The Grand Republican Strategy: We Win, You Pay!

On a recent trip to London, I got into a conversation with a wealthy oil and gas investor about climate change. He didn’t disagree we need to shift from fossil fuels to renewable energy, he said. His job is to make sure the lights in our homes still turn on while we make the transition.

Fair enough, I said. Would you support a carbon tax or a cap-and-trade program to speed up the transition?

“Sure,” he said, to my surprise, without hesitation. “As long as the revenue is spent on new technologies, and not given away to poor people.”

Ah. There’s always a catch.

At first, I thought it was a strange caveat, especially since we’d just got done talking about income inequality, an issue that he seemed quite concerned about. It wasn’t until I saw the Republican presidential hopefuls unveil their new economic plans that it all made sense:

I really want to do the right thing, he’s saying, as long as I don’t have to pay for it.

Carbon Tax BurdenThe reason for his concern, by the way, is that poor people have to spend a higher percentage of their income on oil and gas than rich people, so the burden of a carbon tax or a cap-and-trade program would fall the hardest on them. Many people think that’s unfair since (a) they’re already strapped for cash and (b) they’re not the ones profiting from all the carbon emissions. So progressive proposals usually include a rebate of some sort to ease their cost.

Our friend the oil-and-gas investor would rather give that money to — surprise, surprise — corporate America.

This, I realized, is the grand strategy of the new “reformocon” movement in the Republican party. No longer can a Republican run for president without admitting that the government must do something about our nation’s most pressing problems — but neither can he ask his friends in the One Percent to pay for it. Thus is born a new slogan: We win, you pay!

Mike Lee and Marco Rubio, two of the leading reformocons in the Senate, put this strategy to the test earlier this month when they released an ambitious tax plan centered around an expansion of the Child Tax Credit for middle-income households. Sounds great, right? Rather than cutting government spending for the middle class, these Republicans want to spend more. Heaven knows they could use it, after decades of dismal income growth. But who will pay for it?

Certainly not the rich. The Lee-Rubio plan eliminates taxes on investments, where they get most of their income, and it lowers the corporate tax rate and the income tax rate for the top bracket. Add it all up, and it turns out to be an enormous tax cut for the wealthiest Americans and barely any relief for everyone else.

Republican Budget CutsAnd what happens when all these tax cuts increase the budget deficit by $400 billion a year? Well, if recent history is any indicator, these same Republicans will scream “Crisis!” and demand spending cuts. If you’re wondering where those cuts will come from, look no further than the latest Republican budget, which gets two-thirds of its cuts from programs that help low- and moderate-income households. It scorches their budgets by 40 percent!

So, who will pay for the reformocons’ new plans? You know who.

No sooner had the ink dried on Marco Rubio’s deceptive debut than his presidential competitor Jeb Bush announced, in a speech about income inequality, that he would abolish the federal minimum wage.

Among the reformocon movement, Jeb Bush is not alone in this desire. You may wonder how they can expand the Child Tax Credit in one breath and abolish the minimum wage in the next, since the two policies are basically intended to help the same people?

It’s very simple really, once you understand the “we win, you pay” principle. Wages are paid by corporations. Tax credits are paid by…well, you just saw who, and it ain’t the corporations.

So, for the reformocons: Tax credits, good. Wages, bad.

The most egregious example of this strategy is our first official presidential candidate, Ted Cruz, who’s advocating a “flat tax,” charging the same rate to everyone, regardless of their income. For that to work, he’d have to raise taxes significantly on most Americans in order to cut them significantly for the richest Americans because the only way to raise the same amount of revenue is to find a rate somewhere in the middle of what the two groups pay now. It’s basic arithmetic.

But you never hear the reformocons talk about arithmetic in their speeches. They talk about inequality and upward mobility and the American middle class. They talk about all sorts of expensive new plans, and they never mention that there’s a catch.

They can’t mention the catch because it undermines the entire point of their reforms. If they win, you pay. And if you pay, they’re not helping you after all.

So, who are they helping? You know who.

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This op-ed was originally published in the Huffington Post.

Does Obamacare Infringe on Our Liberty? Or Does It Give Us Even More Freedom?

What right does the government have to make you buy health insurance?

That’s the question that riles Obamacare critics the most. It’s not the premiums or the website or the dropped coverage. It’s the infringement on their liberty.

Does Government Threaten Our Freedom?You hear it all the time: “This is a free country!” That’s what everybody says. But what do they really mean? Do they know what freedom is?

It seems obvious at first. Freedom is lack of coercion. Therefore, anything the government makes you do infringes on your freedom.

But there are different types of coercion, and the government isn’t the only one doing the coercing.

Let’s say that you want your daughter to attend the best school in America. But you can’t afford the tuition. Do you really have freedom of choice? If you choose the school you want, they won’t let you through the front door. If you force your way in, they’ll arrest you.

So you “choose” a more affordable school. You wanted a better school, but they forced you to settle for a different one. Sounds like coercion to me.

