Wednesday, November 29, 2017

A BAD JOKE



The tax bills now careening through Congress are a very bad joke.

What the Republican leadership is calling “tax reform” is nothing but an ideologically driven plan to lower the taxes of wealthy Americans, myself included.   To finance the cut, they propose to add a trillion and a half dollars to the national debt and impose higher taxes on an uninformed and largely unsuspecting electorate.

America’s middle class is falling behind.  In 1971, the middle class earned 62% of aggregate income; by 2015, that percentage had fallen to 43%.  In inflation adjusted terms, real average hourly wages for non-supervisory workers have fallen in the years since 1973.  The middle class is hurting, yet the proposed “reform” would raise taxes on many middle-class families immediately and far more as deferred provisions of the “reform” take effect.  Having America’ s middle class pay higher taxes so that a retired CEO – like me – can pay less makes no sense.  

Meanwhile, the top 1%, which has done incredibly well financially, will benefit enormously from the proposed “reform”. The share of total income earned by the top 1% has reached nearly 20%, up from about 10% in the early 1970’s. Despite this groups prosperity, the Tax Policy Center  calculates that this “reform” will  generate an average tax cut of $35,000 for the top 1% and $85,000 for the top 0.1% in 2019.  And both the 1% and the 0.1% will get larger savings in later years, when middle class taxes would go up rather than down.  

Nor do the several arguments advocating lower corporate tax rates hold water. As every CEO worth his or her salt knows, most U. S. corporations pay nothing like the statutory tax rate, and some pay no taxes at all.    During recent decades, wages have not kept pace with productivity and as a result, profits have increased as a share of GDP while wage income has decreased.  America’s corporations are doing just fine.

“Reform” proponents argue that their proposals will lead to more investment.  It’s hard to see why.  American is capital rich, and the notion that capital shortages are hampering investment just does not compute.

Proponents also argue that repatriating offshore cash will drive investment.  Good luck. America has tried this before, to its sorrow.  In 2004, Congress passed legislation allowing corporations to repatriate foreign earnings at a lower tax rate in hopes of stimulating investment.  But instead of leading to investment and jobs, repatriated funds were used to buy back shares, thus transforming the program into a windfall for shareholders – and making the already rich still richer.

Albert Einstein is credited with saying “The definition of insanity is doing the same thing over and over and hoping for a different result”.  For decades, Republicans have told us that cutting taxes will facilitate solving our problems.   In fact, since we began cutting taxes in the mid-80’s, we have denied our government the resources needed to sustain the activities which support middle class life and have fallen steadily behind other countries, who have raised taxes to  expand the security network they offer citizens and have  improved or sustained their infrastructures.


We need to get America growing again, but to do so, we need to use common sense, not the snake oil of more tax cuts. To make America more competitive, reduce income inequality and revitalize the middle class, we need to invest  in the things that made America a world leader from the middle to the end of the 20th Century.

We need to invest in our future by rebuilding our roads, bridges, water systems, sewage system, ports, railroads and airports. We need to be sure every kid gets a great education. We need to rebuild the energy grid and reclaim leadership in the search for non-polluting energy sources.   We need to do the research needed to cure cancer and stop Alzheimer’s.  And we need to fund these investments with taxes, not with borrowed money. 

This tax “reform” is worse than a bad joke – it’s a refutation of the common- sense steps which are clearly needed to reclaim American exceptionalism. 

Ronald Reagan called America “A shining city on a hill”, a vision of our country that reflects the opinions and hopes of most  Americans.    Before committing themselves to embracing this nonsensical “tax reform”, Republican leaders ought to ask themselves whether they believe it will help our country shine as brightly in the future as it has in the past. 




Sunday, October 29, 2017

A GOOD CENSUS IS ESSENTIAL

Dispute is the name of the game in today’s politics.

Republicans think the President's efforts to improve the terms of trade between America and other countries, to control immigration from selected countries, to undo Obamacare, to limit economic and social regulation, to strengthen defense and to reduce taxes are steps that will benefit America and are consistent with his campaign promises.        

Democrats think the President is systematically dismantling our government by appointing Secretaries of the major agencies who are opposed to what their agencies are charged with doing, lack experience in the relevant disciplines or are intellectually unable to master the tasks with which they are charged.  They believe the government should sustain and build upon past regulatory accomplishments, act to prevent further decay of our infrastructure, should sustain and expand government R&D, should broaden the government’s efforts to retrain workers for better jobs and higher wages, and should not seek tax cuts that are inconsistent with sound fiscal policy.  

Whatever the validity of these differing points of view, and for all the damage or good that those appointed to high places are doing and will do before 2020,  the President’s unwillingness to appoint management at the US Census Bureau  and provide funding for the upcoming 2020 U.S. Census will likely have more profound and far reaching consequences than the near term impact of either legislation or executive orders.

