Do We Need Tax Reform?

Do we need tax reform? If so what should it look like? Why do we need ‘reform’ and what should our goals be in changing the federal tax system?

These questions should be uppermost in our minds as we digest the sketchy proposal put forward this week by Republican leaders. We need a positive proposal, or at least the broad shape of one. Criticism of the Trump/McConnell/Ryan proposal is too shallow and won’t take us anywhere.

Should we be trying to lower federal tax receipts overall, or just make the burdens fairer? Do we want to tax every dollar earned in the same way, or are there certain activities we want to encourage through the tax code? If so, which activities? Investments? All investments, or just those reasonably expected to generate new jobs?

Should corporations be taxed as well as individuals? At the same rate? Charitable contributions? Home ownership? Both of those even if they disproportionately favor those with higher incomes?

We need to be grappling with these questions, tough as these may be. I believe we need fairer taxes, but not a tax cut. We need the federal government to do at least as much as it is doing at present.

One of the few public policy matters on which Donald Trump and Hillary Clinton agreed during the campaign was that the ‘carried interest’ loophole for hedge managers should be closed. For starters it tells you a great deal about the Republican sketch that it doesn’t even bother to mention that loophole. “Carried interest is the portion of their clients’ profit paid to managers of private equity, venture capital, real estate, and other funds in return for managing those funds. The payments are the managers’ compensation, for which the top tax rate would otherwise be 39.6%. But because of the loophole, carried interest is instead taxed at the capital gains rate, which tops off at 23.8%.” Not fair, not defensible.

The failure to address the carried interest loophole is the first indication that this is not ‘tax reform’ but rather a tax cut for the wealthy. E. J. Dionne of the Washington Post certainly thinks so. “The only thing today’s Republican Party knows how to do is cut taxes for the very rich.”

The response from the proposal’s supporters is that this tax bill (once written) will generate enough economic growth that it will pay for itself and benefit everyone. Bruce Bartlett, a policy adviser to Ronald Reagan, lays that shopworn untruth to rest. The bipartisan, wonky Committee for a Responsible Federal Budget agrees. (You can read here, on p 8, what the Republican Platform in the 2016 election had to say about the federal debt. Hint: it didn’t call for a massive increase in the debt.)

A good deal of the initial commentary about the proposal focused on the call to repeal the estate tax.  “To protect millions of small businesses and the American farmer, we are finally ending the crushing, the horrible, the unfair estate tax, or as it is often referred to, the death tax,” Donald Trump said in a speech unveiling the proposal. Politifact rated this statement “Pants on Fire” for its level of dishonesty.  A tiny number of farms or small businesses are affected by the estate tax today.  Eliminating the estate tax would benefit the very wealthy.

The most comprehensive analysis of the effect of the proposal so far comes from the Urban-Brookings Tax Policy Center. They estimate that if passed the federal government would lose $2.4 trillion over the first ten years and a further $3.2 trillion over the subsequent decade. This would add significantly to the federal debt. The beneficiaries would primarily be those with high incomes, especially those in the top 1% of U.S. incomes.

One deduction the sketchy proposal would eliminate is the provision in the tax code that would allow you to deduct what you pay in state and local taxes from your tax bill. (The provisions for exempting employer-provided health care, mortgage interest payments, and charitable giving – all largely benefitting the more affluent would stay in place.) This would hit particularly hard those states with higher state taxes – most of them more likely to vote Democratic. It will also likely be one of the more controversial features of the proposal.

But the real issue is not what we make of this or that feature of the proposal. The real question is what would fairer taxes look like?

Here’s what the 2016 Republican Platform said about taxes – and on page 1.

The current tax code is rightly the object of both anger and mockery. Its length is exceeded only by its complexity. We must start anew. That will be an enormous undertaking and, if it is to succeed, it must command the attention and approval of the American people. It cannot be engineered from the top down, but must have a common sense approach, and be simplified.

Our proposal is straightforward. Wherever tax rates penalize thrift or discourage investment, they must be lowered. Wherever current provisions of the code are disincentives for economic growth, they must be changed. We will not divide the American people into winners and losers. We will eliminate as many special interest provisions and loopholes as possible and curb corporate welfare, especially where their erosion of the tax base has created pressure for higher rates. We will be mindful of the burdens on families with children and the impact on an aging population. We will seek simplicity and clarity so that every taxpayer can understand how much of their income is consumed by the federal government.