Let’s consider another example. You want to retire at the age of 65. You’ve worked hard throughout your entire adult life. Unfortunately, wages haven’t risen, and the bills kept piling up. You saved as much as you could, but it’s only enough to live off for a couple years. Oh, and one more thing: Social Security and Medicare don’t exist.

If you “choose” to retire, you’ll go broke. You’ll go without preventive health care. Your chances of dying early will increase significantly.

So you have a choice: Keep working or die young.

In this case, you actually have less freedom because the government is less involved. Without Social Security and Medicare, you do not have the freedom to choose a long, healthy retirement.

Freedom requires more than the absence of laws and taxes. True freedom of choice requires the capability to make that choice — and the free market doesn’t always give us that capability.

Jobs are scarce. Most of us don’t have the freedom to work anywhere we want. We take what we can get. For many of us, that means working at a company that doesn’t pay for our health insurance. So we “choose” to buy insurance on the individual market.

Before Obamacare, the individual market charged really low rates to healthy people and really high rates to sick people. So the people who needed insurance the most couldn’t afford it. They didn’t have the capability — and therefore the freedom — to buy it.

Obamacare outlaws that kind of discrimination. It requires insurers to charge the same rates to healthy and sick people alike, and that means that healthy people will have to pay higher rates. Some of them won’t want to, so they’ll stop buying insurance. When they drop out, they leave behind the sicker people who are most costly to insure, forcing insurers to raise rates even more. It’s a vicious cycle, a “death spiral,” that results in almost everyone being priced out of the market.

Virtually no one will have the freedom to buy health insurance on the individual market.

And that’s why we have an individual mandate. If the healthy people don’t drop out, there’s no death spiral, and the insurance remains affordable for the people who need it the most.

The government gives them a freedom that the free market cannot. It gives them the capability to purchase health insurance.

If we choose not to buy insurance, we pay a penalty. As Supreme Court Chief Justice John Roberts has written, “it makes going without insurance just another thing the Government taxes, like buying gasoline or earning income.” Those taxes pay for our roads and Army and Navy and Social Security and Medicare — and those things give us the freedom to live a life that we often take for granted. Without those taxes, without those government-funded investments, we could not call ourselves a free country.

In the same way, without Obamacare, without the government making us buy health insurance, we would be condemning millions of Americans to lives without health care. We would be restricting their freedom. And what right do we have to do that?

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This op-ed was published in today’s South Florida Sun-Sentinel and Huffington Post.

The Many Tax Plans of Mitt Romney

Math is pretty important these days. If you’ve been watching the presidential debates, you’ve probably felt like the candidates should use a chalkboard to explain their disagreement on taxes. The numbers have been flying, and many Americans are confused.

I’m here to help. This is a tutorial on the many tax plans of Mitt Romney.

Don’t be scared. As Bill Clinton said, it’s just arithmetic.

Earlier this year, Romney announced his first tax plan. His big idea was to reduce individual income tax rates by 20 percent in addition to extending all the Bush tax cuts permanently.

So, instead of paying 10 percent, the bottom tax bracket would pay 8 percent. Instead of paying 15 percent, the next tax bracket would pay 12 percent. And so on.

But 20 percent of 35 is a lot bigger than 20 percent of 10, so high-income taxpayers would get a much bigger tax cut.

Romney also proposed cutting the corporate income tax, eliminating the estate tax, and eliminating the tax on investment income for folks earning less than $200,000.

Under this plan, the top 0.1 percent of households would get an average tax cut of $725,716, while the middle class would get $810 apiece.

But there’s a problem with this plan. It would decrease tax revenue and increase the budget deficit by $456 billion in 2015. That would almost double what our deficit is projected to be at that time.

So Mitt Romney came up with a new plan. After he cut taxes by $456 billion, he’d raise them by $456 billion.

If that sounds like a waste of time, you’re not thinking like a politician. This way, he could campaign on a huge tax cut and, at the same time, vow to reduce the budget deficit. He just wouldn’t tell people he won’t actually be cutting their taxes. Because he can’t. Not unless he wants to increase the budget deficit.

Here’s how he’d do it. After he lowered everyone’s tax rates, he’d eliminate enough deductions and tax credits to make up for all that lost tax revenue.

So, you can say goodbye to the child tax credit, the education tax credit, the charitable-donation deduction, the mortgage-interest deduction, etc, etc. I’m just making this up because Romney never specified which deductions and credits he’d eliminate. And that’s kind of important, right? He’s proposing a radical restructuring of the tax code that could have a huge effect on you, and he refuses — again and again and again — to give any details. But suffice it to say, if you benefit from any of those deductions or credits, you should be worried.

Now he’s got a new problem. For high-income households, there aren’t enough deductions and credits to make up for the massive tax cuts they’d enjoy under Romney’s plan. Even if he got rid of all those deductions and credits, they’d still get a tax cut.

