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Are you angry yet? Tax “reform” will be followed by Medicare, Social Security “reform”

Late last night, the Senate passed its version of the tax cut bill.  Next step? According to GOP leaders, it will be “entitlement reform.” Which includes the Social Security and Medicare benefits you have been paying for – with every paycheck – since you started working. Just like they’ve been talking about since the Bush tax cuts.

Congress won’t have to do anything, to cut Medicare by $25 billion next year.  If President Trump signs a final version of this bill, according to the Congressional Budget Office, it will create a budget deficit that will trigger $25 billion in automatic cuts to Medicare.

And if “chained-CPI” is still in the bill, Congress won’t have to do anything to cut Social Security benefits, long term. “Chained-CPI” is a way of calculating inflation that incorporates a ratcheting-down of benefits. It assumes that senior citizens who can’t afford steak don’t need a cost of living increase because they can buy chicken, instead. And those who can’t afford to buy chicken can buy tuna. And if they can’t afford tuna…  It’s the cat food thing. (Read our 2013 post about chained-CPI here.)

BUT they’re already planning more cuts. Because at some point, our government is going to have to do something about our national debt. Which has quadrupled since the Bush tax cuts.  Which is now equal to more than $170,000 per taxpayer. Which has increased by $745 billion – almost 4% — since the debt limit was suspended on September 8th.  Which was only 11 weeks ago.

Having a hard time wrapping your head around what you just read?  Let’s try it again.

On September 8, 2017, Congress suspended the debt limit.  Since then (only 11 weeks), the debt has grown by more than $745 billion. And Congress is cutting taxes in order to add $1.5 Trillion to that number.

It’s pretty clear that Congress is creating a “debt problem” that they’re going to “solve” by going after Social Security and Medicare.

Newsweek: Republicans will cut Social Security and Medicare after tax plan passes, Rubio says
Forbes: How the GOP tax plan scrooges middle class, retired and poor
Washington Post: GOP eyes post-tax-cut changes to welfare, Social Security and Medicare

This isn’t a surprise.  Back in 2004, Federal Reserve Chairman Alan Greenspan suggested cutting Social Security and Medicare benefits to pay for the cost of the Bush tax cuts.

Looks like that’s still the strategy. Here’s where it goes from being “strategy” to “theft.”

Since 2012, most workers have been paying more into the Social Security system than they can expect to receive in benefits.

People retiring today are part of the first generation of workers who have paid more in Social Security taxes during their careers than they will receive in benefits after they retire. It’s a historic shift that will only get worse for future retirees, according to an analysis by The Associated Press.

Back in 2001, 57% of Americans wanted to roll back the Bush tax cuts to protect (what was then) the budget surplus. A whopping 92% wanted to prevent Congress from using Social Security for any other purpose. But at last report, about $3 trillion of the national debt is now owed to the Social Security system.

So… if you’ve already put more in to the Social Security system than you can expect to get out of it – and Congress wants to put even more tax cuts on the nation’s credit card – and Congressional leadership wants to pay down that extra debt by cutting Social Security… that means the money to pay for these tax cuts is coming out of your pocket.

Are you angry, yet?

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Public Citizen reports that at least 6,243 Washington lobbyists have been working on this tax bill.  That’s almost 12 lobbyists per legislator! Read about some of the last-minute add-ons – including an amendment that exempts a college in Michigan and a carve-out for cruise ships docking in Alaska – here. Wondering who benefits from this tax bill? Read about analyses done by the Congressional Budget Office and the Joint Committee on Taxation here.

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If you want to contact your elected federal officials about this, please do so on your own time and using your own personal phone/email. (Most employers prohibit using work time or resources for this sort of thing.)

Contact information for President Trump is available here.

You can find contact information for your two US Senators here.

You can find the phone number and website for your US Representative here.  (If you don’t know who your Representative is, check here.)

SEN. Martha Fuller-Clark: Corporate Tax Cuts: The Solution in Search of a Problem

When you’ve spent as much time in the New Hampshire legislature as I have, you are used to seeing solutions proposed to problems yet to arise. This session is no exception. Currently, Senate Bills One and Two are pending in the Senate championed by some as needed to enhance our business climate.

