Story 1: Labor Participation Rate In November 2017 Remained At 62.7% with Over 95.4 Million Not in Labor Force With 160.5 Million In Labor Force –U-3 Unemployment Rate Hit Low 4.1% and U-6 Unemployment Rate Rose To 8.0% — Total Non-farm Payroll Jobs Added 228,000 — Videos —
US economy adds 228K jobs in November
Analyzing The November Jobs Report Compared To Previous Years | Velshi & Ruhle | MSNBC
U.S. economy continues its strong performance
National Economic Council Director Gary Cohn: Tax Reform Will Help Us Drive Real Wage Growth | CNBC
CNN’s Christine Romans Highlights November’s Really Good Jobs Numbers
Larry Kudlow: Jobs Report Shows We Are On Front End Of “Very, Very Strong Rebound In Manufacturing”
Panel on Strong November Jobs Report; 228K Jobs Added. #Economy #Jobs #Report #November
Stockman: Here’s Why Today’s Jobs Report Is Nothing to Celebrate
Alan Greenspan // We are about to go from stagnation to ‘stagflation’
Ep. 307: Trump Continues What He Once Called the Biggest Hoax in American Politics
The Reason Trump is President – Peter Schiff
Civilian Labor Force Level
160,529,000
Labor Force Statistics from the Current Population Survey
Series Id: LNS11000000
Seasonally Adjusted
Series title: (Seas) Civilian Labor Force Level
Labor force status: Civilian labor force
Type of data: Number in thousands
Age: 16 years and over
Download:
Year
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Annual
2000
142267(1)
142456
142434
142751
142388
142591
142278
142514
142518
142622
142962
143248
2001
143800
143701
143924
143569
143318
143357
143654
143284
143989
144086
144240
144305
2002
143883
144653
144481
144725
144938
144808
144803
145009
145552
145314
145041
145066
2003
145937(1)
146100
146022
146474
146500
147056
146485
146445
146530
146716
147000
146729
2004
146842(1)
146709
146944
146850
147065
147460
147692
147564
147415
147793
148162
148059
2005
148029(1)
148364
148391
148926
149261
149238
149432
149779
149954
150001
150065
150030
2006
150214(1)
150641
150813
150881
151069
151354
151377
151716
151662
152041
152406
152732
2007
153144(1)
152983
153051
152435
152670
153041
153054
152749
153414
153183
153835
153918
2008
154063(1)
153653
153908
153769
154303
154313
154469
154641
154570
154876
154639
154655
2009
154210(1)
154538
154133
154509
154747
154716
154502
154307
153827
153784
153878
153111
2010
153484(1)
153694
153954
154622
154091
153616
153691
154086
153975
153635
154125
153650
2011
153263(1)
153214
153376
153543
153479
153346
153288
153760
154131
153961
154128
153995
2012
154381(1)
154671
154749
154545
154866
155083
154948
154763
155160
155554
155338
155628
2013
155695(1)
155268
154990
155356
155514
155747
155669
155587
155731
154709
155328
155151
2014
155295(1)
155485
156115
155378
155559
155682
156098
156117
156100
156389
156421
156238
2015
157022(1)
156771
156781
157043
157447
156993
157125
157109
156809
157123
157358
157957
2016
158362(1)
158888
159278
158938
158510
158889
159295
159508
159830
159643
159456
159640
2017
159716(1)
160056
160201
160213
159784
160145
160494
160571
161146
160381
160529
1 : Data affected by changes in population controls.
Labor Force Participation Rate
62.7%
Series Id: LNS11300000
Seasonally Adjusted
Series title: (Seas) Labor Force Participation Rate
Labor force status: Civilian labor force participation rate
Type of data: Percent or rate
Age: 16 years and over
Download:
Year
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Annual
2000
67.3
67.3
67.3
67.3
67.1
67.1
66.9
66.9
66.9
66.8
66.9
67.0
2001
67.2
67.1
67.2
66.9
66.7
66.7
66.8
66.5
66.8
66.7
66.7
66.7
2002
66.5
66.8
66.6
66.7
66.7
66.6
66.5
66.6
66.7
66.6
66.4
66.3
2003
66.4
66.4
66.3
66.4
66.4
66.5
66.2
66.1
66.1
66.1
66.1
65.9
2004
66.1
66.0
66.0
65.9
66.0
66.1
66.1
66.0
65.8
65.9
66.0
65.9
2005
65.8
65.9
65.9
66.1
66.1
66.1
66.1
66.2
66.1
66.1
66.0
66.0
2006
66.0
66.1
66.2
66.1
66.1
66.2
66.1
66.2
66.1
66.2
66.3
66.4
2007
66.4
66.3
66.2
65.9
66.0
66.0
66.0
65.8
66.0
65.8
66.0
66.0
2008
66.2
66.0
66.1
65.9
66.1
66.1
66.1
66.1
66.0
66.0
65.9
65.8
2009
65.7
65.8
65.6
65.7
65.7
65.7
65.5
65.4
65.1
65.0
65.0
64.6
2010
64.8
64.9
64.9
65.2
64.9
64.6
64.6
64.7
64.6
64.4
64.6
64.3
2011
64.2
64.1
64.2
64.2
64.1
64.0
64.0
64.1
64.2
64.1
64.1
64.0
2012
63.7
63.8
63.8
63.7
63.7
63.8
63.7
63.5
63.6
63.8
63.6
63.7
2013
63.6
63.4
63.3
63.4
63.4
63.4
63.3
63.3
63.3
62.8
63.0
62.9
2014
62.9
62.9
63.1
62.8
62.8
62.8
62.9
62.9
62.8
62.9
62.9
62.7
2015
62.9
62.7
62.7
62.8
62.9
62.6
62.6
62.6
62.4
62.5
62.5
62.7
2016
62.7
62.9
63.0
62.8
62.6
62.7
62.8
62.8
62.9
62.8
62.6
62.7
2017
62.9
63.0
63.0
62.9
62.7
62.8
62.9
62.9
63.1
62.7
62.7
Unemployment Level
6.6 Million
Series Id: LNS13000000
Seasonally Adjusted
Series title: (Seas) Unemployment Level
Labor force status: Unemployed
Type of data: Number in thousands
Age: 16 years and over
Year
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Annual
2000
5708
5858
5733
5481
5758
5651
5747
5853
5625
5534
5639
5634
2001
6023
6089
6141
6271
6226
6484
6583
7042
7142
7694
8003
8258
2002
8182
8215
8304
8599
8399
8393
8390
8304
8251
8307
8520
8640
2003
8520
8618
8588
8842
8957
9266
9011
8896
8921
8732
8576
8317
2004
8370
8167
8491
8170
8212
8286
8136
7990
7927
8061
7932
7934
2005
7784
7980
7737
7672
7651
7524
7406
7345
7553
7453
7566
7279
2006
7064
7184
7072
7120
6980
7001
7175
7091
6847
6727
6872
6762
2007
7116
6927
6731
6850
6766
6979
7149
7067
7170
7237
7240
7645
2008
7685
7497
7822
7637
8395
8575
8937
9438
9494
10074
10538
11286
2009
12058
12898
13426
13853
14499
14707
14601
14814
15009
15352
15219
15098
2010
15046
15113
15202
15325
14849
14474
14512
14648
14579
14516
15081
14348
2011
14013
13820
13737
13957
13855
13962
13763
13818
13948
13594
13302
13093
2012
12797
12813
12713
12646
12660
12692
12656
12471
12115
12124
12005
12298
2013
12470
11954
11672
11752
11657
11741
11350
11284
11264
11133
10792
10410
2014
10240
10383
10400
9705
9740
9460
9637
9616
9255
8964
9060
8718
2015
8962
8663
8538
8521
8655
8251
8235
8017
7877
7869
7939
7927
2016
7829
7845
7977
7910
7451
7799
7749
7853
7904
7740
7409
7529
2017
7635
7528
7202
7056
6861
6977
6981
7132
6801
6520
6610
U-3 Unemployment Rate
4.1%
Series Id: LNS14000000
Seasonally Adjusted
Series title: (Seas) Unemployment Rate
Labor force status: Unemployment rate
Type of data: Percent or rate
Age: 16 years and over
Download:
Year
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Annual
2000
4.0
4.1
4.0
3.8
4.0
4.0
4.0
4.1
3.9
3.9
3.9
3.9
2001
4.2
4.2
4.3
4.4
4.3
4.5
4.6
4.9
5.0
5.3
5.5
5.7
2002
5.7
5.7
5.7
5.9
5.8
5.8
5.8
5.7
5.7
5.7
5.9
6.0
2003
5.8
5.9
5.9
6.0
6.1
6.3
6.2
6.1
6.1
6.0
5.8
5.7
2004
5.7
5.6
5.8
5.6
5.6
5.6
5.5
5.4
5.4
5.5
5.4
5.4
2005
5.3
5.4
5.2
5.2
5.1
5.0
5.0
4.9
5.0
5.0
5.0
4.9
2006
4.7
4.8
4.7
4.7
4.6
4.6
4.7
4.7
4.5
4.4
4.5
4.4
2007
4.6
4.5
4.4
4.5
4.4
4.6
4.7
4.6
4.7
4.7
4.7
5.0
2008
5.0
4.9
5.1
5.0
5.4
5.6
5.8
6.1
6.1
6.5
6.8
7.3
2009
7.8
8.3
8.7
9.0
9.4
9.5
9.5
9.6
9.8
10.0
9.9
9.9
2010
9.8
9.8
9.9
9.9
9.6
9.4
9.4
9.5
9.5
9.4
9.8
9.3
2011
9.1
9.0
9.0
9.1
9.0
9.1
9.0
9.0
9.0
8.8
8.6
8.5
2012
8.3
8.3
8.2
8.2
8.2
8.2
8.2
8.1
7.8
7.8
7.7
7.9
2013
8.0
7.7
7.5
7.6
7.5
7.5
7.3
7.3
7.2
7.2
6.9
6.7
2014
6.6
6.7
6.7
6.2
6.3
6.1
6.2
6.2
5.9
5.7
5.8
5.6
2015
5.7
5.5
5.4
5.4
5.5
5.3
5.2
5.1
5.0
5.0
5.0
5.0
2016
4.9
4.9
5.0
5.0
4.7
4.9
4.9
4.9
4.9
4.8
4.6
4.7
2017
4.8
4.7
4.5
4.4
4.3
4.4
4.3
4.4
4.2
4.1
4.1
U-3
U-6 Unemployment Rate
8.0%
Series Id: LNS13327709
Seasonally Adjusted
Series title: (seas) Total unemployed, plus all marginally attached workers plus total employed part time for economic reasons, as a percent of all civilian labor force plus all marginally attached workers
Labor force status: Aggregated totals unemployed
Type of data: Percent or rate
Age: 16 years and over
Percent/rates: Unemployed and mrg attached and pt for econ reas as percent of labor force plus marg attached
Download:
Year
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Annual
2000
7.1
7.2
7.1
6.9
7.1
7.0
7.0
7.1
7.0
6.8
7.1
6.9
2001
7.3
7.4
7.3
7.4
7.5
7.9
7.8
8.1
8.7
9.3
9.4
9.6
2002
9.5
9.5
9.4
9.7
9.5
9.5
9.6
9.6
9.6
9.6
9.7
9.8
2003
10.0
10.2
10.0
10.2
10.1
10.3
10.3
10.1
10.4
10.2
10.0
9.8
2004
9.9
9.7
10.0
9.6
9.6
9.5
9.5
9.4
9.4
9.7
9.4
9.2
2005
9.3
9.3
9.1
8.9
8.9
9.0
8.8
8.9
9.0
8.7
8.7
8.6
2006
8.4
8.4
8.2
8.1
8.2
8.4
8.5
8.4
8.0
8.2
8.1
7.9
2007
8.4
8.2
8.0
8.2
8.2
8.3
8.4
8.4
8.4
8.4
8.4
8.8
2008
9.2
9.0
9.1
9.2
9.7
10.1
10.5
10.8
11.0
11.8
12.6
13.6
2009
14.2
15.2
15.8
15.9
16.5
16.5
16.4
16.7
16.7
17.1
17.1
17.1
2010
16.7
17.0
17.1
17.1
16.6
16.4
16.4
16.5
16.8
16.6
16.9
16.6
2011
16.2
16.0
15.9
16.1
15.8
16.1
15.9
16.1
16.4
15.8
15.5
15.2
2012
15.2
15.0
14.5
14.6
14.7
14.8
14.8
14.6
14.8
14.4
14.4
14.4
2013
14.5
14.4
13.8
14.0
13.8
14.2
13.8
13.6
13.7
13.6
13.1
13.1
2014
12.7
12.6
12.6
12.3
12.1
12.0
12.2
12.0
11.8
11.5
11.4
11.2
2015
11.3
11.0
10.9
10.8
10.7
10.5
10.3
10.2
10.0
9.8
9.9
9.9
2016
9.9
9.8
9.8
9.7
9.7
9.6
9.7
9.7
9.7
9.5
9.3
9.2
2017
9.4
9.2
8.9
8.6
8.4
8.6
8.6
8.6
8.3
7.9
8.0
Employment Situation Summary
Transmission of material in this release is embargoed until USDL-17-1616
8:30 a.m. (EST) Friday, December 8, 2017
Technical information:
Household data: (202) 691-6378 * cpsinfo@bls.gov * www.bls.gov/cps
Establishment data: (202) 691-6555 * cesinfo@bls.gov * www.bls.gov/ces
Media contact: (202) 691-5902 * PressOffice@bls.gov
THE EMPLOYMENT SITUATION -- NOVEMBER 2017
Total nonfarm payroll employment increased by 228,000 in November, and the unemployment
rate was unchanged at 4.1 percent, the U.S. Bureau of Labor Statistics reported today.
Employment continued to trend up in professional and business services, manufacturing,
and health care.
Household Survey Data
The unemployment rate held at 4.1 percent in November, and the number of unemployed
persons was essentially unchanged at 6.6 million. Over the year, the unemployment rate
and the number of unemployed persons were down by 0.5 percentage point and 799,000,
respectively. (See table A-1.)
Among the major worker groups, the unemployment rate for teenagers increased to 15.9
percent in November. The jobless rates for adult men (3.7 percent), adult women (3.7
percent), Whites (3.6 percent), Blacks (7.3 percent), Asians (3.0 percent), and Hispanics
(4.7 percent) showed little change. (See tables A-1, A-2, and A-3.)
The number of long-term unemployed (those jobless for 27 weeks or more) was essentially
unchanged at 1.6 million in November and accounted for 23.8 percent of the unemployed.
Over the year, the number of long-term unemployed was down by 275,000. (See table A-12.)
The labor force participation rate remained at 62.7 percent in November and has shown no
clear trend over the past 12 months. The employment-population ratio, at 60.1 percent,
changed little in November and has shown little movement, on net, since early this year.
(See table A-1.)
The number of persons employed part time for economic reasons (sometimes referred to as
involuntary part-time workers), at 4.8 million, was essentially unchanged in November but
was down by 858,000 over the year. These individuals, who would have preferred full-time
employment, were working part time because their hours had been cut back or because they
were unable to find full-time jobs. (See table A-8.)
In November, 1.5 million persons were marginally attached to the labor force, down by
451,000 from a year earlier. (The data are not seasonally adjusted.) These individuals
were not in the labor force, wanted and were available for work, and had looked for a job
sometime in the prior 12 months. They were not counted as unemployed because they had not
searched for work in the 4 weeks preceding the survey. (See table A-16.)
Among the marginally attached, there were 469,000 discouraged workers in November, down by
122,000 from a year earlier. (The data are not seasonally adjusted.) Discouraged workers
are persons not currently looking for work because they believe no jobs are available for
them. The remaining 1.0 million persons marginally attached to the labor force in November
had not searched for work for reasons such as school attendance or family responsibilities.
(See table A-16.)
Establishment Survey Data
Total nonfarm payroll employment increased by 228,000 in November. Employment continued to
trend up in professional and business services, manufacturing, and health care. Employment
growth has averaged 174,000 per month thus far this year, compared with an average monthly
gain of 187,000 in 2016. (See table B-1.)
Employment in professional and business services continued on an upward trend in November
(+46,000). Over the past 12 months, the industry has added 548,000 jobs.
In November, manufacturing added 31,000 jobs. Within the industry, employment rose in
machinery (+8,000), fabricated metal products (+7,000), computer and electronic products
(+4,000), and plastics and rubber products (+4,000). Since a recent low in November 2016,
manufacturing employment has increased by 189,000.
Health care added 30,000 jobs in November. Most of the gain occurred in ambulatory health
care services (+25,000), which includes offices of physicians and outpatient care centers.
Monthly employment growth in health care has averaged 24,000 thus far in 2017, compared
with an average increase of 32,000 per month in 2016.
Within construction, employment among specialty trade contractors increased by 23,000 in
November and by 132,000 over the year.
Employment in other major industries, including mining, wholesale trade, retail trade,
transportation and warehousing, information, financial activities, leisure and hospitality,
and government, changed little over the month.
The average workweek for all employees on private nonfarm payrolls increased by 0.1 hour
to 34.5 hours in November. In manufacturing, the workweek was unchanged at 40.9 hours, and
overtime remained at 3.5 hours. The average workweek for production and nonsupervisory
employees on private nonfarm payrolls was unchanged at 33.7 hours. (See tables B-2 and
B-7.)
In November, average hourly earnings for all employees on private nonfarm payrolls rose
by 5 cents to $26.55. Over the year, average hourly earnings have risen by 64 cents, or
2.5 percent. Average hourly earnings of private-sector production and nonsupervisory
employees rose by 5 cents to $22.24 in November. (See tables B-3 and B-8.)
The change in total nonfarm payroll employment for September was revised up from +18,000
to +38,000, and the change for October was revised down from +261,000 to +244,000. With
these revisions, employment gains in September and October combined were 3,000 more than
previously reported. (Monthly revisions result from additional reports received from
businesses and government agencies since the last published estimates and from the
recalculation of seasonal factors.) After revisions, job gains have averaged 170,000 over
the last 3 months.
_____________
The Employment Situation for December is scheduled to be released on Friday, January 5,
2018, at 8:30 a.m. (EST).
______________________________________________________________________________________
| |
| Revision of Seasonally Adjusted Household Survey Data |
| |
| In accordance with usual practice, The Employment Situation news release for December|
| 2017, scheduled for January 5, 2018, will incorporate annual revisions in seasonally |
| adjusted household survey data. Seasonally adjusted data for the most recent 5 |
| years are subject to revision. |
|______________________________________________________________________________________|
______________________________________________________________________________________
| |
| Conversion to the 2017 North American Industry Classification System |
| |
| With the release of January 2018 data on February 2, 2018, the establishment survey |
| will revise the basis for industry classification from the 2012 North American |
| Industry Classification System (NAICS) to 2017 NAICS. The conversion to 2017 NAICS |
| will result in minor revisions reflecting content changes within the mining and |
| logging, retail trade, information, financial activities, and professional and |
| business services sectors. Additionally, some smaller industries will be combined |
| within the mining and logging, durable goods manufacturing, retail trade, and |
| information sectors. Several industry titles and descriptions also will be updated. |
| |
| Approximately 4 percent of employment will be reclassified into different industries |
| as a result of the revision. Details of new, discontinued, and combined industries |
| due to the 2017 NAICS update, as well as changes due to the annual benchmarking |
| process, will be available on January 5, 2018. |
| |
| For more information on the 2017 NAICS update, visit www.census.gov/eos/www/naics/. |
|______________________________________________________________________________________|
Employment Situation Summary Table A. Household data, seasonally adjusted
HOUSEHOLD DATA
Summary table A. Household data, seasonally adjusted[Numbers in thousands]
Category
Nov.
2016
Sept.
2017
Oct.
2017
Nov.
2017
Change from:
Oct.
2017-
Nov.
2017
Employment status
Civilian noninstitutional population
254,540
255,562
255,766
255,949
183
Civilian labor force
159,456
161,146
160,381
160,529
148
Participation rate
62.6
63.1
62.7
62.7
0.0
Employed
152,048
154,345
153,861
153,918
57
Employment-population ratio
59.7
60.4
60.2
60.1
-0.1
Unemployed
7,409
6,801
6,520
6,610
90
Unemployment rate
4.6
4.2
4.1
4.1
0.0
Not in labor force
95,084
94,417
95,385
95,420
35
Unemployment rates
Total, 16 years and over
4.6
4.2
4.1
4.1
0.0
Adult men (20 years and over)
4.3
3.9
3.8
3.7
-0.1
Adult women (20 years and over)
4.2
3.9
3.6
3.7
0.1
Teenagers (16 to 19 years)
15.2
12.9
13.7
15.9
2.2
White
4.2
3.7
3.5
3.6
0.1
Black or African American
8.0
7.0
7.5
7.3
-0.2
Asian
3.0
3.7
3.1
3.0
-0.1
Hispanic or Latino ethnicity
5.7
5.1
4.8
4.7
-0.1
Total, 25 years and over
3.9
3.5
3.3
3.3
0.0
Less than a high school diploma
7.9
6.5
5.7
5.2
-0.5
High school graduates, no college
4.9
4.3
4.3
4.3
0.0
Some college or associate degree
3.9
3.6
3.7
3.6
-0.1
Bachelor’s degree and higher
2.3
2.3
2.0
2.1
0.1
Reason for unemployment
Job losers and persons who completed temporary jobs
3,542
3,359
3,227
3,159
-68
Job leavers
934
738
742
751
9
Reentrants
2,266
2,079
2,006
2,029
23
New entrants
728
669
629
691
62
Duration of unemployment
Less than 5 weeks
2,415
2,226
2,129
2,250
121
5 to 14 weeks
2,133
1,874
1,942
1,878
-64
15 to 26 weeks
1,073
963
853
927
74
27 weeks and over
1,856
1,733
1,621
1,581
-40
Employed persons at work part time
Part time for economic reasons
5,659
5,122
4,753
4,801
48
Slack work or business conditions
3,485
3,121
2,952
2,983
31
Could only find part-time work
1,902
1,733
1,629
1,559
-70
Part time for noneconomic reasons
21,059
21,011
20,923
21,018
95
Persons not in the labor force (not seasonally adjusted)
Marginally attached to the labor force
1,932
1,569
1,535
1,481
–
Discouraged workers
591
421
524
469
–
– Over-the-month changes are not displayed for not seasonally adjusted data.
NOTE: Persons whose ethnicity is identified as Hispanic or Latino may be of any race. Detail for the seasonally adjusted data shown in this table will not necessarily add to totals because of the independent seasonal adjustment of the various series. Updated population controls are introduced annually with the release of January data.
Employment Situation Summary Table B. Establishment data, seasonally adjusted
ESTABLISHMENT DATA
Summary table B. Establishment data, seasonally adjusted
Footnotes (1) Includes other industries, not shown separately. (2) Data relate to production employees in mining and logging and manufacturing, construction employees in construction, and nonsupervisory employees in the service-providing industries. (3) The indexes of aggregate weekly hours are calculated by dividing the current month’s estimates of aggregate hours by the corresponding annual average aggregate hours. (4) The indexes of aggregate weekly payrolls are calculated by dividing the current month’s estimates of aggregate weekly payrolls by the corresponding annual average aggregate weekly payrolls. (5) Figures are the percent of industries with employment increasing plus one-half of the industries with unchanged employment, where 50 percent indicates an equal balance between industries with increasing and decreasing employment. (P) Preliminary
NOTE: Data have been revised to reflect March 2016 benchmark levels and updated seasonal adjustment factors.
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Republicans are moving their tax plan toward final passage at stunning speed, blowing past Democrats before they’ve had time to fully mobilize against it but leaving the measure vulnerable to the types of expensive problems popping up in their massive and complex plan.Questionable special-interest provisions have been stuffed in along the way, out of public view and in some cases literally in the dead of night. Drafting errors by exhausted staff are cropping up and need fixes, which must be tackled by congressional negotiators working to reconcile competing versions of the legislation passed separately by the House and the Senate.And the melding process underway has opened the door to another frenzy of 11th-hour lobbying as special interests, including President Trump’s rich friends, make one last dash for cash before the final bill speeds through both chambers of Congress and onto Trump’s desk. Passage is expected the week before Christmas.
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Veterans of congressional tax overhauls, particularly the seminal revamp under President Ronald Reagan in 1986, have been stunned and in some cases outraged at how swiftly Republicans are moving on legislation that touches every corner of the economy and all Americans. And although GOP leaders make no apologies, some in their rank and file say that the process would have benefited from a more deliberate and open approach.
“I think it would have looked better if we had taken more time and had more transparency, had more open committee hearings,” said freshman Rep. James Comer (R-Ky.).
“Having said that, the goal that everybody had was to reduce the tax rates. . . . So at the end of the day the goal is going to be achieved, but we could have done it in a more transparent manner that probably would have given the voters that are being polled a little more confidence,” Comer said, referring to the effort’s poor showing in opinion surveys.
It has been a little more than a month since the $1.5 trillion legislation was introduced in the House, and in that short time it has cleared the two key committees in the House and Senate and won approval on the floors of both chambers, all without a single Democratic vote. If Trump signs the bill as planned before Christmas, that would mean a journey of less than two months between introduction and final passage.
The specific legislation that probably will become law, sold as a middle-class tax cut but featuring a massive corporate rate reduction at its center, is moving from release toward passage without any hearings, unusual for a bill of such magnitude. And as it tumbled along it picked up some startling new features, to the surprise of affected industries, Democrats and in some cases Republicans themselves.
Some of the most notable changes came in the hours before the Senate’s passage of its version of the plan, which happened about 1:50 a.m. Dec. 2.
The final vote was preceded by hours of inaction as Republicans fine-tuned their legislation behind closed doors, while fuming Democratic staffers ate Chinese food and pored over versions of the bill and lists of amendments that had been leaked by lobbyists on K Street before Republicans had made anything public.
As they got additional drafts of the bill, Democrats were incensed at some of what they found, including new breaks for the oil and gas industry, and a provision that appeared aimed specifically at helping Hillsdale College, a small liberal arts college in Michigan that doesn’t accept federal funding and has a large endowment funded by wealthy conservatives — including the family of Education Secretary Betsy DeVos.
An angry Sen. Bernie Sanders (I-Vt.) stood on his chamber’s floor to declare that “the federal treasury is being looted.” In their one victory of the debate, Democrats offered an amendment to strike the Hillsdale provision, and with the help of four Republicans it passed.
Democrats weren’t the only ones surprised by what was in the bill. Republicans and the business community were stunned when the final Senate version restored the alternative minimum tax for corporations. The tax, aimed at keeping companies from shirking their tax duties entirely, had been repealed in the House bill and earlier versions of the Senate measure.
Restoring the corporate alternative minimum tax created $40 billion in revenue for the bill, which helped Republicans come in under complex budgetary guidelines saying the legislation can’t go over the $1.5 trillion the GOP has agreed to add to the deficit over the next decade. Still, some Republicans professed not to know how the change had come about.
And under the new tax code the GOP bill would create, including the alternative minimum tax could have the unintended consequence of preventing companies from using other deductions, including the popular research and development tax credit.
“I’m guessing they just needed something quick to make the bill work,” said Rep. Devin Nunes (R-Calif.), who is one of the conferees charged with blending the two bills together.
Now, as quickly as it reappeared, the corporate alternative minimum tax probably will disappear again. Republican lawmakers widely agree that it doesn’t work and can’t be included, but it remains a mystery where they’ll find revenue to offset that change and pay for others they’re looking to include in the final package.
There has been discussion of moving the corporate rate — slashed from 35 percent to 20 percent by the House and Senate — back up to 22 percent, but the backlash against that proposal has been intense and it probably will be dropped. But revenue must be found somewhere because there are some changes that look nearly certain, including adjusting the new limit on deducting state and local taxes. Both the House and Senate legislation would allow taxpayers to deduct only up to $10,000 in property taxes. Some of Trump’s New York friends have taken exception to that provision and have lobbied the president personally against it.
It’s all part of a breakneck pace of the tax plan that contrasts with the nearly a year-and-a-half that passed between when Reagan unveiled his initial version of the 1986 tax plan and its ultimate passage into law. The less far-ranging tax cuts that President George W. Bush signed in 2001 took four months to become law after the release of Bush’s initial blueprint. And the Affordable Care Act took nearly a year to complete, including a congressional summer recess featuring angry town hall meetings that turned public sentiment sharply against the bill.
Democrats accuse Republicans of whisking the legislation along to avoid extended public scrutiny and prevent them from mounting an offensive at public hearings or over lengthy congressional breaks. The GOP bills have endured neither.
“It’s clear that we could have defeated this bill had we gone through regular order and had any expert witness from any blue state or high-tax state come in,” said Rep. John B. Larson (Conn.), who was a member of Democratic leadership during the much lengthier and more open process of passing the ACA. The provision limiting taxpayers’ ability to deduct state and local taxes hits high-tax areas such as California, New York, New Jersey and Connecticut particularly hard.
“People would have said, ‘Well, wait a minute,’ ” Larson said.
Republican congressional leaders dispute such comparisons, saying that the process on taxes has been going on for years, given that the party has long been debating the idea and an early foundational bill was released by then-Rep. Dave Camp (R-Mich.), former chairman of the tax-writing Ways and Means Committee, nearly four years ago. House Republicans, led by Speaker Paul D. Ryan (Wis.), also campaigned last year on an agenda called “A Better Way,” which featured a tax plank similar in many respects to the bill the House ultimately passed, although it drew scant attention at the time.
“These are relatively small bills, 400 pages or so; they’re not hard to digest. The policy decisions, the thoughtfulness, a lot of these issues we’ve been debating together and apart for years,” said House Ways and Means Chairman Kevin Brady (R-Tex.). “Bottom line is the American people have been waiting 30 years. So to paraphrase a hardware store: less talking, more doing.”
Even before the late-night Senate dramatics, the process offered surprises and sudden twists.
A provision repealing an Affordable Care Act requirement for most Americans to carry insurance or pay fines was added to the Senate bill with little warning over the course of an afternoon, a major health policy decision that is projected to leave 13 million more Americans uninsured in a decade but that would give Republicans $330 billion to pay for other things they want to do.
And the release of the House bill stunned manufacturers when they discovered it contained an “excise tax” on purchases from American companies’ foreign subsidiaries that some said could drive them out of business. The provision was watered down before passage by the Ways and Means Committee, but companies are still fighting to keep it out of the final bill, said Nancy McLernon, president of the Organization for International Investment, which represents global companies with U.S. operations. Despite the years-long focus on tax overhaul, such a provision had not been debated — even after companies beat back a different import tax, she said.
The Senate has a different provision that companies like better, but as far as the cost of going from one to the other or how it will all shake out, “It’s all a Rubik’s cube,” McLernon said.
Many lobbyists, Democrats and other observers expect to find the final version of the plan, which could be filed late this week, just as full of surprises as the various iterations that have appeared. But as they gun for a legislative win that has eluded them this year, Republicans show little interest in slowing down to take a closer look.
“The frenzy, and I would call it a frenzy, to get it done and have a Christmas present for America — number one, I think it’s unnecessary; it’s a self-imposed deadline, and number two, it makes the possibility for error much greater,” said Steve Bell, a senior adviser at the Bipartisan Policy Center who was staff director of the Senate Budget Committee during the 1986 tax effort. “This is a rush without a reason other than the political desire for a Rose Garden signing ceremony.”
The Taxman Cometh: Senate Bill’s Marginal Rates Could Top 100% for Some
Certain high-income business owners would face backwards incentives; lawmakers work to bridge gap
House and Senate Republicans are trying to reconcile their tax bills to get rid of the most contentious proposals.PHOTO: DANIEL ACKER/BLOOMBERG NEWS
By Richard Rubin
WASHINGTON—Some high-income business owners could face marginal tax rates exceeding 100% under the Senate’s tax bill, far beyond the listed rates in the Republican plan.
That means a business owner’s next $100 in earnings, under certain circumstances, would require paying more than $100 in additional federal and state taxes.
As lawmakers rush to write the final tax bill over the next week, they already are looking at changes to prevent this from happening. Broadly, House and Senate Republicans are trying to reconcile their bills, looking for ways to pay for eliminating the most contentious proposals. The formal House-Senate conference committee will meet on Wednesday, and GOP lawmakers may unveil an agreement by week’s end.
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The possible marginal tax rate of more than 100% results from the combination of tax policies designed to provide benefits to businesses and families but then deny them to the richest people. As income climbs and those breaks phase out, each dollar of income faces regular tax rates and a hidden marginal rate on top of that, in the form of vanishing tax breaks. That structure, if maintained in a final law, would create some of the disincentives to working and to earning business profit that Republicans have long complained about, while opening lucrative avenues for tax avoidance.
As a taxpayer’s income gets much higher and moves out of those phaseout ranges, the marginal tax rates would go down.
Consider, for example, a married, self-employed New Jersey lawyer with three children and earnings of about $615,000. Getting $100 more in business income would force the lawyer to pay $105.45 in federal and state taxes, according to calculations by the conservative-leaning Tax Foundation. That is more than double the marginal tax rate that household faces today.
