they put more revenues towards investment, their net-income is lower and they pay lower taxes.

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    I am talking about a tax deduction not income adjustment. Maybe vague but the fundamental is to increase the velocity of money by moving it from securitizing to capitalizing. Stock ownership could lead to zero taxes. Make derivatives useless by returning futures to true price and supply protection of sensitive commodities pre year 2000 definition of futures.

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    If you want to increase the velocity of money, put more money in the hands of those most likely to spend it. That means those with the lowest propensities to save and the highest propensities to spend, e.g. poor and working people. That's what a payroll tax cut would do, and that's what Bernie Sanders' total net-spending plans would do.

    Consumers run this thing. Capitalism runs on sales. You are focused and all over the place on supply side stuff. That's the wrong way to attack an aggregate (bleeping) demand problem and history shows it to be the case. More than any other factor demand leads investment, not taxes or interest rates or regulatory changes.

    Just get the dollars in the hands of working people so they can buy the stuff they produce with their labor.

    Democratic constituencies, i.e. the poor, middle class, and seniors, deserve tax cuts and more government spending for public purpose that improves their lives, and we don't have to raise revenue by taxing rich people to get the funds to do it.

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    You get money in the hands of the people that will spend it by giving them jobs that create income and discretionary income. You do that by invigorating an economy. You invigorate an economy by getting the trillions of dollars securing the derivative market back into the economy. That is done by target taxing derivatives out of existence. Roll back futures definition to pre 2000 and penalize tax everything declared a futures after that. Tax at a penalty rate any trading exceeding capacity of a working person. Any trading done at a level above a working person is for generating income and serves no purpose.

    I am not proposing taxes as an income but for investing in brick and mortar businesses. Rewarding jobs investing with tax credits. Not unlike the credits low income qualify for but determing qualifications by investments. I have no problem with people making money and getting rich. That is how accomplishments happen. My problem is with willful stagnation of money. There is no politically correct way of putting money in the hands of people that will spend it. Directed taxation is the only way of returning money to an economy. Predatory financing serves no purpose other than generating an income. That contributes to taking money out of the economy. Especially in the case of student loans that finance low return degrees. The income from those people will mostly service their loan debt, taking more and future money out of the economy. Annuities are creating the world we live in.

    BTW Several years ago Warren Buffet said to put money in the hands of people that will spend it. I wanted to quote him but an internet search will not turn that up.


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    This thread was started in the spring of 2016, when Trump was still trailing badly in the polls.

    Less than a year after he got elected, he managed to pass a huge tax cut that largely benefited corporations and wealthy people.

    As article in the morning New York Times illustrates, once again, why tax cuts simply do not work - and Kansas is exhibit #1.

    Spending cuts are enormously harmful to the people who rely on government services and the public workers who lose their jobs. In a recession, cuts also damage the broader economy, causing layoffs to ripple through the community.

    When you fire a teacher, you harm her family and her. But you also harm the local grocery store where she shops, and all the other people and businesses she gives money to.

    Using conservative estimates, these ripple effects mean that each dollar of spending the state cuts leads to a drop of at least $1.50 in the gross domestic product, and there are reasons to believe that the drop is as much as $2.50. With state budget shortfalls forecast to approach $300 billion this fiscal year, a spending-cut-only approach to balancing state budgets will cause at least a $450 billion reduction in G.D.P.— more than 2 percent.

    Tax increases, especially on high-income people who aren’t living paycheck to paycheck, are much less economically damaging, costing the economy only around 35 cents for every dollar raised. States and localities that raise taxes on the rich to increase spending will create at least $1.15 of economic activity for every dollar raised, and most likely closer to $2.15 or more.

    This at a time when education funding should be expanding. The Trump administration’s failure to control the pandemic has made it impossible in most places to safely open schools at current funding levels, but large budget increases to support smaller class sizes, building retrofits and other innovations could make it possible for kids to attend classes in person rather than on the computer. Instead, many districts are shuttering buildings and laying off teachers and other staff members.

