Feeding The Rich And Starving “The Beast.”

The top 10 percent control 76 percent of the nation’s wealth. Yet a new study* found that the bottom 99.9 percent pay 175 times as much income tax as the top 0.1 percent! That’s because the wealthy use a variety of tax shelters, both offshore and in tax havens such as Delaware and South Dakota. In addition, our largest, multinational corporations dodge taxes by moving their headquarters offshore (at least on paper) and by parking large sums of cash in offshore tax shelters.

Obviously, tax reform is sorely needed, and it’s the next big item on the Trump agenda. But, with Trump and the GOP in charge, don’t expect it to benefit you. While true reform would be almost universally welcomed, the people shaping the process are all billionaires and multi-millionaires with ties to Wall Street.

What are the chances that they will introduce a bill to benefit ordinary working-class Americans?

The short answer is zero if you look at the framework being considered by the administration as reported by Politico. For example, the administration is planning to raid your 401k savings account by forcing you to pay taxes on the money up front. Other proposals include eliminating the mortgage interest deduction for homeowners, eliminating federal deductions for the money you pay for state and local taxes, and eliminating charitable deductions. All of these proposals will result in a substantial tax INCREASE for ordinary Americans. They will also punish the poor by eliminating incentives for taxpayers to donate to charities.

Even more worrying are the tax rates being proposed.

At the heart of the “reform” is a plan to reduce the number of tax brackets from 7 to 3. That, alone, will punish taxpayers at the bottom of each bracket.

Of course, there is plenty of good news in the plan for the wealthy. The new plan would repeal the Alternative Minimum Tax – a boon to many well-off households. It would repeal the estate tax, a tax that currently applies only to 2 out of every 100 estates. (The tax is levied only on the portion of an estate’s value exceeding $5.49 million per person.) The plan would repeal the tax on investment income that helps pay for Obamacare. And it would cut the top marginal rate for the wealthiest Americans from 39.6 percent to 35 percent.

The Tax Policy Center estimates that the administration’s tax “reform” plan will cut taxes by $6 trillion over 10 years with almost half of the savings going to the top one percent.

And if you’re an executive for a large corporation, the news is just as good.

Though the current top marginal corporate rate of 39 percent is one of the highest in the world, very few US corporations actually pay that rate. Indeed, according to the 2015 ranking by World Bank, the total corporate tax burden for US corporations as a percentage of profits is tied with Tanzania for 64th in the world! And our corporate taxes as a percentage of GDP are lower than 22 of 32 of the world’s most advanced nations. Yet the Trump plan would cut the corporate tax rate to just 15 percent, making it one of the lowest tax rates in the world. The plan would also create a territorial tax system permitting multinational corporations to pay tax only on income earned in the US. Just what they need – yet another tax dodge! Additionally, Trump’s proposed tax plan would gift multinationals a one-time reduced tax on the trillions of dollars currently being held offshore.

The Center for a Responsible Federal Budget estimates that the cuts in corporate taxes alone will deprive the federal government of at least $2 trillion in the next 10 years! The administration’s belief is that the cuts in revenue will be offset by a yuuuge spurt of business growth. But that belief is wildly optimistic. Indeed, except in times of deep recession, there is no evidence that tax cuts grow the economy. And, following 8 years of private sector job growth, we are most certainly not in a recession.

If this plan – or anything approaching it – is approved, Grover Norquist will finally realize his dream. The federal government will be starved to the point where he can “drown it in a bathtub.”

* Study by John Hatdioannides of the Cass business school, Marika Karanassou of Queen May University and Hector Sala of the Universitat Autonoma de Barcelona and IZA in Bonn.

The Balanced Budget Fraud.

It may sound like a good idea to require the federal government to balance the budget, but it’s nothing more than a thinly-disguised way for Teapublicans to shrink government and give corporations free reign to exploit people and resources.

Make no mistake, as soon as a balanced budget amendment is passed, if it ever is, Teapublicans will cut taxes at the first opportunity. That will result in less revenue, which, in turn, will result in large budget cuts. Of course, those cuts will not affect corporate welfare or the military-industrial complex. Instead, there will be cuts to regulatory agencies and safety nets. Already we’ve seen the GOP propose the repeal of the Affordable Care Act which will deny affordable health insurance to more than 16 million Americans. We’ve seen GOP-sponsored budgets that propose cuts to Medicaid, Medicare, Social Security and Supplemental Nutrition programs. We’ve seen Teapublican initiatives to defund the Department of Education, the Environmental Protection Agency, the IRS, and the Department of Labor.

