Common Sense Tax Reform

January 30, 2019

Massachusetts Sen. Elizabeth Warren recently announced the launch of an exploratory committee to consider a 2020 White House bid, vowing to be a tenacious advocate for economic fairness and rebuilding the middle class.

Sen. Warren subsequently proposed an “Ultra-Millionaire Tax” through which her campaign committee promises to raise some $3 Trillion in new federal tax revenues over the next 10 years.

Her proposal is not a tax on income; it is a tax on assets.

She identified some 75,000 U.S. families which hold assets in excess of $50 Million.

Her proposal is interesting, and it seems relatively simple.  All families with assets between $50 Million and $1 Billion would owe a 2% annual tax on assets valued in excess of $50 Million; and, the rate would rise to 3% on those assets that exceed $1 Billion.  What could go wrong?

Most appealing in the Warren proposal?

Senator Warren claims that this approach would affect just the wealthiest 0.1% of Americans, and that the incremental revenue generated through this novel approach could help rebuild the American middle class by providing for universal child care; student debt relief; and other critical societal needs.

What could go wrong?  Let us try to explore some possibilities.

The Warren plan anticipates that if your family holds $750 Million in gross assets, you would be facing a potential annual tax of $14 Million on those assets.

What the plan doesn’t mention is that for a fraction of that amount, you could employ lawyers and other experts to help value your assets quite differently.

One recent case study was illuminated by some extensive research conducted by the New York Times on the estate of Fred Trump.  https://www.bloomberg.com/opinion/articles/2018-10-03/trump-taxes-fred-s-scheme-was-quite-impressive

Stay tuned.  There is more to come from The Walrus on “Common Sense Tax Reform”!

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Build The Wall?

January 23, 2019

Ever ready to incite a riot and to encourage acts of violence, President Trump recently tweeted, “Four people in Nevada viciously robbed and killed by an illegal immigrant who should not have been in our Country… We need a powerful Wall!”

[Background:  Wilbur Martinez-Guzman, 19, has been jailed in Carson City, Nevada since January 19 on an immigration violation. Federal immigration authorities said that Guzman entered the U.S. illegally from El Salvador. Guzman is a prime suspect in 3 home invasion burglaries in Nevada over a 6 day period during which four people were shot and killed.]

No, Mr. President.  We probably don’t need a Wall.  Certainly not because of this particular case.

What we need is elected officials who consistently adhere to the highest standards of mature, honest and responsible leadership.

And, we need our elected officials to separate day-to-day federal government operations from capital projects.

We need immediate restoration of funding for the day-to-day operations in all sectors of our federal government, at the same time putting debate and deliberations over capital projects into the traditional federal budget process.

Monday, January 21, 2019The International Monetary Fund pared back its world economic growth forecasts for 2019 and 2020 due to sustained economic weakness in Europe and some emerging markets. They also said looming trade tensions and the longer-term ramifications of the U.S. government shutdown could further destabilize a slowing global economy.

“After two years of solid expansion, the world economy is growing more slowly than expected and risks are rising,” IMF Managing Director Christine Lagarde said.

In addition to other forces, IMF economists pointed to: (a) challenges to German auto manufacturers due to new fuel emission standards; (b) uncertainty in Italy where a newly elected coalition government has clashed with EU leadership over a budget proposal which would dangerously increase the Italian sovereign deficit, combined with limp domestic demand; and (c) the uncertainty of fallout from a less-than-smooth exit from the European Union by the U.K. a.k.a. ‘a no-deal Brexit’.

Fears of a global slowdown began to jinx financial markets in early November 2018 as investors began to worry about increasingly weak signs in China.

The ripple effect of Sino-U.S. trade frictions over the past year apparently has exacerbated the slowing of China’s official growth rate to its weakest level since 1990, attributed to a combination of diminishing domestic demand and damaging U.S. tariffs.

Each of these issues is important, and they generally share a common theme:  bad policy decisions made by incompetent and/or uninformed people, some of whom are voters; some private-sector executives; and some unconstrained elected officials.

On Day 30 of the 2018-19 U.S Shutdown:  It is becoming increasingly evident that this partial federal government shutdown is taking an increasingly negative short-term toll on consumer and business confidence, and by extension, the overall US economy.  The White House’s Council of Economic Advisors recently updated their estimate that the shutdown will reduce current economic growth by 0.13% for every week that it lasts.  Doesn’t sound like much, you say?

We can look back to the “Ted Cruz Green Eggs & Ham” shutdown of 2013 – a mere 16 days – to see estimates of negative economic impact:

  • $24 billion in lost domestic economic output;
  • $2.1 billion in non-productive government costs (primarily the cost of paying furloughed workers for hours they didn’t actually work);
  • $2.4 billion in lost travel spending (based on a combination of estimated reductions in business travel for federal contractors and federal employees, plus cancellations of discretionary travel by tourists);
  • $7.2 Million in lost revenue at National Parks (based on an average collection of $450,000 per day);
  • Most alarming? While we can estimate current economic effects, there really is no valid means to estimate long-term economic – and societal – effects of an extended shutdown.

