But it helps the rich

It seems the Trump administration is contemplating a tax break so corporations will repatriate cash:

Drug makers are promising to create tens of thousands of American jobs if President Donald Trump follows through on his promise to give them a big tax break if they “repatriate” cash they’ve stashed overseas.

The article points to a Senate report: repatriatingoffshorefundsreportoct202011wexhibitsfinal. Here are the conclusions in the executive summary:

1. U.S. Jobs Lost Rather Than Gained. After repatriating over $150 billion under the 2004 American Jobs Creation Act (AJCA), the top 15 repatriating corporations reduced their overall U.S. workforce by 20,931 jobs, while broad-based studies of all 840 repatriating corporations found no evidence that repatriated funds increased overall U.S. employment.
2. Research and Development Expenditures Did Not Accelerate. After repatriating over $150 billion, the 15 top repatriating corporations showed slight decreases in the pace of their U.S. research and development expenditures, while broad-based studies of all 840 repatriating corporations found no evidence that repatriation funds increased overall U.S. research and development outlays.
3. Stock Repurchases Increased After Repatriation. Despite a prohibition on using repatriated funds for stock repurchases, the top 15 repatriating corporations accelerated their spending on stock buybacks after repatriation, increasing them 16% from 2004 to 2005, and 38% from 2005 to 2006, while a broad-based study of all 840 repatriating corporations estimated that each extra dollar of repatriated cash was associated with an increase of between 60 and 92 cents in payouts to shareholders.
4. Executive Compensation Increased After Repatriation. Despite a prohibition on using repatriated funds for executive compensation, after repatriating over $150 billion, annual compensation for the top five executives at the top 15 repatriating corporations jumped 27% from 2004 to 2005, and another 30%, from 2005 to 2006, with ten of the corporations issuing restricted stock awards of $1 million or more to senior executives.
5. Only a Narrow Sector of Multinationals Benefited. Repatriation primarily benefited a narrow slice of the American economy, returning about $140 billion in repatriated dollars to multinational corporations in the pharmaceutical and technology industries, while providing no benefit to domestic firms that chose not to engage in offshore operations or investments.
6. Most Repatriated Funds Flowed from Tax Havens. Funds were repatriated primarily from low tax or tax haven jurisdictions; seven of the surveyed corporations repatriated between 90% and 100% of their funds from tax havens.
7. Offshore Funds Increased After 2004 Repatriation. Since the 2004 AJCA repatriation, the corporations that repatriated substantial sums have built up their 5 offshore funds at a greater rate than before the AJCA, evidence that repatriation has encouraged the shifting of more corporate dollars and investments offshore.
8. More than $2 Trillion in Cash Assets Now Held by U.S. Corporations. In 2011, U.S. corporations have record domestic cash assets of around $2 trillion, indicating that that the availability of cash is not constraining hiring or domestic investment decisions and that allowing corporations to repatriate more cash would be an ineffective way to spur new jobs.
9. Repatriation is a Failed Tax Policy. The 2004 repatriation cost the U.S. Treasury an estimated net revenue loss of $3.3 billion over ten years, produced no appreciable increase in U.S. jobs or research investments, and led to U.S. corporations directing more funds offshore.

So it worked very well for the rich. I can see why the Trump administration would be for it.

Apple CEO makes a funny

The European Union decided that a tax deal that Ireland gave to Apple Computers was illegal and says they have to pay money back to Ireland. Tim Cook, the CEO of Apple, is upset:

Timothy D. Cook, the Apple chief, defended the company’s tax practices in Ireland, countering European officials’ ruling this week that the Irish government provided illegal incentives which allowed the technology giant to pay essentially nothing some years. In an interview with the Irish broadcaster RTE, Cook said the company paid its fair share in Ireland, the United States, and elsewhere.

Cook noted that Apple planned to send some of its enormous amount of cash overseas back to the United States next year, although he did not specify how much. Those international reserves have been particularly divisive as they remain out of the reach of US tax authorities.

“The finding is wrongheaded,” Cook told RTE. “It’s not true — there wasn’t a special deal between Ireland and Apple.”

He continued, “When you’re accused of doing something that is so foreign to your values, it brings out outrage in you.”

That last bit is a joke, I assume, and it’s quite funny. Apple specifically moved its operation to Ireland to save billions of dollars in taxes and has basically said they’ll bring the overseas cash back to the US only if they get a special deal on taxes. But cheating on taxes is “foreign to their values”. Ha ha, good one Tim.

Let’s cut taxes for the rich

So, one of the first things that Republicans did in the House was to change how the CBO calculates future budgets:

Republicans controlling the House have changed the rules on budget scorekeeping and Democrats are unhappy with the new math.

At issue is so-called dynamic scoring, which factors in the economic effects of legislation when estimating its effect on the deficit.

The rules change promises to make it somewhat easier for Republicans to advance legislation such as an overhaul of the loophole-ridden tax code, since the positive economic effects of such legislation would generate greater tax revenue. That means lawmakers would have to come up with less in offsetting revenues to make up for bold cuts in income tax rates.