If the New Jersey lawyer’s stay-at-home spouse wanted a job, the first $100 of the spouse’s wages would require $107.79 in taxes. And the tax rates for similarly situated residents of California and New York City would be even higher, the Tax Foundation found. Analyses by the Tax Policy Center, which is run by a former Obama administration official, find similar results, with federal marginal rates as high as 85%, and those don’t include items such as state taxes, self-employment taxes or the phase-out of child tax credits.
The bill as written would provide incentives for business owners to shift profit across calendar years, move personal expenses inside the business and engage in other economically unproductive maneuvers, said David Gamage, a tax-law professor at Indiana University.
“I would expect a huge tax-gaming response once people fully understand how it works,” said Mr. Gamage, a former Treasury Department official, who said business owners have an easier time engaging in such tax avoidance than salaried employees do. “The payoff for gaming is huge, within the set of people who both face these rates and have flexible enough business structures.”
The analyses “raise a valid concern” that lawmakers are examining, said Julia Lawless, a spokeswoman for the Senate Finance Committee.
“With any major reform, there will always be unusual hypotheticals delivering anomalous results,” she said. “The goal of Congress’s tax overhaul has been to lower taxes on the American people and by and large, according to a variety of analyses, we’re achieving that.”
Marginal tax rates are different from average tax rates. A marginal rate is the tax on the edge, or margin, of one’s earnings, and so it reflects what would be the next dollar of income. The average rate is a way of measuring a taxpayer’s total burden.
The Republican bills are trying to reduce both marginal and average tax rates, and for many taxpayers, they do. The marginal tax rates above 100% affect a small slice of households with very particular circumstances. Similar, though smaller, effects occur throughout the tax system.
“This is a big concern,” said Scott Greenberg, a Tax Foundation analyst. “It would be unfortunate if Congress passed a tax bill that had the effect of making additional work and additional income not worthwhile for any subgroup of households.”
Here’s how that New Jersey lawyer’s marginal rate adds up to more than 100%:
The household is paying the 35% marginal tax rate on their income range. Or, they are paying the alternative minimum tax, which operates at the same marginal rate in that income range.
The household is paying New Jersey’s highest income-tax rate, which is 8.97%, and now has to pay all of that because the Republican tax plan wouldn’t let such state or local taxes be deducted from federal income.
The household is also losing a deduction the Senate created for so-called pass-through businesses such as partnerships and S corporations. That 23% deduction is fully available to owners of service businesses like law firms, but only if income is below $500,000 for a married couple.
The deduction then phases out over $100,000 in income, according to a complex formula, disappearing entirely once income reaches $624,000. Up to that point, each additional dollar of business income faces progressively steeper tax rates because the deduction and its benefit are shrinking rapidly as income goes up.
The provisions also interact with each other in ways that drive up marginal rates. “The central problem here is that there is a large benefit phasing out over a short range,” Mr. Greenberg said.
The Republican bill doubles the child tax credit to $2,000 but phases it out beginning at $500,000 income for joint filers. The credit shrinks by $50 for every $1,000 in income above that, so a married couple with three children faces a higher marginal tax rate when they’re in that phase-out range.
The analysis assumes that the New Jersey lawyer is paying a 3.8% tax on self-employment income.
Pushing marginal rates lower on these households wouldn’t be easy and would require tradeoffs. Republicans could make the phaseout of the business deduction more gentle, spreading it over, say, $200,000, as opposed to $100,000, of income above $500,000. But that would make the tax cuts bigger, and Republicans are already looking for money to offset other changes they are planning.
They could lower the threshold for the child tax credit, but that would reduce tax cuts for households below $500,000.
Under current law, there are some high marginal tax rates for some lower-income households. Some families just above the poverty line can see their earned income tax credits and food stamps going down as their federal and state taxes go up. That combination can create marginal tax rates of around 75%, according to the Congressional Budget Office.
Appeared in the December 11, 2017, print edition as ‘Taxman Cometh: Marginal Rates Could Top 100% for Some.’
[This is part of an ongoing series entitled “The Case for Tax Reform,” which examines the importance of reforming the outdated tax code, and how achieving that goal will advance economic growth, jobs, and prosperity.]
Tax reform’s chances are better in this Congress than at any time in the past 30 years. Thus, comparisons come naturally to the events leading up to the 1986 Tax Reform Act (TRA86). These comparisons are useful for the similarities and the differences, both of which provide insights as to how to assure success today.
One important similarity is TRA86 brought to conclusion a long and detailed debate about tax policy. Our current efforts also rest on a lengthy debate recently brought to the fore. An important difference, however, is TRA86 was enacted as a widely accepted “should do,” whereas tax reform in 2017 is much more of a “must do.”
Two years later, in response to a poorly performing economy, Congress adopted the Steiger Amendment, significantly cutting the capital gains tax rate as part of the 1978 Revenue Act. While often ignored, the Steiger Amendment marked the bi-partisan recognition of tax policy’s importance for economic growth. Pro-growth tax reform was not just for tax geeks anymore.
Federal tax policy debate took on new energy in 1981 with the passage of the landmark Reagan tax cuts, dominated by substantial rate reduction. Following legislation in 1982 and 1984 to readjust tax levels, the stage was set for fundamental tax reform.
A bipartisan consensus regarding sound tax policy evolved through the years leading up to TRA86. This consensus distilled down to the simple mantra of “lower the rates, broaden the base.” Like the 1981 legislation, TRA86 would reduce tax rates substantially and install a less punitive system of capital consumption allowances. Unlike the 1981 legislation, however, the focus would also be on simplification, on the wide range of areas of the tax code reformed, and especially on revenue neutrality.
This consensus first took concrete form in two highly-detailed proposals out the Reagan Treasury Department, commonly dubbed Treasury I and its improved version, Treasury II, and released in 1984 and 1985 respectively. With these reports laying the groundwork, Congress then took over a year to legislate, finally producing TRA86.
The years between
TRA86 was the product of an extended period of consensus building and analysis. For those new to the debate, today’s strong momentum for comprehensive, pro-growth tax reform may seem to have arisen out of thin air, but, in fact, this debate has ebbed and flowed almost without pause since 1986.
The appetite for tax reform did not die following TRA86, and so consideration naturally moved on to the “next big thing.” For a period, the big thing seemed to be some kind of European-style Value Added Tax (VAT). The VAT momentum quickly petered out, however, and soon revenue pressures shifted the focus of tax policy once again to raising income tax rates, often with distinct “soak-the-rich” overtones. The VAT episode set tax reform’s pattern of ebb and flow for the following years.
Even as the debate toward TRA86 was underway, a very different approach to tax policy appeared in the Hall-Rabushka Flat Tax. Though the Flat Tax is best known for having a single rate of tax, hence the name, what really distinguishes the Flat Tax is its simplification, the elimination of all taxes on capital income and capital gains, and the adoption of a cash-flow tax on businesses centered on allowing capital purchases to be “expensed,” or deducted immediately.
In the 1990s, as the Flat Tax gained greater acceptance, tax reform topped the national agenda with Steve Forbes leading the charge. But this effort soon deflated along with Forbes’ 1996 presidential campaign.
Tax reform again gained traction briefly after the 2004 election with the release of the superb report of the presidential commission led by former Democratic Senator John Breaux and former Republican Senator Connie Mack. However, this effort, too, led to naught, a victim of competing priorities and a lack of consensus.
Income tax reform was pushed far onto the back burners during President Barack Obama’s tenure. Despite a historically weak economic recovery, the Obama administration expressed little interest in proposals to reduce the tax code’s drag on growth. The Obama administration contented itself with modest tweaks at the edges and otherwise dedicated its efforts to defending the status quo, especially in the area of international tax where global pressures were felt most profoundly.
Tax reform today
Even as years of inaction passed, pressure to reform the federal income tax code rose steadily from all sides. In part, this pressure arose because the U.S. economy was changing rapidly, and the tax code became an ever-worse fit for a modern economy.
In part, the pressure arose because even as America stood pat, America’s major trading partners did not. They were cutting business tax rates steadily and almost all were moving toward a territorial tax system to allow their businesses to compete more effectively in a global business climate of increasing intensity.
Though on the back burner, tax reform continued to simmer in backchannels. Then-House Budget Committee Chairman Paul Ryan (R-WI) advanced a series of thoughtful tax reform proposals as part of his broader efforts to reform Federal tax policy. Rep. Devin Nunes (R-CA) offered his variation on tax reform, differing from but along the same broad lines as the Ryan proposal. Sen. Marco Rubio (R-FL) also introduced a major, comprehensive tax reform proposal with his own interpretations, and then released subsequent iterations as comments and critiques soon followed. In these years, though President Obama continued to block tax reform’s path, the debate remained alive and well.
In 2014, former Ways and Means Committee Chairman David Camp (R-MI) introduced a detailed tax reform proposal. As tax reform would originate in this committee, Camp’s proposal took on greater significance than most. The Camp proposal was intended to serve as a prototype for tax legislation and so offered much more detail and, in some cases, specific options for resolving some of the nagging technical issues in adopting a territorial tax system, for example. However, in the face of President Obama’s determined disinterest, few were willing to contemplate seriously the hard choices the Camp plan laid out and so, again, tax reform was left to simmer on the back burner.
Tax reform played a limited role in the 2016 presidential campaign, with the Democratic nominee, Hillary Clinton, largely continuing the defense of the status quo established by President Obama. Meanwhile, the Republican nominee, Donald Trump, suggested a bold change of direction; though, he accompanied it by very few details. Trump’s election, combined with the strong Republican interest in tax reform, quickly moved the issue to the front burner.
The focus on growth
Tax reform today, like its 1986 predecessor, has a long history of debate, evolution, and refinement. TRA86 and the current effort also share an intense focus on improving economic growth, but with one important difference: TRA86 largely responded to a sense borne of the previous, deep recession that the economy needed to be both stronger and more resilient, and that sound tax policy could help. Tax reform was seen as something Congress and the president could and should accomplish.
Tax reform today shares a similar motivation, but with far greater urgency. Just as no business can compete for long if its cost structure substantially exceeds those of its competitors, American businesses cannot continue to compete effectively at home or abroad facing high tax rates, an inadequate capital cost recovery system, and an international tax system long abandoned by competing companies.
American companies are managing to compete successfully today but with ever greater difficulty under the federal tax system. Failure to reform the tax system would not result overnight in significant decline in Americans’ long-run economic prospects. But it would most assuredly do so over the next few years as both financial and human capital is driven overseas.
Tax reform is one task Congress and the president simply have to get right if America is to prosper.
[This is part of an ongoing series entitled “The Case for Tax Reform,” which examines the importance of reforming the outdated tax code, and how achieving that goal will advance economic growth, jobs, and prosperity.]
An underperforming economy and mounting international competition have propelled tax reform from topic of discussion to front-burner issue. There is no change in federal policy that offers greater potential to strengthen employment and increase wages for American workers than sound, comprehensive tax reform.
Reviewing and respecting the lessons from the last major tax reform over thirty years ago illuminates the road ahead, and provides lessons for how to raise our odds of success. Time provides a dimension worth exploring for similarities and contrasts between 1986 and today. Specifically, the time leading up to the effort, and the time needed for Congress to act.
The Historical On Ramp to Tax Reform
President John F. Kennedy understood the dampening economic effects of high tax rates. Though he died before seeing his program enacted, his successor, President Lyndon B. Johnson pushed the program through Congress and thus the 1964 tax bill is commonly referred to as the “Kennedy tax cuts.” The 1964 bill centered on significant tax rate reductions to achieve a substantially stronger economy.
Thereafter, budget pressures from the Vietnam War and Great Society programs reoriented tax policy once again toward ever-higher tax rates accompanied by a steady accretion of deductions and credits to blunt the effects of higher rates on politically favored constituencies. This process continued unabated into President Jimmy Carter’s administration and not surprisingly coinciding with a languishing economy.
Even as tax rates climbed and new distortions filled the tax code, a countermovement arose. In the final moments of the Ford Administration, Secretary William E. Simon released a landmark Treasury report directed by one of the era’s great economists, David Bradford, called “Blueprints for Basic Tax Reform,” guiding concepts of sound tax policy for years to come.
As the economy struggled and President Carter stood by, Congress took the initiative. With strong, bipartisan support over Carter’s objections, Congress substantially cut the capital gains tax rate as part of the 1978 Revenue Act, marking the first step in a change in tax philosophy culminating in the 1986 Tax Reform Act (TRA86).
Senator Bill Roth (R-DE) and Congressman Jack Kemp (R-NY) then picked up tax reform’s guidon, leading the charge for lower tax rates. At the same time, a second dimension in tax policy gained steam – the need for a less punitive capital cost recovery system. This debate was led largely outside Congress by the likes of Charls Walker and Ernie Christian, former Ford Administration Treasury hands, and Norman B. Ture, later Treasury undersecretary under Ronald Reagan.
Spurred by a recession wrought by a disinflationary monetary policy, the tax debate quickly came to a head in the 1981 “Reagan tax cuts.” The 1981 bill cut tax rates and instituted a vastly superior capital cost recovery system among other reforms. In the process, the bill cut revenues far more than Reagan proposed.
Though the 1981 bill was championed by a Republican president, it enjoyed widespread Democratic support. Rep. Dan Rostenkowski (D-IL), Chairman of the House Committee on Ways and Means introduced and pushed the legislation to passage, joined by almost half the House Democrats and almost a third of Senate Democrats.
The magnitude of the 1981 tax cuts proved politically unsustainable and were quickly followed by a series of tax hikes reversing some of the 1981 revenue reductions. Having settled the issue of how much to tax, the stage was now set for the 1986 reform and deciding who and how to tax.
Building Toward the 1986 Tax Reform Act
At about this time a fundamentally different approach to tax policy appeared: the Hall-Rabushka Flat Tax. The Flat Tax’s popularity often associates with the simplicity of imposing a single tax rate. However, the real revolution it offered was not the single tax rate,but what is subject to tax. Despite appearing as a traditional income tax, the Flat Tax was something quite new as it explicitly eliminated tax on investment income and imposed a simple cash flow tax on all businesses, thus adopting the principle of expensing, or allowing a full and immediate deduction for capital purchases.
The Flat Tax was too radical to gain wide acceptance in the early 1980s, but a vigorous bipartisan debate harkening back to Bradford’s 1976 “Blueprints” continued nonetheless. The 1981 tax cuts worked as intended to launch a powerful economic recovery, but memories of poor economic performance under Carter still lingered. A broad, bipartisan consensus championed faster economic growth by reforming the tax code to reduce the distortions to economic decision making it caused and the resulting misallocation of basic resources.
The basic strategy was to lower rates as in the 1981 Act, only further, and to implement a sound cost recovery system as in the 1981 Act. In contrast to 1981, however, the new strategy included a determined effort to “broaden the tax base” by eliminating distorting loopholes and tax credits, thereby intending the overall bill to be revenue neutral. .
The Treasury Department under Secretary Don Regan took the first big step in 1984 with the release of a densely packed 275 page proposal for comprehensive tax reform, dubbed “Treasury I”. While many aspects were well-received, as with most prototypes, Treasury I contained flaws, some of which Treasury addressed in 1985 with “Treasury II”.
Tax reform was off and running in Congress with the release of Treasury II, but the road was by no means easy. Time and again Reagan had to give Congress another not-always-gentle push. The greatest peril demanding Reagan’s firm hand came when Senate Finance Committee Chairman Bob Packwood (R-OR) realized he couldn’t pass tax reform on the path it was on. Ironically, the man who had repeatedly saved tax reform, President Reagan, was also now tax reform’s biggest obstacle.
The Price for Overcoming the Greatest Hurdle
Reagan was forced into pushing for the most rate reduction possible. Initially he drew the line at 25 percent for individuals and he held firm for much of the debate. Like most policy, tax reform involves trade-offs and Packwood just couldn’t find enough obvious base broadeners he could economically or politically trade off to hit a 25 percent rate.
Something had to give. At first the rate crept up to 26 and then to 28 percent. But at 28 percent, Reagan would go no further.
As Reagan urged Packwood to press on, Packwood had to get creative. He took fairly innocuous existing individual and corporate minimum taxes and expanded them into full-fledged parallel tax systems; voila, massive back-door base broadening. Packwood’s new Alternative Minimum Tax (AMT), while a superb example of terrible tax policy, had as its one redeeming feature: it raised enough money in a sufficiently confusing manner to hit the 28 percent rate without creating too many political problems, at least not for the duration of the debate. Three months later, the final bill passed the Senate.
Packwood’s AMT offers an important lesson for tax reform today. As important as low tax rates are for economic growth, policy makers and the public need to be honest about the tradeoffs involved. The broadest possible tax base capable of garnering sufficient political support can only raise so much revenue at a targeted tax rate. Demand an even lower tax rate and something (or someone) else will have to give and very likely pro-growth tax policy will suffer as a consequence.
Back to the Present
With respect to time, the current tax reform debate parallels that of 1986 closely. TRA86 concluded a lengthy, evolutionary process regarding accepted beliefs about sound, pro-growth tax policy. That process distilled to the lowest possible rates and applied to a simple, broad tax base, while allowing for a depreciation system for capital costs minimizing the anti-investment aspects of an income tax.
Tax reform today shares these traits, both with respect to the substance of reform – low rates, broad base, and today, expensing – and with respect to time. Like the 1986 episode, tax reform today reflects the product of many years of debate regarding the design of pro-growth tax policy, an evolution that began in 1986.
In one other critical respect regarding time, TRA86 and the current effort offer stark contrasts. Where the legislative starting gun on TRA86 went off in 1984 and the effort then proceeded for over two years, Congress in 2017 will have only a handful of months from introduction to tax reform’s final passage. This difference in time will have significant implications for how Congress defines “comprehensive” as they work toward pro-growth tax reform.
BAGHDAD – Hundreds of ISIS fighters had just been chased out of a northern Syrian city and were fleeing through the desert in long convoys, presenting an easy target to U.S. A-10 “warthogs.”
But the orders to bomb the black-clad jihadists never came, and the terrorists melted into their caliphate — living to fight another day. The events came in August 2016, even as then-Republican presidential nominee Donald Trump was vowing on the campaign trail to let generals in his administration crush the organization that, under President Obama, had grown from the “jayvee team” to the world’s most feared terrorist organization.
U.S. Air Force Brig. Gen. Andrew Croft said the Trump administration has put a strong leadership team in place (U.S. Army photo by Sgt. Tracy McKithern)
“I will…quickly and decisively bomb the hell out of ISIS,” Trump, who would name legendary Marine Corps Gen. James Mattis as secretary of defense, promised. “We will not have to listen to the politicians who are losing the war on terrorism.”
Just over a year later, ISIS has been routed from Iraq and Syria with an ease and speed that’s surprised even the men and women who carried out the mission. Experts say it’s a prime example of a campaign promise kept. President Trump scrapped his predecessor’s rules of engagement, which critics say hamstrung the military, and let battlefield decisions be made by the generals in the theater, and not bureaucrats in Washington.
“I felt quite liberated because we had a clear mandate and there was no questioning that.”
– U.S. Marine Col. Seth Folsom
At its peak, ISIS held land in Iraq and Syria that equaled the size of West Virginia, ruled over as many as 8 million people, controlled oilfields and refineries, agriculture, smuggling routes and vast arsenals. It ran a brutal, oppressive government, even printing its own currency.
Lt. Col. Seth Folsom credits the cooperation between Iraqi Security Forces and the U.S-led coalition for the military defeat of ISIS in Iraq. (Courtesy U.S Army)
ISIS remains a danger, as members who once ruled cities and villages like a quasi-government now live secretly among civilian populations in the region, in Europe and possibly in the U.S. These cells will likely present a terrorist threat for years. In addition, the terrorist organization is attempting to regroup in places such as the Philippines, Libya and the Sinai Peninsula.
But the military’s job — to take back the land ISIS claimed as its caliphate and liberate cities like Mosul, in Iraq, and Raqqa, in Syria, as well as countless smaller cities and villages, is largely done. And it has taken less than a year.
Mattis, a US Marine Corps general, said there would be no White House micromanaging on his watch (Associated Press)
“The leadership team that is in place right now has certainly enabled us to succeed,” Brig. Gen. Andrew Croft, the ranking U.S. Air Force officer in Iraq, told Fox News. “I couldn’t ask for a better leadership team to work for, to enable the military to do what it does best.”
“It moved more quickly than at least I had anticipated,” Croft said. “We and the Iraqi Security Forces were able to hunt down and target ISIS leadership, target their command and control.”
U.S. Marine Corps Brig. Gen. Robert Sofge said the military now has a clear mandate (U.S. Army photo by Spc. Cole Erickson)
After the battle to liberate Mosul – ISIS’ Iraqi headquarters – was completed in July — the U.S.-led coalition retook Tel Afar in August, Hawija in early October and Rawa in Anbar province in November.
Marine Col. Seth Folsom, who oversaw fighting in Al Qaim near the Syrian border, agreed. He wasn’t expecting his part of the campaign against ISIS to get going until next spring and figured even then, it would then “take six months or more.”
Instead, ISIS was routed in Al Qaim in just a few days.
Mosul, and several other cities liberated by ISIS, were largely destroyed in the fighting. (Fox News/Hollie McKay)
“We really had one mandate and that was enable the Iraqi Security Forces to defeat ISIS militarily here in Anbar. I feel that we have achieved that mission,” Folsom said. “I never felt constrained. In a lot of ways, I felt quite liberated because we had a clear mandate and there was no questioning that.”
Brig. Gen. Robert “G-Man” Sofge, the top U.S. Marine in Iraq, told Fox News his commanders have “enjoyed not having to deal with too many distractions and there was no question about what the mission here in Iraq was.”
Iraqi Brig. Gen. Yahya Rasool was skeptical of Trump at first, but says success on the ground has been swift (Fox News/Hollie McKay )
“We were able to focus on what our job was without distraction and I think that goes a long way in what we are trying to accomplish here,” he said.
Sofge said criticism that loosening rules of engagement put civilians at risk is “absolutely not true.”
Col. Ryan Dillon. Combined Joint Task Force – Inherent Resolve Spokesman (Photo by CJTFOIR)
“We used precision strikes, and completely in accordance with international standards,” he said. “We didn’t lower that standard, not one little bit. But we were able to exercise that precision capability without distraction and I think the results speak for themselves.”
The U.S.-led coalition said this week the Coalition Civilian Casualty Assessment Team has added 30 new staffers to travel throughout the region. It said military leaders continue to “hold themselves accountable for actions that may have caused unintentional injury or death to civilians.”
The coalition also said dozens of reports of civilian casualties have been determined to be “non-credible,” and just .35 percent of the almost 57,000 separate engagement carried out between August 2014 and October 2017 resulted in a credible report of a civilian casualty.
In addition to air support, the U.S.-led strategy also includes training and equipping Iraqi troops on the ground.
While the Trump administration’s success is often underplayed in the U.S. media, it is obvious on the ground in Iraq, according to a spokesman for Iraq’s Ministry of Defense, Yahya Rasool.
“I was not optimistic when Trump first came to the office,” Rasool said. “But after a while I started to see a new approach, the way the U.S. was dealing with arming and training. I saw how the coalition forces were all moving faster to help the Iraq side more than before. There seemed to be a lot of support, under Obama we did not get this.”
Al-Baghdadi, who once ruled a caliphate the size of California, is now inn hiding and likely badly injured
Despite the victories on the battlefield, U.S. officials cautioned much work remains to be done.
“ISIS is very adaptive,” noted Col. Ryan Dillon, the U.S.-led coalition spokesman. “We are already seeing smaller cells and pockets that take more of an insurgent guerrilla type approach as opposed to an Islamic army or conventional type force. So we have got to be prepared for that.”
He said as a result the coalition is “adjusting some training efforts” so the Iraqi forces — upwards of 150,000 have already undergone training — are equipped to address such threats and ensure long-term stability.
Folsom said “the worst thing we could do” is not finish the job.
“If a country becomes a failed state, if it becomes a lawless region, you begin to set the conditions for what happened in the years before 9/11,” he said. “In those ungoverned spaces where we don’t know what is going on, that is where those seeds of extremism begin to blossom.”
Part 2 of 2 Story 1: President Trump’s Tax Speech — Very Light On Specifics — Let Congress Fill in The Details — Formula For Failure — Tax Rate Cuts Are Not Fundamental Tax Reform — A Broad Based Consumption Tax Such as The FairTax or Fair Tax Less Not Even Mentioned — What Good Is Dreaming It If You don’t actually do it! — Videos —
FULL. President Trump speech on tax reform in Springfield, Missouri. August 30, 2017.
Special Report with Bret Baier 8/30/17 – Special Report Fox News August 30, 2017 TRUMP TAX REFORM
Destroy Trump Media – President Trump Pitches Tax Reform Plan – Kellyanne Conway – Hannity
President Trump’s tax plan
Will US Markets Finally Get Tax Reform – 29 Aug 17 | Gazunda
Keiser Report: The bizarre decade (E1117)
Ben Shapiro: Donald Trump outlines his tax reform plan (audio from 08-31-2017)
Dan Mitchell on GOP Tax Reform Wrangling, Part I
Dan Mitchell on GOP Tax Reform Wrangling, Part II
Dan Mitchell Discussing the Fate of Tax Cuts and Tax Reform
How Trump’s tax plan impacts average Americans
Trump’s Tax Cut Plan Alienates His Base
Cohn Says White House Is Concerned About U.S. Wages
Gary Cohn on the Trump administration taking on tax loopholes
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Limbaugh Airs Montage Of The ‘3 LIES’ Media Said After Trump’s Tax Speech
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Donald Trump Is To Give Speech On Tax Reform But He Has No Tax Reform Plan | The 11th Hour | MSNBC
Freedom from the IRS! – FairTax Explained in Detail
Mark Levin: Donald Trump gave a good speech on tax reform (August 30 2017)
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Milton Friedman – Why Tax Reform Is Impossible
Honda – “Impossible Dream” Power of Dreams Advert Full
Trump’s Tax Reform Plan Targets Middle-Class Tax Complexity
Clyde Wayne Crews Jr. , CONTRIBUTOR
Policy director at Competitive Enterprise Institute
President Trump visited Missouri to talk about tax reform, stressing simplicity and middle-class tax relief and “plans to bring back Main Street by reducing the crushing tax burden on our companies and on our workers.”
Noting the elimination of “dozens of loopholes,” special interest carve-outs, and the reduction of brackets and rates that Congress achieved three decades ago, Trump said, “the foundation of our job creation agenda is to fundamentally reform our tax code for the first time in more than 30 years. I want to work with Congress, Republicans and Democrats alike, on a plan that is pro-growth, pro-jobs, pro-worker — and pro-American.”
We’re about to re-enter Obamacare repeal-style complexity and venom, but it’s important, I think, for the public to see the tax reform debate as something other than a campaign to benefit business. The U.S. does have comparatively high corporate tax rates. And the Econ 101 lesson on tax incidence shows that consumers pay much of the corporate tax, not the company.
It’s probable some Democrats would like to reform the tax code, especially come 2016, but the zero-tolerance of Trump, such as that seen at the Commonwealth Club when Sen. Diane Feinstein was barely favorable toward him, prevails.
My broader point here though is is that taxation is just the beginning of the story when it comes to the complexity of regulatory compliance. The economy marinates in compliance burdens to service noble ends, but sometimes serve regulators instead. Trump characterized the Internal Revenue Service’s unfairness to the typical taxpayer like this:
The tax code is now a massive source of complexity and frustration for tens of millions of Americans.
In 1935, the basic 1040 form that most people file had two simple pages of instructions. Today, that basic form has one hundred pages of instructions, and it’s pretty complex stuff. The tax code is so complicated that more than 90 percent of Americans need professional help to do their own taxes.
This enormous complexity is very unfair. It disadvantages ordinary Americans who don’t have an army of accountants while benefiting deep-pocketed special interests. And most importantly, this is wrong.
There’s solid backup for what Trump’s talking about in terms of pubic burdens, even if some are disinclined to reckon with it, or if their allegiances require professing public disdain for corporations (one of the great democratizing forces in human history, but that’s another story).
The Government Accountability Office (GAO) agrees, I think, that Trump’s example of the IRS is a good one. In the course of a project I have of compiling examples of government proclamationsthat are not laws from Congress, nor even formal regulations from agencies, but instead “memoranda” and “guidance,” the IRS emerged as a leading “offender.”
A September 2016 GAO report called “Regulatory Guidance Processes: Treasury and OMB Need to Reevaluate Long-standing Exemptions of Tax Regulations and Guidance,” looked at the Internal Revenue Service’s hierarchy of law, regulations, guidance, and explanatory material with respect to communicating interpretation of tax laws to the public.
It’s an eye-opener.
A pyramid diagram presented by GAO was topped by the Internal Revenue Code, as passed by Congress. Beneath that, in widening stages, one finds “Treasury Regulations,” “Internal Revenue Bulletins,” (IRB), “Written Determinations,” and “Other IRS Publications and Information.” The IRS regards the bulletins as generally authoritative, while determinations tend to apply to individual taxpayers.
That’s a lot of public guidance, difficult to absorb.
Treasury and IRS are among the largest generators of federal agency regulations and they issue thousands of other forms of taxpayer guidance. IRS publishes tax regulations and other guidance in the weekly IRB. Each annual volume of the IRB contains about 2,000 pages of regulations and other guidance documents.
From 2013 to 2015, each annual Internal Revenue Bulletin edition contained some 300 guidance documents; back in 2002-2008, about 500.
When one sees such document proliferation from the IRS, an impartial observer might surmise the time for tax reform and simplification has arrived.
Likewise, when regulatory guidance multiplies that applies to various sectors—like finance, Internet, health care—one might similarly conclude the time has come for Congress to enact regulatory liberalization. Trump mentioned cutting the overall federal regulatory burden in the Missouri speech, too.
We knew it all along, but paying taxes also requires paying a lot of attention to regulations. In more ways than one, tax reform and regulatory reform go hand in hand.
Ann Coulter goes off on Trump over taxes, saying he delivered his ‘worst, most tone-deaf speech’
Maxwell Tani
Aug. 30, 2017, 5:38 PM
Conservative author Ann Coulter rebuked President Donald Trump over his speech on Wednesday in which he rolled out the broad outline of his tax reform plan.
In a slew of tweets on Wednesday, the firebrand conservative pundit said the president’s focus on simplifying the tax code and lowering business taxes to 15% was missing an opportunity to prioritize some of his more incendiary, but unique, policy objectives, including building a southern border wall and deporting immigrants living in the US without permission.
Coulter particularly singled out the similarities between Trump’s plan and a hypothetical plan that other Republicans like former Florida Gov. Jeb Bush would’ve put forward.
Indeed, beyond the prominent former Wall Street figures playing key roles in overhauling the tax code, Trump’s administration has absorbed some financial figures from Bush’s policy world.
Notably, Bush’s former senior policy director Justin Muzinich joined the Treasury Department in March to work closely with Treasury Secretary Steve Mnuchin on “major policy initiatives” and on tax reform.
Over the past several months, Coulter has increasingly criticized Trump and mocked him on social media and in interviews, saying that he has not fulfilled his anti-immigration campaign promises.
“The millions of people who haven’t voted for 30 years and came out to vote for Trump, thinking, ‘Finally, here’s somebody who cares about us’ — Nope!” Coulter told The Daily Beast after former chief strategist Steve Bannon left the White House earlier this month. “Republicans, Democrats — doesn’t matter. Jeb exclamation point, Donald Trump, Hillary Clinton — doesn’t matter. Goldman Sachs is running the country.”
The charts below illustrate the share of taxes paid by income percentiles for Tax Year 2014, the most recent set of data available from the IRS. NTUF has broken down the federal share of income taxes by gross income to show how much each bracket contributes yearly.
Trump Hits The Road To Promote Tax Cuts (Details To Come)
August 30, 20176:00 AM ET
SCOTT HORSLEY
President Trump participates in a tax overhaul kickoff event at the Loren Cook Company in Springfield, Mo., on Wednesday.
Jim Watson/AFP/Getty Images
Updated at 5:25 p.m. ET
President Trump called for a major rewrite of the U.S. tax code during a visit to Springfield, Mo., on Wednesday afternoon. The speech came a day after Trump’s trip to Harvey-hit Texas and is the first in what is expected to be a series of traveling sales pitches on taxes from the president.
But the White House is not ready to spell out what the rewrite will look like or what kind of price tag it will carry. Trump spoke in broad terms about creating a tax system that favors middle-class Americans and keeps business in the U.S.
“First and foremost our tax system should benefit loyal, hardworking Americans and their families. That is why tax reform must dramatically simplify the tax code, eliminate special-interest loopholes,” he said.
Trump called on Congress to join him and “unite in the name of common sense and the name of common good” to create jobs and improve America’s “competitive advantage.”
“I am fully committed to working with Congress to get this job done, and I don’t want to be disappointed by Congress,” he said.
Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn have been meeting regularly with Republican congressional leaders to discuss tax policy. Thus far, though, they’ve committed only to a vague statement of principles that calls for lower tax rates on both individuals and businesses. Cohn said it will be up to lawmakers to fill in the details.