We will welcome all to this enterprise — to discuss, debate, challenge, and amend — so that together we can restore economic growth for the American people and, even more important, renew their faith in the future.

Perhaps it is a place to begin. But, in fairness, here’s what the Democratic Platform called for (p 12):

At a time of massive income and wealth inequality, we believe the wealthiest Americans and largest corporations must pay their fair share of taxes. Democrats will claw back tax breaks for companies that ship jobs overseas, eliminate tax breaks for big oil and gas companies, and crack down on inversions and other methods companies use to dodge their tax responsibilities. We will make sure that our tax code rewards businesses that make investments and provide good-paying jobs here in the United States, not businesses that walk out on America. We will end deferrals so that American corporations pay United States taxes immediately on foreign profits and can no longer escape paying their fair share of U.S. taxes by stashing profits abroad. We will then use the revenue raised from fixing the corporate tax code to reinvest in rebuilding America and ensuring economic growth that will lead to millions of good-paying jobs.

We will ensure those at the top contribute to our country’s future by establishing a multimillionaire surtax to ensure millionaires and billionaires pay their fair share. In addition, we will shut down the “private tax system” for those at the top, immediately close egregious loopholes like those enjoyed by hedge fund managers, restore fair taxation on multimillion dollar estates, and ensure millionaires can no longer pay a lower rate than their secretaries. At a time of near-record corporate profits, slow wage growth, and rising costs, we need to offer tax relief to middle-class families—not those at the top.

Democrats believe that no one should be able avoid paying their fair share by hiding money abroad, and that corrupt leaders and terrorists should not be able to use the system of international finance to their advantage. We will work to crack down on tax evasion and promote transparency to fight corruption and terrorism. And we will make sure that law-abiding Americans living abroad are not unfairly penalized by finding the right solutions for them to the requirements under the Foreign Account Tax Compliance Act (FATCA) and Report of Foreign Bank and Financial Accounts (FBAR).

We will offer tax relief to hard working, middle-class families for the cost squeeze they have faced for years from rising health care, childcare, education, and other expenses.

Maybe there are some ideas here, too.  Let’s talk about what we want to accomplish together.

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Remembering and Respecting

September 29, 2017

We are awash these days in controversies about how we show our respect for this nation and its history, and how we show our disagreements with what’s happening or what has happened in the past. Monuments to leaders of the Confederacy, the National Anthem, the Flag: all these are once again in the center ring of this country’s drama.

I have little taste for these symbolic clashes. Going back to the Vietnam War I have friends who will not rise for the National Anthem and who will not recite the Pledge of Allegiance. I do rise and I do recite, and I have no beef with those who do not so long as I know them to be thoughtful people of good will. I do not take their not-rising and not-reciting to be acts of disrespect. I understand how their sensibilities are inflamed. Their protesting in this way does not strike me as a way to make progress on matters about which I care: endless war, white supremacy, vote suppression and more.

A few nights ago Ellen and I were at a Portland Symphony concert. On taking the stage the conductor Robert Moody led us quickly into playing and singing the Star Spangled Banner. I rose and sang along. I saw others remain sitting. Moody said he played the Anthem as a mark of concern for those Americans battered by hurricanes and many applauded, but I doubt that this did little for the storm-ravaged, and others surely put a different construction on the event. I didn’t mind too much and yet the playing of the Anthem at that time struck me as something I wouldn’t have chosen to do if it had been up to me. On this occasion I felt a bit coerced. Nevertheless, asked to show a small mark of respect for this, the country of my citizenship, I followed along. Inflaming the sentiments of those around me does not strike me as a helpful step.

At such moments I remember Albert Camus: “I love my country, but I love it in justice.” My country is not always just and we have important work to do to make it more just. In this regard it will not help to fail to show my love of country. But only so long as I’m not being manipulated into seeming to approve of things just the way they are.

Over the past two weeks, Ellen and I have watched the Ken Burns/Lynn Novick “Vietnam.” There have been moments both terrible and tender. We’ve often had tears in our eyes. We’ve talked about the difference that the nine-years difference in our ages makes. Watching this documentary has seemed to me like an important act of respect to those who died, needlessly, on both sides and to those whose lives were torn apart. We were both struck at how many of the contemporary political ills of our nation trace back to the illusions and lies of the War in Vietnam. How do we recover our ideals and trust? That question seems worth our attention.

