The Pronk Pops Show 881, April 26, 2017, Story 1: District Court Judge in 9th Circuit Commits Judicial Fraud Makes Up A Violation of Law — Trump Executive Order Requires Existing Federal Laws Passed By Congress Be Enforced — Videos — Story 2: Senator Ted Cruz Great Idea For Paying For The Wall — Videos — Story 3: Trump’s Latest Tax Proposal — Good But Not Great — Missed Opportunity To Transition From An Income Tax Based System To A Broad Based Consumption Tax — FairTax or Fair Tax Less — Forget The Republican Establishment Border Adjustment Tax — Videos

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The Pronk Pops Show Podcasts

Pronk Pops Show 881: April 26, 2017

Pronk Pops Show 880: April 25, 2017

Pronk Pops Show 879: April 24, 2017

Pronk Pops Show 878: April 21, 2017

Pronk Pops Show 877: April 20, 2017

Pronk Pops Show 876: April 19, 2017

Pronk Pops Show 875: April 18, 2017

Pronk Pops Show 874: April 17, 2017

Pronk Pops Show 873: April 13, 2017

Pronk Pops Show 872: April 12, 2017

Pronk Pops Show 871: April 11, 2017

Pronk Pops Show 870: April 10, 2017

Pronk Pops Show 869: April 7, 2017

Pronk Pops Show 868: April 6, 2017

Pronk Pops Show 867: April 5, 2017

Pronk Pops Show 866: April 3, 2017

Pronk Pops Show 865: March 31, 2017

Pronk Pops Show 864: March 30, 2017

Pronk Pops Show 863: March 29, 2017

Pronk Pops Show 862: March 28, 2017

Pronk Pops Show 861: March 27, 2017

Pronk Pops Show 860: March 24, 2017

Pronk Pops Show 859: March 23, 2017

Pronk Pops Show 858: March 22, 2017

Pronk Pops Show 857: March 21, 2017

Pronk Pops Show 856: March 20, 2017

Pronk Pops Show 855: March 10, 2017

Pronk Pops Show 854: March 9, 2017

Pronk Pops Show 853: March 8, 2017

Pronk Pops Show 852: March 6, 2017

Pronk Pops Show 851: March 3, 2017

Pronk Pops Show 850: March 2, 2017

Pronk Pops Show 849: March 1, 2017

Pronk Pops Show 848: February 28, 2017

Pronk Pops Show 847: February 27, 2017

Pronk Pops Show 846: February 24, 2017

Pronk Pops Show 845: February 23, 2017

Pronk Pops Show 844: February 22, 2017

Pronk Pops Show 843: February 21, 2017

Pronk Pops Show 842: February 20, 2017

Pronk Pops Show 841: February 17, 2017

Pronk Pops Show 840: February 16, 2017

Pronk Pops Show 839: February 15, 2017

Pronk Pops Show 838: February 14, 2017

Pronk Pops Show 837: February 13, 2017

Pronk Pops Show 836: February 10, 2017

Pronk Pops Show 835: February 9, 2017

Pronk Pops Show 834: February 8, 2017

Pronk Pops Show 833: February 7, 2017

Pronk Pops Show 832: February 6, 2017

Pronk Pops Show 831: February 3, 2017

Pronk Pops Show 830: February 2, 2017

Pronk Pops Show 829: February 1, 2017

Pronk Pops Show 828: January 31, 2017

Pronk Pops Show 827: January 30, 2017

Pronk Pops Show 826: January 27, 2017

Pronk Pops Show 825: January 26, 2017

Pronk Pops Show 824: January 25, 2017

Pronk Pops Show 823: January 24, 2017

Pronk Pops Show 822: January 23, 2017

Pronk Pops Show 821: January 20, 2017

Pronk Pops Show 820: January 19, 2017

Pronk Pops Show 819: January 18, 2017

Pronk Pops Show 818: January 17, 2017

Pronk Pops Show 817: January 13, 2017

Pronk Pops Show 816: January 12, 2017

Pronk Pops Show 815: January 11, 2017

Pronk Pops Show 814: January 10, 2017

Pronk Pops Show 813: January 9, 2017

Image result for list of santuary citiesImage result for branco cartoons trump paying for the wallImage result for branco cartoons trump tax reform blueprint april 26, 2017

 

 

 

Story 1: District Court Judge in 9th Circuit Commits Judicial Fraud Makes Up A Violation of Law — Trump Executive Order Requires Existing Federal Laws Passed By Congress Be Enforced — Videos — 

Image result for list of santuary cities

Image result for Mexico Southern Border FenceImage result for list of santuary cities

Federal judge rules Trump cannot punish sanctuary cities by withholding funds

Sanctuary Cities, Fed Money, and 9th Circuit Judge Block!