    Some states, and their voters, are taking bold action. Oklahoma and Missouri just voted to expand Medicaid by ballot initiative. Arizona voters will decide in November on an ambitious plan to raise more than $900 million a year for education through a 3.5 percent income tax surcharge on the top one percent of Arizonans.

    https://www.nytimes.com/2020/09/03/opinion/sunday/progressive-policies-taxes.html?action=click&module=Opinion&pgtype=Homepage

    The amount of U.S. government debt has grown to nearly outpace the size of the nation’s economy in the 2020 fiscal year and is set to exceed it next year, as the virus downturn saps tax revenues, spurs government spending and necessitates record amounts of federal borrowing, the Congressional Budget Office said on Wednesday. Federal debt, as a share of the economy, is now on track to smash America’s World War II-era record by 2023.

    The turnabout on deficit fears caps several years of declining concern over Washington spending more than it takes in, particularly among Republicans. Lawmakers voted along party lines in 2017 to pass a $1.5 trillion tax cut that President Trump and Republican leaders insisted would pay for itself but has instead added to the deficit. The budget deficit surpassed $1 trillion in 2019 — before the coronavirus pandemic hit — a jump of 17 percent from 2018 as tax cuts and spending increases continued to force heavy government borrowing.

    The deficit — the difference between what the United States spends and what it earns through taxes and other revenue — is expected to reach $3.3 trillion for fiscal year 2020, the budget office said on Wednesday. That is more than triple the level it reached in the 2019 fiscal year.

    But it has been decades since the amount of federal debt was larger than the sum of the nation’s annual economic output. That came in 1946, shortly after the war ended.

    In a separate report released on Wednesday afternoon, the budget office updated its forecasts for the solvency of the Social Security Trust Fund, showing it will run out of money faster than the office previously forecast in June.

    The new estimates imply the fund will be exhausted by 2031, a year earlier than previously projected, forcing immediate benefit cuts, unless lawmakers intervene. Medicare’s hospital insurance trust fund is now on track to run out of money in 2024, instead of 2026. Trump's plan to cut the payroll tax would make both of these situations worst.

    While Trump, as a candidate in 2016, famously pledged to pay off the entire national debt in eight years, he and his fellow speakers during this year’s Republican National Convention did not raise the deficit issue at all. Mr. Trump’s most recent budget proposal, offered before the pandemic spread rapidly in the United States, did not include a balanced budget even if he were to win re-election.

    https://www.nytimes.com/2020/09/02/business/us-federal-debt.html?action=click&module=Latest&pgtype=Homepage

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    It appears that Biden's $1.9 trillion stimulus bill will be signed into law today.

    Although conservatives (like Robert Robb of the Arizona Republic) don't like it because it does far more than provide direct COVID relief, they are ignoring the "multiplier effect" that I mentioned in August.

    For the folks who are suddenly worried about the deficit (but weren't when the 2017 tax cut bill was passed), this morning's New York Times brought good news.

    With the passage of a deficit-financed $1.9 trillion relief bill just days away, Democrats in Congress may soon pivot to new agenda items, including President Biden’s Build Back Better plan for infrastructure and other critical investments. And those lawmakers will inevitably face intense pressure from fiscal moderates to include tax “pay fors” in spending legislation. One of the best ways to raise plenty of revenue — and help honest taxpayers — is to effectively battle tax cheats. To do that, though, Mr. Biden and Congress must seize the chance to revamp and restore the federal government’s own infrastructure: the Internal Revenue Service.

    After a decade of budget cuts for the agency, the cracks in the I.R.S. are costing taxpayers trillions of dollars and growing impossible to ignore. The agency is increasingly unable to detect or address blatant tax cheating by high-income filers and the largest businesses. In February, I.R.S. Commissioner Charles P. Rettig told Congress that about $570 billion in taxes owed in 2019 were not paid. That tax gap is projected to total about $7.5 trillion over this decade. Meanwhile, the I.R.S. answered fewer than a quarter of its phone calls from people seeking help with their taxes.

    Estimates suggest that the top 1 percent of filers account for at least 28 percent and as much as 70 percent of the tax gap. The wealthiest households and largest businesses often use a complex maze of financial arrangements and offshore entities that make it incredibly hard and time-consuming for the I.R.S. to untangle what taxes are owed but not paid.

    Various estimates by the Congressional Budget Office, the U.S. Treasury and academic researchers have concluded that investing in the I.R.S. would pay for itself many times over. The Treasury Department, for instance, estimated that each additional dollar dedicated to I.R.S. enforcement results in directly recouping about $6 in taxes owed.