While these bills would modestly reduce taxes on a very small percentage of New Hampshire’s businesses, they would blow a major hole in the state’s budget for the next two years – a budget that is already significantly challenged – and limit our ability to provide the vital investments that businesses have told us they want and need in order to continue to thrive in our state. 

Proponents of these bills believe that our current business climate – routinely ranked in the top ten in the country for attracting, growing, and creating new thriving businesses – needs fixing. They think that the only improvement in that climate our state government can offer is a reduction in taxes businesses pay. Yet any survey of the way that site selection professionals chose locations for new facilities makes clear that, while taxation levels are a consideration, they are an increasingly minor one. 

Area Development, a leading trade publication for industrial real estate professionals for over fifty years, published a comprehensive 10-part series in the fourth quarter of 2014 based on their 28th annual survey of corporate executives.[1]The results will not surprise anyone who has worked with economic development professionals, business leaders, and industrial realtors. Taxes are important, but other factors have long-since eclipsed tax rates as the leading priorities for businesses looking to expand. 

The top six factors cited in the Area Development survey all reflect priorities that Gov. Hassan stressed in her inaugural address and that Democrats agree need to be adequately funded in order to actually improve our business climate. These include a more market-ready workforce by making higher education more flexible and more affordable (Factors 1[2] and 3[3]), improved transportation infrastructure (Factor 2[4]), and a “robust” information and communications technology infrastructure (Factor 5[5].) Factors 4[6] and 6[7] both concern the price and cost of physical plants and turnkey facilities, variables that the State of New Hampshire could help address if more financial resources from the state were allocated to help communities lower their property taxes. 

The survey goes on to address the impact of state and local taxation, citing it as the seventh most important factor.[8] The discussion of the impact of taxes is mitigated, however, by the understanding that states with extremely low taxes often cannot supply crucial services. Area Development quotes Larry Gigerich, managing director of the site selection firm Ginovus:  

“We talk to C-suite people who say that we’ve hit a tipping point on corporate taxes now because of examples like Kansas. They’re saying that there are basic services that governments provide, and if states cut taxes too much, they don’t have the revenue to do it. They want states to be able to pay for services and infrastructure and workforce development.” (Emphasis mine) [9]

Meanwhile, New Hampshire continues to attract new businesses like Albany International and Revolution Energy, both here on the Seacoast, as well as grow existing ones, both large and small.  The right-wing Tax Foundation, who lauds Rep. Paul Ryan (R-WI) and Gov. Mike Pence (R-IN) on their  blog’s front page[10], rates New Hampshire seventh in their annual State Business Tax Climate Index for 2015, continuing its long run in the top ten states for business climate based on taxes.[11] The Tax Foundation has consistently found New Hampshire to have one of the most attractive tax climates in the US, notably throughout the terms of Democratic governors Shaheen, Lynch, and Hassan. 

It is important to note the number of companies that would benefit from SB1 and SB2. Three out of every four businesses in New Hampshire (75.7%) currently pay no taxes under the business profit tax (BPT) that would be cut under SB1 while almost half (43.9%) of New Hampshire businesses pay no taxes under the business enterprise tax (BET) that would be cut by SB2. Another 10.9% pay less than $1000 and would surely be unaffected by the SB1 cuts. Another one in three businesses pay less than $1000 under the BET and would see no benefit in the reduction proposed by SB 2. Altogether, fewer than 17,000 businesses out of the more than 120,000 businesses registered in the state paid more than $1000 dollars in business taxes in 2011 and might see some tax relief. [12] 

Clearly the impact on the business climate of tax cuts proposed in SB1 and SB2 would be almost de minimus, while the loss of revenue to the general fund, projected to be  $78,008,824[13] over the next two years, would be significant to an already cash strapped budget. This would mean less support for higher education and local schools, including school building aid, fewer miles of roads paved and red lined bridges repaired to name but a few of the services so essential to a healthy business climate and a thriving economy.  Creating a well-educated and skilled workforce, investing in a well maintained and modern infrastructure, including available and effective broad-band and cloud service and ensuring a safe and healthy environment will have a far more positive impact on our business climate than any small tax cut offered by SB1 and 2 – a tax solution to a potential  problem that, in reality, despite the rhetoric, will only affect a very small number of large and successful businesses. More importantly, we should listen to business professionals and prioritize our economic development strategies accordingly.