CA Fed Judge: Pres Trump Can’t Punish Sanctuary Cities By Withholding Funds – Tucker Carlson

San Francisco sues over Trump’s executive order targeting sanctuary cities

Judge Blocks Attempts To Withhold Funding For Sanctuary Cities

9th Circuit Court “Going Bananas”

A Ruling About Nothing

by ANDREW C. MCCARTHY April 26, 2017 1:45 PM

A federal judge suspends Trump’s unenforced ban on funding for sanctuary cities.

A federal judge suspends Trump’s unenforced ban on funding for sanctuary cities. A showboating federal judge in San Francisco has issued an injunction against President Trump’s executive order cutting off federal funds from so-called sanctuary cities. The ruling distorts the E.O. beyond recognition, accusing the president of usurping legislative authority despite the order’s express adherence to “existing law.” Moreover, undeterred by the inconvenience that the order has not been enforced, the activist court — better to say, the fantasist court — dreams up harms that might befall San Francisco and Santa Clara, the sanctuary jurisdictions behind the suit, if it were enforced. The court thus flouts the standing doctrine, which limits judicial authority to actual controversies involving concrete, non-speculative harms.

Although he vents for 49 pages, Judge William H. Orrick III gives away the game early, on page 4. There, the Obama appointee explains that his ruling is about . . . nothing. That is, Orrick acknowledges that he is adopting the construction of the E.O. urged by the Trump Justice Department, which maintains that the order does nothing more than call for the enforcement of already existing law. Although that construction is completely consistent with the E.O. as written, Judge Orrick implausibly describes it as “implausible.”

That is, Orrick acknowledges that he is adopting the construction of the E.O. urged by the Trump Justice Department, which maintains that the order does nothing more than call for the enforcement of already existing law. Although that construction is completely consistent with the E.O. as written, Judge Orrick implausibly describes it as “implausible.”

Since Orrick ultimately agrees with the Trump Justice Department, and since no enforcement action has been taken based on the E.O., why not just dismiss the case? Why the judicial theatrics?

There appear to be two reasons.

The first is Orrick’s patent desire to embarrass the White House, which rolled out the E.O. with great fanfare. The court wants it understood that Trump is a pretender: For all the hullaballoo, the E.O. effectively did nothing. Indeed, Orrick rationalizes his repeated misreadings of what the order actually says by feigning disbelief that what it says could possibly be what it means. Were that the case, he suggests, there would have been no reason to issue the order in the first place.

Thus, taking a page from the activist left-wing judges who invalidated Trump’s “travel ban” orders, Orrick harps on stump speeches by Trump and other administration officials. One wonders how well Barack “If you like your plan, you can keep your plan” Obama would have fared under the judiciary’s new Trump Doctrine: The extravagant political rhetoric by which the incumbent president customarily sells his policies relieves a court of the obligation to grapple with the inevitably more modest legal text of the directives that follow.

Of course, the peer branches of government are supposed to presume each other’s good faith in the absence of a patent violation of the law. But let’s put aside the unseemliness of Orrick’s barely concealed contempt for a moment, because he is also wrong. The proper purpose of an executive order is to direct the operations of the executive branch within the proper bounds of the law. There is, therefore, nothing untoward about an E.O. that directs the president’s subordinates to take enforcement action within the confines of congressional statutes.

In fact, it is welcome.

It is the president’s burden to set federal law-enforcement priorities. After years of Obama’s lax enforcement of immigration law and apathy regarding sanctuary jurisdictions, an E.O. openly manifesting an intent to execute the laws vigorously can have a salutary effect. And indeed, indications are that the cumulative effect of Trump’s more zealous approach to enforcement, of which the sanctuary-city E.O. is just one component, has been a significant reduction in the number of aliens seeking to enter the U.S. illegally.

In any event, eight years of Obama’s phone and pen have made it easy to forget that the president is not supposed to make law, and thus that we should celebrate, not condemn, an E.O. that does not break new legal ground. Orrick, by contrast, proceeds from the flawed premise that if a president is issuing an E.O., it simply must be his purpose to usurp congressional authority. Then he censures Trump for a purported usurpation that is nothing more than a figment of his own very active imagination.