On the other hand, I’ve been paying very little attention to the protests of NFL players and the tweet-storm reaction of the foolish, venal man who is currently the President of the United States. I’m glad the players taking a knee are standing up for racial justice (yes, ironic) but I know that I have more constructive things to do than follow this tempest and I worry that the real issues are being buried beneath the who-is-disrespecting-who-or-what claims and counter claims. Posturing is far more Trump’s preferred terrain than any cause or purpose I care about. (On the celebrity front, I’m much more appreciative of what Jimmy Kimmel did to keep the right issues in view on healthcare.)

I do think there are important issues deserving my attention and yours in the question of monuments and memorials. I do think that the various monuments to leaders of the Confederacy should come down, and no I don’t think this is a slippery slope to having no monuments at all because all humans have done bad things.

Monuments and memorials are one of the ways we tell our nation’s story. We need to regularly tell that story, noting both the high points where we advanced “liberty and justice for all” or slipped back. Every time we tell the story, we tell it a little differently: there are different tellers, different audiences and time has passed since the last telling. We learn new things. Over time, some bits recede in importance, and they should. We never can and never should tell it in exactly the same way.

We erect monuments and memorials, making them of bronze and granite and other sturdy stuff, to give some solidity or permanence to the telling. Our national monuments to Washington, Jefferson and Lincoln seem quite wonderful to me and I think always will. (When I visit, I especially like reading the stone-inscribed texts on the walls of the Lincoln and the Jefferson.) However we tell the nation’s story, these monuments are solid reminders than these singular people did extraordinary things, things that far outweigh less good things they also did.

Similarly the Vietnam Memorial strikes me as a holy site of national respect. (I think I like Arthur Danto’s distinction between monuments and memorials even if we do not follow it consistently.) It seems altogether right that we have preserved (for example) the Gettysburg Battleground, the Little Bighorn Battlefield, and the USS Arizona Memorial. Ditto the Statue of Liberty.

And yet, we need to remember that the telling of the nation’s story, the story of “e pluribus unum” and “created equal” and “liberty and justice for all”, is a story that can never be frozen in stone. Every telling is itself someone’s effort to emphasize some things and therefore give less attention to others. Each telling, thus, is an assertion and also an exercise of power. There’s nothing wrong with that. Or nothing wrong so long as we remember that no one’s telling is the last telling or the only authoritative telling. We all have a role in telling the story: that’s part of our story.

To love our country is to love a work in progress, never finished. Monuments and memorials, anthems and pledges are all efforts to give permanence to some way of understanding. This week I am remembering that full respect for the efforts of the past looks at all of these as having only relative permanence. Today or next year or next decade we are likely to need a different monument, perhaps need to remove one erected long ago. We’ll likely tell the story differently. Only with such a recognition can we pledge allegiance or sing the national anthem (perhaps we need a different one) with a full heart.

How Does One Become Morally Obtuse?

July 22, 2017

I have a letter in today’s (?) New York Times.  It’s in the on-line version, the post is dated yesterday, and perhaps it will be in tomorrow’s print edition (The Sunday Review section). The letter is in a collection of reader responses to various stories about Trump: Trump Critics All Around.  Mine is one of two reacting to a David Brooks column titled Moral Vacuum in the House of Trump that appeared on July 14.  Here’s the letter:

To the Editor:

I appreciate David Brooks’s account of how Donald Trump and his son Donald Jr. were led morally off kilter by their fathers’ examples, but how do we account for the silence of Vice President Mike Pence, the Senate majority leader, Mitch McConnell, and Speaker Paul D. Ryan?

Did their moral obtuseness come from amoral fathers or grandfathers? (I doubt it.) For that matter, what are the wellsprings of moral clarity and courage?

Donald Trump remains president only because the Republican majorities in Congress excuse his behavior by their silence and apologetics.

DOUGLAS C. BENNETT
TOPSHAM, ME.

I’ve had other recent letters in the New York Times:

On February 16, 2017 about Our Polarized Politics, also reacting to a David Brooks column.

On May 4, 2016, regarding A New Foreign Policy Elite.

Second Amendment Not a Blank Check

July 21, 2017

I had a letter in yesterday’s Brunswick Times Record, about the Second Amendment.  The text of the letter is below.  I wrote it in response to an opinion column by Dale Landrith Sr. the BTR published on July 18

LETTERS

Second Amendment Not a Blank Check

In his otherwise laudable column on “The Bill of Rights,” Dale Landrith Sr. makes an important mistake about the Second Amendment.