“We’ve got a great, I would say, skeleton,” Cohn told reporters earlier this month. “We need the Ways and Means Committee to put some muscle and skin on the skeleton and drive tax reform forward. And it’s our objective to do that between now and the end of the year.”
With Republicans in control of the House, Senate and the presidency, supporters have described this as a once-in-a-generation opportunity to overhaul the tax code in accordance with GOP principles. But after Trump’s insistence on swift, ultimately unsuccessful bids to repeal the Affordable Care Act, some observers are skeptical that Trump has the patience or discipline to see a tax overhaul through to completion.
Mnuchin insists tax cuts are now Trump’s No. 1 priority.
“He’s going to go on the road,” Mnuchin said. “The president is 100 percent supportive of us passing legislation this year.”
The White House has been promising such a sales campaign for weeks, only to see much of August consumed with controversy over the president’s Charlottesville, Va., remarks and his intraparty carping with fellow Republicans, including Senate Majority Leader Mitch McConnell, R-Ky.
Mnuchin conceded that rewriting the tax code is a taller order than he initially imagined.
“Earlier in the year I said I thought we’d get it done by August, and I was wrong,” the Treasury secretary said. “I am now going to say that I’m very hopeful, and I think we can get this done by the end of the year, but we will continue to revisit it.”
“The president’s leadership on this is critical,” said a senior White House official who briefed reporters on the Springfield trip. “Everybody involved understands that and believes that. And he is ready to really take this conversation where it belongs and that’s the heartland of America.”
The official spoke on condition of anonymity.
“The president now feels that it’s the right time to begin engaging directly with the American people on tax reform,” he said.
The administration argues the current tax code is too complicated and rates are too high to encourage investment in the U.S.
“We are not competitive with the rest of the world on the business tax and on the personal income tax,” Cohn said.
Neither the White House nor congressional leaders have spelled out how much lower tax rates should go, nor have they specified how the government would make up the lost revenue. They’re counting on faster economic growth to help close the gap. They’ve also promised to eliminate unspecified tax “loopholes,” which Trump called out multiple times in his speech on Wednesday.
Back in April, the White House proposed lowering the corporate tax rate from 35 percent to 15 percent while reducing the top individual tax rate from 39.6 percent to 35 percent. That’s broadly similar to a proposal Trump put forward during the presidential campaign. The nonpartisan Tax Policy Center said at the time 78 percent of the tax savings in Trump’s campaign plan would go to people on the top 20 percent of the income ladder. (Nearly a quarter would go to the top one-tenth of 1 percent.)
The campaign plan was also forecast to reduce government revenue by more than $6 trillion over a decade — a gap that would be difficult to erase through growth and loophole closings.
The White House has said it wants to preserve deductions for charitable contributions, retirement savings and mortgage interest.
One popular tax break that could be on the chopping block is the deduction for state and local taxes. That’s one of the biggest loopholes in the tax code. Eliminating it would boost federal revenues by an estimated $1.3 trillion over a decade. The tax break is particularly popular with residents in the Northeast and West Coast, typically blue states with relatively high tax rates.
House Speaker Paul Ryan, R-Wis., favored a so-called border adjustment tax on imports as another way to raise revenue and offset the cost of income tax cuts. But lawmakers ultimately scrapped that idea after consultation with the administration.
Senate Republicans plan to use a procedural tactic to prevent Democrats from blocking the tax overhaul with a filibuster. Under Senate rules, though, any measure passed with that tactic must not add to the federal deficit for more than 10 years.
This presents a choice for Republicans: Go with a more modest tax cut that can be offset by growth and closing loopholes, or opt for a more ambitious cut but allow it to sunset after a decade.
For all the challenges, GOP lawmakers are under political pressure to pass something they can brand as “tax reform.” Otherwise, they’ll have to face voters in 2018 with little to show for two years of single-party rule.
On Wednesday, President Trump traveled to Missouri to expand on the need for tax reform, to lay the groundwork for a major legislative push in Congress this fall. But more than anything else, what Trump’s speech revealed was that despite months of behind-the-scenes negotiations, Republicans aren’t much closer to enacting the most significant overhaul of the tax code in 30 years than they were back in April.
Trump was pitching a plan that doesn’t exist and demanding votes for a bill that hasn’t been written. If anything, the address the president delivered was even less detailed than the skimpy blueprint the White House issued in the spring. The most specific item Trump mentioned—a 15 percent corporate tax rate, down from the current 35 percent—is something that Republican tax-writers on Capitol Hill believe is impossible to achieve under the parameters with which they must work. He talked in broad terms about simplifying the code so that it’s easier for people to file their taxes, removing unspecified special interest loopholes, and encouraging businesses to bring back profits they’ve parked overseas—all policies that have been central to GOP proposals for years and offer little indication of the particular direction the party plans to go.
This was a bully pulpit speech. Having laid down his principles, Trump is once again leaving the dirty work to Congress, a strategy that even he seemed to acknowledge was as risky as it is politically necessary. “I don’t want to be disappointed by Congress, do you understand me? Do you understand?” he warned at one point, a none-too-subtle reference to his recent hectoring over the GOP’s failure to deliver on health care.
To the delight of Republican leaders, the one lawmaker Trump singled out for pressure was not one of their own; for the first time in weeks, the president picked on a Democrat, Missouri Senator Claire McCaskill, who is up for reelection in a state he won easily in November. If McCaskill doesn’t vote for tax reform—whatever it turns out to be—“you have to vote her out of office,” Trump demanded of the crowd.
Top Republicans were evidently pleased with the speech, or at least with the fact that the president stuck to the message they were told beforehand he would deliver. Within minutes after it ended, statements (undoubtedly prewritten) flowed in with glowing reviews. “President Trump is taking the case for tax reform straight to Main Street,” House Speaker Paul Ryan said. “We are united in our determination to get this done.” Representative Kevin Brady, the chairman of the Ways and Means Committee, said his remarks were “excellent.” Even members of Trump’s Cabinet that have no role in tax reform, like Health and Human Services Secretary Tom Price, or in domestic politics whatsoever, like Secretary of State Rex Tillerson, chimed in with praise.Yet while Trump talked at length about the need for tax reform, he said little about how Republicans would get it done. And that’s because they still don’t know themselves. GOP leaders haven’t made several crucial decisions. Will the legislation be a revenue-neutral tax reform that fully offsets the reduction in rates by eliminating costly—and popular—exemptions and deductions? Or will it be a more straightforward tax cut, that would likely have to expire within a decade to comply with Senate rules? How low will they try to push down the corporate rate? About all they’ve determined is that 15 percent is too low, but will it be closer to 20 percent or 25 percent? And on, and on.The Ways and Means Committee is currently writing the tax bill, but the only timeline they’ve set is to get it done by the end of 2018. The longer they take to write it, however, the less realistic that deadline becomes. And as I explainedearlier this month, Republicans must first pass a budget before they can even get to tax reform, which, to this point, has been no easy task.These unresolved details have also tripped up Trump’s messaging toward Democrats. Does he want their support, or are Republicans planning to do it alone as they tried to do on health care? In his speech, the president started out by saying he wanted to work with both parties to enact tax reform. Later on, however, he attacked Democrats as “obstructionists” and called out McCaskill. By the end, he was back where he began, saying tax reform was an issue on which lawmakers should put aside partisanship.Democrats say there’s been no outreach from the administration on taxes, and they’ve noted that Republicans are, for now, planning to use the same budget reconciliation process on tax reform that they used in trying to repeal the Affordable Care Act. That would allow them to skirt a Democratic filibuster and pass tax reform with a simple majority of 51 votes in the Senate. Unlike Obamacare repeal, some Democrats have expressed a willingness to work with the administration on taxes, so long as the GOP plan is not skewed to benefit the wealthy. With so few details, they were unimpressed with Trump’s speech in Missouri. “Stepping to the podium to declare that we need tax reform does not signal leadership on this issue; rather, doing so without offering any proposals on how to achieve it is an abdication,” said Representative Steny Hoyer of Maryland, the second-ranking House Democrat. “If the president is serious about tax reform, he should focus on the how, not the why.”Trump is not a detail-oriented president. That much is clear. But while he may be able to stick to broad strokes in rally-the-public speeches and leave the rest to Congress, his party will eventually have to make the tough decisions about who’s going to pay more, who gets to pay less, and by how much. Until that happens, tax reform isn’t going anywhere.
Trump’s populist message on taxes comes with heavy dose of corporate rate cuts
Trump’s speech didn’t mask the fact that lawmakers still face a wide range of knotty questions when they return to Washington next week.
President Donald Trump kicked off his efforts to sell a big tax package to voters on Wednesday, calling for a “pro-American” system that would cut tax rates for businesses and offer a boost to the middle class.
Trump maintained that a new tax system was crucial to ushering in a new prosperity in the U.S., in a speech that White House officials acknowledged beforehand would be light on policy details.
The president laid out several principles for tax reform, including cleaning the code of tax breaks and offering tax relief to middle-class families. But in a speech meant to put a populist polish on tax reform, Trump also spoke repeatedly about the need to lower the statutory corporate tax rate — which, at 35 percent, stands among the highest in the industrialized world — and to give companies more opportunity to bring back profits they’ve stashed offshore.
“Instead of exporting our jobs, we will export our goods. Our jobs will both stay here in America and come back to America. We’ll have it both ways,” Trump said at a Springfield, Mo., manufacturer, adding that millions of people would move from welfare to work and “will love earning a big fat beautiful paycheck.”
“We believe that ordinary Americans know better than Washington how to spend their own money and we want to help them take home as much of their money as possible and then spend it,” he said. “So they’ll keep their money, they’ll spend their money, they’ll buy our product.”
But Trump’s speech also underscored just how big a challenge he and a Republican Congress will face in pulling off a true overhaul of the tax code. The president only briefly touched on policy details, saying that businesses would “ideally” be taxed at a top rate of 15 percent and that the tax code would contain incentives for child care — a top priority of his daughter, Ivanka Trump.
“I am fully committed to working with Congress to get this job done,” Trump said. “And I don’t want to be disappointed by Congress. Do you understand me?”
Trump’s speech was aimed at showing that Republicans have the message down on tax reform, but lawmakers have yet to confront the monumental task of turning the rhetoric into reality.
Senior White House officials this week repeatedly billed the president’s speech as an address focused on why tax reform needs to happen, not how it will materialize. That’s the sort of big-picture cover on taxes that Trump didn’t offer congressional leaders in their doomed efforts to repeal and replace Obamacare.
But while congressional leaders undoubtedly welcome the president making the broad case for a tax revamp, Trump’s speech doesn’t mask the fact that lawmakers still face a wide range of knotty questions when they return to Washington next week.
Republicans still have to figure out how to pass a budget this fall, a process that will play a big role in deciding how generous a tax plan they can write. They also have to decide whether tax changes should be permanent or temporary, or a mix of the two, and whether their plan should be a net tax cut that would add to the deficit.
And that’s before they will feel the full brunt of a massive lobbying push on what would be the first major tax overhaul in more than 30 years. Already, GOP lawmakers are starting to hear from industries that might be the losers in a tax overhaul, such as big corporations that don’t want a minimum tax on foreign earnings and a retirement sector wary of potential changes to savings plans.
The hurdles won’t be limited to policy, either, after a summer that saw both sides of Pennsylvania Avenue grow increasingly wary of the other as the GOP’s health care efforts imploded. Republicans on Capitol Hill steamed privately in July that Trump’s obsession with White House infighting and the Russia controversy was a major factor in the death of the repeal effort. They’re crossing their fingers that he won’t be so easily distracted on tax reform.
Fact-checking President Trump’s speech on his tax plan
By Glenn Kessler and Michelle Ye Hee LeeAugust 31 at 3:00 AM
The Fact Checker’s round-up of five fishy claims made by President Trump in his speech on Aug. 30. (Meg Kelly/The Washington Post)
President Trump on Wednesday delivered an address on his “principles” for a tax plan in Springfield, Mo., though he provided few details. He also shifted from extolling how well the economy is doing to language that suggested the United States was suffering terribly. As usual, some of the president’s facts and figures were a bit fishy, so here’s a roundup of 10 of his claims.
“In the last 10 years, our economy has grown at only around 2 percent a year.”
This is misleading. By going back 10 years, Trump includes the worst recession since the Great Depression, which brings down the 10-year average. This chart shows that that quarterly average since the recession was well above 2 percent, even hitting 5 percent in the third quarter of 2014. The GDP growth rate for the United States averaged 3.22 percent from 1947 to 2017.
Source: Bureau of Economic Analysis via Federal Reserve Bank of St. Louis
“We just announced that we hit 3 percent in GDP. Just came out. And on a yearly basis, as you know, the last administration, during an eight-year period, never hit 3 percent.”
Trump plays some sleight-of-hand with the numbers. He first cites an annualized quarterly figure — 3 percent GDP growth in the second quarter of 2017 — and then compares it to what appears to be calendar-year figures for former president Barack Obama.
As the chart above shows, the economy grew better than 3 percent in eight quarters during Obama’s presidency, most recently in the third quarter of 2016. (Technically, this is known as “annualized quarterly change” or SAAR — seasonally adjusted at annual rate.) Trump gets his terminology wrong, using the phrase “yearly basis,” which could mean from the third quarter of 2015 to the the third quarter of 2016, in which case Obama easily exceeded 3 percent numerous times. On an annual basis, Obama’s best year was 2015, when annual growth was 2.6 percent.
“If we achieve sustained 3 percent growth, that means 12 million new jobs and $10 trillion of new economic activity over the next decade. That’s some numbers.”
With this statement, Trump downgrades promises he made during the 2016 campaign — he said he would achieve 4 percent GDP growth and 25 million jobs over 10 years.
“In 1935, the basic 1040 form that most people file had two simple pages of instruction. Today, that basic form has 100 pages of instructions, and it’s pretty complex stuff.”
Trump is correct that in 1935, the basic 1040 individual income tax form had two pages of instructions, but this claim needs historical context.
There are many reasons the instructions were so simple back then — including that just about 4 percent of the population paid the federal individual income tax. In 1935, the individual income tax largely was a tax on the wealthy. In fact, the top rate in 1935 was 63 percent — and President Franklin D. Roosevelt raised it to 75 percent later that year.
This changed with World War II. “Driven by staggering revenue needs, lawmakers in both parties agreed to raise taxes on everyone: rich, poor, and — especially — the middle class,” wrote Joseph Thorndike, director of the Tax History Project.
“The tax code is so complicated that more than 90 percent of Americans need professional help to do their own taxes.”
This is misleading. The 90 percent figure he is referring to includes people using tax software, such as Turbo Tax, which helps people file their taxes on their own. According to the National Taxpayer Advocate’s 2016 report, 54 percent of individual taxpayers pay preparers and about 40 percent of individual taxpayers use software that costs about $50 or more.
Yet later during the speech, he made it sound as if the “professional help” is only referring to hired accountants: “That is why tax reform must dramatically simplify the tax code … and allow the vast majority of our citizens to file their taxes on a single, simple page without having to hire an accountant.”
“Our last major tax rewrite was 31 years ago. It eliminated dozens of loopholes and special interest tax breaks, reduced the number of tax brackets from 15 to two, and lowered tax rates for both individuals and businesses. At the time it was really something special … In 1986, Ronald Reagan led the world by cutting our corporate tax rate to 34 percent. That was below the average rate for developed countries at the time. Everybody thought that was a monumental thing that happened. But then, under this pro-America system, our economy boomed. It just went beautifully right through the roof. The middle class thrived, and median family income increased.”
Trump heaped praise on Reagan’s Tax Reform Act of 1986, which simplified tax brackets and eliminated tax shelters; it also lowered the top individual tax rate to 28 percent but raised the capital gains rate to the same level, giving them parity. But this is a rather strange flip-flop because Trump always has been a fierce critic of the bill, blaming it repeatedly for the savings and loan crisis, a decline in real estate investing and the 1990-1991 recession.
“This tax act was just an absolute catastrophe for the country, for the real estate industry, and I really hope that something can be done,” Trump told Congress in 1991. In a television interview with Joan Rivers, he said: “What caused the savings and loan crisis was the 1986 tax law change. It was a disaster. It took all of the incentives away from investors.”
Trump also frequently attacked one of the Democratic sponsors of the bill, Sen. Bill Bradley (D-N.J.), such as in a Wall Street Journal commentary in 1999. “Mr. Bradley’s last big idea to be enacted into legislation was also one of the worst ideas in recent history,” Trump wrote, saying Bradley was responsible for the elimination of a tax shelter for real estate investments. (He said the good parts of the bill could be attributed to Reagan.)
“We lost the jobs. We lost the taxes. They closed the buildings. They closed the plants and factories. We got nothing but unemployment. We got nothing.”
As Trump frequently notes, the unemployment rate in July was 4.3 percent — the lowest level in 16 years. So this overwrought language seems misplaced.
“We have gone from a tax rate that is lower than our economic competitors, to one that is more than 60 percent higher. … In other words, foreign companies have more than a 60 percent tax advantage over American companies.”
The United States certainly has one of the highest statutory corporate tax rates in the world, currently pegged as high as 39.1 percent when including state taxes. (The federal rate is 35 percent.) Trump says it is 60 percent higher than “our economic competitors,” comparing 39.1 percent to the average rate for the other members of the Organization for Economic Co-operation and Development, which is 25.5 percent when not weighted for GDP. (It is 29.6 percent when weighted for GDP.)
But the official rate does not necessarily tell the whole story. What also matters is the actual tax a company pays, after deductions and tax benefits. That is known as the effective tax rate, which can be calculated differently depending on the survey. According to the Congressional Research Service, the effective rate for the United States is 27.1 percent, compared to an effective GDP-weighted average of 27.7 percent for the OECD. “Although the U.S. statutory tax rate is higher, the average effective rate is about the same, and the marginal rate on new investment is only slightly higher,” the CRS says.
The Congressional Budget Office, when it examined the issue, said the U.S. effective tax rate was 18.6 percent, which it said was among the highest of the biggest economic powers, the Group of 20.
Trump, naturally, used the numbers that suggest the difference is really huge.
“Today, we are still taxing our businesses at 35 percent, and it’s way more than that. And think of it, in some cases, way above 40 percent when you include state and local taxes in various states. The United States is now behind France, behind Germany, behind Canada, Ireland, Japan, Mexico, South Korea and many other nations.”
As we noted, the statutory federal corporate tax rate in the United States is 35 percent, making the United States the highest among G-20 countries, including the countries Trump listed. But the effective corporate tax rate in the United States in 2012 was 18.6 percent, making it the fourth highest among G-20 countries, behind Argentina, Japan and Britain, according to the CBO.
“Because of our high tax rate and horrible, outdated, bureaucratic rules, large companies that do business overseas will often park their profits offshore to avoid paying a high United States tax if the money is brought back home. So they leave the money over there. The amount of money we’re talking about is anywhere from $3 trillion to $5 trillion.”
There are no official, current numbers on the profits held overseas by U.S. companies, just estimates. The White House would not respond to a query on where Trump is getting these numbers, but his high-end figure appears to be an exaggeration. The Internal Revenue Service in 2012 said the figure was $2.3 trillion, and the Joint Committee on Taxation estimated that it had risen to $2.6 trillion in 2015. There are other estimates as well, but none top $2.8 trillion, according to PolitiFact.
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What is Gross Domestic Product (GDP)?
Nominal vs. Real GDP
Real GDP Per Capita and the Standard of Living
EMBARGOED UNTIL RELEASE AT 8:30 A.M. EDT, Wednesday, August 30, 2017
BEA 17—42
* See the navigation bar at the right side of the news release text for links to data tables, contact personnel and their telephone numbers, and supplementary materials.
National Income and Product Accounts
Gross Domestic Product: Second Quarter 2017 (Second Estimate)
Corporate Profits: Second Quarter 2017 (Preliminary Estimate)
Real gross domestic product (GDP) increased at an annual rate of 3.0 percent in the second quarter of
2017(table 1), according to the "second" estimate released by the Bureau of Economic Analysis. In the
first quarter, real GDP increased 1.2 percent.
The GDP estimate released today is based on more complete source data than were available for the
"advance" estimate issued last month. In the advance estimate, the increase in real GDP was 2.6
percent. With this second estimate for the second quarter, the general picture of economic growth
remains the same; increases in personal consumption expenditures (PCE) and in nonresidential fixed
investment were larger than previously estimated. These increases were partly offset by a larger
decrease in state and local government spending (see "Updates to GDP" below).
Real gross domestic income (GDI) increased 2.9 percent in the second quarter, compared with an
increase of 2.7 percent (revised) in the first. The average of real GDP and real GDI, a supplemental
measure of U.S. economic activity that equally weights GDP and GDI, increased 3.0 percent in the
second quarter, compared with an increase of 2.0 percent in the first quarter (table 1).
The increase in real GDP in the second quarter reflected positive contributions from PCE, nonresidential
fixed investment, exports, federal government spending, and private inventory investment that were
partly offset by negative contributions from residential fixed investment and state and local government
spending. Imports, which are a subtraction in the calculation of GDP, increased (table 2).
The acceleration in real GDP in the second quarter primarily reflected upturns in private inventory
investment and federal government spending and an acceleration in PCE that were partly offset by
downturns in residential fixed investment and state and local government spending and a deceleration
in exports.
Current-dollar GDP increased 4.0 percent, or $189.0 billion, in the second quarter to a level of $19,246.7
billion. In the first quarter, current-dollar GDP increased 3.3 percent, or $152.2 billion (table 1 and table
3).
The price index for gross domestic purchases increased 0.8 percent in the second quarter, compared
with an increase of 2.6 percent in the first quarter (table 4). The PCE price index increased 0.3 percent,
compared with an increase of 2.2 percent. Excluding food and energy prices, the PCE price index
increased 0.9 percent, compared with an increase of 1.8 percent (appendix table A).
Updates to GDP
The percent change in real GDP was revised up from the advance estimate, reflecting upward revisions
to PCE and to nonresidential fixed investment that were partly offset by a downward revision to state
and local government spending. For more information, see the Technical Note. A detailed "Key Source
Data and Assumptions" file is also posted for each release. For information on updates to GDP, see the
“Additional Information” section that follows.
Advance Estimate Second Estimate
(Percent change from preceding quarter)
Real GDP 2.6 3.0
Current-dollar GDP 3.6 4.0
Real GDI … 2.9
Average of Real GDP and Real GDI … 3.0
Gross domestic purchases price index 0.8 0.8
PCE price index 0.3 0.3
For the first quarter of 2017, the percent change in real GDI was revised from 2.6 percent to 2.7 percent
based on revised first-quarter tabulations from the BLS Quarterly Census of Employment and Wages
program.
Corporate Profits (table 12)
Profits from current production (corporate profits with inventory valuation adjustment and capital
consumption adjustment) increased $26.8 billion in the second quarter, in contrast to a decrease of
$46.2 billion in the first quarter.
Profits of domestic financial corporations decreased $29.4 billion in the second quarter, compared with
a decrease of $40.7 billion in the first quarter. Profits of domestic nonfinancial corporations increased
$64.8 billion, compared with an increase of $3.8 billion. The rest-of-the-world component of profits
decreased $8.6 billion, compared with a decrease of $9.3 billion. This measure is calculated as the
difference between receipts from the rest of the world and payments to the rest of the world. In the
second quarter, receipts increased $8.5 billion, and payments increased $17.1 billion.
* * *
Next release: September 28, 2017 at 8:30 A.M. EDT
Gross Domestic Product: Second Quarter 2017 (Third Estimate)
Corporate Profits: Second Quarter 2017 (Revised Estimate)
Additional Information
Resources
Additional resources available at www.bea.gov:
• Stay informed about BEA developments by reading the BEA blog, signing up for BEA’s email
subscription service, or following BEA on Twitter @BEA_News.
• Historical time series for these estimates can be accessed in BEA’s Interactive Data Application.
• Access BEA data by registering for BEA’s Data Application Programming Interface (API).
• For more on BEA’s statistics, see our monthly online journal, the Survey of Current Business.
• BEA's news release schedule
• NIPA Handbook: Concepts and Methods of the U.S. National Income and Product Accounts
Definitions
Gross domestic product (GDP) is the value of the goods and services produced by the nation’s economy
less the value of the goods and services used up in production. GDP is also equal to the sum of personal
consumption expenditures, gross private domestic investment, net exports of goods and services, and
government consumption expenditures and gross investment.
Gross domestic income (GDI) is the sum of incomes earned and costs incurred in the production of GDP.
In national economic accounting, GDP and GDI are conceptually equal. In practice, GDP and GDI differ
because they are constructed using largely independent source data. Real GDI is calculated by deflating
gross domestic income using the GDP price index as the deflator, and is therefore conceptually
equivalent to real GDP.
Current-dollar estimates are valued in the prices of the period when the transactions occurred—that is,
at “market value.” Also referred to as “nominal estimates” or as “current-price estimates.”
Real values are inflation-adjusted estimates—that is, estimates that exclude the effects of price changes.
The gross domestic purchases price index measures the prices of final goods and services purchased by
U.S. residents.
The personal consumption expenditure price index measures the prices paid for the goods and services
purchased by, or on the behalf of, “persons.”
Profits from current production, referred to as corporate profits with inventory valuation adjustment
(IVA) and capital consumption adjustment (CCAdj) in the NIPAs, is a measure of the net income of
corporations before deducting income taxes that is consistent with the value of goods and services
measured in GDP. The IVA and CCAdj are adjustments that convert inventory withdrawals and
depreciation of fixed assets reported on a tax-return, historical-cost basis to the current-cost economic
measures used in the national income and product accounts.
For more definitions, see the Glossary: National Income and Product Accounts.
Statistical conventions
Annual rates. Quarterly values are expressed at seasonally-adjusted annual rates (SAAR), unless
otherwise specified. Dollar changes are calculated as the difference between these SAAR values. For
detail, see the FAQ “Why does BEA publish estimates at annual rates?”
Percent changes in quarterly series are calculated from unrounded data and are displayed at annual
rates, unless otherwise specified. For details, see the FAQ “How is average annual growth calculated?”
Quantities and prices. Quantities, or “real” volume measures, and prices are expressed as index
numbers with a specified reference year equal to 100 (currently 2009). Quantity and price indexes are
calculated using a Fisher-chained weighted formula that incorporates weights from two adjacent
periods (quarters for quarterly data and annuals for annual data). “Real” dollar series are calculated by
multiplying the published quantity index by the current dollar value in the reference year (2009) and
then dividing by 100. Percent changes calculated from real quantity indexes and chained-dollar levels
are conceptually the same; any differences are due to rounding.
Chained-dollar values are not additive because the relative weights for a given period differ from those
of the reference year. In tables that display chained-dollar values, a “residual” line shows the difference
between the sum of detailed chained-dollar series and its corresponding aggregate.
Updates to GDP
BEA releases three vintages of the current quarterly estimate for GDP: "Advance" estimates are
released near the end of the first month following the end of the quarter and are based on source data
that are incomplete or subject to further revision by the source agency; “second” and “third” estimates
are released near the end of the second and third months, respectively, and are based on more detailed
and more comprehensive data as they become available.
Annual and comprehensive updates are typically released in late July. Annual updates generally cover at
least the 3 most recent calendar years (and their associated quarters) and incorporate newly available
major annual source data as well as some changes in methods and definitions to improve the accounts.
Comprehensive (or benchmark) updates are carried out at about 5-year intervals and incorporate major
periodic source data, as well as major conceptual improvements.
The table below shows the average revisions to the quarterly percent changes in real GDP between
different estimate vintages, without regard to sign.
Vintage Average Revision Without Regard to Sign
(percentage points, annual rates)
Advance to second 0.5
Advance to third 0.6
Second to third 0.2
Advance to latest 1.1
Note - Based on estimates from 1993 through 2015. For more information on GDP
updates, see Revision Information on the BEA Web site.
The larger average revision from the advance to the latest estimate reflects the fact that periodic
comprehensive updates include major statistical and methodological improvements.
Unlike GDP, an advance current quarterly estimate of GDI is not released because data on domestic
profits and on net interest of domestic industries are not available. For fourth quarter estimates, these
data are not available until the third estimate.
https://www.bea.gov/newsreleases/national/gdp/2017/gdp2q17_2nd.htm
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Net Operating Loss (NOL): What Is It & How Do I Write It Off
Net operating losses (NOL) carryback, carryforward CH 19 p 7 –
Net Operating Loss Carryback & Carryforward (Tax Refund, Tax Benefit Due, Deferred Tax Asset)
Net Operating Loss – NOL
What is a ‘Net Operating Loss – NOL’
A net operating loss (NOL) is a loss taken in a period where a company’s allowable tax deductions are greater than its taxable income. When more expenses than revenues are incurred during the period, the net operating loss for the company can generally be used to recover past tax payments. The reasoning behind this is that corporations deserve some form of tax relief when they lose money, so they may apply the net operating loss to future income tax payments, reducing the need to make payments in future periods.
BREAKING DOWN ‘Net Operating Loss – NOL’
An NOL makes a company unprofitable for tax purposes. For example, Company A has taxable income of $500,000, tax deductions of $700,000 and a corporate tax rate of 30%. Its NOL is $500,000 – $700,000 = -$200,000. Because Company A does not have taxable income, it does not pay taxes that year. Otherwise it would have paid $250,000 x 30% = $75,000 in taxes. Because the company had an NOL the previous year, it may put the NOL toward the current year’s tax bill or apply it against taxable income in previous years.
Rules for Applying an NOL
A business may carry the taxable amount back to the two previous years and apply it against taxable income for a refund. For example, an NOL occurring in 2015 may be used for lowering tax payments in 2013 or 2014. Because the time value of money shows that tax savings at that time is more valuable than in the future, this is the more beneficial choice. However, if the business did not pay taxes in prior years, or the owner’s income is expected to substantially increase in the future and raise the company’s tax rate, the business may also carryforward the amount over the next 20 years, reducing the amount of taxable income during that time.
If a business creates NOLs in more than one year, they are to be drawn down completely in the order they are created before drawing down another NOL. Because any remaining NOL is canceled after 20 years, this reduces the risk of the NOL not being used.
Section 382 Limitation
An NOL may be considered a valuable asset because it can lower a company’s amount of taxable income. For this reason, the Internal Revenue Service (IRS) has a restriction on using an acquired company simply for its NOL’s tax benefits. Section 382 of the Internal Revenue Code states that if a company with a NOL has at least a 50% ownership change, the acquiring company may use only that part of the NOL in each concurrent year that is based on the long-term tax-exempt bond rate multiplied by the stock of the acquired company. However, purchasing a business with a substantial NOL may mean an increased amount of money going to the acquired company’s shareholders than if the business possessed a smaller NOL.
This morning, the Government Accountability Office (GAO) published a report on corporate income taxes, which found that 19.5 percent of “profitable large corporations” paid zero corporate income taxes in 2012.
Senator Bernie Sanders, whose campaign has been circulating the report, had this to say:
“There is something profoundly wrong in America when one out of five profitable corporations pay nothing in federal income taxes… We need real tax reform to ensure that the most profitable corporations in America pay their fair share in taxes. That means closing corporate tax loopholes to raise the revenue necessary to rebuild America and create millions of jobs.”
Should you be as outraged as Senator Sanders about the number of U.S. corporations that pay no corporate income tax?
In fact, there is good reason to think that many of the corporations that the GAO identifies as “profitable” did not actually earn a profit. In such cases, it would have been a mistake to collect corporate income taxes from these companies.
Defining Profitable Corporations
To understand why some unprofitable corporations might have been considered profitable by the recent GAO report, we need to distinguish between three concepts: book income, taxable income, and economic profit.
Book income refers to the income that a corporation reports on its publicly filed financial statement. Corporations generally seek to report book incomes that are as high as possible, in order to appear as profitable as possible to their shareholders.
Taxable income refers to the amount of income that a corporation reports on its tax return. Much of the U.S. tax code is devoted to defining corporate taxable income, which often differs somewhat from book income. Corporations with more than $10 million in assets are required to file Schedule M-3 to reconcile their book income with their taxable income.
Economic profit refers to a company’s revenues minus its expenditures. There are a few important differences between book income and economic profit, as described below.
The recent GAO report defines “profitable large corporations” as “those that did not report net losses in their financial statements.” In other words, the GAO’s 19.5 percent statistic applies to corporations with positive book income in 2012.
However, there are many clear-cut cases in which a corporation with positive book income should not owe federal corporate income taxes:
1. Corporations with Carried-Forward Net Operating Losses
Especially over the last decade, many U.S. corporations have experienced volatile earnings, with large gains in some years and large losses in other years. The U.S. tax code allows companies with losses in one tax year to deduct those losses from their profits in future tax years.
To see why this is important, imagine a company that had $3 million in losses in 2014 and made $1 million in profits in 2015. Over the two-year period, the corporation experienced a net loss, and should not be required to pay corporate income taxes on its income over that period.
The deduction for carried-forward losses allows the corporation to reduce its tax liability in 2015 to zero, to reflect that it still recovering from past losses. But if the company were not able to carry its losses forward, it would owe a positive tax liability in 2015, even though it made a net loss over the two year period.