Orrick’s second reason for issuing his Ruling About Nothing is to rationalize what is essentially an advisory opinion. It holds — I know you’ll be shocked to hear this — that if Trump ever did try to cut off funds from sanctuary cities, it would be an epic violation of the Constitution. Given that courts are supposed to refrain from issuing advisory opinions, the Constitution is actually more aggrieved by Orrick than by Trump. * * *

In a nutshell, the court claims that the E.O. is presidential legislation, an unconstitutional violation of the separation of powers. Orrick insists that the E.O. directs the attorney general and the secretary of homeland security to cut off any federal funds that would otherwise go to states and municipalities if they “willfully refuse to comply” with a federal law (Section 1373 of Title 8) that calls for state and local cooperation in enforcing immigration law.

According to Judge Orrick, Trump’s E.O. is heedless of whether Congress has approved any terminations of state funding from federal programs it has enacted. In one of the opinion’s most disingenuous passages, Orrick asserts that the E.O. “directs the Attorney General and the [Homeland Security] Secretary to ensure that ‘sanctuary jurisdictions’ are ‘not eligible to receive’ federal grants.” (Emphasis in original.)

But this is just not true; Orrick has omitted key context from the relevant passage, which actually states that “the Attorney General and the Secretary, in their discretion and to the extent consistent with law, shall ensure that jurisdictions that willfully refuse to comply with 8 U.S.C. 1373 (sanctuary jurisdictions) are not eligible to receive Federal grants.” (Emphasis added.) In plain English, the president has expressly restricted his subordinates to the limits that Congress has enacted. Under Trump’s order, there can be no suspension or denial of funding from a federal program unless congressional statutes authorize it. The president is not engaged in an Obama-

Of course, the peer branches of government are supposed to presume each other’s good faith in the absence of a patent violation of the law. But let’s put aside the unseemliness of Orrick’s barely concealed contempt for a moment, because he is also wrong. The proper purpose of an executive order is to direct the operations of the executive branch within the proper bounds of the law. There is, therefore, nothing untoward about an E.O. that directs the president’s subordinates to take enforcement action within the confines of congressional statutes. In fact, it is welcome.

It is the president’s burden to set federal law-enforcement priorities. After years of Obama’s lax enforcement of immigration law and apathy regarding sanctuary jurisdictions, an E.O. openly manifesting an intent to execute the laws vigorously can have a salutary effect. And indeed, indications are that the cumulative effect of Trump’s more zealous approach to enforcement, of which the sanctuary-city E.O. is just one component, has been a significant reduction in the number of aliens seeking to enter the U.S. illegally. In any event, eight years of Obama’s phone and pen have made it easy to forget that the president is not supposed to make law, and thus that we should celebrate, not condemn, an E.O. that does not break new legal ground. Orrick, by contrast, proceeds from the flawed premise that if a president is issuing an E.O., it simply must be his purpose to usurp congressional authority. Then he censures Trump for a purported usurpation that is nothing more than a figment of his own very active imagination.

Orrick’s second reason for issuing his Ruling About Nothing is to rationalize what is essentially an advisory opinion. It holds — I know you’ll be shocked to hear this — that if Trump ever did try to cut off funds from sanctuary cities, it would be an epic violation of the Constitution. Given that courts are supposed to refrain from issuing advisory opinions, the Constitution is actually more aggrieved by Orrick than by Trump. * * *

In a nutshell, the court claims that the E.O. is presidential legislation, an unconstitutional violation of the separation of powers. Orrick insists that the E.O. directs the attorney general and the secretary of homeland security to cut off any federal funds that would otherwise go to states and municipalities if they “willfully refuse to comply” with a federal law (Section 1373 of Title 8) that calls for state and local cooperation in enforcing immigration law. According to Judge Orrick, Trump’s E.O. is heedless of whether Congress has approved any terminations of state funding from federal programs it has enacted. In one of the opinion’s most disingenuous passages, Orrick asserts that the E.O. “directs the Attorney General and the [Homeland Security] Secretary to ensure that ‘sanctuary jurisdictions’ are ‘not eligible to receive’ federal grants.” (Emphasis in original.)

But this is just not true; Orrick has omitted key context from the relevant passage, which actually states that “the Attorney General and the Secretary, in their discretion and to the extent consistent with law, shall ensure that jurisdictions that willfully refuse to comply with 8 U.S.C. 1373 (sanctuary jurisdictions) are not eligible to receive Federal grants.” (Emphasis added.)