All of this will be made much easier if Teapublicans can muster enough votes to pass a balanced budget amendment.

The truth is, our federal government has often operated at a deficit. Not because of bad management or negligence. But out of necessity. Indeed, the Constitution was created to replace the failed Articles of Confederation over federal deficits. The fledgling government had run up substantial debts during the Revolutionary War and, without a central government, it had no way of collecting the funds to repay those debts. And that’s but one example: Had FDR not expanded government programs to put people back to work, we likely would have never emerged from the Great Depression. Had the US not operated at a deficit, we would not have been able to conduct military operations for WWII and most of our other all-too-frequent wars.

The Reagan administration operated at massive deficits in an attempt to outspend the Soviet Union. The Bush administration operated at enormous deficits in order to create the Homeland Security Department and to prosecute the Afghan and Iraq Wars. And the Obama administration has operated at deficits (albeit steadily decreasing deficits) in order to wind down operations in Iraq and Afghanistan and to dig our economy out of the trench created by Bush.

Since 1975, only two administrations have produced surpluses, and both of them were Democrats! Taking it a step further, in the past 100 years, there have been eight Democratic presidents and nine Republicans. Five of the eight Democrats oversaw deficits smaller than they inherited, while seven of the nine Republicans oversaw deficits larger than they inherited.

Given their history, do you really think Teapublicans are pushing a balanced budget amendment out of a sense of fiscal responsibility?

Moreover, balanced budget requirements are no guarantee of fiscal responsibility. In Arizona, for example, once the legislature passed a balanced budget requirement, Teapublicans set about starving the state with tax cuts. Of course, those tax cuts have not been shared equally. The state not only cut taxes for the wealthy. It has cut corporate taxes for 24 of the past 25 years. Meanwhile, it has raised sales taxes to push the costs of government onto those who can least afford it. The resulting lack of revenue has, in turn, led to catastrophic cuts to education and other services.

Since no Teapublican will ever again agree to raise taxes, the state is caught in a downward spiral fueled by ideologues, greedy corporations, self-serving politicians, dark money donations to lapdog candidates, and a series of “studies” and propaganda from conservative “think tanks.” It’s a death spiral from which the state may never recover.

What’s The Matter With Kansas Now?

In 2004, Thomas Frank wrote the book “What’s The Matter With Kansas?” which looked into the state’s religious and political extremism. It was a fascinating read. But it’s time for him to write a sequel because the answer to that question is now more clear. What’s wrong with Kansas is Governor Sam Brownback and his version of Horse and Sparrow economics (feed the horse enough oats and a few will pass through to fall on the road for the sparrows to eat), aka Trickle Down economics, aka Supply Side economics, aka Reaganomics, aka Voodoo economics.

Most economists have known for years that this economic policy doesn’t work. Even the architects of Reaganomics now repudiate the philosophy. But Brownback is certain that he knows better. So, since he was elected governor, he has implemented Reaganomics on steroids. He cut taxes for the wealthy and eliminated taxes for thousands of corporations, promising that businesses would flock to the state bringing thousands of new jobs with them.

It hasn’t quite worked that way.

There have been no businesses flocking to Kansas from neighboring states. And the resulting loss in tax revenue ($333 million in 2014 alone) has not only caused the state to burn through the $700 million reserve fund that existed before Brownback took office, it has led to cuts for public schools, community colleges and state universities. But Brownback steadfastly refuses to return taxes to their previous levels or to raise taxes even a little bit. So the governor and the state’s Republican legislature are hoping to meet this year’s $710 million deficit by cutting funding to pensions for public employees and by cutting the budget for roads and infrastructure.

And Kansas isn’t alone in this right wing-fueled misery. After more than 20 years of corporate tax cuts and, with almost nothing left to cut, the Arizona Republican-led government is facing a $1 billion annual deficit. After the failed policies of a Republican governor, Pennsylvania’s new Democratic governor is facing a $2.3 billion deficit. And, after Gov. Scott Walker’s $541 million tax cuts in 2014, Wisconsin is now facing a two-year deficit of $2.2 billion. In all, there are 16 states facing deficits…most of them controlled by tax-cutting Republicans. Meanwhile, Democratic-controlled states like California and Minnesota have some of the nation’s lowest unemployment figures, the nation’s best job creation and…wait for it…budget surpluses!

So tax cuts combined with budget cuts equals few new jobs, reduced revenue and even larger deficits, while reasonable taxes, reasonable spending on education and other services equals more jobs, more revenue and thriving economies.

It can’t be any more clear than that.