2014
2015
2014-2015
Net profit/loss
-$3 million
+$1 million
-$2 million
Tax liability
zero
zero
zero
Tax liability if the corporation is not allowed to carry losses forward
zero
positive
positive
In all likelihood, some of the “profitable” corporations in the GAO report that paid zero corporate income taxes in 2012 were carrying forward losses from past years. These corporations might have had positive book incomes in 2012, but might have had no taxable income, due to carried-forward losses from the Great Recession.
The deduction for carried-forward losses is an important provision in the U.S. tax code, which prevents corporations with long-term net losses from being taxed. If some corporations in 2012 paid zero corporate income taxes because they were carrying forward past losses, this should be seen as a normal feature of the U.S. tax code, not a cause for concern.
2. Corporations with Foreign Profits and Domestic Losses
Many large U.S. corporations conduct business in multiple countries. It is likely that some of the corporations that were categorized as “profitable” by the GAO in 2012 did not actually earn positive profits in the United States.
As an example, we can imagine a U.S. multi-national corporation that brought back $2 million in 2012 from its overseas business but lost $1 million on its domestic business. Such a business would be categorized as profitable by the recent GAO report, because its total book income (foreign and domestic) adds up to $1 million.
Foreign income
Domestic income
Total (book) income
+$2 million
-$1 million
$1 million
However, there are good reasons why such a corporation would still face zero corporate tax under the U.S. law. The U.S. tax code offers corporations tax credits for the taxes they pay to foreign governments on their foreign income. The corporation in this example would probably be able to reduce its tax liability to zero by claiming a credit for the foreign taxes paid on its $2 million of overseas business income.
Foreign tax credits are a feature, not a bug, of the U.S. tax system. There are several good arguments for why U.S. corporations should not face U.S. corporate taxes on income earned abroad. Foreign tax credits help mitigate the double tax that arises when both a foreign government and the U.S. government try to tax the same foreign income.
To the extent that some of the “profitable” corporations in the GAO report earned only foreign profits, rather than domestic profits, it is entirely reasonable that these corporations should not be subject to any U.S. corporate tax burden.
3. Corporations with Large Capital Investments
The most important difference between book income, taxable income, and economic profit has to do with the treatment of investment costs. Under typical U.S. accounting standards, when a corporation makes a capital investment, it is only able to treat a small fraction of that investment as a current-year expense. However, the U.S. tax code allows corporations to treat a much larger fraction of the investment as a current year expense. Meanwhile, when calculating a corporation’s economic profit, it is appropriate to treat the entire cost of an investment as a current year expense.
As a result of these different calculation rules, a corporation with significant book income could have a much lower taxable income and an even lower economic profit. For example, we can imagine a corporation with $1 million in operating profits and $2 million in investment costs. Depending on how much of the investment the corporation treats as a current-year expense, the corporation could be making a large profit, no profit, or negative profit (see the example below).
Measuring the income of a corporation with $1 million in operating profit and $2 million in investments
Book income
Taxable income
Economic profit
+$800,000
$0
-$1,000,000
Note: the calculation for book income assumes that the corporation depreciates 10% of its investment. The calculation for taxable income assumes that the corporation depreciates 50% of its investment. The calculation for economic profit treats the full cost of the investment as an expense.
This blog post is not the place to argue how corporations should treat their capital investments for tax purposes (although the Tax Foundation has pretty strong opinionsabout this). The important point is that some U.S. corporations with positive book income might have negative taxable income: not because of any tricks or loopholes, but simply because the tax code operates under different accounting rules.
It is likely that many of the “profitable” corporations that owed zero corporate tax in 2012 were corporations with significant capital investments, who had positive book income under one accounting method but zero or negative taxable income under another accounting method. These corporations are not evading taxes or taking advantage of loopholes; they’re simply less profitable according to the tax code’s definitions than they are according to the GAO’s.
In conclusion, there are real, legitimate reasons why a “profitable” corporation would not and should not be required to pay corporate income taxes in a given year. Politicians should avoid jumping to the conclusion that there is something “profoundly wrong” when a large minority of corporations do not pay corporate income taxes.
Story 2: Wikileaks October Surprise On Hillary Clinton Emails Coming Soon? — Videos
WikiLeaks ‘October surprise’
FULL: Wikileaks Press Conference (10-4-2016) | Assange Trolls Trump World
Julian Assange A Sell Out? | No Hillary Clinton October Surprise By Wikileaks |
Alex Jones Goes Off On Julian Assange
Internet Enraged By Assange / Wikileaks Standown / Trolling of Public
Roger Stone: “Wednesday Hillary Clinton is done” Wikileaks release
HILLARY CLINTON WANTED TO DRONE WIKILEAKS!!!
AFRAID: Hillary Clinton Wikileaks Reveal, Due Tuesday, CANCELLED
Judicial Watch Panel: Clinton Scandal Update – Emails and the Clinton Foundation
Can Assange turn it around for Trump? Wikileaks boss WILL release ‘damaging information’ about Hillary tomorrow after initially cancelling ‘October Surprise’ speech from embassy balcony
Julian Assange had originally planned to address the world from the balcony of the Ecuadorian embassy in London on Monday
He was due to speak at the tenth anniversary of the founding of WikiLeaks
Assange will instead speak video link to an event in Berlin on Tuesday
The organisation earlier released information hacked from the Democrats
It came as a new report claimed Clinton had proposed a drone strike to take out Assange in 2010
By DARREN BOYLE FOR MAILONLINE and KHALEDA RAHMAN FOR DAILYMAIL.COM
PUBLISHED: 03:07 EST, 3 October 2016 | UPDATED: 14:19 EST, 3 October 201
WikiLeaks founder Julian Assange cancelled a planned appearance to mark the 10th anniversary of his organization from the balcony of the Ecuadorian embassy in London over security fears on Monday.
He had been planning to give a speech – amid claims he was about to release damaging information about Clinton which some claimed could be an ‘October Surprise’ which would swing the presidential election.
However, Assange, who is wanted by Swedish authorities for questioning in connection with an alleged rape, will make an announcement via video link to an event in Berlin on Tuesday morning.
In a tweet on Monday afternoon, WikiLeaks said Assange’s speech in London was moved to Berlin due to ‘specific information’ but did not elaborate further.
Scroll down for video
Wikileaks founder Julian Assange, pictured here in February on the balcony of the Ecuadorian embassy in London, had been planning to address a press conference later this week
In a tweet on Monday afternoon, WikiLeaks said Assange’s speech in London was moved to Berlin due to ‘specific information’ but did not elaborate further
Donald Trump’s former right-hand man Roger Stone claimed the new WikiLeaks revelations would destroy Clinton’s campaign.
In August this year, Assange told Fox News that he was holding information on Clinton which yielded ‘some quite unexpected angles, that are quite interesting, some even entertaining’.
He said he would release the information before the November 8 election.
Assange claimed the information could alter the election result, adding: ‘I think it’s significant. It depends on how it catches fire in the public and in the media.’
Meanwhile, a new report claims that Clinton once proposed a military drone strike to take out Assange in a bid to silence WikiLeaks.
Clinton discussed the possible assassination while she was Secretary of State in a meeting with her staff in 2010 about how to prevent a WikiLeaks document dump dubbed ‘CableGate,’ TruePundit reports.
+4
Donald Trump supporters believe Wikileaks will release highly damaging information later this week on Hillary Clinton’s presidential campaign in a so-called October Surprise event
Conservative political commentator Roger Stone believes Clinton’s campaign will collapse
At the time, Assange had been declaring his intention to release 250,000 secret cables – revealing a huge amount of damning communications between State Department officials and its foreign allies between 1966 and 2010.
‘Can’t we just drone this guy?’ Clinton asked during the meeting on November 23, 2010, the website reports citing State Department sources.
The sources said that her controversial query drew laughter in the room, but that it quickly died down when Clinton continued to speak in a ‘terse’ manner.
She allegedly called Assange a soft target as he was walking around freely at the time and not fearful of any reprisals.
Clinton and the Obama administration feared the content of the cables would damage US intelligence gathering operations as well as compromise private communication and intelligence shared with foreign governments.
In 2010, Assange had already released records that divulged secret US documents about the war in Afghanistan in July and about the war in Iraq in October.
A new report claims that Clinton once proposed a military drone strike to take out Assange in a bid to silence WikiLeaks. Above, one of Clinton’s aides sent an email with the subject line ‘an SP memo on possible legal and nonlegal strategies re Wikileaks’
After Clinton allegedly proposed a drone strike, another solution was reportedly brought up to solve the WikiLeaks problem: place a bounty for Assange’s capture and extradition to the United States.
Figures discussed were in the area of $10million, according to TruePundit.
And following that meeting, one of Clinton’s top aides – Anne-Marie Slaughter, the State Department’s director of policy planning – wrote an email to Clinton, Clinton’s aides Huma Abedin and Jacob Sullivan as well as Chief of Staff Cheryl Mills with the subject line ‘an SP memo on possible legal and nonlegal strategies re Wikileaks.’
Assange will make an announcement via video link to an event in Berlin on Tuesday morning
This year, WikiLeaks has already released information stolen by unknown hackers from the Democratic leadership in advance of the party’s convention.
The 20,000 leaked emails showed how party officials had tried to undermine Clinton’s rival Bernie Sanders.
The release of the emails forced the resignation of Debbie Wasserman Schultz, chair of the Democratic National Committee.
Assange said: ‘In the case of the DNC leaks for example, we pushed as fast as we could to try and get it in before the Democratic Nomination Conference, because obviously people had a right to understand who it is that they’re nominating.
‘The same is true here for the US electoral process.’
Tuesday’s anniversary party in Berlin will commemorate the 2006 registration of the domain name wikileaks.org.
WikiLeaks launched in January 2007, with Assange saying it would use encryption and a censorship-proof website to protect sources and publicise secret information.
The site has since published more than 10million leaked documents.
It first caught the world’s attention when it released manuals for prison guards at Guantanamo Bay.
But it really hit its stride in 2010, unveiling logs of US military operations in Iraq and Afghanistan and a video showing a US helicopter crew mowing down a group of unarmed civilians – including two journalists – in Baghdad.
That same year, it also published a cache of diplomatic cables from US embassies around the world, deeply embarrassing Washington.
In an interview with Der Spiegel over the weekend, Assange said: ‘The most important single collection of material we have published is the US diplomatic cable series.’
But 2010 also saw grave blows to the organization.
Assange was accused of having sex with a woman while she was asleep after the two met at a Stockholm conference.
The white-haired WikiLeaks founder took refuge in the Embassy of Ecuador, London – which granted him political asylum in 2012 after he lost a legal battle to block his extradition to Sweden.
The 45-year-old has always maintained the allegations are false and has refused to travel to Stockholm for questioning due to concerns that Sweden will hand him over to the US to stand trial for espionage.
WikiLeaks has been accused of allowing foreign powers to influence November’s presidential election by publishing information which may have been gathered by Russian hackers.
He said: ‘We’re not going to start censoring our publications because there is a US election. Our role is to publish. We believe in what we’re doing. The attacks only make us stronger.’
Since November 2010, Assange has been subject to extradition to Sweden, where he is wanted for questioning concerning an allegation of rape. Assange denies the allegation and has expressed concern that he will be extradited from Sweden to the United States due to his perceived role in publishing secret American documents.[2][3]
After exhausting his legal options in the United Kingdom, Assange failed to surrender for extradition. Instead, he sought and was granted asylum by Ecuador in August 2012. Assange has since remained in the Embassy of Ecuador in London, and he is unable to leave without being arrested for breaching his bail conditions.[4] The United Nations’ Working Group on Arbitrary Detention found, by a majority, that he has been “arbitrarily detained” and that his detention should be brought to an end;[5] UK Foreign Secretary Philip Hammond said the claim was “ridiculous” and that the group was “made up of lay people”, and called Assange a fugitive from justice.[6]
Early life
Assange was born in the north Queensland city of Townsville,[7][8] to Christine Ann Hawkins (b. 1951),[9] a visual artist,[10] and John Shipton, an anti-war activist and builder.[11] The couple had separated before Assange was born.[11]
When he was a year old, his mother married Richard Brett Assange,[12][13][14] an actor, with whom she ran a small theatre company.[15] They divorced around 1979, and Christine Assange then became involved with Leif Meynell, also known as Leif Hamilton, a member of the Australian New Age group the Family, with whom she had a son before the couple broke up in 1982.[7][16][17] Assange had a nomadic childhood, and had lived in over thirty[18][19]different Australian towns by the time he reached his mid-teens, when he settled with his mother and half-brother in Melbourne, Victoria.[12][20]
In September 1991, Assange was discovered hacking into the Melbourne master terminal of Nortel, a Canadian multinationaltelecommunications corporation.[13] The Australian Federal Police tapped Assange’s phone line (he was using a modem), raided his home at the end of October,[29] and eventually charged him in 1994 with 31 counts of hacking and related crimes.[13] In December 1996, he pleaded guilty to 25 charges (the other six were dropped), was ordered to pay reparations of A$2,100 and released on a good behaviour bond,[27][30] avoiding a heavier penalty due to the perceived absence of malicious or mercenary intent and his disrupted childhood.[31][32][33][34] After the trial, Assange lived in Melbourne, where he survived on single-parent income support.[30]
Programming
In 1993 Assange gave technical advice to the Victoria Police Child Exploitation Unit and assisted with prosecutions.[35] In the same year he was involved in starting one of the first public Internet service providers in Australia, Suburbia Public Access Network.[12][36] He began programming in 1994, authoring or co-authoring the Transmission Control Protocol port scanner strobe.c (1995);[37][38] patches to the open-source database PostgreSQL(1996);[39][40] the Usenet caching software NNTPCache (1996);[41] the Rubberhosedeniable encryption system (1997),[42][43] which reflected his growing interest in cryptography;[44] and Surfraw, a command-line interface for web-based search engines (2000).[45] During this period he also moderated the AUCRYPTO forum;[44] ran Best of Security, a website “giving advice on computer security” that had 5,000 subscribers in 1996;[46] and contributed research to Suelette Dreyfus’sUnderground (1997), a book about Australian hackers, including the International Subversives.[25][47] In 1998, he co-founded the company Earthmen Technology.[33]
In 1999 Assange registered the domain leaks.org, but, as he put it, “I didn’t do anything with it.”[33][unreliable source?] He did, however, publicise a patent granted to the National Security Agency in August 1999 for voice-data harvesting technology: “This patent should worry people. Everyone’s overseas phone calls are or may soon be tapped, transcribed and archived in the bowels of an unaccountable foreign spy agency.”[44] Systematic abuse of technology by governments against fundamental freedoms of world citizens remained an abiding concern — more than a decade later in the introduction to Cypherpunks (2012) Assange summarized “the Internet, our greatest tool for emancipation, has been transformed into the most dangerous facilitator of totalitarianism we have ever seen”.[48]
After his period of study at the University of Melbourne, Assange and others established WikiLeaks in 2006. Assange is a member of the organisation’s advisory board[49] and describes himself as the editor-in-chief.[50] From 2007 to 2010, Assange travelled continuously on WikiLeaks business, visiting Africa, Asia, Europe and North America.[13][19][51][52][53]
WikiLeaks published secret information, news leaks,[54] and classified media from anonymous sources.[55] By 2015 WikiLeaks had published more than 10 million documents and associated analyses, and was described by Assange himself as “a giant library of the world’s most persecuted documents”.[56] The published material between 2006 and 2009 attracted various degrees of publicity,[57] but it was only after it began publishing documents supplied by Chelsea Manning that Wikileaks became a household name.[58] The Manning material included the Collateral Murder video (April 2010)[59] which showed US soldiers shooting dead 18 people from a helicopter in Iraq, [60] the Afghanistan war logs (July 2010), the Iraq war logs(October 2010), a quarter of a million diplomatic cables (November 2010), and the Guantánamo files (April 2011).
The year 2010 culminated with the Sam Adams Award, which Assange accepted in October,[93] and a string of distinctions in December—the Le Monde readers’ choice award for person of the year,[94][95] the Time readers’ choice award for person of the year (he was also a runner-up in Time’s overall person of the year award),[96][97] a deal for his autobiography worth at least US$1.3 million,[98][99][100] and selection by the Italian edition of Rolling Stone as “rockstar of the year.”[101][102]
Assange wrote on WikiLeaks in February 2016: “I have had years of experience in dealing with Hillary Clinton and have read thousands of her cables. Hillary lacks judgement and will push the United States into endless, stupid wars which spread terrorism. … she certainly should not become president of the United States.”[120]
On 22 July 2016, WikiLeaks released emails and files sent from or received by Democratic National Committee (DNC). The New York Times reported that “Assange accused Mrs. Clinton of having been among those pushing to indict him…” and that he had timed the release to coincide with the 2016 Democratic National Convention.[121] In an interview with Robert Peston of ITV News Assange suggested that he saw Hillary Clinton as a personal foe.[122][123] He said in an interview with “Democracy Now!” that choosing between Hillary Clinton and Donald Trump is like choosing between cholera or gonorrhea. “Personally, I would prefer neither.”[124]
US criminal investigation
Assange speaks on the steps of St Paul’s Cathedral in London, 16 October 2011
After WikiLeaks released the Manning material, US authorities began investigating WikiLeaks and Assange personally with a view to prosecuting them under the Espionage Act of 1917.[125] In November 2010 US Attorney-GeneralEric Holder said there was “an active, ongoing criminal investigation” into WikiLeaks.[126] It emerged from legal documents leaked over the ensuing months that Assange and others were being investigated by a federal grand jury in Alexandria, Virginia.[127][128][129] An email from an employee of intelligence consultancy Strategic Forecasting, Inc. (Stratfor) leaked in 2012 said, “We have a sealed indictment on Assange.”[130] The US government denies the existence of such an indictment.[131][132]
In December 2011 prosecutors in the Chelsea Manning case revealed the existence of chat logs between Manning and an alleged WikiLeaks interlocutor they claimed to be Assange;[133][134] he denied this,[135][136] dismissing the alleged connection as “absolute nonsense.”[137] The logs were presented as evidence during Manning’s court-martial in June–July 2013. The prosecution argued that they show WikiLeaks helping Manning reverse-engineer a password.[138][139] The evidence that the interlocutor was Assange is circumstantial, however, and Manning insists she acted alone.[129][139]
Assange was being examined separately by “several government agencies” in addition to the grand jury, most notably the FBI.[140] Court documents published in May 2014 suggest that Assange was still under “active and ongoing” investigation at that time.[141]
Moreover, some Snowden documents published in 2014 show that the United States government put Assange on the “2010 Manhunting Timeline”,[142] and in the same period they urged their allies to open criminal investigations into the editor-in-chief of WikiLeaks.[143] In the same documents there was a proposal by the NSA to designate WikiLeaks as a “malicious foreign actor”, thus increasing the surveillance against it.
On 26 January 2015, WikiLeaks revealed that three members of the organisation received notice that “Google had handed over all their emails and metadata to the United States government”.[144]In the notifications, there was the list of possible charges that originated the warrant to Google and that the secret grand jury intends to use against WikiLeaks and likely Assange too. They were espionage, conspiracy to commit espionage, theft or conversion of property belonging to the United States government, violation of the Computer Fraud and Abuse Act and general conspiracy. They carry up to a minimum of 45 years in prison, if they amount to one charge per these five types; otherwise, even more years could be added.
The United States investigation confirmed its ongoing proceedings against WikiLeaks in a 15 December 2015 court submission.[145]
Swedish sexual assault allegations
Demonstration in support of Assange in front of Sydney Town Hall, 10 December 2010
In November 2010 Assange was alleged to have committed several crimes against two different women during a visit to Sweden that August. He was wanted for questioning in Sweden over two counts of sexual molestation, one count of unlawful coercion and one count of “lesser-degree rape” (mindre grov våldtäkt). Assange denies the allegations.[146][147]
After 18 August 2015, Assange could no longer be charged for all three of the less serious allegations, as the Swedish prosecutors did not succeed in interviewing Assange before the statute of limitations for these alleged crimes ran out. However, he is still wanted for questioning over the allegation of rape. The preliminary investigation still continues as the statute of limitations here will only expire in 2020.[148][149][150][151][152]
Political asylum and life at the Ecuadorian embassy
Julian Assange on a balcony in the Ecuadorian embassy in London
Assange and his supporters claim he is concerned not about any proceedings in Sweden as such, but that his deportation to Sweden could lead to politically motivated deportation to the United States, where he could face severe penalties, up to the death sentence, for his activities related to WikiLeaks.[60]
Ecuadoran Foreign Minister Ricardo Patiño met with Julian Assange in the Ecuadorian Embassy on 16 June 2013
On 16 August 2012, Foreign Minister Patiño announced that Ecuador was granting Assange political asylum because of the threat represented by the United States secret investigation against him and several calls for assassination from many American politicians.[157][158][159][160] In its formal statement, Ecuador reasoned that “as a consequence of [Assange’s] determined defense to freedom of expression and freedom of press… in any given moment, a situation may come where his life, safety or personal integrity will be in danger”.[161] Latin American states expressed support for Ecuador.[162][163][164][165] Ecuadorian PresidentRafael Correa confirmed on 18 August that Assange could stay at the embassy indefinitely,[166][167][168] and the following day Assange gave his first speech from the balcony.[169][170][171][172] Assange’s supporters forfeited £293,500 in bail[173] and sureties.[173][174] His home since then has been an office converted into a studio apartment, equipped with a bed, telephone, sun lamp, computer, shower, treadmill, and kitchenette.[175][176][177]
Just before Assange was granted asylum, the UK Government wrote to Foreign Minister Patiño stating that the police were entitled to enter the embassy and arrest Assange under UK law.[178] Patiño criticised what he claimed to be an implied threat, stating that “such actions would be a blatant disregard of the Vienna Convention“. Officers of the Metropolitan Police Service were stationed outside the building from June 2012 to October 2015 in order to arrest Assange for extradition and for breach of bail, should he leave the embassy. The police guard was withdrawn on grounds of cost in October 2015, but the police said they would still deploy “a number of overt and covert tactics to arrest him”. The cost of the policing for the period was reported to have been £12.6 million.[179]
In April 2015, during a video conference to promote the documentary Terminal F about Edward Snowden, Bolivia‘s ambassador to Russia, María Luisa Ramos Urzagaste, accused Assange of putting the life of Bolivian presidentEvo Morales at risk by intentionally providing the United States with false rumours that Snowden was on the president’s plane when it was forced to land in Vienna in July 2013. “It is possible that in this wide-ranging game that you began my president did not play a crucial role, but what you did was not important to my president, but it was to me and the citizens of our country. And I have faith that when you planned this game you took into consideration the consequences,” the ambassador told Assange. Assange stated that the plan “was not completely honest, but we did consider that the final result would have justified our actions. We weren’t expecting this outcome. The result was caused by the United States’ intervention. We can only regret what happened.”[180] Later, in an interview[181] with Democracy Now, Assange explained the story of the grounding of Morales’ plane, claiming that after the United States cancelled Snowden’s passport, WikiLeaks thought about other strategies to take him to Latin America, and they considered private presidential jets of those countries which offered support. The appointed jet was that of Venezuelan President Nicolás Maduro, but Assange stated that “our code language that we used deliberately swapped the presidential jet that we were considering for the Bolivian jet […] and in some of our communications, we deliberately spoke about that on open lines to lawyers in the United States. And we didn’t think much more of it. […] We didn’t think this was anything more than just distracting.” Eventually, the plan was not pursued and, under Assange’s advice, Snowden sought asylum in Russia.
Paris newspaper Le Monde in its edition of 3 July 2015 published an open letter from Assange to French President François Hollande in which Assange urged the French government to grant him refugee status.[182] Assange wrote that “only France now has the ability to offer me the necessary protection against, and exclusively against, the political persecution that I am currently the object of.”[183] In the letter Assange wrote, “By welcoming me, France would fulfill a humanitarian but also probably symbolic gesture, sending an encouragement to all journalists and whistleblowers … Only France is now able to offer me the necessary protection … France can, if it wishes, act.”[182][183]
In a statement issued by the Élysée Palace on 3 July 2015 in response to this letter, the French President said: “France cannot act on his request. The situation of Mr Assange does not present an immediate danger.”[184]
On 4 July 2015, in response to the denial of asylum by France, a spokesman for Assange denied that Assange had actually “filed” a request for asylum in France. Speaking on behalf of Assange, Baltasar Garzón, head of his legal team, said that Assange had sent the open letter to French president Francois Hollande; but Assange had only expressed his willingness “to be hosted in France if and only if an initiative was taken by the competent authorities”.[183]
UNWGAD ruling
On 5 February 2016, the UN’s Working Group on Arbitrary Detention decided that Assange had been subject to arbitrary detention by the UK and Swedish Governments since 7 December 2010, including his time in prison, on conditional bail and in the Ecuadorian embassy. According to the group, Assange should be allowed to walk free and be given compensation.[185][186]
Assange is an advocate of information transparency and market libertarianism.[193] He has written a few short pieces, including “State and terrorist conspiracies” (2006),[194] “Conspiracy as governance” (2006),[195] “The hidden curse of Thomas Paine” (2008),[196] “What’s new about WikiLeaks?” (2011),[197] and the foreword to Cypherpunks (2012).[48] He also contributed research to Suelette Dreyfus’sUnderground (1997),[25] and received a co-writer credit for the Calle 13 song “Multi_Viral” (2013).
Assange’s book, When Google Met WikiLeaks, was published by OR Books on 18 September 2014.[198] The book recounts when Google CEO Eric Schmidt requested a meeting with Assange, while he was under house arrest in rural Norfolk, UK. Schmidt was accompanied by Jared Cohen, director of Google Ideas; Lisa Shields, vice-president of the Council on Foreign Relations; and Scott Malcomson, the communications director for the International Crisis Group. Excerpts were published on the Newsweek website, while Assange participated in a Q&A event that was facilitated by the Reddit website and agreed to an interview with Vogue magazine.[199][200][201]
Personal life
While in his teens, Assange married a woman named Teresa, and in 1989 they had a son, Daniel Assange, now a software designer.[12][24][202] The couple separated and initially disputed custody of the child.[13] Assange was Daniel’s primary carer for much of his childhood.[203] In an open letter to French President François Hollande, Assange stated his youngest child lives in France with his/her mother. He also claimed that his family had faced death threats and harassment due to his work, forcing them to change identities and reduce contact with him.[204]
Andrew Fowler, The Most Dangerous Man in the World: The Explosive True Story of Julian Assange and the Lies, Cover-ups and Conspiracies He Exposed (2011).
Rep. Cuellar Asks DHS Sec. Johnson About Immigration Enforcement
Wave of Cubans Make Their Way to the U.S. Border
Cuban Immigration Surges After Thaw in US-Cuba Relations
TRT World – World in Focus: Record numbers of Cuban refugees in the US
Published on Jan 19, 2016
‘We want to go to the US’
Eight-thousand Cuban refugees were stuck at Costa Rica’s border with Nicaragua when Managua closed its border to them in mid-November last year. They were on their way to the United States. And only a 180 of them have made it through.
‘Wet foot, dry foot’
US immigration policy grants Cubans automatic refugee status and permanent residency after they stay in the country for more than a year. That remains the case, even if they arrive there illegally. The policy was first drafted in 1966 and revised 40 years later – with a slight change. Now, to seek asylum, people must arrive in the US without being intercepted at sea. For that reason, it’s been dubbed the ‘wet foot, dry foot’ policy. The US gives only Cubans this right – and between October 2014 and September 2015, more than 43-thousand Cubans exercised it. The Pew Research Center says that’s a 78 percent increase from the year before. So WHY are they all heading to the US now? Many Cubans fear that the recent thawing of relations between Washington and Havana could bring an end to the policy. But many others in the US and Central America feel their countries can’t sustain the influx of asylum seekers.
Air bridge to the US
Last month, several Latin American countries agreed with the International Organization for Migration to implement a pilot programme to transfer refugees to the United States. The first group of asylum seekers each paid 555 dollars to join – and they’ve now arrived in the US – via Costa Rica, El Salvador, Guatemala and Mexico. But those four countries are still to decide whether the programme should become permanent. But countries working to solve the crisis say they’re still overwhelmed.
Can the US support its Cuban refugees?
A popular destination for Cuban refugees is Miami. But its mayor says the city doesn’t have the money to take care of the refugees who are likely to end up there… A Florida newspaper reported that in 1960, Cuban immigrants received around 1 million dollars worth of US federal funding. Now, they receive about 680 million a year in food stamps and other benefits. Republican presidential candidate and Cuban-American, Marco Rubio thinks the US policy is outdated ‘hard to justify’ – given that Cubans who now come to settle in the US end up travelling to and from Cuba. And he questioned whether they can be considered oppressed. But whatever their reason for coming to the US may be…it seems many Cubans will continue to make the most of the ‘wet foot, dry foot’ policy for sometime yet.
The Wet-Foot, Dry-Foot Policy
Cuban Revolution (Fidel Castro Raul Castro Che Guevara)
THE WATCHMEN: CIA Secrets – Cuban Missile Crisis
The Cuban Missile Crisis Declassified 1 of 2
The Cuban Missile Crisis Declassified 2 of 2
Missile Crisis: The Man Who Saved the World
This PBS documentary explores the dramatic and little-known events that unfolded inside a nuclear-armed Russian submarine during the Cuban Missile Crisis of October 1962. While both U.S. and Russian politicians sought a solution to the stand-off, Vasili Arkhipov, an officer aboard the submarine, refused to fire a nuclear torpedo, thus averting disaster. The program combines tense drama with eyewitness accounts and expert testimony about a critical event during the Cold War.
“THE MISSILES OF OCTOBER” (1974)
Peter Jennings – The Missiles of October: What the World Didn’t Know (1992)
Bay of Pigs Invasion: Lessons Learned
Bay Pigs Declassified
The Brilliant Disaster Part 1 – JFK,Castro, & America’s Doomed Invasion Of Cuba’s Bay Of Pigs
The Brilliant Disaster Part 2 – JFK, Castro, & America’s Doomed Invasion Of Cuba’s Bay Of Pigs
TUSSLING ON HUMAN RIGHTS, OBAMA, CASTRO VOW NEW PATH FORWARD
BY JOSH LEDERMAN
President Barack Obama and Cuban President Raul Castro tussled Monday over differences on human rights and democracy but pledged to keep working on a new path forward between their two countries in a stunning diplomatic display.
Obama, midway through his history-making trip to Cuba, succeeded in getting Cuba’s leader to submit to questioning by reporters, a routine occurrence for U.S. presidents but an anomaly in a communist country where the media are tightly controlled. Though Castro’s answers were far from forthcoming, the mere occurrence of the news conference was significant in that way.
Asked by an American television reporter about political prisoners in Cuba, Castro seemed oblivious, first saying he couldn’t hear the question, then asking whether it was directed to him or Obama. Eventually he pushed back, saying if the journalist could offer up names of anyone allegedly imprisoned, “they will be released before tonight ends.”
“What political prisoners? Give me a name or names,” Castro said defiantly as Cuban citizens watched on state television. He added later, “It’s not correct to ask me about political prisoners in general.”
After responding to a handful of questions, Castro ended the news conference abruptly, declaring, “I think this is enough.”
Cuba is criticized for briefly detaining demonstrators thousands of times a year but has drastically reduced its practice of handing down long prison sentences for crimes human rights groups consider to be political. Cuba released dozens of political prisoners as part of its deal to normalize relations with Cuba, and Amnesty International said in a recent report that it knew of no prisoners of conscience in Cuba.
It’s extremely rare for Raul Castro to preside over a formal news conference, although he has sometimes taken reporters’ questions when the mood strikes. The White House worked feverishly to get him to agree, with negotiations going right up until the moment the two walked out of their meeting and faced reporters.
Obama, speaking earlier alongside Castro at the Palace of the Revolution, declared “this is a new day” for the U.S. and Cuba, which were estranged for half a century until he and Castro pursued a diplomatic thaw 15 months ago. Still, Obama said he and Castro had spoken openly about U.S. concerns over Cuba’s human rights record, calling such delicate discussions a prerequisite to truly normalizing relations.
“This is something that we are going to stay on,” Obama said, adding that if the two countries could make progress on the issue, their relationship could blossom. “In the absence of that, I think it will continue to be a very powerful irritant.”
Castro, in a lengthy statement, worked to turn the tables on Obama by saying Cuba found it “inconceivable” for a government to fail to ensure health care, education, food and social security for its people – a clear reference to the U.S. Aiming to show the issue needn’t be one-sided, Obama said he was open to hearing Cuba’s concerns.
“I actually welcome President Castro commenting on some of the areas where he feels that we’re falling short,” Obama said. “Because I think we should not be immune or afraid of criticism or discussion as well.”