In plain English, the president has expressly restricted his subordinates to the limits that Congress has enacted. Under Trump’s order, there can be no suspension or denial of funding from a federal program unless congressional statutes authorize it. The president is not engaged in an Obama-esque rewrite of federal law; he explicitly ordered his subordinates to follow federal law.

It is not enough to say Orrick mulishly ignores the clear text of the executive order. Again and again, Justice Department lawyers emphasized to the court that Trump’s order explicitly reaffirmed existing law. Orrick refused to listen because, well, what fun would that be? If the president is simply directing that the law be followed, there is no basis for a progressive judge to accuse him of violating the law.

Were he to concede that, how would Orrick then win this month’s Social Justice Warrior in a Robe Award for Telling Donald Trump What For? Orrick can’t confine himself to merely inventing a violation, either, because there is no basis for a lawsuit unless a violation results in real damages. So, the judge also has to fabricate some harm. This takes some doing since, in addition to merely directing that the law be enforced, the Trump administration has not actually taken any action against any sanctuary jurisdiction to this point.

No problem: Orrick theorizes that because San Francisco and Santa Clara receive lots of government funding, Trump’s order afflicts them with “pre-enforcement” anxiety. They quake in fear that their safety-net and services budgets will be slashed. Sanctuary cities? Maybe we should call them snowflake cities. As noted above, there is a transparent agenda behind Orrick’s sleight of hand. The judge is keen to warn the president that, if ever his administration were to deny funds to sanctuary cities, it would violate the Constitution. It is in connection with this advisory opinion that the judge makes the only point worthy of consideration — albeit not in the case before him. Here, it is useful to recall the Supreme Court’s first Obamacare ruling.

Sanctuary cities? Maybe we should call them snowflake cities.

As noted above, there is a transparent agenda behind Orrick’s sleight of hand. The judge is keen to warn the president that, if ever his administration were to deny funds to sanctuary cities, it would violate the Constitution. It is in connection with this advisory opinion that the judge makes the only point worthy of consideration — albeit not in the case before him. Here, it is useful to recall the Supreme Court’s first Obamacare ruling.

Sanctuary cities? Maybe we should call them snowflake cities. As noted above, there is a transparent agenda behind Orrick’s sleight of hand. The judge is keen to warn the president that, if ever his administration were to deny funds to sanctuary cities, it would violate the Constitution. It is in connection with this advisory opinion that the judge makes the only point worthy of consideration — albeit not in the case before him. Here, it is useful to recall the Supreme Court’s first Obamacare ruling.

As noted above, there is a transparent agenda behind Orrick’s sleight of hand. The judge is keen to warn the president that, if ever his administration were to deny funds to sanctuary cities, it would violate the Constitution. It is in connection with this advisory opinion that the judge makes the only point worthy of consideration — albeit not in the case before him. Here, it is useful to recall the Supreme Court’s first Obamacare ruling.

While conservatives inveighed against Chief Justice Roberts’s upholding of the individual mandate, the decision had a silver lining: The majority invalidated Obamacare’s Medicaid mandate, which required the states, as a condition of qualifying for federal Medicaid funding, to enforce the federal government’s generous new Medicaid qualifications. In our system, the states are sovereign — the federal government may not dictate to them in areas of traditional state regulation, nor may it conscript them to enforce federal law. The Supremes therefore explained that state agreements to accept federal funding in return for adopting federal standards (e.g., to accept highway funding in exchange for adopting the federally prescribed 55-mph speed limit) are like contracts. The state must agree to the federal government’s terms. Once such an agreement is reached, the feds may not unilaterally make material changes in the terms, nor may they use their superior bargaining position to extort a state into acceding to onerous new terms in order to get the federal money on which it has come to depend. Whether a particular case involves such an extortion, as opposed to a permissible nudge, depends on the facts. If the feds are too heavy-handed, they run the risk of violating the Tenth Amendment’s federalist division of powers.

Who knew federal judges in ur-statist San Francisco had become such federalists? Orrick contends that if Trump were to cut off funds from sanctuary cities for failure to assist federal immigration-enforcement officials, it would offend the Tenth Amendment. This is highly unlikely. First, let’s remember — though Orrick studiously forgets — that Trump’s order endorses only such stripping of funds as Congress has already approved. Thus, sanctuary jurisdictions would be ill-suited to claim that they’d been sandbagged.

