Tax Reform: Two Places to Start

1040 Tax Form

An anonymous announcement of a forthcoming public announcement: On April 26, an anonymous White House source says, the Trump administration “will outline our broad principles and priorities …. We are moving forward on comprehensive tax reform that cuts tax rates for individuals, simplifies our overly-complicated system and creates jobs by making American businesses competitive.”

That sounds very nice. But given the administration’s previously revealed “principles and priorities,” it’s reasonable to expect a heaping helping of economically dumb protectionist tinkering floating atop a billowing cloud of hot air.

If Trump, his administration, and congressional Republicans were serious about real tax reform (they aren’t, but if they were), I’d expect to see two major initial proposals: A measure increasing the “personal exemption” to the federal income tax once a year, every year, automatically, and a “FICA floor” that likewise increases each year.

The personal exemption is part of the amount an individual can earn each year before being taxed on income at all (the other part is either taking the “standard deduction” or itemizing and adding up specific spending that’s deductible).  For income earned in 2016, the personal exemption is $4,050 (with a “phaseout” starting at $150k; that “phaseout” should be eliminated as well).

Automatically increasing the personal exemption each year and eliminating the phaseout would have two effects: It would cut taxes for everyone who pays them, and it would take the lowest income Americans off the income tax rolls altogether.

Since the Reagan era, tax cut proposals have been aimed at cutting top rates on the basis of a “supply side” theory — that rich entrepreneurs who get tax cuts will invest their retained wealth in new businesses that create jobs. But there are two sides to an economy, supply and demand. Cutting taxes for everyone, starting at the bottom with increased personal exemptions, would spur economic demand. That demand would be just as good for those entrepreneurs, and better for everyone else, than “supply side” cuts.

FICA taxes are used to finance Social Security and Medicare.  They are regressive taxes which, due to collection ceilings and life expectancy differentials,  force lower-income black males to subsidize retirement and healthcare for higher-income white females.

Yes, retirement income and post-retirement healthcare expenses are important. But so is making a living. A FICA floor — a “personal exemption” income amount below which FICA taxes aren’t collected — would let low-income Americans keep and use more of their money now instead of hoping to live long enough to claw some of it back later.

As a libertarian, I would prefer to see the income and FICA taxes eliminated altogether. Failing that, we should at least do what we can to get the government spending monkey off the backs of the poorest among us.

Yes, there is a grass roots organization pushing these two common-sense tax reforms. Disclosure: I am a member of that organization and sit on its steering committee. It’s called the Mobilization for Incremental Tax Exemption (catchy acronym: The MITE). You can find it on the web at TheMite.org.

Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

PUBLICATION  HISTORY

“Buy American, Hire American” is Anti-American

Public Domain - published before 1923 - Drawin...
Public Domain – published before 1923 – Drawing of the Thomas B. Jeffery Co. factory in Kenosha, Wisconsin (circa 1916) (Photo credit: Wikipedia)

On April 18, US president Donald Trump visited the Kenosha, Wisconsin headquarters of Snap-on to speak in front of an American flag made of the company’s tools and publicly sign an executive order titled “Hire American, Buy American.”

The order itself is small beans — it just orders four federal agency heads (Homeland Security, Justice, Labor, and State) to “review” policies and recommend changes that tend toward  hiring and spending domestically instead of abroad. But such changes would just increase Americans’ cost of living (and their taxes) rather than “saving Americans’ jobs.”

In his signing remarks,  Trump complains that “for too long, we’ve watched as our factories have been closed and our jobs have been sent to other faraway lands.” He omits both the reasons for manufacturing moving abroad and the effects of manufacturing moving abroad.

Capital tends to flow to where it can be most profitably invested. There’s no secret conspiracy to deprive Bob in Wisconsin of gainful employment so that Li can have a job in Shenzhen. If a manufacturer can make a widget in Shenzhen, get that widget to America, and sell it at less than the cost of making it in Kenosha, Shenzhen wins … and so does the consumer who buys that widget for less than it would have cost if Bob had made it. In fact, that consumer may be Bob himself, who’s now hopefully making or doing something more profitable than manufacturing widgets.

I have two relatives who worked (in the 1980s) for a company that made blue jeans. One operated a sewing machine, the other was a sewing machine mechanic. Then the factory closed and the company moved production abroad.

They both found jobs in other fields.  I’ve not discussed their wages or working conditions with them, but my impression is that they made out okay. Not everyone does, but on the whole we’re better off with freer trade that tends to lower the prices we pay for goods and push our own work toward its most profitable and efficient uses.

The other day, I went shopping for jeans, and it suddenly occurred to me that the pair I was looking at cost less than a similar pair I bought circa 1990, and that not even accounting for inflation. I thought of my relatives.

Trump claims to be thinking of my relatives too, but his economic fantasies would harm them in the name of protecting them.

Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

PUBLICATION  HISTORY

Pompeo vs. WikiLeaks: It’s No Contest

English: A van that purports to be the 'WikiLe...
English: A van that [falsely] purports to be the ‘WikiLeaks Top Secret Information Collection Unit’ parked at the protest event Occupy Wall Street in New York. (Photo credit: Wikipedia)
Last July, while stumping for then-candidate, now-president Donald Trump, US Representative Mike Pompeo (R-KS) gleefully referenced nearly 20,000 Democratic National Committee emails released by the transparency/disclosure journalists at Wikileaks. “Need further proof that the fix was in from Pres. Obama on down?” Pompeo tweeted. The emails showed that DNC officials had worked overtime to rig their party’s primaries for eventual nominee Hillary Clinton and against challenger Bernie Sanders.

What a difference nine months makes! On April 13, Pompeo — now in charge at the Central Intelligence Agency — used the bully pulpit of his first public speech in his new job to call out his old ally as “a nonstate hostile intelligence service often abetted by state actors like Russia.”

WikiLeaks says that no, it is not in fact abetted by Vladimir Putin’s regime.

If I have to choose between believing WikiLeaks or believing Mike Pompeo, I’ll believe WikiLeaks six days a week and twice on Sunday.

Over the course of more than a decade, WikiLeaks has built a sterling reputation for delivering the real goods on various governments (including Russia’s). The next document it releases which is shown to be fake will be the first. WikiLeaks has earned the trust of the public — and moreover, it has shown that it trusts the public with information about what our governments are doing in our names and with our money.

The US intelligence community, on the other hand, spies on us, lies to us about it, and expects us to pick up the check even after decades of irrefutable evidence of its dishonesty and incompetence.

The publicly released evidence for Pompeo’s allegation that WikiLeaks is in bed with the Russians is: Zero, zip, zilch, nada, a big fat goose-egg. If Pompeo has any such evidence, he’s keeping it secret. And  that’s not very believable: After all, the CIA has done a pretty poor job of keeping secrets lately.  WikiLeaks is in the process of releasing “Vault 7,” a trove of CIA documents revealing the agency’s work to subvert the electronic devices we all use on a daily basis and spy on us through them.

If Pompeo had any evidence that WikiLeaks was working with or for Putin, someone (maybe even WikiLeaks itself) would likely have already procured and published that information. Just sayin’.

WikiLeaks has changed the world, and it’s changed it for the better. Pompeo and his old and busted spy mill, not so much.

 

Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

PUBLICATION  HISTORY