The Census matters a lot, for many reasons.  Census data determines the makeup of Congress, and provides information which determines the allocation of tens of billions of federal dollars. Moreover, the Census provides essential protection and guidance for both individuals and businesses.  Without accurate census information, there would be no way to be sure that government funds for building schools, roads and other public facilities would be accurately allocated. Nor would businesses have accurate data about population densities and trends to help locate stores, assess the probable success of new products, and do other kinds of planning.  

Our founders believed that census data is essential to participatory democracy, and wrote the requirement for a census into our constitution.

Unhappily, neither the President nor the Congress have yet taken the steps necessary to properly conduct the 2020 census.  The Director of the Census Bureau retired in June 2017, and has not been replaced.  Moreover, recent budgetary proposals include substantially less for the Bureau than the approximately $12 billion the retiring Director told Congress the 2020 census will cost.  Unless these problems are fixed by early 2018, there will not be sufficient time to test 2020 census procedures and get the hundreds of thousands of people needed organized and in place.  


Without census data, the government will lack an essential compass.  Since our course is already erratic, the absence of a compass could prove catastrophic.   
  

Tuesday, April 11, 2017

LET'S HAVE MORE FLINTS!!!!



Sometimes, true life is hard to believe.  A year ago, with the country agog about unsafe drinking water in Flint, Michigan, the notion that the  US Government would soon reduce the amount of federal money available to help state and local agencies test for water safety would have been regarded as fanciful. 

No more.  President Trump’s proposed budget seeks to chop spending at the Environmental Protection Agency by $2.4 billion – about 31% --   while eliminating a quarter of the agency’s 15,000 jobs. Among many other cuts, the Agency is proposing to reduce the grants that help states and cities monitor public water systems from $102 million to $71 million. Since many cities have the same eroded pipes that have afflicted Flint, it’s hard to understand why anyone would want to reduce the number of inspectors while simultaneously eviscerating the programs that follow up on and seek to correct  unsatisfactory results.  

Cutting back support for clean drinking water is only one of many things the Administration doesn’t think are worthwhile.  The EPA is proposing to eliminate the $400 million it now spends on regional cleanup programs across the country, including an extensive effort to prevent further damage to the Great Lakes.  The Agency  wants to cut  the $165 million it spends helping states identify and deal with pollutants not regulated by the Clean Water Act as well the roughly $50 million it devotes to monitoring vehicle emissions, despite having recently fined both Volkswagen and Fiat Chrysler for cheating on emission tests.

Is there anything the Agency wants to spend more on?  Yes.  It wants to double the agency’s operations staff and provide a round the clock security detail for Scott Pruitt, the new Administrator, who seems to think the door to door protection provided for prior Administrators is insufficient. 

Give you any hint of who and what the new Administration thinks is important?

Wednesday, March 15, 2017

Do Only Suckers Pay Taxes?



                                         DO ONLY SUCKERS PAY TAXES?

I’ve always thought of taxes as the price of civilization, and while grumbling along with everyone else about the tax codes complexity, I have never felt anything but pride in my ability to contribute larger amounts to our shared enterprise.   Once, when I was audited, I was particularly proud of the fact that the only mistakes found were in the government’s failure.  I ended up with a small refund!! 

 For many years, I think the vast majority of citizens shared my view.  In recent years, however, the number of people who disagree with the existence, intent or performance of the government has increased dramatically and as a consequence, there seems to be growing acceptance of tax evasion and a near constant chorus of calls - often from very wealthy people – for lower tax rates.

In my view, a collective disdain for tax compliance threatens both our solvency and our form of government.    In a large country like the US, where most people do not run for public office or otherwise participate actively in governance,   preserving representative government  depends, at least in part,  on sustaining the rituals of participation that establish  a common interest. In years past, one of the most important of those rituals was mandatory military service, which touched virtually every family’s life directly or indirectly.  Mandatory service has given way to a volunteer military about which most of us know very little and with which we have little interaction.
Another weakened ritual is voting. In the most recent Presidential election, only 58% of eligible voters bothered to cast a ballot; 90 million citizens simply didn’t bother and by implication, care little about voting rights. 
       
One of the most important remaining rituals is obeying our tax laws, which rest on a presumption of compliance.     Unhappily, the Congress – which levies taxes and should seek to encourage honest tax reporting – seems intent on making tax compliance a “suckers only” game.  In addition to echoing calls for lower taxes, lawmakers have been gradually eviscerating the IRS, which is no longer capable of enforcing our tax laws. In 2014, the latest year for which I could find records, the IRS audited less than 1% of all returns, and only 16% of those returns which reported income of more than $10 million.  The reason is simple: fewer auditors.  In 2016, enforcement staffing fell to less than 16,000, fewer than were on the job back in 2010.  

The lack of investigative manpower leads, inevitably, to widespread tax evasion.  Following each of the last several Presidential elections, one or more cabinet appointees have been revealed as having failed to pay taxes on household help.  Last year, fewer than 200,000 taxpayers paid these taxes, a number implying massive non-compliance. It doesn’t seem to matter to these evaders that the helpers will end up, years in the future, without the retirement benefits everyone needs. 