[1] http://www.areadevelopment.com/Corporate-Consultants-Survey-Results/Q1-2014/28th-Corporate-Executive-RE-survey-results-6574981.shtml

[2] http://www.areadevelopment.com/skilled-workforce-STEM/Q4-2014/skilled-labor-critical-site-selection-factors-7221554.shtml

[3] http://www.areadevelopment.com/labor-costs/Q4-2014/labor-costs-critical-site-selection-factors-272611.shtml

[4] http://www.areadevelopment.com/logisticsInfrastructure/Q4-2014/highway-accessibility-critical-site-selection-factors-700913.shtml

[5] http://www.areadevelopment.com/logisticsInfrastructure/Q4-2014/critical-site-selection-factors-ICT-infrastructure-2929217.shtml

[6] http://www.areadevelopment.com/construction-project-planning/Q4-2014/site-selection-factors-occupancy-construction-costs-282721.shtml

[7] http://www.areadevelopment.com/economic-analysis/Q4-2014/building-availability-critical-site-selection-factors-398297.shtml

[8] http://www.areadevelopment.com/taxesIncentives/Q4-2014/corporate-tax-rate-critical-site-selection-factors-222449.shtml

[9] ibid, note 8

[10] http://taxfoundation.org/blog

[11] http://taxfoundation.org/article/facts-figures-2014-how-does-your-state-compare

[12] http://www.revenue.nh.gov/publications/reports/documents/ar-2014.pdf (see alsohttp://www.revenue.nh.gov/publications/presentations/documents/senate-ways-means-present-2015.pdf for recent revenue history of BET, BPT.

[13] Fiscal Notes for SB1 and SB2 http://www.gencourt.state.nh.us/bill_status/bill_status.aspx?lsr=189&sy=2015&sortoption=&txtsessionyear=2015&txtbillnumber=SB1

http://www.gencourt.state.nh.us/bill_status/bill_status.aspx?lsr=868&sy=2015&sortoption=&txtsessionyear=2015&txtbillnumber=SB2

These are the stakes…To make a world in which all of God’s children can live, or to go into the dark. We must either love each other, or we must die. LBJ, 1964

Taxpayers Are Paying Profitable Corporations To Create Jobs?

Toyota GT86 – Frontansicht, 17. September 2012, DüsseldorfWhen word first spread that Toyota was moving jobs from California to Texas, some right-wing talking heads were blaming California’s government.

But within a day, the Wall Street Journal had figured it out: it was actually Texas’ government.  Yes, the newspaper owned by Rupert Murdoch broke the story: Texas to Pay $10,000 for Each Toyota Job

Texas offered Toyota $40 million to move, part of a Texas Enterprise Fund incentive program run out of the governor’s office. At $10,000 a job, it was one of the largest incentives handed out in the decade-old program and cost more per job created than any other large award. Last year, Texas spent about $6,800 to lure each of 1,700 Chevron Corp. positions to Houston and $5,800 for each of 3,600 Apple Inc. jobs shifted to Austin.

Ok, so… let me see if I can get this straight.

Toyota just had a second year of record profits.

Toyota wasn’t actively considering locating in Texas.  “Toyota narrowed its preferred locations to Denver, Atlanta and Charlotte, N.C.” before choosing to move to Texas because of the economic incentives.

$10,000 a job.  Courtesy of Texas taxpayers.

Gosh, it’s a good time to be a corporation.

OK, I need to give the Wall Street Journal some credit here: they have been working the “state economic incentives for jobs” beat for a while now.  From their 2013 story about Washington state’s genuflection to Boeing:

Officials from most of the states Boeing invited to participate have publicly expressed interest. Missouri’s governor, Democrat Jay Nixon, on Tuesday is to sign a package of incentives approved last week by the state’s largely Republican legislature. The measure would be worth $150 million annually to Boeing if the company creates at least 2,000 jobs in Missouri.

Ok, by my math: $150 million a year divided by 2,000 jobs equals $75,000 per job per year… which would have been courtesy of Missouri taxpayers.

Back to their story:

Washington’s legislature last month approved sweeteners valued at $8.7 billion over 16 years—which experts say is the largest corporate-incentive package in U.S. history—in an effort to keep the jobs

And, back to my math: $8.7 billion over 16 years is about $544 million a year – or, more than three times what Missouri offered.