    The bipartisan Taxpayer First Act, which was signed into law in 2019, included some modernization measures but, crucially, didn’t include needed funding. Lawmakers have the opportunity to remedy that this year and finally secure the 21st-century tools and resources the I.R.S. needs. Because reforming the I.R.S. is compatible with the budget process that lets spending bills pass in the Senate with a simple majority, there’s little excuse for inaction

    https://www.nytimes.com/2021/03/10/opinion/deficits-taxes-biden-infrastructure.html?action=click&module=Opinion&pgtype=Homepage

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    The NYT editorial board this morning offered yet another way to increased tax revenues.

    Although increased funding for the IRS is part of the solution, another simple solution is to create a new form called a "1009New" form, which would create a third party verification system for business income, which the W-2 forms already do for wage income.

    Unreported income is the single largest reason that unpaid federal income taxes may amount to more than $600 billion this year, and more than $7.5 trillion over the next decade. It is a truly staggering sum — more than half of the projected federal deficit over the same period.

    Charles Rossotti, who led the IRS from 1997 to 2002, suggested that the new forms would apply only to people above a generous income level. The proposal would not increase the amount anyone owes in taxes. It would, instead, increase the amount paid in taxes by those who are currently cheating.

    Elizabeth Warren has proposed a "wealth tax". Although it also makes sense, getting it passed by an evenly divided Senate may be difficult, whereas a simple change in forms used by the IRS may be easier to implement .

    https://www.nytimes.com/2021/03/20/opinion/sunday/unpaid-tax-evasion-IRS.html?action=click&module=Opinion&pgtype=Homepage

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    Taxes are jobs. Cutting taxes cuts jobs. Historically every major tax cut has precipitated a recession. The people that benefit mostly from our system want to take personal credit for their success. Therefore cutting taxes to them is giving them their money back. Biden's stimulus would better serve the country if the money we don't know about was used to create pilot plants for increased use of our resources, note I said our.
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    IRS: Sorry, but It's Just Easier and Cheaper to Audit the Poor ...

    propublica.org › article › irs-sorry-but-its-j...

    Oct 2, 2019 — Congress asked the IRS to report on why it audits the poor more than the affluent. ... over the past nine years — something lawmakers have shown little i

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    When Doug Ducey was sworn in, he vowed to cut taxes every year. ignoring the fact that "trickle down" tax cuts simply do not work - and Ronald Reagan proved that a lot time ago.

    Ducey has attended a number of the Koch brothers conferences, so it is obvious where he gets his ideas.

    This morning's Flagstaff paper reported that he is planning to cut taxes AGAIN in the next budget.

    A budget deal struck between Republican leaders of the Arizona Legislature and Gov. Doug Ducey includes implementing a flat 2.5% income tax that cuts $1.5 billion a year from state revenue and keeps higher earning taxpayers from having to directly pay a new 3.5% surcharge to fund schools.

    The agreement would cap the maximum any taxpayer will owe with a new voter-approved tax surcharge for education at 4.5% — the current top tax rate. It envisions using state general fund revenue to make up the difference so the full 3.5% surcharge voters approved in November in Proposition 208 will go to schools, if the measure survives a state Supreme Court challenge.

    The deal struck by Senate and House leaders with the Republican governor essentially cuts 25% from personal income tax revenue, with most of the savings going to higher-earning taxpayers.

    Republican Sen. Paul Boyer of Glendale was critical of several parts of the plan, including the tax cut.

    (Paul Boyer was the guy who said that the current election audit "made them look like fools".

    Not enough ongoing for Universities,” Boyer said in a text message Tuesday, after being briefed. “Need more fiscal responsibility in paying down debt, more in the Rainy Day fund. Not prudent to cut so much in taxes.”

    Democrats are virtually certain to unanimously oppose the deal, since it envisions a huge tax cut they dislike because they consider state government massively underfunded, especially K-12 schools. They instead want to boost teacher pay, which is among the lowest in the nation, and invest in other state priorities.