This is how it works:

Finally, dynamic scoring can create a   bias favoring tax cuts over investments in infrastructure, education, and other priorities. While the House rule would require dynamic scoring for legislation making large changes in revenues and/or mandatory spending, and makes it permissible at the option of leadership for any such legislation (even if modest), it would not apply to discretionary spending, ignoring potential growth effects of investments in research, education, and infrastructure. More insidious, economic models that find large growth effects of tax cuts are often based on the assumption that they would be paid for entirely through reduced spending – without taking into account at all the economic consequences the reduction in government investment.

This is perfect for Republicans–they can get their tax cuts and still pretend that they’re cutting the deficit. Then, when the deficits go up, they can say they have to make large cuts to bring down the deficit. When this hurts the economy, they can again call for more tax cuts. Perfect.

Take from the poor and give to the (somewhat) rich

Here’s a short article in the Boston Globe:

More families with higher incomes could claim the popular child tax credit under a bill that won approval Friday in the House. But in a dispute that divides Republicans and Democrats, millions of the poorest low-income families would still lose the credit in 2018, when enhancements championed by President Obama expire.

The bill would gradually boost the amount of the $1,000-per-child tax credit by tying it to inflation, so it would go up as consumer prices rise.

House Republicans say the bill would strengthen the tax credit by increasing it as inflation rises, and by making it available to even more middle-income families.

The White House said the bill favors high-income taxpayers over the poor, while adding $90 billion to the budget deficit over the next decade.

If you didn’t know any better, you might think that Republicans were trying to help children but (via here):

Thus, the current design of the CTC creates a marriage penalty. For instance, imagine a couple where each person makes $60,000. Separately, they would both be eligible to collect the full credit. But combined, their income ($120,000) would exceed the current phase-out threshold for couples filing jointly. Therefore, the couple could maximize their after-tax income by living together, but not marrying. In other words, the credit is an economic disincentive to marriage.

The House-passed legislation would eliminate this marriage penalty by extending the phase out threshold for couples to $150,000 and indexing it to inflation. These changes would allow a couple to collect the same CTC no matter if they filed separately or jointly. The bill would also index the current maximum credit to inflation and require applicants to provide their Social Security numbers. It would cost $115 billion over the next ten years.

If the House legislation became law, the Center for Budget and Policy Priorities estimated that a couple making $160,000 a year would receive a new tax cut of $2,200. On the other hand, the expiring provisions of the CTC would cause a single mother with two kids making $14,500 to lose her full CTC, worth $1,725. The CBPP projects that 12 million people, including six million children, would either fall into poverty or fall deeper into poverty if Congress does not extend those 2009 changes. Taken together, these changes would be extremely regressive.

I’m sure you’re surprised that Republicans want to help the rich and don’t mind hurting the poor.

The Republican IRS

Republicans want to decrease the size of the government, here’s what happened in the IRS:

■ The IRS makes billions of dollars in potentially fraudulent payments because it lacks the ability to check whether many returns are accurate before refunds are mailed.

■ The IRS relies on tax preparers to file accurate returns on behalf of taxpayers. But many preparers are not required to receive training and can be declared a tax professional by paying a $64.25 fee to the IRS. A federal court on Tuesday rejected the agency’s effort to license such preparers.

■ The IRS is increasingly impenetrable to taxpayers with questions and complaints. The agency is so short-staffed it cannot answer nearly 40 percent of phone calls, and it has failed to meet its own 45-day deadline to respond to millions of letters per year from taxpayers. The same dismal rate is likely to be repeated this year, according to the agency.

■ The decision by Congress to cut the agency’s budget over the past four years by more than $1 billion, designed to save money, has had the reverse effect. The loss of about 10,000 employees, more than 9 percent of the workforce, has shrunk collections by $8 billion. In other words, the budget cut increased the deficit.

This is good for Republicans: they want government to be inefficient so they can say it’s inefficient; they want people to hate the IRS so they underfund it. It seems silly to cut the IRS budget when that actually increases the deficit, waste, and fraud, but it helps Republicans so we get it.

Pulpit Sunday

It seems Pulpit Sunday came again:

When Ron Johnson takes take his pulpit on Sunday, he will willfully break the law. After presenting his views on President Barack Obama’s handling of religious issues –- like abortion, gay marriage, and religious freedom – Johnson will ask his congregation a question.

“In light of what I have presented,” Johnson says he will say, “How can you go into that election booth and vote for Barack Obama as president of the United States?”

What Johnson plans to do is in violation of the IRS’ so-called Johnson Amendment, a 1954 law that has made it illegal for churches that receive tax exempt status from the federal government to intervene in “any political campaign on behalf of (or in opposition to) any candidate for elective public office.”

Why is Johnson so brazenly violating that law this Sunday? Strength in numbers: He will be joined by at least 1,400 others pastors across the United States.

It is, of course, conservatives:

Critics charge that the movement is a Republican front dressed up as an exercise in religious freedom. When CNN asked to be put in touch with a church that plans to endorse the president, representatives from the organization said they don’t screen who the churches plan to endorse.