If we’re still talking about 2,000 jobs… that’s about $272,000 per job per year, courtesy of Washington state taxpayers.

Wow.

(Boeing, by the way, just distributed $3 billion as dividends and stock buy-backs.)

Yes, this is what has been going on, all across America.  Billions of dollars in government aid to corporations, even as Congress cut the Food Stamp program and rejected an increase in the minimum wage.

It’s a really good time to be a corporation.

Or a CEO.

Or a lobbyist.

(But not such a good time to be a US veteran.  More than a million veterans are minimum-wage workers who won’t see their pay increase.  And another million veterans just had their Food Stamp allotments cut.  Where are our priorities?)

Racing to Blame Public Workers for State Finances

Suffolk DownsAnd… they’re off, on a new round of attacks on public pension systems nationwide.

When you hear about this week’s Mercatus Center report on the financial condition of all 50 states… start by considering the source.  Mercatus is housed at George Mason University, so it has a veneer of academic credibility.  But here’s what SourceWatch has to say:

“The Mercatus Center was founded and is funded by the Koch Family Foundations. According to financial records, the Koch family has contributed more than thirty million dollars to George Mason, much of which has gone to the Mercatus Center, a nonprofit organization.”

The last time George Mason University really hit the headlines was in 2012, when a faculty economist authored a doomsday report about how horribly Sequester cuts would affect… the Defense Industry.

(Meanwhile, military contractors seem to be doing just fine.  Back in November’s budget compromise, Congress gave the Pentagon more than $1.3 billion for programs it didn’t want.  And according to Reuters, there’s not much oversight of all that money.  “The Pentagon … has not complied with a law that requires annual audits of all government departments. That means that the $8.5 trillion in taxpayer money doled out by Congress to the Pentagon since 1996, the first year it was supposed to be audited, has never been accounted for.”)

But I digress.

The thing that strikes me, about this week’s Mercatus report, is that once again it tries to blame public workers for whatever is wrong with state finances.

  • It doesn’t say a thing about corporate giveaways, such as Washington state’s recent biggest-in-US-history giveaway of $8.7 billion to Boeing.

According to a New York Times analysis, these so-called “economic incentives” add up to big money: “Oklahoma and West Virginia give up amounts equal to about one-third of their budgets, and Maine allocates nearly a fifth.”   But do these incentives actually work?  The Times couldn’t find any evidence.

  • It doesn’t say a thing about revenues.  Just try Googling “state tax cuts”.  Out in Wisconsin, Scott Walker’s going to cut taxes (even more than he already has).  Chris Christie wants to cut taxes (even more).  Dave Heineman, out in Nebraska, is going to cut taxes.  Even Andrew Cuomo is pitching tax cuts.

But, let me digress again.  Out there in Nebraska, they actually studied the “economic stimulus” effect of tax cuts.  Here’s what they found:  even accounting for the “stimulus effect”, a $100 million reduction in regressive sales/use taxes would have a “net revenue impact” of (negative) $79.45 million… while a $100 million cut in income taxes would have an impact of (negative) $93.58 million. That’s right, neither of these types of tax cuts would be good for the state budget; but one of them is much worse than the other.  So, guess which type of taxes Governor Heineman wants to cut (rather than expanding Medicaid).

  • It doesn’t say a thing about how Wall Street’s “robust recovery” has affected public pension funds.  After losing a TRILLION dollars between October 2007 and October 2008, public pension trust funds are finally beginning to recover.  Here in New Hampshire, last year, investment returns added $818 million to our Retirement System Trust Fund.  How big is that number?  The NHRS Trust Fund started the year with less than $6 billion.  It paid benefits totaling about $630 million.  Do the math yourself: last year, investment returns paid for every single penny of benefits… and still increased the Trust Fund.

So yeah, maybe you should take all those Mercatus Center headlines with a grain of salt.

Or a bushel.

As Amy Traub says: your mailman didn’t make the economy collapse.

And public employees aren’t responsible for the damage that has been done to their state budgets.  (We’re just the workers, remember?  It’s the elected officials who decide how many billions to give away to private corporations.)

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