    “Giving away $1.5 billion in long-term permanent tax cuts is something that we would not support,” Rep. Reginald Bolding, the House minority leader, said. “We believe that those dollars could be re-invested in teacher salary. Let’s make Arizona teachers Top-25 in the nation, and add a $7,000 pay increase. (Democrats) had a budget that would do that.“

    https://outlook.live.com/mail/0/inbox/id/AQMkADAwATZiZmYAZC04YTBiLTEyYTYtMDACLTAwCgBGAAADpqG04fTX00KKsFUU3Y8pVAcA5lKaVemBxkqBRuAA9YyB%2FgAAAgEMAAAA5lKaVemBxkqBRuAA9YyB%2FgAEUZIB1gAAAA%3D%3D

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    Two articles were published today about the worldwide minimum tax rate:

    From the New York Times:

    "Over the weekend, largely at the urging of Janet Yellen, the Treasury secretary, finance ministers from the Group of 7 — the major advanced economies — agreed to set a minimum 15 percent tax rate on the profits of foreign subsidiaries of multinational corporations. You may wonder what that’s about, or why you should care.

    So let me tell you about Apple and the leprechauns.

    Apple Inc. has vast global reach. Its products are sold almost everywhere; it has subsidiaries in a number of countries. It is also, of course, immensely profitable.

    But where are those profits earned? Apple does very little manufacturing, mainly contracting production out to other companies, mostly in China. Much of its profits comes from licensing fees, reflecting the company’s intangible assets — its patents, trademarks, brands and trade secrets. And where are those intangible assets located? From an economic point of view, that’s not even a meaningful question.

    For tax purposes, however, Apple needs to report its profits somewhere. Right now that means that it’s basically up to Apple to declare where it makes its money — and what it does, naturally, is claim that its profits accrue to subsidiaries in countries with low tax rates on those profits, Ireland in particular."

    The thing is, Apple is far from unique in exploiting its multinational status to avoid taxes, and Ireland is far from being the most egregious tax haven, even in Europe.

    According to International Monetary Fund numbers, Luxembourg — which has about the same population as Vermont — has attracted more than $3 trillion in foreign corporate investment, roughly comparable to the total for the U.S. as a whole. What’s that about? Almost no real investment is involved; instead, the tiny duchy has offered many companies deals under which they can report their profits there while paying almost nothing in taxes.

    According to International Monetary Fund numbers, Luxembourg — which has about the same population as Vermont — has attracted more than $3 trillion in foreign corporate investment, roughly comparable to the total for the U.S. as a whole. What’s that about? Almost no real investment is involved; instead, the tiny duchy has offered many companies deals under which they can report their profits there while paying almost nothing in taxes.

    https://www.nytimes.com/2021/06/07/opinion/yellens-new-alliance-against-leprechauns.html

    Here's a few more comments from the National Catholic Reporter:

    Along the same lines, at Foreign Affairs, Joseph Stiglitz, Todd Tucker and Gabriel Zucman argue that increased taxation on the rich is absolutely necessary in order to save capitalism. The numbers are shocking, for example:

    The global average corporate income tax rate fell from 49 percent in 1985 to 24 percent in 2018. Today, according to the latest available estimates, corporations around the world shift more than $650 billion in profits each year (close to 40 percent of the profits they make outside the countries where they are headquartered) to tax havens, primarily Bermuda, Ireland, Luxembourg, Singapore, and a number of Caribbean islands.

    The public sector has been starved while the richest of the rich put their money where the common good can't touch it. It is a scandal.

    https://www.ncronline.org/news/opinion/distinctly-catholic/links-bidens-first-diplomatic-victory-aclus-changing-politics

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    Yes that is how it works, Bezos and Musk etc. barely pay any taxes compared to people who do real work and have to support a family. Our present form of government and the present danger coming from the right may do exactly what you describe, i.e. the hoarding of "money" by the rich and placing their "hoard" in tax free places. For them it is never enough. In the meantime others are struggling to even get food on the table. The present "trend" is an very dangerous one, but our leaders are kind of unaware of the dangers lurking around the corner. I seldom "bet", but I bet that the chaos as it is right now, will continue or getting worse, unless Pelosi and Biden show some backbone; words alone won't fix it. The Fed's should be in charge over the 50 unruly States and make sure of that, if not then forget "governing" as it should.

    The Titanic can float only so long until it sinks; the "rats" ( billionaires) already saved their own asses and just let the rest drown. Amen