“The right of the people to keep and bear Arms, shall not be infringed,” he quotes it as saying. Landrith omits, however, the first and very important words of the Second Amendment: “A well regulated Militia being necessary to the security of a free State …” The idea that gun ownership and use need to be “well regulated” is right there in the text of the Second Amendment and has been since 1791.

What “well regulated” means is something worthy of public debate. Should there be criminal background checks for all gun purchasers? Should silencers be allowed? Should there be stricter limitations on ownership of automatic weapons? Should there be locations (schools, courthouses, etc.) where guns are not allowed? These and many other questions deserve our attention. I believe these are all measures we need, and all fully in keeping with the Second Amendment.

Hildreth says “When surveyed the American people do not want the Second Amendment violated. Gun owners and non-gun owners do not want restrictions on the ability to possess firearms.” That’s incorrect. Public opinion polling regularly shows that a majority of Americans want sensible regulation of firearms such as those measures listed above.

The Second Amendment is not a blank check that anyone anywhere has a right to any gun. It is not a prohibition on regulation of firearms. It never was.

Doug Bennett,  Topsham

Collusion Investigation Update

July 20, 2017

“Jeff Sessions says he won’t resign as attorney general after public rebuke from President Trump,” reads the headline from the New York Daily News.  “Citing Recusal, Trump Says He Wouldn’t Have Hired Sessions,” reads the headline from the New York Times, whose reporters (Peter Baker, Michael S. Schmidt and Maggie Haberman) conducted the interview with Trump that’s leading the news today.  Most of the headlines focus on this attack on Attorney General Sessions and the question of whether Sessions will or should resign following Trump’s public voicing of no confidence.

“Trump’s deeply worrisome New York Times interview reveals a lawless president” is the headline on Greg Sargent’s The Plum Line column in today’s Washington Post.  I think that gets closer to the meat of this interview.  This interview shows a president who does not understand his constitutional obligations to “preserve, protect and defend the Constitution of the United States.”

On the Lawfare blog, Benjamin Wittes makes the same point: that this president sees the Department of Justice, the FBI and all other federal police and legal institutions as his to direct as he pleases:

In an environment in which the President of the United States, in a single interview, expresses no-confidence in the attorney general, the deputy attorney general, the special counsel, the acting FBI director, and the special counsel’s staff, and in which he makes clear that the FBI should be his personal force and that all of law enforcement should be about serving him, the principle protection is having people with backbone who are willing to do their jobs and stand up for one another in the elevation of their oaths of office over political survival.

Wittes clearly thinks Sessions should resign, and Rosenstein (Deputy Attorney General), too: it’s the only honorable thing to do.  On the same blog, Jack Goldsmith (a Harvard Law Professor) disagrees.  He thinks Sessions and others should stay precisely to protect the DOJ and the FBI.  Mueller’s investigation of the Trump campaign need to continue.

When the President openly declares he is above the law, is there any fit remedy other than impeachment?

Western Values or Human Values?

July 16, 2017

On July 6, Donald Trump delivered a speech in Poland celebrating ‘western values.’ He linked together historic threats (including both Nazi terror and Soviet domination) against which Poland struggled and the current threats that the United States and other countries (Trump especially mentioned European countries) face from “radical Islamic terrorism.”  He said this:

Because as the Polish experience reminds us, the defense of the West ultimately rests not only on means but also on the will of its people to prevail and be successful and get what you have to have.  The fundamental question of our time is whether the West has the will to survive.  Do we have the confidence in our values to defend them at any cost?  Do we have enough respect for our citizens to protect our borders?  Do we have the desire and the courage to preserve our civilization in the face of those who would subvert and destroy it?  (Applause.)

“Our values:” Over and over, Trump referred to “the West” as the source and identity of the values to which he was referring.  He was a smidge light in articulating the content of these values, but he did say this:

above all, we value the dignity of every human life, protect the rights of every person, and share the hope of every soul to live in freedom.  That is who we are.  Those are the priceless ties that bind us together as nations, as allies, and as a civilization.

Dignity, rights, freedom, equality: these will do as markers for what Trump was defending. For the moment, pass over the question of whether Donald Trump has any standing to stand up for these rights.  I want to ask a different question:  Is it appropriate to speak of these values as being grounded in or belonging to “the West?” Also, what is encompassed within “the West” and what is set outside the pale?