Story 1: Asset Price Bubble Bursts Coming In October With 69 Months of Near Zero Federal Funds Interest Rates! — Interest Rate Suppression or Price Control and Manipulation Will Blow Up Economy — Suppressing Savings and Investment With Low Interest Rates Is A Formula For Diaster and Depression — Panic Time — Start A War Over Oil — Meltdown America –Videos
TABLE I -- SUMMARY OF TREASURY SECURITIES OUTSTANDING, AUGUST 31, 2014
(Millions of dollars)
Amount Outstanding
Title Debt Held Intragovernmental Totals
By the Public Holdings
Marketable:
Bills....................................... 1,450,293 1,704 1,451,998
Notes....................................... 8,109,269 7,365 8,116,634
Bonds....................................... 1,521,088 57 1,521,144
Treasury Inflation-Protected Securities..... 1,031,836 52 1,031,888
Floating Rate Notes 21 ................... 109,996 0 109,996
Federal Financing Bank 1 ................. 0 13,612 13,612
Total Marketable a........................... 12,222,481 22,790 2 12,245,271
Nonmarketable:
Domestic Series............................. 29,995 0 29,995
Foreign Series.............................. 2,986 0 2,986
State and Local Government Series........... 105,440 0 105,440
United States Savings Securities............ 177,030 0 177,030
Government Account Series................... 193,237 4,993,277 5,186,514
Hope Bonds 19............................... 0 494 494
Other....................................... 1,443 0 1,443
Total Nonmarketable b........................ 510,130 4,993,771 5,503,901
Total Public Debt Outstanding ................ 12,732,612 5,016,561 17,749,172
TABLE II -- STATUTORY DEBT LIMIT, AUGUST 31, 2014
(Millions of dollars)
Amount Outstanding
Title Debt Held Intragovernmental Totals
By the Public 17, 2Holdings
Debt Subject to Limit: 17, 20
Total Public Debt Outstanding............... 12,732,612 5,016,561 17,749,172
Less Debt Not Subject to Limit:
Other Debt ............................... 485 0 485
Unamortized Discount 3................... 15,742 12,421 28,163
Federal Financing Bank 1 ............ 0 13,612 13,612
Hope Bonds 19............................. 0 494 494
Plus Other Debt Subject to Limit:
Guaranteed Debt of Government Agencies 4 * 0 *
Total Public Debt Subject to Limit ......... 12,716,386 4,990,033 17,706,419
Statutory Debt Limit 5..................................................................... 0
COMPILED AND PUBLISHED BY
THE BUREAU OF THE FISCAL SERVICE
www.TreasuryDirect.gov
Interest Expense on the Debt Outstanding
The Interest Expense on the Debt Outstanding includes the monthly interest for:
Amortized discount or premium on bills, notes and bonds is also included in the monthly interest expense.
The fiscal year represents the total interest expense on the Debt Outstanding for a given fiscal year. This includes the months of October through September. View current month details (XLS Format, File size 199KB, uploaded 09/05/2014).
Note: To read or print a PDF document, you need the Adobe Acrobat Reader (v5.0 or higher) software installed on your computer. You can download the Adobe Acrobat Reader from the Adobe Website.
Even after the Dow and the S&P 500 closed at new all-time highs, closely followed contrarian Marc Faber keeps sounding the alarm.
“We have a bubble in everything, everywhere,” the publisher of The Gloom, Boom & Doom Report told CNBC’s “Squawk Box” on Friday. Faber has long argued that the Federal Reserve’s massive asset purchasing programs and near-zero interest rates have inflated stock prices.
The catalyst for a market decline, as he sees it, could be a “raise in interest rates, not engineered by the Fed,” referring an increase in bond yields.
Faber also expressed concern about American consumers. “Their cost of living have gone up more than the salary increases, so they’re getting squeezed. So that’s why retailing is not doing particularly well.”
A real black swan event, he argued, would be a global recession. “The big surprise will be that the global economy slows down and goes into recession. And that will shock markets.”
If economies around the world can’t recovery with the Fed and other central banks pumping easy money into the system, that would send a dire message, Faber added. He believes the best way for world economies to recover is to cut the size of government.
There’s a dual-economy in the U.S. and around the world with the rich doing really well and others struggling, he said. “[But] the rich will get creamed one day, especially in Europe, on wealth taxes.”
The Wharton School professor sees second half economic growth of 3 to 4 percent, S&P 500 earnings near $120, and the start of Fed rate hikes in the spring or summer of 2015
Fed and TWTR Overvaluation, Evidence of Looming Market Crash: Stockman
The Federal Reserve Wednesday reassured investors that it will hold interest rates near zero for a “considerable time” after it ends the bond-buying program known as quantitative easing in October. In response, the Dow Jones Industrial Average (^DJI) closed at a new record high.
Former Director of the Office of Management and Budget and author of the book, The Great Deformation, David Stockman, has significant concerns about that very policy.
“I’m worried… that we’ve got the greatest bubble created by a central bank in human history,” he told Yahoo Finance.
In a recent blog post, Stockman offered a handful of high-flying stocks as evidence of what he sees as “madness.”
“…Twitter, is all that is required to remind us that once
again markets are trading in the nosebleed section
of history, rivaling even the madness of March 2000.”
Behind the madness
In an interview with Yahoo Finance, Stockman blamed Fed policy for creating that madness.
“We have been shoving zero-cost money into the financial markets for 6-years running,” he said. “That’s the kerosene that drives speculative trading – the carry trades. That’s what the gamblers use to fund their position as they move from one momentum play and trade to another.”
And that, he says, is not sustainable. While Stockman believes tech stocks are especially overvalued, he warns that it’s not just tech valuations that are inflated. “Everything’s massively overvalued, and it’s predicated on zero-cost overnight money that continues these carry trades; It can’t continue.”
And he still believes, as he has for some time – so far, incorrectly – that there will be a day of reckoning.
“When the trades begin to unwind because the carry cost has to normalize, you’re going to have a dramatic re-pricing dislocation in these financial markets.”
As Yahoo Finance’s Lauren Lyster points out in the associated video, investors who heeded Stockman’s advice last year would have missed out on a 28% run-up in stocks. But Stockman remains steadfast in his belief that the current Fed policy and the resultant market behavior can not continue. “I think what the Fed is doing is so unprecedented, what is happening in the markets is so unnatural,” he said. “This is dangerous, combustible stuff, and I don’t know when the explosion occurs – when the collapse suddenly is upon us – but when it happens, people will be happy that they got out of the way if they did.”
Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks
September 11, 2014
1. Factors Affecting Reserve Balances of Depository Institutions
Millions of dollars
Reserve Bank credit, related items, and
reserve balances of depository institutions at
Federal Reserve Banks
Averages of daily figures
Wednesday
Sep 10, 2014
Week ended
Sep 10, 2014
Change from week ended
Sep 3, 2014
Sep 11, 2013
Reserve Bank credit
4,377,690
+ 4,183
+ 761,693
4,379,719
Securities held outright1
4,159,537
+ 2,675
+ 765,361
4,160,521
U.S. Treasury securities
2,439,657
+ 2,671
+ 401,376
2,440,637
Bills2
0
0
0
0
Notes and bonds, nominal2
2,325,368
+ 2,678
+ 386,333
2,326,351
Notes and bonds, inflation-indexed2
97,755
0
+ 11,737
97,755
Inflation compensation3
16,534
– 7
+ 3,306
16,531
Federal agency debt securities2
41,562
0
– 22,868
41,562
Mortgage-backed securities4
1,678,317
+ 4
+ 386,851
1,678,322
Unamortized premiums on securities held outright5
208,963
– 219
+ 5,815
208,907
Unamortized discounts on securities held outright5
-18,664
+ 21
– 12,958
-18,654
Repurchase agreements6
0
0
0
0
Loans
291
– 8
+ 18
352
Primary credit
10
– 18
– 8
53
Secondary credit
0
0
0
0
Seasonal credit
247
+ 9
+ 94
266
Term Asset-Backed Securities Loan Facility7
34
0
– 68
34
Other credit extensions
0
0
0
0
Net portfolio holdings of Maiden Lane LLC8
1,664
– 1
+ 171
1,665
Net portfolio holdings of Maiden Lane II LLC9
63
0
– 1
63
Net portfolio holdings of Maiden Lane III LLC10
22
0
0
22
Net portfolio holdings of TALF LLC11
44
0
– 80
44
Float
-675
– 69
+ 94
-627
Central bank liquidity swaps12
77
+ 1
– 243
77
Other Federal Reserve assets13
26,369
+ 1,784
+ 3,517
27,349
Foreign currency denominated assets14
22,933
– 353
– 737
22,801
Gold stock
11,041
0
0
11,041
Special drawing rights certificate account
5,200
0
0
5,200
Treasury currency outstanding15
46,103
+ 14
+ 820
46,103
Total factors supplying reserve funds
4,462,967
+ 3,844
+ 761,776
4,464,863
Note: Components may not sum to totals because of rounding. Footnotes appear at the end of the table.
1. Factors Affecting Reserve Balances of Depository Institutions (continued)
Millions of dollars
Reserve Bank credit, related items, and
reserve balances of depository institutions at
Federal Reserve Banks
Averages of daily figures
Wednesday
Sep 10, 2014
Week ended
Sep 10, 2014
Change from week ended
Sep 3, 2014
Sep 11, 2013
Currency in circulation15
1,292,467
– 442
+ 84,956
1,291,993
Reverse repurchase agreements16
266,584
+ 818
+ 173,996
267,602
Foreign official and international accounts
102,228
– 296
+ 9,640
107,303
Others
164,356
+ 1,115
+ 164,356
160,299
Treasury cash holdings
165
+ 4
+ 23
164
Deposits with F.R. Banks, other than reserve balances
52,715
– 6,170
– 19,233
53,117
Term deposits held by depository institutions
0
0
0
0
U.S. Treasury, General Account
39,081
– 3,787
+ 530
31,872
Foreign official
5,432
– 1,134
– 3,562
5,241
Other17
8,202
– 1,248
– 16,201
16,004
Other liabilities and capital18
63,991
– 1
+ 818
63,033
Total factors, other than reserve balances,
absorbing reserve funds
1,675,922
– 5,792
+ 240,561
1,675,910
Reserve balances with Federal Reserve Banks
2,787,045
+ 9,636
+ 521,214
2,788,954
Note: Components may not sum to totals because of rounding.
1.
Includes securities lent to dealers under the overnight securities lending facility; refer to table 1A.
2.
Face value of the securities.
3.
Compensation that adjusts for the effect of inflation on the original face value of inflation-indexed securities.
4.
Guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. The current face value shown is the remaining principal balance of
the securities.
5.
Reflects the premium or discount, which is the difference between the purchase price and the face value of the securities that has not been amortized. For U.S. Treasury and Federal agency debt securities, amortization is on a straight-line basis. For mortgage-backed securities, amortization is on an effective-interest basis.
6.
Cash value of agreements.
7.
Includes credit extended by the Federal Reserve Bank of New York to eligible borrowers through the Term Asset-Backed Securities Loan Facility.
8.
Refer to table 4 and the note on consolidation accompanying table 9.
9.
Refer to table 5 and the note on consolidation accompanying table 9.
10.
Refer to table 6 and the note on consolidation accompanying table 9.
11.
Refer to table 7 and the note on consolidation accompanying table 9.
12.
Dollar value of foreign currency held under these agreements valued at the exchange rate to be used when the foreign currency is returned
to the foreign central bank. This exchange rate equals the market exchange rate used when the foreign currency was acquired from the
foreign central bank.
13.
Includes accrued interest, which represents the daily accumulation of interest earned, and other accounts receivable. Also, includes Reserve Bank premises and equipment net of allowances for depreciation.
14.
Revalued daily at current foreign currency exchange rates.
15.
Estimated.
16.
Cash value of agreements, which are collateralized by U.S. Treasury securities, federal agency debt securities, and mortgage-backed securities.
17.
Includes deposits held at the Reserve Banks by international and multilateral organizations, government-sponsored enterprises, and designated financial market utilities.
18.
Includes the liabilities of Maiden Lane LLC, Maiden Lane II LLC, Maiden Lane III LLC, and TALF LLC to entities other than the Federal Reserve Bank of New York, including liabilities that have recourse only to the portfolio holdings of these LLCs. Refer to table 4 through table 7 and the note on consolidation accompanying table 9. Also includes the liability for interest on Federal Reserve notes due to U.S. Treasury. Refer to table 8 and table 9.
Sources: Federal Reserve Banks and the U.S. Department of the Treasury.
1A. Memorandum Items
Millions of dollars
Memorandum item
Averages of daily figures
Wednesday
Sep 10, 2014
Week ended
Sep 10, 2014
Change from week ended
Sep 3, 2014
Sep 11, 2013
Securities held in custody for foreign official and international accounts
3,338,309
– 417
+ 61,832
3,343,937
Marketable U.S. Treasury securities1
3,010,563
– 456
+ 86,414
3,016,027
Federal agency debt and mortgage-backed securities2
285,805
+ 28
– 29,008
285,934
Other securities3
41,942
+ 12
+ 4,427
41,976
Securities lent to dealers
10,669
+ 1,648
– 1,429
11,123
Overnight facility4
10,669
+ 1,648
– 1,429
11,123
U.S. Treasury securities
9,860
+ 1,721
– 1,405
10,373
Federal agency debt securities
810
– 72
– 23
750
Note: Components may not sum to totals because of rounding.
1.
Includes securities and U.S. Treasury STRIPS at face value, and inflation compensation on TIPS. Does not include securities pledged as collateral to foreign official and international account holders against reverse repurchase agreements with the Federal Reserve presented in tables 1, 8, and 9.
2.
Face value of federal agency securities and current face value of mortgage-backed securities, which is the remaining principal balance of the securities.
3.
Includes non-marketable U.S. Treasury securities, supranationals, corporate bonds, asset-backed securities, and commercial paper at face value.
4.
Face value. Fully collateralized by U.S. Treasury securities.
2. Maturity Distribution of Securities, Loans, and Selected Other Assets and Liabilities, September 10, 2014
Millions of dollars
Remaining Maturity
Within 15
days
16 days to
90 days
91 days to
1 year
Over 1 year
to 5 years
Over 5 year
to 10 years
Over 10
years
All
Loans1
118
234
0
0
0
…
352
U.S. Treasury securities2
Holdings
0
90
3,194
1,037,162
742,261
657,930
2,440,637
Weekly changes
0
0
0
+ 1,615
– 1
+ 2,037
+ 3,651
Federal agency debt securities3
Holdings
1,556
1,329
3,584
32,746
0
2,347
41,562
Weekly changes
0
0
0
0
0
0
0
Mortgage-backed securities4
Holdings
0
0
0
10
4,698
1,673,614
1,678,322
Weekly changes
0
0
0
0
+ 863
– 857
+ 6
Asset-backed securities held by
TALF LLC5
0
0
0
0
0
0
0
Repurchase agreements6
0
0
…
…
…
…
0
Central bank liquidity swaps7
77
0
0
0
0
0
77
Reverse repurchase agreements6
267,602
0
…
…
…
…
267,602
Term deposits
0
0
0
…
…
…
0
Note: Components may not sum to totals because of rounding.
…Not applicable.
1.
Excludes the loans from the Federal Reserve Bank of New York (FRBNY) to Maiden Lane LLC, Maiden Lane II LLC, Maiden
Lane III LLC, and TALF LLC. The loans were eliminated when preparing the FRBNY’s statement of condition consistent with consolidation
under generally accepted accounting principles.
2.
Face value. For inflation-indexed securities, includes the original face value and compensation that adjusts for the effect of inflation on the
original face value of such securities.
3.
Face value.
4.
Guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. The current face value shown is the remaining principal balance of the securities.
5.
Face value of asset-backed securities held by TALF LLC, which is the remaining principal balance of the underlying assets.
6.
Cash value of agreements.
7.
Dollar value of foreign currency held under these agreements valued at the exchange rate to be used when the foreign currency is returned to
the foreign central bank. This exchange rate equals the market exchange rate used when the foreign currency was acquired from the foreign
central bank.
3. Supplemental Information on Mortgage-Backed Securities
Millions of dollars
Account name
Wednesday
Sep 10, 2014
Mortgage-backed securities held outright1
1,678,322
Commitments to buy mortgage-backed securities2
80,643
Commitments to sell mortgage-backed securities2
0
Cash and cash equivalents3
4
1.
Guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. The current face value shown is the remaining principal balance of the securities.
2.
Current face value. Generally settle within 180 days and include commitments associated with outright transactions, dollar rolls, and coupon swaps.
3.
This amount is included in other Federal Reserve assets in table 1 and in other assets in table 8 and table 9.
4. Information on Principal Accounts of Maiden Lane LLC
Millions of dollars
Account name
Wednesday
Sep 10, 2014
Net portfolio holdings of Maiden Lane LLC1
1,665
Outstanding principal amount of loan extended by the Federal Reserve Bank of New York2
0
Accrued interest payable to the Federal Reserve Bank of New York2
0
Outstanding principal amount and accrued interest on loan payable to JPMorgan Chase & Co.3
0
1.
Fair value. Fair value reflects an estimate of the price that would be received upon selling an asset if the transaction were to be conducted in an orderly market on the measurement date. Revalued quarterly. This table reflects valuations as of June 30, 2014. Any assets purchased after
this valuation date are initially recorded at cost until their estimated fair value as of the purchase date becomes available.
2.
Book value. This amount was eliminated when preparing the Federal Reserve Bank of New York’s statement of condition consistent with consolidation under generally accepted accounting principles. Refer to the note on consolidation accompanying table 9.
3.
Book value. The fair value of these obligations is included in other liabilities and capital in table 1 and in other liabilities and accrued dividends in table 8 and table 9.
Note: On June 26, 2008, the Federal Reserve Bank of New York (FRBNY) extended credit to Maiden Lane LLC under the authority of section 13(3) of the Federal Reserve Act. This limited liability company was formed to acquire certain assets of Bear Stearns and to manage those assets through time to maximize repayment of the credit extended and to minimize disruption to financial markets. Payments by Maiden Lane LLC from the proceeds of the net portfolio holdings will be made in the following order: operating expenses of the LLC, principal due to the FRBNY, interest due to the FRBNY, principal due to JPMorgan Chase & Co., and interest due to JPMorgan Chase & Co. Any remaining funds will be paid to the FRBNY.
5. Information on Principal Accounts of Maiden Lane II LLC
Millions of dollars
Account name
Wednesday
Sep 10, 2014
Net portfolio holdings of Maiden Lane II LLC1
63
Outstanding principal amount of loan extended by the Federal Reserve Bank of New York2
0
Accrued interest payable to the Federal Reserve Bank of New York2
0
Deferred payment and accrued interest payable to subsidiaries of American International Group, Inc.3
0
1.
Fair value. Fair value reflects an estimate of the price that would be received upon selling an asset if the transaction were to be conducted in an orderly market on the measurement date. Revalued quarterly. This table reflects valuations as of June 30, 2014. Any assets purchased after
this valuation date are initially recorded at cost until their estimated fair value as of the purchase date becomes available.
2.
Book value. This amount was eliminated when preparing the Federal Reserve Bank of New York’s statement of condition consistent with consolidation under generally accepted accounting principles. Refer to the note on consolidation accompanying table 9.
3.
Book value. The deferred payment represents the portion of the proceeds of the net portfolio holdings due to subsidiaries of American
International Group, Inc. in accordance with the asset purchase agreement. The fair value of this payment and accrued interest payable are
included in other liabilities and capital in table 1 and in other liabilities and accrued dividends in table 8 and table 9.
Note: On December 12, 2008, the Federal Reserve Bank of New York (FRBNY) began extending credit to Maiden Lane II LLC under the authority of section 13(3) of the Federal Reserve Act. This limited liability company was formed to purchase residential mortgage-backed securities from the U.S. securities lending reinvestment portfolio of subsidiaries of American International Group, Inc. (AIG subsidiaries). Payments by Maiden Lane II LLC from the proceeds of the net portfolio holdings will be made in the following order: operating expenses of Maiden Lane II LLC, principal due to the FRBNY, interest due to the FRBNY, and deferred payment and interest due to AIG subsidiaries. Any remaining funds will be shared by the FRBNY and AIG subsidiaries.
6. Information on Principal Accounts of Maiden Lane III LLC
Millions of dollars
Account name
Wednesday
Sep 10, 2014
Net portfolio holdings of Maiden Lane III LLC1
22
Outstanding principal amount of loan extended by the Federal Reserve Bank of New York2
0
Accrued interest payable to the Federal Reserve Bank of New York2
0
Outstanding principal amount and accrued interest on loan payable to American International Group, Inc.3
0
1.
Fair value. Fair value reflects an estimate of the price that would be received upon selling an asset if the transaction were to be conducted in an orderly market on the measurement date. Revalued quarterly. This table reflects valuations as of June 30, 2014. Any assets purchased after
this valuation date are initially recorded at cost until their estimated fair value as of the purchase date becomes available.
2.
Book value. This amount was eliminated when preparing the Federal Reserve Bank of New York’s statement of condition consistent with consolidation under generally accepted accounting principles. Refer to the note on consolidation accompanying table 9.
3.
Book value. The fair value of these obligations is included in other liabilities and capital in table 1 and in other liabilities and accrued dividends in table 8 and table 9.
Note: On November 25, 2008, the Federal Reserve Bank of New York (FRBNY) began extending credit to Maiden Lane III LLC under the authority of section 13(3) of the Federal Reserve Act. This limited liability company was formed to purchase multi-sector collateralized debt obligations (CDOs) on which the Financial Products group of American International Group, Inc. (AIG) has written credit default swap (CDS) contracts. In connection with the purchase of CDOs, the CDS counterparties will concurrently unwind the related CDS transactions. Payments by Maiden Lane III LLC from the proceeds of the net portfolio holdings will be made in the following order: operating expenses of Maiden Lane III LLC, principal due to the FRBNY, interest due to the FRBNY, principal due to AIG, and interest due to AIG. Any remaining funds will be shared by the FRBNY and AIG.
7. Information on Principal Accounts of TALF LLC
Millions of dollars
Account name
Wednesday
Sep 10, 2014
Asset-backed securities holdings1
0
Other investments, net
44
Net portfolio holdings of TALF LLC
44
Outstanding principal amount of loan extended by the Federal Reserve Bank of New York2
0
Accrued interest payable to the Federal Reserve Bank of New York2
0
Funding provided by U.S. Treasury to TALF LLC, including accrued interest payable3
0
1.
Fair value. Fair value reflects an estimate of the price that would be received upon selling an asset if the transaction were to be conducted in an orderly market on the measurement date.
2.
Book value. This amount was eliminated when preparing the Federal Reserve Bank of New York’s statement of condition consistent with consolidation under generally accepted accounting principles. Refer to the note on consolidation accompanying table 9.
3.
Book value. The fair value of these obligations is included in other liabilities and capital in table 1 and in other liabilities and accrued dividends in table 8 and table 9.
Note: On November 25, 2008, the Federal Reserve announced the creation of the Term Asset-Backed Securities Loan Facility (TALF) under theauthority of section 13(3) of the Federal Reserve Act. The TALF is a facility under which the Federal Reserve Bank of New York (FRBNY) extended loans with a term of up to five years to holders of eligible asset-backed securities. The Federal Reserve closed the TALF for new loan extensions in 2010. The loans provided through the TALF to eligible borrowers are non-recourse, meaning that the obligation of the borrower can be discharged by surrendering the collateral to the FRBNY.
TALF LLC is a limited liability company formed to purchase and manage any asset-backed securities received by the FRBNY in connection with the decision of a borrower not to repay a TALF loan. TALF LLC has committed, for a fee, to purchase all asset-backed securities received by the FRBNY in conjunction with a TALF loan at a price equal to the TALF loan plus accrued but unpaid interest. Prior to January 15, 2013, the U.S. Treasury’s Troubled Asset Relief Program (TARP) committed backup funding to TALF LLC, providing credit protection to the FRBNY. However, the accumulated fees and income collected through the TALF and held by TALF LLC now exceed the remaining amount of TALF loans outstanding. Accordingly, the TARP credit protection commitment has been terminated, and TALF LLC has begun to distribute excess proceeds to the Treasury and the FRBNY. Any remaining funds will be shared by the FRBNY and the U.S. Treasury.
8. Consolidated Statement of Condition of All Federal Reserve Banks
Millions of dollars
Assets, liabilities, and capital
Eliminations from consolidation
Wednesday
Sep 10, 2014
Change since
Wednesday
Wednesday
Sep 3, 2014
Sep 11, 2013
Assets
Gold certificate account
11,037
0
0
Special drawing rights certificate account
5,200
0
0
Coin
1,930
+ 8
– 62
Securities, unamortized premiums and discounts, repurchase agreements, and loans
4,351,126
+ 3,534
+ 756,847
Securities held outright1
4,160,521
+ 3,657
+ 763,739
U.S. Treasury securities
2,440,637
+ 3,651
+ 399,549
Bills2
0
0
0
Notes and bonds, nominal2
2,326,351
+ 3,661
+ 385,784
Notes and bonds, inflation-indexed2
97,755
0
+ 10,546
Inflation compensation3
16,531
– 10
+ 3,219
Federal agency debt securities2
41,562
0
– 22,654
Mortgage-backed securities4
1,678,322
+ 6
+ 386,844
Unamortized premiums on securities held outright5
208,907
– 132
+ 5,820
Unamortized discounts on securities held outright5
-18,654
+ 19
– 12,787
Repurchase agreements6
0
0
0
Loans
352
– 10
+ 75
Net portfolio holdings of Maiden Lane LLC7
1,665
+ 1
+ 167
Net portfolio holdings of Maiden Lane II LLC8
63
0
– 1
Net portfolio holdings of Maiden Lane III LLC9
22
0
0
Net portfolio holdings of TALF LLC10
44
0
– 68
Items in process of collection
(0)
94
– 22
– 31
Bank premises
2,255
0
– 29
Central bank liquidity swaps11
77
+ 1
– 243
Foreign currency denominated assets12
22,801
– 404
– 925
Other assets13
25,095
+ 2,704
+ 3,719
Total assets
(0)
4,421,408
+ 5,821
+ 759,373
Note: Components may not sum to totals because of rounding. Footnotes appear at the end of the table.
8. Consolidated Statement of Condition of All Federal Reserve Banks (continued)
Millions of dollars
Assets, liabilities, and capital
Eliminations from consolidation
Wednesday
Sep 10, 2014
Change since
Wednesday
Wednesday
Sep 3, 2014
Sep 11, 2013
Liabilities
Federal Reserve notes, net of F.R. Bank holdings
1,247,980
– 2,086
+ 84,510
Reverse repurchase agreements14
267,602
+ 17,296
+ 175,438
Deposits
(0)
2,842,072
– 8,612
+ 499,663
Term deposits held by depository institutions
0
0
0
Other deposits held by depository institutions
2,788,954
– 24,799
+ 513,312
U.S. Treasury, General Account
31,872
+ 10,836
+ 1,852
Foreign official
5,241
– 1,326
– 3,524
Other15
(0)
16,004
+ 6,676
– 11,978
Deferred availability cash items
(0)
721
– 482
– 163
Other liabilities and accrued dividends16
6,693
– 299
– 1,529
Total liabilities
(0)
4,365,067
+ 5,817
+ 757,919
Capital accounts
Capital paid in
28,170
+ 2
+ 726
Surplus
28,170
+ 2
+ 726
Other capital accounts
0
0
0
Total capital
56,341
+ 4
+ 1,454
Note: Components may not sum to totals because of rounding.
1.
Includes securities lent to dealers under the overnight securities lending facility; refer to table 1A.
2.
Face value of the securities.
3.
Compensation that adjusts for the effect of inflation on the original face value of inflation-indexed securities.
4.
Guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. The current face value shown is the remaining principal balance of the securities.
5.
Reflects the premium or discount, which is the difference between the purchase price and the face value of the securities that has not been amortized. For U.S. Treasury and Federal agency debt securities, amortization is on a straight-line basis. For mortgage-backed securities, amortization is on an effective-interest basis.
6.
Cash value of agreements, which are collateralized by U.S. Treasury and federal agency securities.
7.
Refer to table 4 and the note on consolidation accompanying table 9.
8.
Refer to table 5 and the note on consolidation accompanying table 9.
9.
Refer to table 6 and the note on consolidation accompanying table 9.
10.
Refer to table 7 and the note on consolidation accompanying table 9.
11.
Dollar value of foreign currency held under these agreements valued at the exchange rate to be used when the foreign currency is returned to
the foreign central bank. This exchange rate equals the market exchange rate used when the foreign currency was acquired from the foreign
central bank.
12.
Revalued daily at current foreign currency exchange rates.
13.
Includes accrued interest, which represents the daily accumulation of interest earned, and other accounts receivable.
14.
Cash value of agreements, which are collateralized by U.S. Treasury securities, federal agency debt securities, and mortgage-backed securities.
15.
Includes deposits held at the Reserve Banks by international and multilateral organizations, government-sponsored enterprises, and designated financial market utilities.
16.
Includes the liabilities of Maiden Lane LLC, Maiden Lane II LLC, Maiden Lane III LLC, and TALF LLC to entities other than the Federal
Reserve Bank of New York, including liabilities that have recourse only to the portfolio holdings of these LLCs. Refer to table 4 through table 7 and the note on consolidation accompanying table 9. Also includes the liability for interest on Federal Reserve notes due to U.S. Treasury.
9. Statement of Condition of Each Federal Reserve Bank, September 10, 2014
Millions of dollars
Assets, liabilities, and capital
Total
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas
Dallas
San
City
Francisco
Assets
Gold certificate account
11,037
352
4,125
338
464
824
1,349
706
278
173
291
880
1,257
Special drawing rights certificate acct.
5,200
196
1,818
210
237
412
654
424
150
90
153
282
574
Coin
1,930
32
94
124
123
320
222
276
25
46
153
182
332
Securities, unamortized premiums and discounts, repurchase agreements,
and loans
4,351,126
88,009
2,670,390
104,231
94,993
243,168
240,542
177,833
53,725
26,795
57,330
132,586
461,524
Securities held outright1
4,160,521
84,160
2,553,576
99,673
90,839
232,534
229,991
170,046
51,317
25,497
54,804
126,772
441,311
U.S. Treasury securities
2,440,637
49,370
1,497,974
58,470
53,288
136,409
134,917
99,752
30,104
14,957
32,149
74,367
258,881
Bills2
0
0
0
0
0
0
0
0
0
0
0
0
0
Notes and bonds3
2,440,637
49,370
1,497,974
58,470
53,288
136,409
134,917
99,752
30,104
14,957
32,149
74,367
258,881
Federal agency debt securities2
41,562
841
25,509
996
907
2,323
2,298
1,699
513
255
547
1,266
4,409
Mortgage-backed securities4
1,678,322
33,949
1,030,093
40,207
36,644
93,803
92,777
68,595
20,701
10,285
22,107
51,139
178,021
Unamortized premiums on securities held outright5
208,907
4,226
128,220
5,005
4,561
11,676
11,548
8,538
2,577
1,280
2,752
6,365
22,159
Unamortized discounts on securities held outright5
-18,654
-377
-11,449
-447
-407
-1,043
-1,031
-762
-230
-114
-246
-568
-1,979
Repurchase agreements6
0
0
0
0
0
0
0
0
0
0
0
0
0
Loans
352
1
44
0
0
0
34
11
61
132
20
17
33
Net portfolio holdings of Maiden
Lane LLC7
1,665
0
1,665
0
0
0
0
0
0
0
0
0
0
Net portfolio holdings of Maiden
Lane II LLC8
63
0
63
0
0
0
0
0
0
0
0
0
0
Net portfolio holdings of Maiden
Lane III LLC9
22
0
22
0
0
0
0
0
0
0
0
0
0
Net portfolio holdings of TALF LLC10
44
0
44
0
0
0
0
0
0
0
0
0
0
Items in process of collection
94
0
0
0
0
0
93
0
0
1
0
0
0
Bank premises
2,255
121
434
74
110
222
209
198
124
97
243
224
200
Central bank liquidity swaps11
77
4
25
6
6
16
4
2
1
0
1
1
11
Foreign currency denominated assets12
22,801
1,037
7,335
1,714
1,813
4,754
1,311
629
192
96
240
381
3,299
Other assets13
25,095
535
15,039
739
546
1,547
1,374
1,014
356
219
347
798
2,580
Interdistrict settlement account
0
+ 10,547
– 58,585
+ 2,678
+ 9,252
+ 197
+ 8,040
– 10,297
– 10,950
– 2,083
– 134
+ 2,635
+ 48,701
Total assets
4,421,408
100,833
2,642,468
110,114
107,543
251,460
253,799
170,787
43,900
25,434
58,623
137,969
518,478
Note: Components may not sum to totals because of rounding. Footnotes appear at the end of the table.