 In addition to doing far too few audits, the agency is doing fewer investigations of identity theft, money laundering, and public corruption.  Moreover, taxpayers seeking IRS assistance increasingly find their written queries unanswered and the agency’s telephones unmanned.  

None of this makes sense, since we have a huge tax gap – the difference between the amount paid and the amount owed – and the IRS is extremely efficient, spending just 35 cents to collect every $100 of revenue collected.    Moreover, incremental spending produces huge incremental gains: for every $1 spent on additional agents, the government recovers $4 of additional revenue.  And the government needs the money.  Last year’s budget deficit was $587 billion, but more than $450 billion in taxes went uncollected.  Collecting the money due but unpaid would nearly eliminate the deficit and free up funds that are needed to improve our infrastructure, improve health care and revitalize our educational system. 

Unhappily, things seem to be getting worse, not better.  The Trump Administration has proposed a 14.1 percent cut to the IRS for the fiscal year that begins in October, which would reduce the agency’s budget to about 70% of what it was six years ago.   If that proposal becomes reality, agency effectiveness will decline still further. 

I don’t understand why our government follows policies seemingly designed to minimize tax collections and create a nation of scofflaws.  In years past, Americans mocked countries unable or unwilling to collect taxes; today, we seemed determined to emulate them.

There will always be disagreements about what roles government should or should not take on.    But if we want to sustain self- governance, we need to recognize that doing so requires adherence to the rule of law, including calculating and paying all the taxes that are due.  Only by doing so can we be sure that citizens who pay their taxes will see themselves as patriots, not suckers!!!!






Sunday, February 21, 2016

WRONG ON THIS ONE

                                                        WRONG ON THIS ONE

On  February 15, the New York Times editorialized against a proposal to remove management of America's air traffic control system from the FAA, and hand responsibility to a non-profit corporation governed by the system's customers and participants. More than 50 countries around the world have already taken equivalent steps, with outstanding results. The US has fallen behind in aviation, and without this change, is unlikely to catch up.

Although I am a great fan of  the Times -- and a Democrat -- I think both the paper and my party are wrong on this issue.   On February 16, I sent the Times the following response,  which it has declined to publish. 





As a long time student of the airline industry and fan of the New York Times, I am deeply disappointed by the Paper’s opposition to the proposal that the FAA’s Air Traffic Control function be moved into a non-profit corporatized ANSP (Air Navigation Service Provider).  The present system is clearly broken and I believe that the Paper is wrong on the facts.

  •    First and foremost, corporatizing is not privatizing. The proposed non-profit organization will be governed by a Board which includes representatives of the airlines, general aviation, consumers, unions and the federal government.  The organization will set and collect service fees sufficient to cover its costs and will be able to sell bonds against those fees, thus providing reliable capital funding.  It will be free to manage its business as it sees fit so long as it conforms to safety requirements established by the FAA.
  • The purpose of the proposal is to separate the  safety oversight and navigation service provider functions, as more than 50 countries have already done. Safety oversight should and will remain the responsibility of government; navigation services should and will be provided by an organization able to provide for its long term financing needs by bonding its flow of user fees, free to compete with private enterprise for the skilled personnel needed to manage the world’s largest and most complex air space, financed and governed by its customers, and free of political interference.
  • The claim that Canadian air traffic control costs have increased more rapidly than costs in the United States is incorrect. Nav Canada's charging rates are now only 5% higher than when user fees were fully implemented in 1999, but are one third lower after correcting for inflation since then. By way of contrast, FAA's  cost per unit of workload has increased sharply since 1999.  Moreover, Nav Canada’s cost per IFR flight hour is more than 30% lower than the same cost in the U. S. 
  • The notion that safety will somehow be compromised is bogus.  While the FAA has done an excellent job of operating a complex system safely, in every country in which safety and  aviation navigation service functions have been separated,  the safety record  has been equal to or better than the record prior to separation of the two. That’s only logical, since splitting the functions removes the burden of self- regulation, in which some level of conflict of interest is inherent and inevitable. 
  • The idea that creating an ANSP would disrupt the FAA's effort to implement Next Gen - a broad upgrade of the nation's airspace management system -- is a refutation of reality.  The FAA has struggled for years with  Next Gen, routinely running far behind schedule and far over budget on each of its many components.  The financial uncertainty and political meddling inherent in Congressional supervision are incompatible with optimizing technical progress. 
  • It is disingenuous to claim that the proposed bill gives short shrift to passenger interests. The public interest is never well served by inefficiency, and in the status quo too many flights are delayed and cancelled and too many passengers are left unserved.   We need a more efficient air space management system, and to get it, we need to create an organization that will be funded and governed by its customers.  Those customers will naturally demand a system optimized for both efficiency and economy. The improved system will allow airlines and others to schedule more flights, burn less fuel and make travel both less expensive and more enjoyable.

This is a change that many in the aviation community have been pursuing for decades.  I hope the New York Times Editorial Board will re-think its position and that Democratic politicians will recognize the error of their opposition and work with the bill’s sponsors to produce a change that will benefit both travelers and the nation’s economy.