The message?  Political decisions made by unqualified and/or inexperienced individuals can and do have long term negative consequences. A comprehensive system of checks and balances is a critical ingredient in the long-term viability of any institution. In the public sector, a key ingredient seems to be the involved and active participation by a well-educated and well-informed body of citizens who are able and willing to vote.

What is there about the simple concept of separating day-to-day operations from long-term planning that our elected federal officials seem unwilling or unable to comprehend?

Our current federal budgetary process was set into law by the 1974 Budget Control Act, based on a federal fiscal year which runs from October 1st to September 30th.  Thus our current Federal Fiscal Year — known as FY 2019 — runs from October 1, 2018 until September 30, 2019.

In February 2018, President Trump – through the Office of Management and Budget – submitted a proposed budget to Congress for FY 2019. The operating budget for FY 2019 was discussed, deliberated and adopted, and it needs to be funded.

There just isn’t any room in the process for the President – or any other elected official — to demand modifications to the current FY budget prior to approving ongoing funding for current government operations.

While it is unfortunately true that Congress doesn’t always follow the schedule as proscribed in the 1974 Budget Control Act, the proper time for the President to present new spending initiatives to Congress is during the annual federal budget deliberations process which typically begins in January when the OMB presents a proposed FY budget to the President.

President Trump’s current demands are only legitimately appropriate as a component of a proposed FY 2020 federal budget proposal.

PLEASE:  Let’s get the federal government back into its day-to-day operation by providing necessary current funding, and bring the debate over additional border funding where it belongs – in the discussions and deliberation toward a FY 2020 federal budget.

Where’s Mitch McConnell?

January 17, 2019

Where’s Mitch is a question many people are asking.

There are 800,000 federal workers and their families who are going without pay right now – including thousands of Kentuckians.

Here in Florida, we have about 5,000 Coast Guard members doing their jobs to protect our 1,350 miles of Gulf and Atlantic coastline, and they are not currently being paid.

The new Democratic House, on its first day in office, passed two bills funding and reopening the government.

McConnell has refused to allow a vote on any of those bills in the Senate. He’s even twice blocked a bill reopening the government from coming to the floor that he himself voted for back in December.

Despite the fact that Majority Leader McConnell has the ability to end this shutdown right now, Mitch is seemingly nowhere to be found.

I’m angry that this one man who has the power to stop this absurd drama has refused to do his job.

If you are nearly as angry as I am, perhaps you will consider donating $15 – or what you can afford – to the Ditch Mitch movement.  Let’s shine a bright light on McConnell’s irresponsible behavior.

http://ditchmit.ch/

 

Remember Benghazi?

January 16, 2019

I refer to a deplorable attack by members of the Islamic militant group Ansar al-Sharia on the U.S. embassy in Benghazi, Libya during which four U.S. citizens were killed. That atrocity occurred in September 2012, just over 6 years ago.

Today (January 16, 2019) — just a month after President Donald Trump declared that the Islamic State had been defeated and that he was pulling U.S. troops out of Syria — a suicide bombing in northern Syria attributed to the Islamic State killed at least 16 people, including two U.S. service members and two American civilians.

About four hours after this vicious attack by Islamic Militants – and after having been briefed on the bombing — Vice President Mike Pence told the world, “Thanks to the leadership of this commander in chief and the courage and sacrifice of our armed forces, we are now actually able to begin to hand off the fight against ISIS in Syria to our coalition partners. And we are bringing our troops home. The caliphate has crumbled, and ISIS has been defeated.”

Cold? Callous? Confused? Disconnected?

Even some senior Republican elected officials have pushed back on this mess, warning President Trump that his statements have served to encourage and inspire ‘the enemy we’re fighting.’

Back to Benghazi: At two years and four months, Trey Gowdy’s Benghazi investigation was longer than previous Congressional probes into 9/11; Watergate; the JFK assassination; and Pearl Harbor. Add to that time wasted: the $22 Million of public money spent in a clearly partisan attempt to “get” former Secretary Clinton, it must have been deeply disappointing to those who backed Gowdy when they read the final report which found no evidence of wrongdoing by Hillary Clinton.

Lessons Learned: Despite the temptation, let us be sure to tell our elected officials in Washington:  Please don’t waste any scarce government resources investigating the direct impact of President Trump’s actions on the January 16, 2019 Islamic State fatal attack on innocent people in northern Syria.

Trump does what he is told, and there is no reason to investigate what we already know.