9. Statement of Condition of Each Federal Reserve Bank, September 10, 2014 (continued)
Millions of dollars
Assets, liabilities, and capital
Total
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas
Dallas
San
City
Francisco
Liabilities
Federal Reserve notes outstanding
1,443,974
44,572
489,349
42,766
65,118
103,568
212,875
94,569
37,360
21,242
36,783
115,911
179,862
Less: Notes held by F.R. Banks
195,994
5,311
63,063
6,357
8,870
11,177
20,690
11,915
4,937
4,278
5,302
25,736
28,359
Federal Reserve notes, net
1,247,980
39,261
426,285
36,409
56,248
92,391
192,186
82,654
32,423
16,964
31,481
90,175
151,503
Reverse repurchase agreements14
267,602
5,413
164,244
6,411
5,843
14,956
14,793
10,937
3,301
1,640
3,525
8,154
28,385
Deposits
2,842,072
53,409
2,030,175
62,876
40,791
131,999
42,547
75,315
7,510
6,356
22,882
38,429
329,783
Term deposits held by depository institutions
0
0
0
0
0
0
0
0
0
0
0
0
0
Other deposits held by depository institutions
2,788,954
53,397
1,977,410
62,837
40,788
131,731
42,538
75,306
7,510
6,355
22,881
38,428
329,774
U.S. Treasury, General Account
31,872
0
31,872
0
0
0
0
0
0
0
0
0
0
Foreign official
5,241
2
5,214
3
3
8
2
1
0
0
0
1
6
Other15
16,004
11
15,679
36
0
260
7
7
0
0
1
0
3
Deferred availability cash items
721
0
0
0
0
0
611
0
0
110
0
0
0
Interest on Federal Reserve notes due
to U.S. Treasury16
1,693
19
1,199
20
10
23
86
73
20
12
20
54
155
Other liabilities and accrued
dividends17
5,000
167
2,179
211
208
544
361
282
142
118
126
208
454
Total liabilities
4,365,067
98,270
2,624,083
105,927
103,101
239,913
250,583
169,261
43,395
25,200
58,034
137,021
510,279
Capital
Capital paid in
28,170
1,282
9,193
2,093
2,221
5,773
1,608
763
252
117
295
474
4,099
Surplus
28,170
1,282
9,193
2,093
2,221
5,773
1,608
763
252
117
295
474
4,099
Other capital
0
0
0
0
0
0
0
0
0
0
0
0
0
Total liabilities and capital
4,421,408
100,833
2,642,468
110,114
107,543
251,460
253,799
170,787
43,900
25,434
58,623
137,969
518,478
Note: Components may not sum to totals because of rounding. Footnotes appear at the end of the table.
9. Statement of Condition of Each Federal Reserve Bank, September 10, 2014 (continued)
1.
Includes securities lent to dealers under the overnight securities lending facility; refer to table 1A.
2.
Face value of the securities.
3.
Includes the original face value of inflation-indexed securities and compensation that adjusts for the effect of inflation on the original face value of such securities.
4.
Guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. The current face value shown is the remaining principal balance of the securities.
5.
Reflects the premium or discount, which is the difference between the purchase price and the face value of the securities that has not been amortized. For U.S. Treasury and Federal agency debt securities, amortization is on a straight-line basis. For mortgage-backed securities, amortization is on an effective-interest basis.
6.
Cash value of agreements, which are collateralized by U.S. Treasury and federal agency securities.
7.
Refer to table 4 and the note on consolidation below.
8.
Refer to table 5 and the note on consolidation below.
9.
Refer to table 6 and the note on consolidation below.
10.
Refer to table 7 and the note on consolidation below.
11.
Dollar value of foreign currency held under these agreements valued at the exchange rate to be used when the foreign currency is returned to the foreign central bank. This exchange rate
equals the market exchange rate used when the foreign currency was acquired from the foreign central bank.
12.
Revalued daily at current foreign currency exchange rates.
13.
Includes accrued interest, which represents the daily accumulation of interest earned, and other accounts receivable.
14.
Cash value of agreements, which are collateralized by U.S. Treasury securities, federal agency debt securities, and mortgage-backed securities.
15.
Includes deposits held at the Reserve Banks by international and multilateral organizations, government-sponsored enterprises, and designated financial market utilities.
16.
Represents the estimated weekly remittances to U.S. Treasury as interest on Federal Reserve notes or, in those cases where the Reserve Bank’s net earnings are not sufficient to equate surplus to capital paid-in, the deferred asset for interest on Federal Reserve notes. The amount of any deferred asset, which is presented as a negative amount in this line, represents the amount of the Federal Reserve Bank’s earnings that must be retained before remittances to the U.S. Treasury resume. The amounts on this line are calculated in accordance with Board of Governors policy, which requires the Federal Reserve Banks to remit residual earnings to the U.S. Treasury as interest on Federal Reserve notes after providing for the costs of operations, payment of dividends, and the amount necessary to equate surplus with capital paid-in.
17.
Includes the liabilities of Maiden Lane LLC, Maiden Lane II LLC, Maiden Lane III LLC, and TALF LLC to entities other than the Federal Reserve Bank of New York, including liabilities that have recourse only to the portfolio holdings of these LLCs. Refer to table 4 through table 7 and the note on consolidation below.
Note on consolidation:
The Federal Reserve Bank of New York (FRBNY) has extended loans to several limited liability companies under the authority of section 13(3) of the Federal Reserve Act. On June 26, 2008, a loan was extended to Maiden Lane LLC, which was formed to acquire certain assets of Bear Stearns. On November 25, 2008, a loan was extended to Maiden Lane III LLC, which was formed to purchase multi-sector collateralized debt obligations on which the Financial Products group of the American International Group, Inc. has written credit default swap contracts. On December 12, 2008, a loan was extended to Maiden Lane II LLC, which was formed to purchase residential mortgage-backed securities from the U.S. securities lending reinvestment portfolio of subsidiaries of American International Group, Inc. On November 25, 2008, the Federal Reserve Board authorized the FRBNY to extend credit to TALF LLC, which was formed to purchase and manage any asset-backed securities received by the FRBNY in connection with the decision of a borrower not to repay a loan extended under the Term Asset-Backed Securities Loan Facility.
The FRBNY is the primary beneficiary of TALF LLC, because of the two beneficiaries of the LLC, the FRBNY and the U.S. Treasury, the FRBNY is primarily responsible for directing the financial activities of TALF LLC. The FRBNY is the primary beneficiary of the other LLCs cited above because it will receive a majority of any residual returns of the LLCs and absorb a majority of any residual losses of the LLCs. Consistent with generally accepted accounting principles, the assets and liabilities of these LLCs have been consolidated with the assets and liabilities of the FRBNY in the preparation of the statements of condition shown on this release. As a consequence of the consolidation, the extensions of credit from the FRBNY to the LLCs are eliminated, the net assets of the LLCs appear as assets on the previous page (and in table 1 and table 8), and the liabilities of the LLCs to entities other than the FRBNY, including those with recourse only to the portfolio holdings of the LLCs, are included in other liabilities in this table (and table 1 and table 8).
10. Collateral Held against Federal Reserve Notes: Federal Reserve Agents’ Accounts
Millions of dollars
Federal Reserve notes and collateral
Wednesday
Sep 10, 2014
Federal Reserve notes outstanding
1,443,974
Less: Notes held by F.R. Banks not subject to collateralization
195,994
Federal Reserve notes to be collateralized
1,247,980
Collateral held against Federal Reserve notes
1,247,980
Gold certificate account
11,037
Special drawing rights certificate account
5,200
U.S. Treasury, agency debt, and mortgage-backed securities pledged1,2
1,231,743
Other assets pledged
0
Memo:
Total U.S. Treasury, agency debt, and mortgage-backed securities1,2
4,160,521
Less: Face value of securities under reverse repurchase agreements
257,508
U.S. Treasury, agency debt, and mortgage-backed securities eligible to be pledged
3,903,013
Note: Components may not sum to totals because of rounding.
1.
Includes face value of U.S. Treasury, agency debt, and mortgage-backed securities held outright, compensation to adjust for the effect of inflation on the original face value of inflation-indexed securities, and cash value of repurchase agreements.
2.
Includes securities lent to dealers under the overnight securities lending facility; refer to table 1A.
Freedom from the IRS! – FairTax Explained – Educate Yourself!
FairTax explained – a 2 minute introduction
What is the FairTax legislation?
How is the FairTax collected?
How does the FairTax affect the economy?
How does the FairTax rate compare to today’s?
Can I pretend to be a business to avoid the sales tax?
Do corporations get a windfall break from the FairTax?
What is the impact of the FairTax on business?
If people bring home their whole paychecks how can prices fall?
Does the FairTax protect privacy and other civil liberties?
What assumptions does the FairTax make about government spending?
Why is the FairTax better than a flat income tax?
Is consumption a reliable source of revenue?
Is the FairTax rate really 23%?
How do we keep exemptions and exclusions from undermining the FairTax?
How does the FairTax impact retailers?
How will used goods be taxed?
How will the FairTax affect state sales tax systems?
What will happen to government programs like Social Security and Medicare?
How will Social Security payments be calculated under the FairTax?
How does the FairTax impact the middle class?
How will the FairTax impact seniors?
How does the FairTax impact savings?
Will the FairTax drive the economy down if people stop buying?
How does the FairTax affect tax preparers and CPAs?
How will the FairTax affect state sales tax systems?
If people bring home their whole paychecks how can prices fall?
Isn’t it a stretch to say the IRS will go away?
Will the FairTax lead to a massive underground economy?
How does the “prebate” work?
Is it fair for rich people to get the same prebate as poor people?
Wouldn’t it be more fair to exempt food and medicine from the FairTax?
Will the prebate create a massive new entitlement system?
Is the FairTax truly progressive?
How does the FairTax affect compliance costs?
How will the FairTax help people who don’t hire an accountant?
How can you tax life saving medical treatment?
How does the FairTax impact charitable giving?
Will government pay taxes under the FairTax?
What will the transition be like from the income tax to the FairTax?
Will the FairTax hurt home ownership with no mortgage interest deduction?
Is education taxed under the FairTax?
Are any significant economies funded by a sales tax?
What will happen to cities who depend on tax free bonds?
Can’t Americans just cross the border to avoid the FairTax
How does the FairTax affect illegal immigration?
How is the FairTax different from a Value Added Tax (VAT)?
Dave Ramsey Supports the Fair Tax
Neal Boortz Explain the FAIRTAX
Rob Woodall Floor Speech: The FairTax will bring jobs back to America.
Woodall: Taxing consumption instead of taxing income will grow the American economy.
Flat Tax vs. National Sales Tax
Grover Norquist: Flat Tax vs Fair Tax
Fair Tax Presentation
FairTax Show – Part 1
FairTax Show – Part 2
FairTax Show – Part 3
FairTax: Fire Up Our Economic Engine (Official HD)
My FAIRTAX Story_Paul Wizikowski
Woodall FairTax Special Order
Congressman John Linder, Father of the FairTax
John Linder devoted some 35 years of his life to public service, starting in the Georgia House of Representatives in 1975, and in Congress 1993 – 2011. Linder is nationally known as the father of the FairTax Act which he sponsored in Washington. Linder and radio commentator Neal Boortz wrote two books about why the FairTax is fairer than current taxation schemes. Linder spoke to the Public Policy Foundation on May 21, 1993, just a few months after he was sworn into Congress for the first of his nine terms.
The FairTax is a proposal to reform the federal tax code of the United States. It would replace all federal income taxes (including the alternative minimum tax, corporate income taxes, and capital gains taxes), payroll taxes(including Social Security and Medicare taxes), gift taxes, and estate taxes with a single broad national consumption tax on retail sales. The Fair Tax Act (H.R. 25/S. 122) would apply a tax, once, at the point of purchase on all new goods and services for personal consumption. The proposal also calls for a monthly payment to all familyhouseholds of lawful U.S. residents as an advance rebate, or “prebate”, of tax on purchases up to the poverty level.[1][2] First introduced into the United States Congress in 1999, a number of congressional committees have heard testimony on the bill; however, it has not moved from committee and has yet to have any effect on the tax system. In recent years, a tax reform movement has formed behind the FairTax proposal.[3] Increased attention was created after talk radio personality Neal Boortz and Georgia Congressman John Linderpublished The FairTax Book in 2005 and additional visibility was gained in the 2008 presidential campaign.As defined in the legislation, the tax rate is 23% for the first year. This percentage is based on the total amount paid including the tax ($23 out of every $100 spent in total). This would be equivalent to a 30% traditional U.S. sales tax ($23 on top of every $77 spent—$100 total).[4] The rate would then be automatically adjusted annually based on federal receipts in the previous fiscal year.[5] With the rebate taken into consideration, the FairTax would be progressive on consumption,[2] but would also be regressive on income at higher income levels (as consumption falls as a percentage of income).[6][7] Opponents argue this would accordingly decrease the tax burden on high-income earners and increase it on the middle class.[4][8] Supporters contend that the plan would effectively tax wealth, increase purchasing power,[9][10] and decrease tax burdens by broadening the tax base.The plan’s supporters believe that a consumption tax would have a positive effect on savings and investment, that it would ease tax compliance, and that the tax would result in increased economic growth, incentives forinternational business to locate in the U.S., and increased U.S. competitiveness in international trade.[11][12][13] The plan is intended to increase cost transparency for funding the federal government, and supporters believe it would have positive effects on civil liberties, the environment, and advantages with taxing illegal activity and undocumented immigrants.[11][14] Opponents contend that a consumption tax of this size would be extremely difficult to collect, and would lead to pervasive tax evasion.[4][6] They also argue that the proposed sales tax rate would raise less revenue than the current tax system, leading to an increased budget deficit.[4][15]There are also concerns regarding the proposed repeal of the Sixteenth Amendment, removal of tax deduction incentives, transition effects on after-tax savings, incentives on credit use, and the loss of tax advantages tostate and local bonds.
Linder first introduced the Fair Tax Act (H.R. 2525) on July 14, 1999 to the 106th United States Congress and a substantially similar bill has been reintroduced in each subsequent session of Congress. The bill attracted a total of 56 House and Senate cosponsors in the 108th Congress,[17][18] 61 in the 109th,[19][20] 76 in the 110th,[21][22] 70 in the 111th,[23][24] 78 in the 112th,[25][26] and 81 in the 113th (H.R. 25/S. 122). Former Speaker of the HouseDennis Hastert (Republican) had cosponsored the bill in the 109th–110th Congress, but it has not received support from the Democratic leadership, which still controls the Senate.[20][21][27] Democratic Representative Collin Peterson of Minnesota and Democratic Senator Zell Miller of Georgia cosponsored and introduced the bill in the 108th Congress, but Peterson is no longer cosponsoring the bill and Miller has left the Senate.[17][18] In the 109th–111th Congress, Representative Dan Boren has been the only Democrat to cosponsor the bill.[19][21] A number of congressional committees have heard testimony on the FairTax, but it has not moved from committee since its introduction in 1999. The legislation was also discussed with President George W. Bush and his Secretary of the TreasuryHenry M. Paulson.[28]
To become law, the bill will need to be included in a final version of tax legislation from the U.S. House Committee on Ways and Means, pass both the House and the Senate, and finally be signed by the President. In 2005, President Bush established an advisory panel on tax reform that examined several national sales tax variants including aspects of the FairTax and noted several concerns. These included uncertainties as to the revenue that would be generated, and difficulties of enforcement and administration, which made this type of tax undesirable to recommend in their final report.[8] The panel did not examine the Fairtax as proposed in the legislation. The FairTax received visibility in the 2008 presidential election on the issue of taxes and the IRS, with several candidates supporting the bill.[29][30] A poll in 2009 by Rasmussen Reports found that 43% of Americans would support a national sales tax replacement, with 38% opposed to the idea; the sales tax was viewed as fairer by 52% of Republicans, 44% of Democrats, and 49% of unaffiliateds.[31] President Barack Obama does not support the bill,[32] arguing for more progressive changes to the income and payroll tax systems.
Tax rate
The sales tax rate, as defined in the legislation for the first year, is 23% of the total payment including the tax ($23 of every $100 spent in total—calculated similar to income taxes). This would be equivalent to a 30% traditional U.S. sales tax ($23 on top of every $77 spent—$100 total, or $30 on top of every $100 spent—$130 total).[4] After the first year of implementation, this rate is automatically adjusted annually using a predefined formula reflecting actual federal receipts in the previous fiscal year.
The effective tax rate for any household would be variable due to the fixed monthly tax rebate that are used to rebate taxes paid on purchases up to the poverty level.[2] The tax would be levied on all U.S. retail sales for personal consumption on new goods andservices. Critics argue that the sales tax rate defined in the legislation would not be revenue neutral (that is, it would collect less for the government than the current tax system), and thus would increase the budget deficit, unless government spending were equally reduced.[4]
Sales tax rate
During the first year of implementation, the FairTax legislation would apply a 23% federal retail sales tax on the total transaction value of a purchase; in other words, consumers pay to the government 23 cents of every dollar spent in total (sometimes called tax-inclusive, and presented this way to provide a direct comparison with individual income and employment taxes which reduce a person’s available money before they can make purchases). The equivalent assessed tax rate is 30% if the FairTax is applied to the pre-tax price of a good like traditional U.S. state sales taxes (sometimes called tax-exclusive; this rate is not directly comparable with existing income and employment taxes).[4] After the first year of implementation, this tax rate would be automatically adjusted annually using a formula specified in the legislation that reflects actual federal receipts in the previous fiscal year.[5]
A household’s effective tax rate on consumption would vary with the annual expenditures on taxable items and the fixed monthly tax rebate. The rebate would have the greatest effect at low spending levels, where they could lower a household’s effective rate to zero or below.[33] The lowest effective tax rate under the FairTax could be negative due to the rebate for households with annual spending amounts below poverty level spending for a specified household size. At higher spending levels, the rebate has less impact, and a household’s effective tax rate would approach 23% of total spending. A person spending at the poverty level would have an effective tax rate of 0%, whereas someone spending at four times the poverty level would have an effective tax rate of 17.2%.[33] Buying or otherwise receiving items and services not subject to federal taxation (such as a used home or car) can contribute towards a lower effective tax rate. The total amount of spending and the proportion of spending allocated to taxable items would determine a household’s effective tax rate on consumption.[33] If a rate is calculated on income, instead of the tax base, the percentage could exceed the statutory tax rate in a given year.
The annual consumption allowance is based on the 2012 DHHS Poverty Guidelines as published in theFederal Register, January 26, 2012. There is no marriage penalty as the couple amount is twice the amount that a single adult receives. For each additional child above 7, add $3,960 to the annual consumption allowance, $911 to the annual rebate, and $76 to the monthly rebate amount. The annual consumption allowance is the amount of spending that is “untaxed” under the FairTax. Note: Alaska and Hawaii have different poverty levels and would have different FairTax rebate amounts.
Under the FairTax, familyhouseholds of lawful U.S. residents would be eligible to receive a “Family Consumption Allowance” (FCA) based on family size (regardless of income) that is equal to the estimated total FairTax paid on poverty level spending according to the poverty guidelines published by the U.S. Department of Health and Human Services.[1] The FCA is a tax rebate (known as a “prebate” as it would be an advance) paid in twelve monthly installments, adjusted for inflation. The rebate is meant to eliminate the taxation of household necessities and make the plan progressive.[4] Households would register once a year with their sales tax administering authority, providing the names and social security numbers of each household member.[1] The Social Security Administration would disburse the monthly rebate payments in the form of a paper check via U.S. Mail, an electronic funds transfer to a bank account, or a “smartcard” that can be used like a debit card.[1]
Opponents of the plan criticize this tax rebate due to its costs. Economists at the Beacon Hill Institute estimated the overall rebate cost to be $489 billion (assuming 100% participation).[35] In addition, economist Bruce Bartlett has argued that the rebate would create a large opportunity for fraud,[36] treats children disparately, and would constitute a welfarepayment regardless of need.[37]
The President’s Advisory Panel for Federal Tax Reform cited the rebate as one of their chief concerns when analyzing their national sales tax, stating that it would be the largestentitlement program in American history, and contending that it would “make most American families dependent on monthly checks from the federal government”.[8][38] Estimated by the advisory panel at approximately $600 billion, “the Prebate program would cost more than all budgeted spending in 2006 on the Departments of Agriculture, Commerce, Defense, Education, Energy, Homeland Security, Housing and Urban Development, and Interior combined.”[8] Proponents point out that income tax deductions, tax preferences, loopholes, credits, etc. under the current system was estimated at $945 billion by the Joint Committee on Taxation.[35] They argue this is $456 billion more than the FairTax “entitlement” (tax refund) would spend to cover each person’s tax expenses up to the poverty level. In addition, it was estimated for 2005 that the Internal Revenue Service was already sending out $270 billion in refund checks.[35]
Presentation of tax rate
Mathematically, a 23% tax out of $100 yields the same as a 30% tax on $77.
Sales and income taxes behave differently due to differing definitions of tax base, which can make comparisons between the two confusing. Under the existing individual income plus employment (Social Security; Medicare; Medicaid) tax formula, taxes to be paid are included in the base on which the tax rate is imposed (known as tax-inclusive). If an individual’s gross income is $100 and the sum of their income plus employment tax rate is 23%, taxes owed equals $23. Traditional state sales taxes are imposed on a tax base equal to the pre-tax portion of a good’s price (known as tax-exclusive). A good priced at $77 with a 30% sales tax rate yields $23 in taxes owed. To adjust an inclusive rate to an exclusive rate, divide the given rate by one minus that rate (i.e. ).
The FairTax statutory rate, unlike most U.S. state-level sales taxes, is presented on a tax base that includes the amount of FairTax paid. For example, a final after-tax price of $100 includes $23 of taxes. Although no such requirement is included in the text of the legislation, Congressman John Linder has stated that the FairTax would be implemented as an inclusive tax, which would include the tax in the retail price, not added on at checkout—an item on the shelf for five dollars would be five dollars total.[28][39] The legislation requires the receipt to display the tax as 23% of the total.[40] Linder states the FairTax is presented as a 23% tax rate for easy comparison to income and employment tax rates (the taxes it would be replacing). The plan’s opponents call the semantics deceptive. FactCheck called the presentation misleading, saying that it hides the real truth of the tax rate.[41]Bruce Bartlett stated that polls show tax reform support is extremely sensitive to the proposed rate,[37] and called the presentation confusing and deceptive based on the conventional method of calculating sales taxes.[42] Proponents believe it is both inaccurate and misleading to say that an income tax is 23% and the FairTax is 30% as it implies that the sales tax burden is higher.
A key question surrounding the FairTax is whether the tax has the ability to be revenue-neutral; that is, whether the tax would result in an increase or reduction in overall federal tax revenues. Economists, advisory groups, and political advocacy groups disagree about the tax rate required for the FairTax to be truly revenue-neutral. Various analysts use different assumptions, time-frames, and methods resulting in dramatically different tax rates making direct comparison among the studies difficult. The choice between static ordynamic scoring further complicates any estimate of revenue-neutral rates.[43]
A 2006 study published in Tax Notes by the Beacon Hill Institute at Suffolk University and Dr. Laurence Kotlikoff estimated the FairTax would be revenue-neutral for the tax year 2007 at a rate of 23.82% (31.27% tax-exclusive).[44] The study states that purchasing power is transferred to state and local taxpayers from state and local governments. To recapture the lost revenue, state and local governments would have to raise tax rates or otherwise change tax laws in order to continue collecting the same real revenues from their taxpayers.[38][44] The Argus Group and Arduin, Laffer & Moore Econometrics each published an analysis that defended the 23% rate.[45][46][47] While proponents of the FairTax concede that the above studies did not explicitly account for tax evasion, they also claim that the studies did not altogether ignore tax evasion under the FairTax. These studies presumably incorporated some degree of tax evasion in their calculations by using National Income and Product Account based figures, which is argued to understate total household consumption.[44] The studies also did not account for capital gains that may be realized by the U.S. government if consumer prices were allowed to rise, which would reduce the real value of nominal U.S. government debt.[44] Nor did these studies account for any increased economic growth that many economists researching the plan believe would occur.[44][47][48][49]
In contrast to the above studies, William G. Gale of the Brookings Institution published a study in Tax Notes that estimated a rate of 28.2% (39.3% tax-exclusive) for 2007 assuming full taxpayer compliance and an average rate of 31% (44% tax-exclusive) from 2006–2015 (assumes that the Bush tax cuts expire on schedule and accounts for the replacement of an additional $3 trillion collected through the Alternative Minimum Tax).[4][15][50] The study also concluded that if the tax base were eroded by 10% due to tax evasion, tax avoidance, and/or legislative adjustments, the average rate would be 34% (53% tax-exclusive) for the 10 year period. A dynamic analysis in 2008 by the Baker Institute For Public Policy concluded that a 28% (38.9% tax-exclusive) rate would be revenue neutral for 2006.[51] The President’s Advisory Panel for Federal Tax Reform performed a 2006 analysis to replace the individual and corporate income tax with a retail sales tax and estimated the rate to be 25% (34% tax-exclusive) assuming 15% tax evasion, and 33% (49% tax-exclusive) with 30% tax evasion.[8] The rate would need to be substantially higher to replace the additional taxes replaced by the FairTax (payroll, estate, and gift taxes). Several economists criticized the President’s Advisory Panel’s study as having allegedly altered the terms of the FairTax, using unsound methodology, and/or failing to fully explain their calculations.[35][44][52]
Taxable items and exemptions
The tax would be levied once at the final retail sale for personal consumption on new goods and services. Purchases of used items, exports and business-to-business intermediate transactions would not be taxed. Also excluded are investments, such as purchases ofstock, corporate mergers and acquisitions and capital investments. Savings and education tuition expenses would be exempt as they would be considered an investment (rather than final consumption).[53]
A good would be considered “used” and not taxable if a consumer already owns it before the FairTax takes effect or if the FairTax has been paid previously on the good, which may be different from the item being sold previously. Personal services such as health care, legal services, financial services, and auto repairs would be subject to the FairTax, as would renting apartments and other real property.[4] Food, clothing, prescription drugs and medical services would be taxed. (State sales taxes generally exempt these types of basic-need items in an effort to reduce the tax burden on low-income families. The FairTax would use a monthly rebate system instead of the common state exclusions.) Internet purchases would be taxed, as would retail international purchases (such as a boat or car) that are imported to the United States (collected by the U.S. Customs and Border Protection).[53]
Boston University study of the FairTax. Lower rates claimed on workers from a larger tax base, replacing regressive taxes, and wealth taxation.
President’s Advisory Panel’s analysis of a hybrid National Sales Tax. Higher rates claimed on the middle-class for an income tax replacement (excludes payroll, estate, and gift taxes replaced under the FairTax).
The FairTax’s effect on the distribution of taxation or tax incidence (the effect on the distribution of economic welfare) is a point of dispute. The plan’s supporters argue that the tax would broaden the tax base, that it would be progressive, and that it would decrease tax burdens and start taxing wealth (reducing the economic gap).[9][54] Opponents argue that a national sales tax would be inherently regressiveand would decrease tax burdens paid by high-income individuals.[4][55] A person earning $2 million a year could live well spending $1 million, and as a result pay a mere 11% of that year’s income in taxes.[4]Households at the lower end of the income scale spend almost all their income, while households at the higher end are more likely to devote a portion of income to saving. Therefore, according to economistWilliam G. Gale, the percentage of income taxed is regressive at higher income levels (as consumption falls as a percentage of income).[6]
Income earned and saved would not be taxed until spent under the proposal. Households at the extreme high end of consumption often finance their purchases out of savings, not income.[6][37] EconomistLaurence Kotlikoff states that the FairTax could make the tax system much more progressive and generationally equitable,[2] and argues that taxing consumption is effectively the same as taxing wages plus taxing wealth.[2] A household of three persons (this example will use two adults of any gender plus one child; the rebate does not consider marital status) spending $30,000 a year on taxable items would devote about 3.4% of total spending ( [$6,900 tax minus $5,888 rebate]/$30,000 spending ) to the FairTax after the rebate. The same household spending $125,000 on taxable items would spend around 18.3% ( [$28,750 tax minus $5,888 rebate]/$125,000 spending ) on the FairTax. At higher spending levels, the rebate has less impact and the rate approaches 23% of total spending. Thus, according to economist Laurence Kotlikoff, the effective tax rate is progressive on consumption.[2]
Studies by Kotlikoff and Daivd Rapson state that the FairTax would significantly reduce marginal taxes on work and saving, lowering overall average remaining lifetime tax burdens on current and future workers.[9][56] A study by Kotlikoff and Sabine Jokisch concluded that the long term effects of the FairTax would reward low-income households with 26.3% more purchasing power, middle-income households with 12.4% more purchasing power, and high-income households with 5% more purchasing power.[10] The Beacon Hill Institute reported that the FairTax would make the federal tax system more progressive and would benefit the average individual in almost all expenditures deciles.[7] In another study, they state the FairTax would offer the broadest tax base (an increase of over $2 trillion), which allows the FairTax to have a lower tax rate than current tax law.[57]
Gale analyzed a national sales tax (though different from the FairTax in several aspects[7][45]) and reported that the overall tax burden on middle-income Americans would increase while the tax burden on the top 1% would drop.[6] A study by the Beacon Hill Institute reported that the FairTax may have a negative effect on the well-being of mid-income earners for several years after implementation.[49]According to the President’s Advisory Panel for Federal Tax Reform report, which compared the individual and corporate income tax (excluding other taxes the FairTax replaces) to a sales tax with rebate,[8][35] the percentage of federal taxes paid by those earning from $15,000–$50,000 would rise from 3.6% to 6.7%, while the burden on those earning more than $200,000 would fall from 53.5% to 45.9%.[8] The report states that the top 5% of earners would see their burden decrease from 58.6% to 37.4%.[8][58] FairTax supporters argue that replacing the regressive payroll tax (a 15.3% total tax not included in the Tax Panel study;[8] payroll taxes include a 12.4% Social Security tax on wages up to $97,500 and a 2.9% Medicare tax, a 15.3% total tax that is often split between employee and employer) greatly changes the tax distribution, and that the FairTax would relieve the tax burden on middle-class workers.[2][52]
The predicted effects of the FairTax are a source of disagreement among economists and other analysts.[41][42][55] According to Money magazine, while many economists and tax experts support the idea of a consumption tax, many of them view the FairTax proposal as having serious problems with evasion and revenue neutrality.[4] Some economists argue that a consumption tax (the FairTax is one such tax) would have a positive effect on economic growth, incentives for international business to locate in the U.S., and increased U.S. international competitiveness (border tax adjustment in global trade).[11][12][13] The FairTax would be tax-free on mortgage interest (up to a basic interest rate) and donations, but some law makers have concerns about losing tax incentives on home ownership and charitable contributions.[59] There is also concern about the effect on the income tax industry and the difficulty of repealing the Sixteenth Amendment (to prevent Congress from re-introducing an income tax).[60]
Americans For Fair Taxation states the FairTax would boost the United States economy and offers a letter signed by eighty economists, including Nobel LaureateVernon L. Smith, that have endorsed the plan.[12] The Beacon Hill Institute estimated that within five years real GDP would increase 10.7% over the current system, domestic investment by 86.3%, capital stock by 9.3%, employment by 9.9%, real wages by 10.2%, and consumption by 1.8%.[49]Arduin, Laffer & Moore Econometrics projected the economy as measured by GDP would be 2.4% higher in the first year and 11.3% higher by the 10th year than it would otherwise be.[47] Economists Laurence Kotlikoff and Sabine Jokisch reported the incentive to work and save would increase; by 2030, the economy’s capital stock would increase by 43.7% over the current system, output by 9.4%, and real wages by 11.5%.[10] Economist John Golob estimates a consumption tax, like the FairTax, would bring long-term interest rates down by 25–35%.[61] An analysis in 2008 by the Baker Institute For Public Policy indicated that the plan would generate significant overall macroeconomic improvement in both the short and long-term, but warned of transitional issues.[51]
FairTax proponents argue that the proposal would provide tax burden visibility and reduce compliance and efficiency costs by 90%, returning a large share of money to the productive economy.[2] The Beacon Hill Institute concluded that the FairTax would save $346.51 billion in administrative costs and would be a much more efficient taxation system.[62]Bill Archer, former head of the House Ways and Means Committee, asked Princeton University Econometrics to survey 500 European and Asian companies regarding the effect on their business decisions if the United States enacted the FairTax. 400 of those companies stated they would build their next plant in the United States, and 100 companies said they would move their corporate headquarters to the United States.[63] Supporters argue that the U.S. has the highest combined statutory corporate income tax rate among OECD countries along with being the only country with no border adjustment element in its tax system.[64][65] Proponents state that because the FairTax eliminates corporate income taxes and is automatically border adjustable, the competitive tax advantage of foreign producers would be eliminated, immediately boosting U.S. competitiveness overseas and at home.[66]
Opponents point to a study commissioned by the National Retail Federation in 2000 that found a national sales tax bill filed by Billy Tauzin, the Individual Tax Freedom Act (H.R. 2717), would bring a three-year decline in the economy, a four-year decline in employment and an eight-year decline in consumer spending.[67]Wall Street Journal columnist James Taranto states the FairTax is unsuited to take advantage of supply-side effects and would create a powerful disincentive to spend money.[55] John Linder states an estimated $11 trillion is held in foreign accounts (largely for tax purposes), which he states would be repatriated back to U.S. banks if the FairTax were enacted, becoming available to U.S. capital markets, bringing down interest rates, and otherwise promoting economic growth in the United States.[11] Attorney Allen Buckley states that a tremendous amount of wealth was already repatriated under law changes in 2004 and 2005.[68] Buckley also argues that if the tax rate was significantly higher, the FairTax would discourage the consumption of new goods and hurt economic growth.[68]
During the transition, many or most of the employees of the IRS (105,978 in 2005)[69] would face loss of employment.[44] The Beacon Hill Institute estimate is that the federal government would be able to cut $8 billion from the IRS budget of $11.01 billion (in 2007), reducing the size of federal tax administration by 73%.[44] In addition, income tax preparers (many seasonal), tax lawyers, tax compliance staff in medium-to-large businesses, and software companies which sell tax preparation software could face significant drops, changes, or loss of employment. The bill would maintain the IRS for three years after implementation before completely decommissioning the agency, providing employees time to find other employment.[16]
In the period before the FairTax is implemented, there could be a strong incentive for individuals to buy goods without the sales tax using credit. After the FairTax is in effect, the credit could be paid off using untaxed payroll. If credit incentives do not change, opponents of the FairTax worry it could exacerbate an existing consumer debt problem.[70] Proponents of the FairTax state that this effect could also allow individuals to pay off their existing (pre-FairTax) debt more quickly,[11] and studies suggest lower interest rates after FairTax passage.[61]
Individuals under the current system who accumulated savings from ordinary income (by choosing not to spend their money when the income was earned) paid taxes on that income before it was placed in savings (such as a Roth IRA or CD). When individuals spend above the poverty level with money saved under the current system, that spending would be subject to the FairTax. People living through the transition may find both their earnings and their spending taxed.[71] Critics have stated that the FairTax would result in unfair double taxation for savers and suggest it does not address the transition effect on some taxpayers who have accumulated significant savings from after-tax dollars, especially retirees who have finished their careers and switched to spending down their life savings.[38][71] Supporters of the plan argue that the current system is no different, since compliance costs and “hidden taxes” embedded in the prices of goods and services cause savings to be “taxed” a second time already when spent.[71] The rebate would supplement accrued savings, covering taxes up to the poverty level. The income taxes on capital gains, estates, social security and pension benefits would be eliminated under FairTax. In addition, the FairTax legislation adjusts Social Security benefits for changes in the price level, so a percentage increase in prices would result in an equal percentage increase to Social Security income.[16] Supporters suggest these changes would offset paying the FairTax under transition conditions.[11]
The FairTax would be tax free on mortgage interest up to the federal borrowing rate for like-term instruments as determined by the Treasury,[72] but since savings, education, and other investments would be tax free under the plan, the FairTax could decrease the incentive to spend more on homes. An analysis in 2008 by the Baker Institute For Public Policy concluded that the FairTax would have significant transitional issues for the housing sector since the investment would no longer be tax-favored.[51] In a 2007 study, the Beacon Hill Institute concluded that total charitable giving would increase under the FairTax, although increases in giving would not be distributed proportionately amongst the various types of charitable organizations.[73] The FairTax may also affect state and local government debt as the federal income tax system provides tax advantages to municipal bonds.[74] Proponents believe environmental benefits would result from the FairTax through environmental economics and the re-use and re-sale of used goods.[75] Former Senator Mike Gravel states the significant reduction of paperwork for IRS compliance and tax forms is estimated to save about 300,000 trees each year.[75] Advocates argue the FairTax would provide an incentive for illegal immigrants to legalize as they would otherwise not receive the rebate.[1][11] Proponents also believe that the FairTax would have positive effects on civil liberties that are sometimes charged against the income tax system, such as social inequality, economic inequality, financial privacy, self-incrimination,unreasonable search and seizure, burden of proof, and due process.[14][76]
If the FairTax bill were passed, permanent elimination of income taxation would not be guaranteed; the FairTax bill would repeal much of the existing tax code, but the Sixteenth Amendment would remain in place. Preventing new legislation from reintroducing income taxation would require a repeal of the Sixteenth Amendment to the United States Constitution with a separate provision expressly prohibiting a federal income tax.[60] This is referred to as an “aggressive repeal”. Separate income taxes enforced by individual states would be unaffected by the federal repeal. Passing the FairTax would require only a simple majority in each house of the United States Congress along with the signature of the President, whereas enactment of a constitutional amendment must be approved by two thirds of each house of the Congress, and three-quarters of the individual U.S. states. It is therefore possible that passage of the FairTax bill would simply add another taxation system. If a new income tax bill were passed after the FairTax passage, a hybrid system could develop; albeit, there is nothing preventing a bill for a hybrid system today. To address this issue and preclude that possibility, in the 111th Congress John Linder introduced a contingent sunset provision in H.R. 25. It would require the repeal of the Sixteenth Amendment within 8 years after the implementation of the FairTax or, failing that, the FairTax would expire.[77] Critics have also argued that a tax on state government consumption could be unconstitutional.[68]
Since the FairTax would not tax used goods, the value would be determined by the supply and demand in relation to new goods.[78] The price differential/margins between used and new goods would stay consistent, as the cost and value of used goods are in direct relationship to the cost and value of the new goods. Because the U.S. tax system has a hidden effect on prices, it is expected that moving to the FairTax would decrease production costs from the removal of business taxes and compliance costs, which is predicted to offset a portion of the FairTax effect on prices.[11]
Value of used goods
Since the FairTax would not tax used goods, some critics have argued that this would create a differential between the price of new and used goods, which may take years to equalize.[37] Such a differential would certainly influence the sale of new goods like vehicles and homes. Similarly, some supporters have claimed that this would create an incentive to buy used goods, creating environmental benefits of re-use and re-sale.[75] Conversely, it is argued that like the income tax system that contains embedded tax cost (seeTheories of retail pricing),[79] used goods would contain the embedded FairTax cost.[71] While the FairTax would not be applied to the retail sales of used goods, the inherent value of a used good includes the taxes paid when the good was sold at retail. The value is determined by the supply and demand in relation to new goods.[78] The price differential / margins between used and new goods should stay consistent, as the cost and value of used goods are in direct relationship to the cost and value of the new goods.