If this plan isn’t going to increase the deficit and high-income households are getting a tax cut, then everyone else is getting a tax increase. In this scenario, the middle class would pay an average of $899 more in taxes, while the top 0.1 percent of households would pay $246,652 less.

So Mitt Romney came up with a new plan. Again.

In this week’s debate, Romney proposed putting a cap on itemized deductions. In this scenario, each household could use only $25,000 in itemized deductions.

Since high-income households are more likely to use more than $25,000 in itemized deductions, this plan would hit them harder. So Romney can say he’s taken the burden off the middle class.

But wait. Yep, you guessed it: There’s a problem. Again.

This plan would only raise $103 billion in 2015. If Romney keeps his promise to cut tax rates, he’d be increasing the budget deficit by $353 billion.

No matter how hard he tries, Mitt Romney can’t avoid arithmetic: Cutting taxes increases the budget deficit.

That’s why the last three Republican presidents each presided over massive increases in federal debt. That’s why Dick Cheney said, “Deficits don’t matter.” And that’s why Mitt Romney’s numbers don’t add up.

But don’t worry. I’m sure he’ll change his mind again.

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This op-ed was published in today’s South Florida Sun-Sentinel.

What to Read on Herman Cain

On the Ropes With Herman Cain — T. A. Frank

In October, Cain had to undo damage from the following: a suggestion to put up an electrified fence on the Mexican border, statements endorsing a woman’s right to choose, an apparent unfamiliarity with the terms “right of return” and “neoconservative,” a tentative thumbs-up to negotiating with Al Qaeda for prisoners and news stories of a completely mismanaged campaign.

Now allegations of sexual harassment have drowned out pretty much anything else related to Herman Cain. And if that’s in any way a blessing, it’s only because it diverted attention from what may have been some serious violations of campaign-finance laws.

Herman Cain gets away with stuff like this — stuff like being inconsiderate or egomaniacal, or just stuff like saying absolutely the wrong thing. An ordinary candidate wouldn’t recover from saying that he wouldn’t appoint Muslims to his cabinet…

Most of [Cain’s] former staff members…speak of a man so egotistical that careful self-policing would never really enter into the realm of consideration.

They also speak — bitterly — of a candidate with zero interest in policy… They speak of unrelenting self-absorption, even by the standards of a politician.

Herman Cain’s 9-9-9 Plan: $210k Tax Cut for Richest 1%, $2k Tax Hike for Bottom Three-Fifths of Taxpayers — Citizens for Tax Justice

Cain’s proposed tax plan would replace all existing federal taxes with three new taxes: a flat nine percent individual income tax, a flat nine percent “business tax,” and a nine percent national sales tax.

Moreover, under the 9-9-9 plan, the United States government would collect about $340 billion less in revenue in 2011 alone.

Herman Cain: Nein, Nein, Nein! — Justin Raimondo

[Cain wrote] that the “war on terrorism” is a conflict that “will be fought forever.”

Cain promotes the views of Pastor Rod Parsley, an evangelical nut-job who not only teaches Islam is an “anti-Christ religion” based on “deception,” and that the prophet Mohammed was a “demon spirit,” but also claims “America was founded in part, with the intention of seeing this false religion destroyed.”

[Cain believes] that “World War III” has already started…: “In WW III, our enemy is the irreconcilable terrorist wing of a religion — Islam — and a handful of nations that harbor terrorists and fund their activities. Those nations include Iran, Syria, Venezuela and North Korea.”

I’m sure Hugo Chavez will be very surprised to learn he’s been lording it over a Muslim country rather than a staunchly Catholic one — and I can only imagine the look on Kim Jong Il’s face when he he hears the muezzin’s call to prayer ring out over the streets of Pyongyang.

The Flat-Tax Fraud — Robert Reich

[The] non-partisan Tax Policy Center estimates that Cain’s plan (the only one out there so far) would lower the after-tax incomes of poor households (incomes below $30,000) by 16 to 20 percent, while increasing the incomes of wealthier households (incomes above $200,000) by 5 to 22 percent, on average.

Under Cain’s plan, fully 95 percent of households with more than $1 million in income would get an average tax cut of $487,300. And capital gains (a major source of income for the very rich) would be tax free.

Reader Requests: How Do Corporations Do-Do That Voodoo?

A reader asks: You claimed that the United States has an average corporate tax rate of 13.4 percent, despite a statutory tax rate of 35 percent. How did you calculate the “average” corporate tax rate?

Actually, I didn’t calculate it. The Bush Treasury did. They divided corporate taxes by corporate capital income.

Another reader asks: Do small corporations pay the same “average” or “effective” tax rate as bigger corporations?

Technically, small corporations are supposed to pay less in taxes. Like individual income tax rates, statutory corporate tax rates are progressive: 15 percent on the first $50,000 of income, 25 percent on income from $50,001 to $75,000, 34 percent on income from $75,001 to $10 million, and 35 percent on income above $10 million. (It gets way more complicated, but the details aren’t relevant here.)   Continue reading “Reader Requests: How Do Corporations Do-Do That Voodoo?”