Of course it became commonplace during the Cold War to refer to the United States and its NATO allies as “the West,” and to the U.S.S.R., and its allies (China, the Warsaw Pact countries) as “the East.” In that way of speaking, “the West” was the standard bearer of those values: dignity, rights, freedom, and equality.  That was a crude characterization then (the years of the Cold War) but does it bear resurrection today, a quarter century after the collapse of the U.S.S.R.?  (That’s what Trump was doing.)

For one thing, he was celebrating “the West” in Poland, which used to be part of “the East;” Poland was a secure member of the Warsaw Pact.  Wait, you object, Trump is right to celebrate Poland in this way because its history, rightfully told, is one of standing up for these values.  But of course Poland also has another thread to its history that denies those values. Should that disqualify Poland? For that matter, how about Germany with its Nazi era? Vichy France? the racist strands of the United States? Etc.  What country can be said to have an unbroken and fully consistent adherence to these values?

We know — don’t we? — that the emergence of this package of values has a long and complex history.  The Greeks and Romans play a part in their beginning, but even at their best those societies stood solidly against human equality and didn’t understand freedom the way we do (they were more interested in the liberty of communities than of individuals).  We want to think of religion as playing a role, meaning by ‘religion’ certain aspects of Judaism and Christianity.  But we want to pass over in silence many moments when those great religious movements were a threat not a support to these values. Are we right to leave Islam out of the religious impulses that birth these values?  I don’t believe so.  For one thing, we owe a huge debt to many Muslim scholars for preserving and transmitting the great writings of the Greeks and Romans.  That Islamic history has illiberal moments is no objection to its inclusion in the foundations of these values, not when we remember the excesses of Christianity (celebration of slavery, subjection of women, defense of autocracy, justification of savage war, etc.).

I believe these values (dignity, rights, freedom, equality) deserve our fullest commitment, but we do them no favor when we tell ourselves fake history about how they have emerged.  And here is where it is important to remember that Donald Trump represents the obverse of these values more fully than their positive expression.

All these thoughts are especially on my mind because of the passing of Liu Xiaobo.  Among the deeds for which he was imprisoned was signing (to his peril) Charter 08, a document signed in 2008 by more than 2000 courageous Chinese citizens affirming these very values.  (Read the document: I urge you.)  China? An affirmation of Western values? Charter 08 does not call them “Western” values. Instead it calls them “basic universal values.”  As “fundamental principles” it names freedom, human rights, equality, republicanism, democracy and constitutional rule.

Charter 08 did not limit the dominion of these values to “the West.” Instead it lifted them up as universal and basic.  It stands squarely in the tradition of the Universal Declaration of Human Rights, signed and proclaimed by the U.N. General Assembly in 1948. In its original form, eight countries abstained from its approval: Byelorussia, Czechoslovakia, Poland, Saudi Arabia, South Africa, Ukraine, the USSR, and Yugoslavia.  All subsequently became signatories.

What needs defending are not us-against-them values, not “our values“, not “Western values,” but rather basic, universal, human values.  They are the foundation for our living together in dignity, peace and justice.

Shout Out to Xiaobo

July 15, 2017

From Liu Xiaobo’s speech accepting the 2010 Nobel Peace Prize, delivered in absentia (it was read by Liv Ullmann):

Nobel Peace Prize Committee members Thorbjorn Jagland and Kaci Kullmann Five sit beside empty chair reserved for Liu Xiaobo

Freedom of expression is the foundation of human rights, the source of humanity, and the mother of truth. To strangle freedom of speech is to trample on human rights, stifle humanity, and suppress truth.

Liu Xiaobo passed away this week, still imprisoned by the Chinese government.

In an era when the President of the United States tells untruth after untruth and regularly attacks journalists who publish factually accurate accounts, in an era when speakers are shouted down on college campuses, I stand with Liu Xiaobo. I honor his clarity, his courage and his generosity.

Also from the speech:

But I still want to say to this regime, which is depriving me of my freedom, that I stand by the convictions I expressed in my “June Second Hunger Strike Declaration” twenty years ago ‑ I have no enemies and no hatred.

and

Hatred can rot away at a person’s intelligence and conscience. Enemy mentality will poison the spirit of a nation, incite cruel mortal struggles, destroy a society’s tolerance and humanity, and hinder a nation’s progress toward freedom and democracy. That is why I hope to be able to transcend my personal experiences as I look upon our nation’s development and social change, to counter the regime’s hostility with utmost goodwill, and to dispel hatred with love.