Based on a study conducted by Dale Jorgenson, proponents state that production cost of domestic goods and services could decrease by approximately 22% on average after embedded tax costs are removed, leaving the sale nearly the same after taxes. The study concludes that producer prices would drop between 15% and 26% (depending on the type of good/service).[80] Jorgenson’s research included all income and payroll taxes in the embedded tax estimation, which assumes employee take-home pay (net income) remains unchanged from pre-FairTax levels.[4][81] Price and wage changes after the FairTax would largely depend on the response of the Federal Reserve monetary authorities.[28][37][82] Non-accommodation of the money supply would suggest retail prices and take home pay stay the same—embedded taxes are replaced by the FairTax. Full accommodation would suggest prices and incomes rise by the exclusive rate (i.e. 30%)—embedded taxes become windfall gains. Partial accommodation would suggest a varying degree in-between.[28][82]
If businesses provided employees with gross pay (including income tax withholding and the employee share of payroll taxes),[44]Arduin, Laffer & Moore Econometrics estimated production costs could decrease by a minimum of 11.55% (partial accommodation).[47] This reduction would be from the removal of the remaining embedded costs, including corporate taxes, compliance costs, and the employer share of payroll taxes. This decrease would offset a portion of the FairTax amount reflected in retail prices, which proponents suggest as the most likely scenario.[28] Bruce Bartlett states that it is unlikely that nominal wages would be reduced, which he believes would result in a recession, but that the Federal Reserve would likely increase the money supply to accommodate price increases.[37] David Tuerck states “The monetary authorities would have to consider how the degree of accommodation, varying from none to full, would affect the overall economy and how it would affect the well-being of various groups such as retirees.”[82]
Social Security benefits would be adjusted for any price changes due to FairTax implementation.[16] The Beacon Hill Institute states that it would not matter, apart from transition issues, whether prices fall or rise—the relative tax burden and tax rate remains the same.[44] Decreases in production cost would not fully apply to imported products; so according to proponents, it would provide tax advantages for domestic production and increase U.S. competitiveness in global trade (see Border adjustability). To ease the transition, U.S. retailers will receive a tax credit equal to the FairTax on their inventory to allow for quick cost reduction. Retailers would also receive an administrative fee equal to the greater of $200 or 0.25% of the remitted tax as compensation for compliance costs,[83] which amounts to around $5 billion.
Effects on tax code compliance
One avenue for non-compliance is the black market. FairTax supporters state that the black market is largely untaxed under the current tax system. Economists estimate the underground economy in the United States to be between one and three trillion dollars annually.[84][85] By imposing a sales tax, supporters argue that black market activity would be taxed when proceeds from such activity are spent on legal consumption.[86] For example, the sale of illegal narcotics would remain untaxed (instead of being guilty of income tax evasion, drug dealers would be guilty of failing to submit sales tax), but they would face taxation when they used drug proceeds to buy consumer goods such as food, clothing, and cars. By taxing this previously untaxed money, FairTax supporters argue that non-filers would be paying part of their share of what would otherwise be uncollected income and payroll taxes.[11][87]
Other economists and analysts have argued that the underground economy would continue to bear the same tax burden as before.[13][86][87][88] They state that replacing the current tax system with a consumption tax would not change the tax revenue generated from the underground economy—while illicit income is not taxed directly, spending of income from illicit activity results in business income and wages that are taxed.[13][86][87]
Proponents state the FairTax would reduce the number of tax filers by about 86% (from 100 million to 14 million) and reduce the filing complexity to a simplified state sales tax form.[52] The Government Accountability Office(GAO), among others, have specifically identified the negative relationship between compliance costs and the number of focal points for collection.[89] Under the FairTax, the federal government would be able to concentrate tax enforcement efforts on a single tax. Retailers would receive an administrative fee equal to the greater of $200 or 0.25% of the remitted tax as compensation for compliance costs.[83] In addition, supporters state that the overwhelming majority of purchases occur in major retail outlets, which are very unlikely to evade the FairTax and risk losing their business licenses.[44] Economic Census figures for 2002 show that 48.5% of merchandise sales are made by just 688 businesses (“Big-Box” retailers). 85.7% of all retail sales are made by 92,334 businesses, which is 3.6% of American companies. In the service sector, approximately 80% of sales are made by 1.2% of U.S. businesses.[28]
The FairTax is a national tax, but can be administered by the states rather than a federal agency,[90] which may have a bearing on compliance as the states’ own agencies could monitor and audit businesses within that state. The 0.25% retained by the states amounts to $5 billion the states would have available for enforcement and administration. For example, California should receive over $500 million for enforcement and administration, which is more than the $327 million budget for the state’s sales and excise taxes.[91] Because the federal money paid to the states would be a percentage of the total revenue collected, John Linder claims the states would have an incentive to maximize collections.[11] Proponents believe that states that choose to conform to the federal tax base would have advantages in enforcement, information sharing, and clear interstate revenue allocation rules.[89][90] A study by the Beacon Hill Institute concluded that, on average, states could more than halve their sales tax rates and that state economies would benefit greatly from adopting a state-level FairTax.[89]
FairTax opponents state that compliance decreases when taxes are not automatically withheld from citizens, and that massive tax evasion could result by collecting at just one point in the economic system.[37] Compliance rates can also fall when taxed entities, rather than a third party, self-report their tax liability. For example, ordinary personal income taxes can be automatically withheld and are reported to the government by a third party. Taxes without withholding and with self-reporting, such as the FairTax, can see higher evasion rates. Economist Jane Gravelle of the Congressional Research Service found studies showing that evasion rates of sales taxes are often above 10%, even when the sales tax rate is in the single digits.[87] Tax publications by the Organisation for Economic Co-operation and Development (OECD), IMF, and Brookings Institution have suggested that the upper limit for a sales tax is about 10% before incentives for evasion become too great to control.[37] According to the GAO, 80% of state tax officials opposed a national sales tax as an intrusion on their tax base.[37]Opponents also raise concerns of legal tax avoidance by spending and consuming outside of the U.S. (imported goods would be subject to collection by the U.S. Customs and Border Protection).[92]
Economists from the University of Tennessee concluded that while there would be many desirable macroeconomic effects, adoption of a national retail sales tax would also have serious effects on state and local government finances.[93] Economist Bruce Bartlett stated that if the states did not conform to the FairTax, they would have massive confusion and complication as to what is taxed by the state and what is taxed by the federal government.[37] In addition, sales taxes have long exempted all but a few services because of the enormous difficulty in taxing intangibles—Bartlett suggests that the state may not have sufficient incentive to enforce the tax.[42]University of Michigan economist Joel Slemrod argues that states would face significant issues in enforcing the tax. “Even at an average rate of around five percent, state sales taxes are difficult to administer.”[94] University of Virginia School of Law professor George Yin states that the FairTax could have evasion issues with export and import transactions.[38] The President’s Advisory Panel for Federal Tax Reform reported that if the federal government were to cease taxing income, states might choose to shift their revenue-raising to income.[8] Absent the Internal Revenue Service, it would be more difficult for the states to maintain viable income tax systems.[8][93]
Underground economy
Opponents of the FairTax argue that imposing a national retail sales tax would drive transactions underground and create a vast underground economy.[4] Under a retail sales tax system, the purchase of intermediate goods and services that are factors of productionare not taxed, since those goods would produce a final retail good that would be taxed. Individuals and businesses may be able to manipulate the tax system by claiming that purchases are for intermediate goods, when in fact they are final purchases that should be taxed. Proponents point out that a business is required to have a registered seller’s certificate on file, and must keep complete records of all transactions for six years. Businesses must also record all taxable goods bought for seven years. They are required to report these sales every month (see Personal vs. business purchases).[40] The government could also stipulate that all retail sellers provide buyers with a written receipt, regardless of transaction type (cash, credit, etc.), which would create a paper trail for evasion with risk of having the buyer turn them in (the FairTax authorizes a reward for reporting tax cheats).[52]
While many economists and tax experts support a consumption tax, problems could arise with using a retail sales tax rather than a value added tax (VAT).[4][37] A VAT imposes a tax at every intermediate step of production, so the goods reach the final consumer with much of the tax already in the price. The retail seller has little incentive to conceal retail sales, since he has already paid much of the good’s tax. Retailers are unlikely to subsidize the consumer’s tax evasion by concealing sales. In contrast, a retailer has paid no tax on goods under a sales tax system. This provides an incentive for retailers to conceal sales and engage in “tax arbitrage” by sharing some of the illicit tax savings with the final consumer. Laurence Kotlikoff has stated that the government could compel firms to report, via 1099-type forms, their sales to other firms, which would provide the same records that arise under a VAT.[52] In the United States, a general sales tax is imposed in 45 states plus the District of Columbia (accounting for over 97% of both population and economic output), which proponents argue provides a large infrastructure for taxing sales that many countries do not have.
Personal versus business purchases
Businesses would be required to submit monthly or quarterly reports (depending on sales volume) of taxable sales and sales tax collected on their monthly sales tax return. During audits, the business would have to produce invoices for the “business purchases” that they did not pay sales tax on, and would have to be able to show that they were genuine business expenses.[40] Advocates state the significant 86% reduction in collection points would greatly increase the likelihood of business audits, making tax evasion behavior much more risky.[52] Additionally, the FairTax legislation has several fines and penalties for non-compliance, and authorizes a mechanism for reporting tax cheats to obtain a reward.[40] To prevent businesses from purchasing everything for their employees, in a family business for example, goods and services bought by the business for the employees that are not strictly for business use would be taxable.[40] Health insurance or medical expenses would be an example where the business would have to pay the FairTax on these purchases. Taxable property and services purchased by a qualified non-profit or religious organization “for business purposes” would not be taxable.[95]
The creation of the FairTax began with a group of businessmen from Houston, Texas, who initially financed what has become the political advocacy group Americans For Fair Taxation (AFFT), which has grown into a large tax reform movement.[3][28] This organization, founded in 1994, claims to have spent over $20 million in research, marketing, lobbying, and organizing efforts over a ten-year period and is seeking to raise over $100 million more to promote the plan.[96] AFFT includes a staff in Houston and a large group of volunteers who are working to get the FairTax enacted. Bruce Bartlett has charged that the FairTax was devised by the Church of Scientology in the early 1990s.[42] Representative John Linder told the Atlanta Journal-Constitution that Bartlett confused the FairTax movement with the Scientology-affiliated Citizens for an Alternative Tax System,[97] which also seeks to abolish the federal income tax and replace it with a national retail sales tax. Leo Linbeck, AFFT Chairman and CEO, stated “As a founder of Americans For Fair Taxation, I can state categorically, however, that Scientology played no role in the founding, research or crafting of the legislation giving expression to the FairTax.”[96]
Much support has been achieved by talk radio personality Neal Boortz.[98] Boortz’s book (co-authored by Georgia Congressman John Linder) entitled The FairTax Book, explains the proposal and spent time atop the New York Times Best Seller list. Boortz stated that he donates his share of the proceeds to charity to promote the book.[98] In addition, Boortz and Linder have organized several FairTax rallies to publicize support for the plan. Other media personalities have also assisted in growing grassroots support including former radio and TV talk show host Larry Elder, radio host and former candidate for the 2012 GOP Presidential Nomination Herman Cain, Fox News and radio host Sean Hannity, and Fox Business Host John Stossel.[99] The FairTax received additional visibility as one of the issues in the 2008 presidential election. At a debate on June 30, 2007, several Republican candidateswere asked about their position on the FairTax and many responded that they would sign the bill into law if elected.[29] The most vocal promoters of the FairTax during the 2008 primary elections were Republican candidate Mike Huckabee and Democratic candidate Mike Gravel. Since 2008, the tax has been popular at Tea Party protests.[100] The Internet, blogosphere, and electronic mailing lists have contributed to promoting, organizing, and gaining support for the FairTax. In the 2012 Republican presidential primary, and his ensuing Libertarian Party presidential run, former Governor of New Mexico and businessman Gary Johnson actively campaigned for the FairTax.[101] Former CEO of Godfather’s PizzaHerman Cain has been promoting the FairTax as a final step in a multiple-phase tax reform.[102] Outside of the United States, the Christian Heritage Party of Canada adopted a FairTax proposal as part of their 2011 election platform[103] but won no seats in that election.
Mack, Connie, III; Breaux, John (2005-11-01). “National Retail Sales Tax (Chapter 9)” (PDF). President’s Advisory Panel for Federal Tax Reform. Retrieved 2010-02-16.
McTague, Jim (April 2005). “The Underground Economy”. The Wall Street Journal Classroom Edition. Barron’s. Archived from the original on 2006-07-18. Retrieved 2006-07-25.
“S.13 112th Cosponsors”. 112th U.S. Congress. The Library of Congress. 2011-01-25. Retrieved 2014-02-07.
“S.25 109th Cosponsors”. 109th U.S. Congress. The Library of Congress. 2005-01-24. Retrieved 2006-08-22.
“S.296 111th Cosponsors”. 111th U.S. Congress. The Library of Congress. 2009-01-22. Retrieved 2009-01-25.
“S.1025 110th Cosponsors”. 110th U.S. Congress. The Library of Congress. 2007-03-29. Retrieved 2007-04-04.
“S.1493 108th Cosponsors”. 108th U.S. Congress. The Library of Congress. 2003-07-30. Retrieved 2006-08-22.
Schlosser, Eric (2004-04-01). Reefer Madness: Sex, Drugs, and Cheap Labor in the American Black Market (Reprint ed.). Mariner Books. ISBN978-0-618-44670-4.
Tuerck, David G.; Haughton, Jonathan; Bachman, Paul; Sanchez-Penalver, Alfonso; Dinwoodie, Sara (February 2007). “The FairTax and Charitable Giving” (PDF). Beacon Hill Institute. Retrieved 2007-09-18.
“Types of Bonds”. SmartMoney.com. Yahoo Finance. Archived from the original on 2006-04-09. Retrieved 2006-07-24.
Vance, Laurence (2005-05-18). “The Fair Tax Fraud”. Ludwig von Mises Institute. Retrieved 2008-08-14.
McCaffery, Edward, J. (2006). Fair Not Flat: How to Make the Tax System Better and Simpler (Paperback ed.). University of Chicago Press. ISBN0-226-55561-5.
The Pronk Pops blog is the broadcasting and mass communication of ideas about life, liberty, and the pursuit of happiness, prosperity, truth, virtue and wisdom.
).
Pronk Pops 
The Pronk Pops Show 1010, December 8, 2017, Story 1: Labor Participation Rate In November 2017 Remained At 62.7% with Over 95.4 Million Not in Labor Force With 160.5 Million In Labor Force –U-3 Unemployment Rate Hit Low 4.1% and U-6 Unemployment Rate Rose To 8.0% — Total Non-farm Payroll Jobs Added 228,000 — Videos — Story 2: Corporate Tax Cut Bill Will Pass By December 22, 2017 — Definitively Not Fundamental Tax Reform For The Middle Class — Replace Income Tax System with A Single Broad Based Consumption Tax Replacing All Federal Income Based Taxes — Videos — Story 3: Defeating The Islamic State in Iraq and Syria By Bombing Them To Death — ISIS Free? — Videos
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Story 1: Labor Participation Rate In November 2017 Remained At 62.7% with Over 95.4 Million Not in Labor Force With 160.5 Million In Labor Force –U-3 Unemployment Rate Hit Low 4.1% and U-6 Unemployment Rate Rose To 8.0% — Total Non-farm Payroll Jobs Added 228,000 — Videos —
US economy adds 228K jobs in November
Analyzing The November Jobs Report Compared To Previous Years | Velshi & Ruhle | MSNBC
U.S. economy continues its strong performance
National Economic Council Director Gary Cohn: Tax Reform Will Help Us Drive Real Wage Growth | CNBC
CNN’s Christine Romans Highlights November’s Really Good Jobs Numbers
Larry Kudlow: Jobs Report Shows We Are On Front End Of “Very, Very Strong Rebound In Manufacturing”
Panel on Strong November Jobs Report; 228K Jobs Added. #Economy #Jobs #Report #November
Stockman: Here’s Why Today’s Jobs Report Is Nothing to Celebrate
Alan Greenspan // We are about to go from stagnation to ‘stagflation’
Ep. 307: Trump Continues What He Once Called the Biggest Hoax in American Politics
The Reason Trump is President – Peter Schiff
Civilian Labor Force Level
160,529,000
Labor Force Statistics from the Current Population Survey
Labor Force Participation Rate
62.7%
Unemployment Level
6.6 Million
U-3 Unemployment Rate
4.1%
U-6 Unemployment Rate
8.0%
Employment Situation Summary
Transmission of material in this release is embargoed until USDL-17-1616 8:30 a.m. (EST) Friday, December 8, 2017 Technical information: Household data: (202) 691-6378 * cpsinfo@bls.gov * www.bls.gov/cps Establishment data: (202) 691-6555 * cesinfo@bls.gov * www.bls.gov/ces Media contact: (202) 691-5902 * PressOffice@bls.gov THE EMPLOYMENT SITUATION -- NOVEMBER 2017 Total nonfarm payroll employment increased by 228,000 in November, and the unemployment rate was unchanged at 4.1 percent, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in professional and business services, manufacturing, and health care. Household Survey Data The unemployment rate held at 4.1 percent in November, and the number of unemployed persons was essentially unchanged at 6.6 million. Over the year, the unemployment rate and the number of unemployed persons were down by 0.5 percentage point and 799,000, respectively. (See table A-1.) Among the major worker groups, the unemployment rate for teenagers increased to 15.9 percent in November. The jobless rates for adult men (3.7 percent), adult women (3.7 percent), Whites (3.6 percent), Blacks (7.3 percent), Asians (3.0 percent), and Hispanics (4.7 percent) showed little change. (See tables A-1, A-2, and A-3.) The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged at 1.6 million in November and accounted for 23.8 percent of the unemployed. Over the year, the number of long-term unemployed was down by 275,000. (See table A-12.) The labor force participation rate remained at 62.7 percent in November and has shown no clear trend over the past 12 months. The employment-population ratio, at 60.1 percent, changed little in November and has shown little movement, on net, since early this year. (See table A-1.) The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers), at 4.8 million, was essentially unchanged in November but was down by 858,000 over the year. These individuals, who would have preferred full-time employment, were working part time because their hours had been cut back or because they were unable to find full-time jobs. (See table A-8.) In November, 1.5 million persons were marginally attached to the labor force, down by 451,000 from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. (See table A-16.) Among the marginally attached, there were 469,000 discouraged workers in November, down by 122,000 from a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.0 million persons marginally attached to the labor force in November had not searched for work for reasons such as school attendance or family responsibilities. (See table A-16.) Establishment Survey Data Total nonfarm payroll employment increased by 228,000 in November. Employment continued to trend up in professional and business services, manufacturing, and health care. Employment growth has averaged 174,000 per month thus far this year, compared with an average monthly gain of 187,000 in 2016. (See table B-1.) Employment in professional and business services continued on an upward trend in November (+46,000). Over the past 12 months, the industry has added 548,000 jobs. In November, manufacturing added 31,000 jobs. Within the industry, employment rose in machinery (+8,000), fabricated metal products (+7,000), computer and electronic products (+4,000), and plastics and rubber products (+4,000). Since a recent low in November 2016, manufacturing employment has increased by 189,000. Health care added 30,000 jobs in November. Most of the gain occurred in ambulatory health care services (+25,000), which includes offices of physicians and outpatient care centers. Monthly employment growth in health care has averaged 24,000 thus far in 2017, compared with an average increase of 32,000 per month in 2016. Within construction, employment among specialty trade contractors increased by 23,000 in November and by 132,000 over the year. Employment in other major industries, including mining, wholesale trade, retail trade, transportation and warehousing, information, financial activities, leisure and hospitality, and government, changed little over the month. The average workweek for all employees on private nonfarm payrolls increased by 0.1 hour to 34.5 hours in November. In manufacturing, the workweek was unchanged at 40.9 hours, and overtime remained at 3.5 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 33.7 hours. (See tables B-2 and B-7.) In November, average hourly earnings for all employees on private nonfarm payrolls rose by 5 cents to $26.55. Over the year, average hourly earnings have risen by 64 cents, or 2.5 percent. Average hourly earnings of private-sector production and nonsupervisory employees rose by 5 cents to $22.24 in November. (See tables B-3 and B-8.) The change in total nonfarm payroll employment for September was revised up from +18,000 to +38,000, and the change for October was revised down from +261,000 to +244,000. With these revisions, employment gains in September and October combined were 3,000 more than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.) After revisions, job gains have averaged 170,000 over the last 3 months. _____________ The Employment Situation for December is scheduled to be released on Friday, January 5, 2018, at 8:30 a.m. (EST). ______________________________________________________________________________________ | | | Revision of Seasonally Adjusted Household Survey Data | | | | In accordance with usual practice, The Employment Situation news release for December| | 2017, scheduled for January 5, 2018, will incorporate annual revisions in seasonally | | adjusted household survey data. Seasonally adjusted data for the most recent 5 | | years are subject to revision. | |______________________________________________________________________________________| ______________________________________________________________________________________ | | | Conversion to the 2017 North American Industry Classification System | | | | With the release of January 2018 data on February 2, 2018, the establishment survey | | will revise the basis for industry classification from the 2012 North American | | Industry Classification System (NAICS) to 2017 NAICS. The conversion to 2017 NAICS | | will result in minor revisions reflecting content changes within the mining and | | logging, retail trade, information, financial activities, and professional and | | business services sectors. Additionally, some smaller industries will be combined | | within the mining and logging, durable goods manufacturing, retail trade, and | | information sectors. Several industry titles and descriptions also will be updated. | | | | Approximately 4 percent of employment will be reclassified into different industries | | as a result of the revision. Details of new, discontinued, and combined industries | | due to the 2017 NAICS update, as well as changes due to the annual benchmarking | | process, will be available on January 5, 2018. | | | | For more information on the 2017 NAICS update, visit www.census.gov/eos/www/naics/. | |______________________________________________________________________________________|https://www.bls.gov/news.release/empsit.nr0.htm
Employment Situation Summary Table A. Household data, seasonally adjusted
Summary table A. Household data, seasonally adjusted[Numbers in thousands]
2016
2017
2017
2017
Oct.
2017-
Nov.
2017
Employment status
Civilian noninstitutional population
Civilian labor force
Participation rate
Employed
Employment-population ratio
Unemployed
Unemployment rate
Not in labor force
Unemployment rates
Total, 16 years and over
Adult men (20 years and over)
Adult women (20 years and over)
Teenagers (16 to 19 years)
White
Black or African American
Asian
Hispanic or Latino ethnicity
Total, 25 years and over
Less than a high school diploma
High school graduates, no college
Some college or associate degree
Bachelor’s degree and higher
Reason for unemployment
Job losers and persons who completed temporary jobs
Job leavers
Reentrants
New entrants
Duration of unemployment
Less than 5 weeks
5 to 14 weeks
15 to 26 weeks
27 weeks and over
Employed persons at work part time
Part time for economic reasons
Slack work or business conditions
Could only find part-time work
Part time for noneconomic reasons
Persons not in the labor force (not seasonally adjusted)
Marginally attached to the labor force
Discouraged workers
– Over-the-month changes are not displayed for not seasonally adjusted data.
NOTE: Persons whose ethnicity is identified as Hispanic or Latino may be of any race. Detail for the seasonally adjusted data shown in this table will not necessarily add to totals because of the independent seasonal adjustment of the various series. Updated population controls are introduced annually with the release of January data.
Employment Situation Summary Table B. Establishment data, seasonally adjusted
Summary table B. Establishment data, seasonally adjusted
2016
2017
2017(P)
2017(P)
EMPLOYMENT BY SELECTED INDUSTRY
(Over-the-month change, in thousands)
Total nonfarm
Total private
Goods-producing
Mining and logging
Construction
Manufacturing
Durable goods(1)
Motor vehicles and parts
Nondurable goods
Private service-providing
Wholesale trade
Retail trade
Transportation and warehousing
Utilities
Information
Financial activities
Professional and business services(1)
Temporary help services
Education and health services(1)
Health care and social assistance
Leisure and hospitality
Other services
Government
(3-month average change, in thousands)
Total nonfarm
Total private
WOMEN AND PRODUCTION AND NONSUPERVISORY EMPLOYEES
AS A PERCENT OF ALL EMPLOYEES(2)
Total nonfarm women employees
Total private women employees
Total private production and nonsupervisory employees
HOURS AND EARNINGS
ALL EMPLOYEES
Total private
Average weekly hours
Average hourly earnings
Average weekly earnings
Index of aggregate weekly hours (2007=100)(3)
Over-the-month percent change
Index of aggregate weekly payrolls (2007=100)(4)
Over-the-month percent change
DIFFUSION INDEX
(Over 1-month span)(5)
Total private (261 industries)
Manufacturing (78 industries)
Footnotes
(1) Includes other industries, not shown separately.
(2) Data relate to production employees in mining and logging and manufacturing, construction employees in construction, and nonsupervisory employees in the service-providing industries.
(3) The indexes of aggregate weekly hours are calculated by dividing the current month’s estimates of aggregate hours by the corresponding annual average aggregate hours.
(4) The indexes of aggregate weekly payrolls are calculated by dividing the current month’s estimates of aggregate weekly payrolls by the corresponding annual average aggregate weekly payrolls.
(5) Figures are the percent of industries with employment increasing plus one-half of the industries with unchanged employment, where 50 percent indicates an equal balance between industries with increasing and decreasing employment.
(P) Preliminary
NOTE: Data have been revised to reflect March 2016 benchmark levels and updated seasonal adjustment factors.
Story 2: Corporate Tax Cut Bill Will Pass By December 22, 2017 — Definitively Not Fundamental Tax Reform For The Middle Class — Replace Income Tax System with A Single Broad Based Consumption Tax Replacing All Federal Income Based Taxes — Videos —
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Now that the Senate and the House have passed two tax bills, there are some crucial differences they need to resolve in conference.(Video: Jenny Starrs/Photo: Melina Mara/The Washington Post)
Economy & Business Alerts
Breaking news about economic and business issues.
Veterans of congressional tax overhauls, particularly the seminal revamp under President Ronald Reagan in 1986, have been stunned and in some cases outraged at how swiftly Republicans are moving on legislation that touches every corner of the economy and all Americans. And although GOP leaders make no apologies, some in their rank and file say that the process would have benefited from a more deliberate and open approach.
“I think it would have looked better if we had taken more time and had more transparency, had more open committee hearings,” said freshman Rep. James Comer (R-Ky.).
“Having said that, the goal that everybody had was to reduce the tax rates. . . . So at the end of the day the goal is going to be achieved, but we could have done it in a more transparent manner that probably would have given the voters that are being polled a little more confidence,” Comer said, referring to the effort’s poor showing in opinion surveys.
It has been a little more than a month since the $1.5 trillion legislation was introduced in the House, and in that short time it has cleared the two key committees in the House and Senate and won approval on the floors of both chambers, all without a single Democratic vote. If Trump signs the bill as planned before Christmas, that would mean a journey of less than two months between introduction and final passage.
The specific legislation that probably will become law, sold as a middle-class tax cut but featuring a massive corporate rate reduction at its center, is moving from release toward passage without any hearings, unusual for a bill of such magnitude. And as it tumbled along it picked up some startling new features, to the surprise of affected industries, Democrats and in some cases Republicans themselves.
Some of the most notable changes came in the hours before the Senate’s passage of its version of the plan, which happened about 1:50 a.m. Dec. 2.
The final vote was preceded by hours of inaction as Republicans fine-tuned their legislation behind closed doors, while fuming Democratic staffers ate Chinese food and pored over versions of the bill and lists of amendments that had been leaked by lobbyists on K Street before Republicans had made anything public.