The two pastors that the Alliance Defending Freedom put CNN in touch with plan to either criticize the president or endorse Romney.

The Pew forum has a nice roundup of pertinent questions, such as:

31. Does the IRS target churches for enforcement of the political campaign intervention prohibition?

No. There are special audit procedures that the IRS must follow before commencing any inquiry about potential violation by a church of the political campaign intervention prohibition.67The IRS may begin a tax inquiry only after a high-ranking Treasury official documents in writing the acts and circumstances, including potential violations of the political campaign intervention prohibition, that lead the official to reasonably believe that the church may not be qualified for section 501(c)(3) tax exemption.68Once an inquiry is begun, the IRS must follow special procedures set forth in the Internal Revenue Code in its further dealings with the church.69Thus, the IRS does not have unfettered discretion to investigate activities by churches, including violations of the political campaign intervention prohibition, and must obtain high-level authorization before doing so. Generally, IRS inquiries about potential violations by churches of the political campaign intervention prohibition are initiated based upon facts reported by the media or complaints submitted by third parties.

and also has a poll showing most people don’t want churches to get involved in politics (66% say they should not endorse one candidate over another).

A reorganization of the IRS also seems to have made an investigation more difficult:

Thirty years later, a group of senators led by Charles E. Grassley, Republican of Iowa, passed legislation to try to rein in the agency a bit in doing some audits. While audits of churches continued over the years, they appeared to have slowed down considerably after a judge rebuffed the agency’s actions in a case involving the Living Word Christian Center and a supposed endorsement of Ms. Bachmann in 2007. The I.R.S. had eliminated positions through a reorganization, and therefore, according to the judge, had not followed the law when determining who could authorize such audits.

Still, it seems that the IRS does have a constitutional right to do this (the ruling is here):

The controversy started late in October of 1992  when Americans United for Separation of Church and State filed a  complaint with the Internal Revenue Service over a small church outside  of Binghamton, N.Y. AU asserted that the Church at Pierce Creek (also  known as Branch Ministries) had violated its tax exempt status by  encouraging Christians to vote against presidential candidate Bill  Clinton.

In March 1999, a federal district court ruled in favor of the IRS, rejecting the church’s claims. The Robertson legal  group appealed on behalf of the church. That case was heard by the D.C.  Circuit Court of Appeals, and again the church lost. The appeals court  ruled unanimously in May of 2000 that the IRS had acted within the scope  of its authority. (AU filed a friend-of-the-court brief in the case,  supporting the IRS’s revocation of church’s tax exempt status.)

Writing for the  unanimous court, Senior Circuit Judge James Buckley found that “the  revocation of the Church’s tax-exempt status neither violated the  Constitution nor exceeded the IRS’s statutory authority.”

It seems that right now there is a good balance between the two views–a church can not be tax exempt if it engages in a political campaign, but the IRS only does something if the church is blatant (in the case above, the church paid for an ad in a newspaper). Of course that means that conservatives will try to push things. I hope they do and lose their tax exemption.

And not a penny more

This answer is very revealing:

In a video clip released in advance of the show, Ms. Morales broached the subject of the Romneys’ finances and tax returns by acknowledging that it’s “not a question that’s welcome,” before asking, “Why not be transparent?”

“Have you seen how we’re attacked?” Mrs. Romney said, leaning forward in her chair. “Have you seen what’s happened?”

Mr. Romney has agreed to release just two years of his tax returns — from 2011, and an estimate from 2012 — but when pressed by Ms. Morales, Mrs. Romney stood her ground, echoing some of her husband’s talking points.

“We have been very transparent to what’s legally required of us,” she said. “But the more we release, the more we get attacked, the more we get questioned, the more we get pushed. And so we have done what’s legally required, and there’s going to be no more tax releases given.”

Romney’s mantra is to do what’s legally required but nothing more. Such as with taxes:

Mitt Romney’s reluctance to reveal his income and tax information received center-stage attention once again at last night’s debate. After weeks of immense scrutiny and criticism from his opponents, Romney caved and agreed to release his tax returns from 2010 and the projections for his 2011 return.

“I pay all the taxes owed. And not a penny more,” Romney said at the debate. “I don’t think we want someone running for president who pays more taxes than he owes.”

Since he’s very rich and can afford to hire professionals to do his taxes, that means he probably paid the absolute minimum he could. That’s not possible for most of us and most of us don’t bother detailing all the expenditures that might possibly be deductible (in fact, for most of my life I used the EZ form since my possible deductions were probably nowhere near as large as the standard deduction–of course a tax pro might have been able to do better).

And this is what the tax release is about, do no more than the minimum required. The ideal of the 2002 Salt Lake City Olympics was to be as transparent as possible, but it wasn’t explicitly written that Romney keep all documents … so he got rid of lots of them. Massachusetts also tries to be transparent by keeping all the records of public officials, but some of the laws don’t explicitly apply to the governor’s office … so he destroyed lots of records and had aides buy their hard drives so they weren’t left behind where others could see what was on them.

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