As they got additional drafts of the bill, Democrats were incensed at some of what they found, including new breaks for the oil and gas industry, and a provision that appeared aimed specifically at helping Hillsdale College, a small liberal arts college in Michigan that doesn’t accept federal funding and has a large endowment funded by wealthy conservatives — including the family of Education Secretary Betsy DeVos.
An angry Sen. Bernie Sanders (I-Vt.) stood on his chamber’s floor to declare that “the federal treasury is being looted.” In their one victory of the debate, Democrats offered an amendment to strike the Hillsdale provision, and with the help of four Republicans it passed.
Democrats weren’t the only ones surprised by what was in the bill. Republicans and the business community were stunned when the final Senate version restored the alternative minimum tax for corporations. The tax, aimed at keeping companies from shirking their tax duties entirely, had been repealed in the House bill and earlier versions of the Senate measure.
Restoring the corporate alternative minimum tax created $40 billion in revenue for the bill, which helped Republicans come in under complex budgetary guidelines saying the legislation can’t go over the $1.5 trillion the GOP has agreed to add to the deficit over the next decade. Still, some Republicans professed not to know how the change had come about.
And under the new tax code the GOP bill would create, including the alternative minimum tax could have the unintended consequence of preventing companies from using other deductions, including the popular research and development tax credit.
“I’m guessing they just needed something quick to make the bill work,” said Rep. Devin Nunes (R-Calif.), who is one of the conferees charged with blending the two bills together.
Now, as quickly as it reappeared, the corporate alternative minimum tax probably will disappear again. Republican lawmakers widely agree that it doesn’t work and can’t be included, but it remains a mystery where they’ll find revenue to offset that change and pay for others they’re looking to include in the final package.
There has been discussion of moving the corporate rate — slashed from 35 percent to 20 percent by the House and Senate — back up to 22 percent, but the backlash against that proposal has been intense and it probably will be dropped. But revenue must be found somewhere because there are some changes that look nearly certain, including adjusting the new limit on deducting state and local taxes. Both the House and Senate legislation would allow taxpayers to deduct only up to $10,000 in property taxes. Some of Trump’s New York friends have taken exception to that provision and have lobbied the president personally against it.
It’s all part of a breakneck pace of the tax plan that contrasts with the nearly a year-and-a-half that passed between when Reagan unveiled his initial version of the 1986 tax plan and its ultimate passage into law. The less far-ranging tax cuts that President George W. Bush signed in 2001 took four months to become law after the release of Bush’s initial blueprint. And the Affordable Care Act took nearly a year to complete, including a congressional summer recess featuring angry town hall meetings that turned public sentiment sharply against the bill.
Democrats accuse Republicans of whisking the legislation along to avoid extended public scrutiny and prevent them from mounting an offensive at public hearings or over lengthy congressional breaks. The GOP bills have endured neither.
“It’s clear that we could have defeated this bill had we gone through regular order and had any expert witness from any blue state or high-tax state come in,” said Rep. John B. Larson (Conn.), who was a member of Democratic leadership during the much lengthier and more open process of passing the ACA. The provision limiting taxpayers’ ability to deduct state and local taxes hits high-tax areas such as California, New York, New Jersey and Connecticut particularly hard.
“People would have said, ‘Well, wait a minute,’ ” Larson said.
Republican congressional leaders dispute such comparisons, saying that the process on taxes has been going on for years, given that the party has long been debating the idea and an early foundational bill was released by then-Rep. Dave Camp (R-Mich.), former chairman of the tax-writing Ways and Means Committee, nearly four years ago. House Republicans, led by Speaker Paul D. Ryan (Wis.), also campaigned last year on an agenda called “A Better Way,” which featured a tax plank similar in many respects to the bill the House ultimately passed, although it drew scant attention at the time.
“These are relatively small bills, 400 pages or so; they’re not hard to digest. The policy decisions, the thoughtfulness, a lot of these issues we’ve been debating together and apart for years,” said House Ways and Means Chairman Kevin Brady (R-Tex.). “Bottom line is the American people have been waiting 30 years. So to paraphrase a hardware store: less talking, more doing.”
Even before the late-night Senate dramatics, the process offered surprises and sudden twists.
A provision repealing an Affordable Care Act requirement for most Americans to carry insurance or pay fines was added to the Senate bill with little warning over the course of an afternoon, a major health policy decision that is projected to leave 13 million more Americans uninsured in a decade but that would give Republicans $330 billion to pay for other things they want to do.
And the release of the House bill stunned manufacturers when they discovered it contained an “excise tax” on purchases from American companies’ foreign subsidiaries that some said could drive them out of business. The provision was watered down before passage by the Ways and Means Committee, but companies are still fighting to keep it out of the final bill, said Nancy McLernon, president of the Organization for International Investment, which represents global companies with U.S. operations. Despite the years-long focus on tax overhaul, such a provision had not been debated — even after companies beat back a different import tax, she said.
The Senate has a different provision that companies like better, but as far as the cost of going from one to the other or how it will all shake out, “It’s all a Rubik’s cube,” McLernon said.
Many lobbyists, Democrats and other observers expect to find the final version of the plan, which could be filed late this week, just as full of surprises as the various iterations that have appeared. But as they gun for a legislative win that has eluded them this year, Republicans show little interest in slowing down to take a closer look.
“The frenzy, and I would call it a frenzy, to get it done and have a Christmas present for America — number one, I think it’s unnecessary; it’s a self-imposed deadline, and number two, it makes the possibility for error much greater,” said Steve Bell, a senior adviser at the Bipartisan Policy Center who was staff director of the Senate Budget Committee during the 1986 tax effort. “This is a rush without a reason other than the political desire for a Rose Garden signing ceremony.”
Mike DeBonis contributed to this report.
https://www.washingtonpost.com/business/economy/precision-sacrificed-for-speed-as-gop-rushes-ahead-on-taxes/2017/12/10/876ab274-dc62-11e7-b1a8-62589434a581_story.html?utm_term=.167e53dc0cba
The Taxman Cometh: Senate Bill’s Marginal Rates Could Top 100% for Some
Certain high-income business owners would face backwards incentives; lawmakers work to bridge gap
By Richard Rubin
WASHINGTON—Some high-income business owners could face marginal tax rates exceeding 100% under the Senate’s tax bill, far beyond the listed rates in the Republican plan.
That means a business owner’s next $100 in earnings, under certain circumstances, would require paying more than $100 in additional federal and state taxes.
As lawmakers rush to write the final tax bill over the next week, they already are looking at changes to prevent this from happening. Broadly, House and Senate Republicans are trying to reconcile their bills, looking for ways to pay for eliminating the most contentious proposals. The formal House-Senate conference committee will meet on Wednesday, and GOP lawmakers may unveil an agreement by week’s end.
The possible marginal tax rate of more than 100% results from the combination of tax policies designed to provide benefits to businesses and families but then deny them to the richest people. As income climbs and those breaks phase out, each dollar of income faces regular tax rates and a hidden marginal rate on top of that, in the form of vanishing tax breaks. That structure, if maintained in a final law, would create some of the disincentives to working and to earning business profit that Republicans have long complained about, while opening lucrative avenues for tax avoidance.
As a taxpayer’s income gets much higher and moves out of those phaseout ranges, the marginal tax rates would go down.
Consider, for example, a married, self-employed New Jersey lawyer with three children and earnings of about $615,000. Getting $100 more in business income would force the lawyer to pay $105.45 in federal and state taxes, according to calculations by the conservative-leaning Tax Foundation. That is more than double the marginal tax rate that household faces today.
If the New Jersey lawyer’s stay-at-home spouse wanted a job, the first $100 of the spouse’s wages would require $107.79 in taxes. And the tax rates for similarly situated residents of California and New York City would be even higher, the Tax Foundation found. Analyses by the Tax Policy Center, which is run by a former Obama administration official, find similar results, with federal marginal rates as high as 85%, and those don’t include items such as state taxes, self-employment taxes or the phase-out of child tax credits.
The bill as written would provide incentives for business owners to shift profit across calendar years, move personal expenses inside the business and engage in other economically unproductive maneuvers, said David Gamage, a tax-law professor at Indiana University.
“I would expect a huge tax-gaming response once people fully understand how it works,” said Mr. Gamage, a former Treasury Department official, who said business owners have an easier time engaging in such tax avoidance than salaried employees do. “The payoff for gaming is huge, within the set of people who both face these rates and have flexible enough business structures.”
The analyses “raise a valid concern” that lawmakers are examining, said Julia Lawless, a spokeswoman for the Senate Finance Committee.
“With any major reform, there will always be unusual hypotheticals delivering anomalous results,” she said. “The goal of Congress’s tax overhaul has been to lower taxes on the American people and by and large, according to a variety of analyses, we’re achieving that.”
Marginal tax rates are different from average tax rates. A marginal rate is the tax on the edge, or margin, of one’s earnings, and so it reflects what would be the next dollar of income. The average rate is a way of measuring a taxpayer’s total burden.
The Republican bills are trying to reduce both marginal and average tax rates, and for many taxpayers, they do. The marginal tax rates above 100% affect a small slice of households with very particular circumstances. Similar, though smaller, effects occur throughout the tax system.
“This is a big concern,” said Scott Greenberg, a Tax Foundation analyst. “It would be unfortunate if Congress passed a tax bill that had the effect of making additional work and additional income not worthwhile for any subgroup of households.”
Here’s how that New Jersey lawyer’s marginal rate adds up to more than 100%:
The household is paying the 35% marginal tax rate on their income range. Or, they are paying the alternative minimum tax, which operates at the same marginal rate in that income range.
The household is paying New Jersey’s highest income-tax rate, which is 8.97%, and now has to pay all of that because the Republican tax plan wouldn’t let such state or local taxes be deducted from federal income.
The household is also losing a deduction the Senate created for so-called pass-through businesses such as partnerships and S corporations. That 23% deduction is fully available to owners of service businesses like law firms, but only if income is below $500,000 for a married couple.
The deduction then phases out over $100,000 in income, according to a complex formula, disappearing entirely once income reaches $624,000. Up to that point, each additional dollar of business income faces progressively steeper tax rates because the deduction and its benefit are shrinking rapidly as income goes up.
The provisions also interact with each other in ways that drive up marginal rates. “The central problem here is that there is a large benefit phasing out over a short range,” Mr. Greenberg said.
The Republican bill doubles the child tax credit to $2,000 but phases it out beginning at $500,000 income for joint filers. The credit shrinks by $50 for every $1,000 in income above that, so a married couple with three children faces a higher marginal tax rate when they’re in that phase-out range.
The analysis assumes that the New Jersey lawyer is paying a 3.8% tax on self-employment income.
Pushing marginal rates lower on these households wouldn’t be easy and would require tradeoffs. Republicans could make the phaseout of the business deduction more gentle, spreading it over, say, $200,000, as opposed to $100,000, of income above $500,000. But that would make the tax cuts bigger, and Republicans are already looking for money to offset other changes they are planning.
They could lower the threshold for the child tax credit, but that would reduce tax cuts for households below $500,000.
Under current law, there are some high marginal tax rates for some lower-income households. Some families just above the poverty line can see their earned income tax credits and food stamps going down as their federal and state taxes go up. That combination can create marginal tax rates of around 75%, according to the Congressional Budget Office.
Appeared in the December 11, 2017, print edition as ‘Taxman Cometh: Marginal Rates Could Top 100% for Some.’
https://www.wsj.com/articles/the-taxman-cometh-senate-bills-marginal-rates-could-top-100-for-some-1512942118
Tax Reform Under History’s Light
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[This is part of an ongoing series entitled “The Case for Tax Reform,” which examines the importance of reforming the outdated tax code, and how achieving that goal will advance economic growth, jobs, and prosperity.]
Tax reform’s chances are better in this Congress than at any time in the past 30 years. Thus, comparisons come naturally to the events leading up to the 1986 Tax Reform Act (TRA86). These comparisons are useful for the similarities and the differences, both of which provide insights as to how to assure success today.
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One important similarity is TRA86 brought to conclusion a long and detailed debate about tax policy. Our current efforts also rest on a lengthy debate recently brought to the fore. An important difference, however, is TRA86 was enacted as a widely accepted “should do,” whereas tax reform in 2017 is much more of a “must do.”
‘86 tax reform in 30 seconds
TRA86 culminated as a complex debate starting about 10 years prior with the release of Treasury’s “Blueprints for Basic Tax Reform” in the waning hours of the Ford administration. Treasury’s “Blueprints” laid out a coherent approach to tax policy, emphasizing simplification and a reduction in tax distortions that were sapping economic growth.
Two years later, in response to a poorly performing economy, Congress adopted the Steiger Amendment, significantly cutting the capital gains tax rate as part of the 1978 Revenue Act. While often ignored, the Steiger Amendment marked the bi-partisan recognition of tax policy’s importance for economic growth. Pro-growth tax reform was not just for tax geeks anymore.
Federal tax policy debate took on new energy in 1981 with the passage of the landmark Reagan tax cuts, dominated by substantial rate reduction. Following legislation in 1982 and 1984 to readjust tax levels, the stage was set for fundamental tax reform.
A bipartisan consensus regarding sound tax policy evolved through the years leading up to TRA86. This consensus distilled down to the simple mantra of “lower the rates, broaden the base.” Like the 1981 legislation, TRA86 would reduce tax rates substantially and install a less punitive system of capital consumption allowances. Unlike the 1981 legislation, however, the focus would also be on simplification, on the wide range of areas of the tax code reformed, and especially on revenue neutrality.
This consensus first took concrete form in two highly-detailed proposals out the Reagan Treasury Department, commonly dubbed Treasury I and its improved version, Treasury II, and released in 1984 and 1985 respectively. With these reports laying the groundwork, Congress then took over a year to legislate, finally producing TRA86.
The years between
TRA86 was the product of an extended period of consensus building and analysis. For those new to the debate, today’s strong momentum for comprehensive, pro-growth tax reform may seem to have arisen out of thin air, but, in fact, this debate has ebbed and flowed almost without pause since 1986.
The appetite for tax reform did not die following TRA86, and so consideration naturally moved on to the “next big thing.” For a period, the big thing seemed to be some kind of European-style Value Added Tax (VAT). The VAT momentum quickly petered out, however, and soon revenue pressures shifted the focus of tax policy once again to raising income tax rates, often with distinct “soak-the-rich” overtones. The VAT episode set tax reform’s pattern of ebb and flow for the following years.
Even as the debate toward TRA86 was underway, a very different approach to tax policy appeared in the Hall-Rabushka Flat Tax. Though the Flat Tax is best known for having a single rate of tax, hence the name, what really distinguishes the Flat Tax is its simplification, the elimination of all taxes on capital income and capital gains, and the adoption of a cash-flow tax on businesses centered on allowing capital purchases to be “expensed,” or deducted immediately.
In the 1990s, as the Flat Tax gained greater acceptance, tax reform topped the national agenda with Steve Forbes leading the charge. But this effort soon deflated along with Forbes’ 1996 presidential campaign.
Tax reform again gained traction briefly after the 2004 election with the release of the superb report of the presidential commission led by former Democratic Senator John Breaux and former Republican Senator Connie Mack. However, this effort, too, led to naught, a victim of competing priorities and a lack of consensus.
Income tax reform was pushed far onto the back burners during President Barack Obama’s tenure. Despite a historically weak economic recovery, the Obama administration expressed little interest in proposals to reduce the tax code’s drag on growth. The Obama administration contented itself with modest tweaks at the edges and otherwise dedicated its efforts to defending the status quo, especially in the area of international tax where global pressures were felt most profoundly.
Tax reform today
Even as years of inaction passed, pressure to reform the federal income tax code rose steadily from all sides. In part, this pressure arose because the U.S. economy was changing rapidly, and the tax code became an ever-worse fit for a modern economy.
In part, the pressure arose because even as America stood pat, America’s major trading partners did not. They were cutting business tax rates steadily and almost all were moving toward a territorial tax system to allow their businesses to compete more effectively in a global business climate of increasing intensity.
Though on the back burner, tax reform continued to simmer in backchannels. Then-House Budget Committee Chairman Paul Ryan (R-WI) advanced a series of thoughtful tax reform proposals as part of his broader efforts to reform Federal tax policy. Rep. Devin Nunes (R-CA) offered his variation on tax reform, differing from but along the same broad lines as the Ryan proposal. Sen. Marco Rubio (R-FL) also introduced a major, comprehensive tax reform proposal with his own interpretations, and then released subsequent iterations as comments and critiques soon followed. In these years, though President Obama continued to block tax reform’s path, the debate remained alive and well.
In 2014, former Ways and Means Committee Chairman David Camp (R-MI) introduced a detailed tax reform proposal. As tax reform would originate in this committee, Camp’s proposal took on greater significance than most. The Camp proposal was intended to serve as a prototype for tax legislation and so offered much more detail and, in some cases, specific options for resolving some of the nagging technical issues in adopting a territorial tax system, for example. However, in the face of President Obama’s determined disinterest, few were willing to contemplate seriously the hard choices the Camp plan laid out and so, again, tax reform was left to simmer on the back burner.
Tax reform played a limited role in the 2016 presidential campaign, with the Democratic nominee, Hillary Clinton, largely continuing the defense of the status quo established by President Obama. Meanwhile, the Republican nominee, Donald Trump, suggested a bold change of direction; though, he accompanied it by very few details. Trump’s election, combined with the strong Republican interest in tax reform, quickly moved the issue to the front burner.
The focus on growth
Tax reform today, like its 1986 predecessor, has a long history of debate, evolution, and refinement. TRA86 and the current effort also share an intense focus on improving economic growth, but with one important difference: TRA86 largely responded to a sense borne of the previous, deep recession that the economy needed to be both stronger and more resilient, and that sound tax policy could help. Tax reform was seen as something Congress and the president could and should accomplish.
Tax reform today shares a similar motivation, but with far greater urgency. Just as no business can compete for long if its cost structure substantially exceeds those of its competitors, American businesses cannot continue to compete effectively at home or abroad facing high tax rates, an inadequate capital cost recovery system, and an international tax system long abandoned by competing companies.
American companies are managing to compete successfully today but with ever greater difficulty under the federal tax system. Failure to reform the tax system would not result overnight in significant decline in Americans’ long-run economic prospects. But it would most assuredly do so over the next few years as both financial and human capital is driven overseas.
Tax reform is one task Congress and the president simply have to get right if America is to prosper.
https://www.uschamber.com/above-the-fold/tax-reform-under-history-s-light
What History Teaches Us About Tax Reform
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[This is part of an ongoing series entitled “The Case for Tax Reform,” which examines the importance of reforming the outdated tax code, and how achieving that goal will advance economic growth, jobs, and prosperity.]
An underperforming economy and mounting international competition have propelled tax reform from topic of discussion to front-burner issue. There is no change in federal policy that offers greater potential to strengthen employment and increase wages for American workers than sound, comprehensive tax reform.
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Reviewing and respecting the lessons from the last major tax reform over thirty years ago illuminates the road ahead, and provides lessons for how to raise our odds of success. Time provides a dimension worth exploring for similarities and contrasts between 1986 and today. Specifically, the time leading up to the effort, and the time needed for Congress to act.
The Historical On Ramp to Tax Reform
President John F. Kennedy understood the dampening economic effects of high tax rates. Though he died before seeing his program enacted, his successor, President Lyndon B. Johnson pushed the program through Congress and thus the 1964 tax bill is commonly referred to as the “Kennedy tax cuts.” The 1964 bill centered on significant tax rate reductions to achieve a substantially stronger economy.
Thereafter, budget pressures from the Vietnam War and Great Society programs reoriented tax policy once again toward ever-higher tax rates accompanied by a steady accretion of deductions and credits to blunt the effects of higher rates on politically favored constituencies. This process continued unabated into President Jimmy Carter’s administration and not surprisingly coinciding with a languishing economy.
Even as tax rates climbed and new distortions filled the tax code, a countermovement arose. In the final moments of the Ford Administration, Secretary William E. Simon released a landmark Treasury report directed by one of the era’s great economists, David Bradford, called “Blueprints for Basic Tax Reform,” guiding concepts of sound tax policy for years to come.
As the economy struggled and President Carter stood by, Congress took the initiative. With strong, bipartisan support over Carter’s objections, Congress substantially cut the capital gains tax rate as part of the 1978 Revenue Act, marking the first step in a change in tax philosophy culminating in the 1986 Tax Reform Act (TRA86).
Senator Bill Roth (R-DE) and Congressman Jack Kemp (R-NY) then picked up tax reform’s guidon, leading the charge for lower tax rates. At the same time, a second dimension in tax policy gained steam – the need for a less punitive capital cost recovery system. This debate was led largely outside Congress by the likes of Charls Walker and Ernie Christian, former Ford Administration Treasury hands, and Norman B. Ture, later Treasury undersecretary under Ronald Reagan.
Spurred by a recession wrought by a disinflationary monetary policy, the tax debate quickly came to a head in the 1981 “Reagan tax cuts.” The 1981 bill cut tax rates and instituted a vastly superior capital cost recovery system among other reforms. In the process, the bill cut revenues far more than Reagan proposed.
Though the 1981 bill was championed by a Republican president, it enjoyed widespread Democratic support. Rep. Dan Rostenkowski (D-IL), Chairman of the House Committee on Ways and Means introduced and pushed the legislation to passage, joined by almost half the House Democrats and almost a third of Senate Democrats.
The magnitude of the 1981 tax cuts proved politically unsustainable and were quickly followed by a series of tax hikes reversing some of the 1981 revenue reductions. Having settled the issue of how much to tax, the stage was now set for the 1986 reform and deciding who and how to tax.
Building Toward the 1986 Tax Reform Act
At about this time a fundamentally different approach to tax policy appeared: the Hall-Rabushka Flat Tax. The Flat Tax’s popularity often associates with the simplicity of imposing a single tax rate. However, the real revolution it offered was not the single tax rate,but what is subject to tax. Despite appearing as a traditional income tax, the Flat Tax was something quite new as it explicitly eliminated tax on investment income and imposed a simple cash flow tax on all businesses, thus adopting the principle of expensing, or allowing a full and immediate deduction for capital purchases.
The Flat Tax was too radical to gain wide acceptance in the early 1980s, but a vigorous bipartisan debate harkening back to Bradford’s 1976 “Blueprints” continued nonetheless. The 1981 tax cuts worked as intended to launch a powerful economic recovery, but memories of poor economic performance under Carter still lingered. A broad, bipartisan consensus championed faster economic growth by reforming the tax code to reduce the distortions to economic decision making it caused and the resulting misallocation of basic resources.
The basic strategy was to lower rates as in the 1981 Act, only further, and to implement a sound cost recovery system as in the 1981 Act. In contrast to 1981, however, the new strategy included a determined effort to “broaden the tax base” by eliminating distorting loopholes and tax credits, thereby intending the overall bill to be revenue neutral. .
The Treasury Department under Secretary Don Regan took the first big step in 1984 with the release of a densely packed 275 page proposal for comprehensive tax reform, dubbed “Treasury I”. While many aspects were well-received, as with most prototypes, Treasury I contained flaws, some of which Treasury addressed in 1985 with “Treasury II”.
Tax reform was off and running in Congress with the release of Treasury II, but the road was by no means easy. Time and again Reagan had to give Congress another not-always-gentle push. The greatest peril demanding Reagan’s firm hand came when Senate Finance Committee Chairman Bob Packwood (R-OR) realized he couldn’t pass tax reform on the path it was on. Ironically, the man who had repeatedly saved tax reform, President Reagan, was also now tax reform’s biggest obstacle.
The Price for Overcoming the Greatest Hurdle
Reagan was forced into pushing for the most rate reduction possible. Initially he drew the line at 25 percent for individuals and he held firm for much of the debate. Like most policy, tax reform involves trade-offs and Packwood just couldn’t find enough obvious base broadeners he could economically or politically trade off to hit a 25 percent rate.
Something had to give. At first the rate crept up to 26 and then to 28 percent. But at 28 percent, Reagan would go no further.
As Reagan urged Packwood to press on, Packwood had to get creative. He took fairly innocuous existing individual and corporate minimum taxes and expanded them into full-fledged parallel tax systems; voila, massive back-door base broadening. Packwood’s new Alternative Minimum Tax (AMT), while a superb example of terrible tax policy, had as its one redeeming feature: it raised enough money in a sufficiently confusing manner to hit the 28 percent rate without creating too many political problems, at least not for the duration of the debate. Three months later, the final bill passed the Senate.
Packwood’s AMT offers an important lesson for tax reform today. As important as low tax rates are for economic growth, policy makers and the public need to be honest about the tradeoffs involved. The broadest possible tax base capable of garnering sufficient political support can only raise so much revenue at a targeted tax rate. Demand an even lower tax rate and something (or someone) else will have to give and very likely pro-growth tax policy will suffer as a consequence.
Back to the Present
With respect to time, the current tax reform debate parallels that of 1986 closely. TRA86 concluded a lengthy, evolutionary process regarding accepted beliefs about sound, pro-growth tax policy. That process distilled to the lowest possible rates and applied to a simple, broad tax base, while allowing for a depreciation system for capital costs minimizing the anti-investment aspects of an income tax.
Tax reform today shares these traits, both with respect to the substance of reform – low rates, broad base, and today, expensing – and with respect to time. Like the 1986 episode, tax reform today reflects the product of many years of debate regarding the design of pro-growth tax policy, an evolution that began in 1986.
In one other critical respect regarding time, TRA86 and the current effort offer stark contrasts. Where the legislative starting gun on TRA86 went off in 1984 and the effort then proceeded for over two years, Congress in 2017 will have only a handful of months from introduction to tax reform’s final passage. This difference in time will have significant implications for how Congress defines “comprehensive” as they work toward pro-growth tax reform.
Read Part 2: Tax Reform Under History’s Light
https://www.uschamber.com/above-the-fold/what-history-teaches-us-about-tax-reform
Story 3: Defeating The Islamic State in Iraq and Syria By Bombing Them To Death — ISIS Free? — Videos
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By Hollie McKay | Fox News
Why ISIS is dwindling in Iraq and Syria
BAGHDAD – Hundreds of ISIS fighters had just been chased out of a northern Syrian city and were fleeing through the desert in long convoys, presenting an easy target to U.S. A-10 “warthogs.”
But the orders to bomb the black-clad jihadists never came, and the terrorists melted into their caliphate — living to fight another day. The events came in August 2016, even as then-Republican presidential nominee Donald Trump was vowing on the campaign trail to let generals in his administration crush the organization that, under President Obama, had grown from the “jayvee team” to the world’s most feared terrorist organization.
U.S. Air Force Brig. Gen. Andrew Croft said the Trump administration has put a strong leadership team in place (U.S. Army photo by Sgt. Tracy McKithern)
“I will…quickly and decisively bomb the hell out of ISIS,” Trump, who would name legendary Marine Corps Gen. James Mattis as secretary of defense, promised. “We will not have to listen to the politicians who are losing the war on terrorism.”
ISIS CURSED, MOCKED IN MOSUL, WHERE OLD CITY REMAINS A HAUNTED WASTELAND
Just over a year later, ISIS has been routed from Iraq and Syria with an ease and speed that’s surprised even the men and women who carried out the mission. Experts say it’s a prime example of a campaign promise kept. President Trump scrapped his predecessor’s rules of engagement, which critics say hamstrung the military, and let battlefield decisions be made by the generals in the theater, and not bureaucrats in Washington.
At its peak, ISIS held land in Iraq and Syria that equaled the size of West Virginia, ruled over as many as 8 million people, controlled oilfields and refineries, agriculture, smuggling routes and vast arsenals. It ran a brutal, oppressive government, even printing its own currency.
Lt. Col. Seth Folsom credits the cooperation between Iraqi Security Forces and the U.S-led coalition for the military defeat of ISIS in Iraq. (Courtesy U.S Army)
The terror organization now controls just 3 percent of Iraq and less than 5 percent of Syria. Its self-styled “caliph,” Abu Bakr al-Baghdadi, is believed to be injured and holed up somewhere along the lawless border of Syria and Iraq.
ISIS remains a danger, as members who once ruled cities and villages like a quasi-government now live secretly among civilian populations in the region, in Europe and possibly in the U.S. These cells will likely present a terrorist threat for years. In addition, the terrorist organization is attempting to regroup in places such as the Philippines, Libya and the Sinai Peninsula.
But the military’s job — to take back the land ISIS claimed as its caliphate and liberate cities like Mosul, in Iraq, and Raqqa, in Syria, as well as countless smaller cities and villages, is largely done. And it has taken less than a year.
Mattis, a US Marine Corps general, said there would be no White House micromanaging on his watch (Associated Press)
“The leadership team that is in place right now has certainly enabled us to succeed,” Brig. Gen. Andrew Croft, the ranking U.S. Air Force officer in Iraq, told Fox News. “I couldn’t ask for a better leadership team to work for, to enable the military to do what it does best.”
President Trump gave a free hand to Mattis, who in May stressed military commanders were no longer being slowed by Washington “decision cycles,” or by the White House micromanaging that existed President Obama. As a result of the new approach, the fall of ISIS in Iraq came even more swiftly than hardened U.S. military leaders expected.
“It moved more quickly than at least I had anticipated,” Croft said. “We and the Iraqi Security Forces were able to hunt down and target ISIS leadership, target their command and control.”
U.S. Marine Corps Brig. Gen. Robert Sofge said the military now has a clear mandate (U.S. Army photo by Spc. Cole Erickson)
IRAQI KURDS STILL LOVE US DESPITE ITS OPPOSITION TO KURDISH INDEPENDENCE, SAYS KURDISH LEADER
After the battle to liberate Mosul – ISIS’ Iraqi headquarters – was completed in July — the U.S.-led coalition retook Tel Afar in August, Hawija in early October and Rawa in Anbar province in November.
Marine Col. Seth Folsom, who oversaw fighting in Al Qaim near the Syrian border, agreed. He wasn’t expecting his part of the campaign against ISIS to get going until next spring and figured even then, it would then “take six months or more.”
Instead, ISIS was routed in Al Qaim in just a few days.
Mosul, and several other cities liberated by ISIS, were largely destroyed in the fighting. (Fox News/Hollie McKay)
“We really had one mandate and that was enable the Iraqi Security Forces to defeat ISIS militarily here in Anbar. I feel that we have achieved that mission,” Folsom said. “I never felt constrained. In a lot of ways, I felt quite liberated because we had a clear mandate and there was no questioning that.”
Brig. Gen. Robert “G-Man” Sofge, the top U.S. Marine in Iraq, told Fox News his commanders have “enjoyed not having to deal with too many distractions and there was no question about what the mission here in Iraq was.”
Iraqi Brig. Gen. Yahya Rasool was skeptical of Trump at first, but says success on the ground has been swift (Fox News/Hollie McKay )
“We were able to focus on what our job was without distraction and I think that goes a long way in what we are trying to accomplish here,” he said.
Sofge said criticism that loosening rules of engagement put civilians at risk is “absolutely not true.”
Col. Ryan Dillon. Combined Joint Task Force – Inherent Resolve Spokesman (Photo by CJTFOIR)
“We used precision strikes, and completely in accordance with international standards,” he said. “We didn’t lower that standard, not one little bit. But we were able to exercise that precision capability without distraction and I think the results speak for themselves.”
The U.S.-led coalition said this week the Coalition Civilian Casualty Assessment Team has added 30 new staffers to travel throughout the region. It said military leaders continue to “hold themselves accountable for actions that may have caused unintentional injury or death to civilians.”
The coalition also said dozens of reports of civilian casualties have been determined to be “non-credible,” and just .35 percent of the almost 57,000 separate engagement carried out between August 2014 and October 2017 resulted in a credible report of a civilian casualty.
In addition to air support, the U.S.-led strategy also includes training and equipping Iraqi troops on the ground.
While the Trump administration’s success is often underplayed in the U.S. media, it is obvious on the ground in Iraq, according to a spokesman for Iraq’s Ministry of Defense, Yahya Rasool.
“I was not optimistic when Trump first came to the office,” Rasool said. “But after a while I started to see a new approach, the way the U.S. was dealing with arming and training. I saw how the coalition forces were all moving faster to help the Iraq side more than before. There seemed to be a lot of support, under Obama we did not get this.”
Al-Baghdadi, who once ruled a caliphate the size of California, is now inn hiding and likely badly injured
Despite the victories on the battlefield, U.S. officials cautioned much work remains to be done.
“ISIS is very adaptive,” noted Col. Ryan Dillon, the U.S.-led coalition spokesman. “We are already seeing smaller cells and pockets that take more of an insurgent guerrilla type approach as opposed to an Islamic army or conventional type force. So we have got to be prepared for that.”
He said as a result the coalition is “adjusting some training efforts” so the Iraqi forces — upwards of 150,000 have already undergone training — are equipped to address such threats and ensure long-term stability.
Folsom said “the worst thing we could do” is not finish the job.
“If a country becomes a failed state, if it becomes a lawless region, you begin to set the conditions for what happened in the years before 9/11,” he said. “In those ungoverned spaces where we don’t know what is going on, that is where those seeds of extremism begin to blossom.”
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