Second, the money likely to be at issue would surely be nothing close to Medicaid funding. Finally, Trump would not be unilaterally rewriting an existing federal–state contract; he’d be calling for the states to follow federal laws that (a) were on the books when the states started taking federal money and (b) pertain to immigration, a legal realm in which the courts have held the federal government is supreme and the states subordinate. Still, all that said, whether any Trump-administration effort to cut off funding would run afoul of the Tenth Amendment would depend on such considerations as how much funding was actually cut; whether Congress had authorized the cut in designing the funding program; whether the funding was tightly related or unrelated to immigration enforcement; and how big a burden it would be for states to comply with federal demands. Those matters will be impossible to evaluate unless and until the administration actually directs a slashing of funds to a sanctuary jurisdiction. If that happens, there will almost certainly be no legal infirmity as long as Trump’s E.O. means what it says — namely, that any funding cuts must be consistent with existing federal law. But it hasn’t happened. And as long as it hasn’t happened, there is no basis for a court to involve itself, much less issue an anticipatory ruling. Such niceties matter only if you’re practicing law, though. Judge Orrick is practicing politics.

Thus, taking a page from the activist left-wing judges who invalidated Trump’s “travel ban” orders, Orrick harps on stump speeches by Trump and other administration officials. One wonders how well Barack “If you like your plan, you can keep your plan” Obama would have fared under the judiciary’s new Trump Doctrine: The extravagant political rhetoric by which the incumbent president customarily sells his policies relieves a court of the obligation to grapple with the inevitably more modest legal text of the directives that follow.

Here, it is useful to recall the Supreme Court’s first Obamacare ruling. While conservatives inveighed against Chief Justice Roberts’s upholding of the individual mandate, the decision had a silver lining: The majority invalidated Obamacare’s Medicaid mandate, which required the states, as a condition of qualifying for federal Medicaid funding, to enforce the federal government’s generous new Medicaid qualifications.

 

In our system, the states are sovereign — the federal government may not dictate to them in areas of traditional state regulation, nor may it conscript them to enforce federal law. The Supremes therefore explained that state agreements to accept federal funding in return for adopting federal standards (e.g., to accept highway funding in exchange for adopting the federally prescribed 55-mph speed limit) are like contracts. The state must agree to the federal government’s terms. Once such an agreement is reached, the feds may not unilaterally make material changes in the terms, nor may they use their superior bargaining position to extort a state into acceding to onerous new terms in order to get the federal money on which it has come to depend. Whether a particular case involves such an extortion, as opposed to a permissible nudge, depends on the facts. If the feds are too heavy-handed, they run the risk of violating the Tenth Amendment’s federalist division of powers.

Who knew federal judges in ur-statist San Francisco had become such federalists?

Orrick contends that if Trump were to cut off funds from sanctuary cities for failure to assist federal immigration-enforcement officials, it would offend the Tenth Amendment. This is highly unlikely. First, let’s remember — though Orrick studiously forgets — that Trump’s order endorses only such stripping of funds as Congress has already approved. Thus, sanctuary jurisdictions would be ill-suited to claim that they’d been sandbagged. Second, the money likely to be at issue would surely be nothing close to Medicaid funding. Finally, Trump would not be unilaterally rewriting an existing federal–state contract; he’d be calling for the states to follow federal laws that (a) were on the books when the states started taking federal money and (b) pertain to immigration, a legal realm in which the courts have held the federal government is supreme and the states subordinate.

Still, all that said, whether any Trump-administration effort to cut off funding would run afoul of the Tenth Amendment would depend on such considerations as how much funding was actually cut; whether Congress had authorized the cut in designing the funding program; whether the funding was tightly related or unrelated to immigration enforcement; and how big a burden it would be for states to comply with federal demands. Those matters will be impossible to evaluate unless and until the administration actually directs a slashing of funds to a sanctuary jurisdiction.

If that happens, there will almost certainly be no legal infirmity as long as Trump’s E.O. means what it says — namely, that any funding cuts must be consistent with existing federal law. But it hasn’t happened. And as long as it hasn’t happened, there is no basis for a court to involve itself, much less issue an anticipatory ruling.

Such niceties matter only if you’re practicing law, though. Judge Orrick is practicing politics.

 http://www.nationalreview.com/article/447058/trump-administration-sanctuary-city-executive-order-activist-liberal-judge-william-h-orrick

Story 2: Senator Ted Cruz Great Idea For Paying For The Wall — Videos —

Image result for senator cruz paying for wall with drug cartel money assets el chapoImage result for senator cruz paying for wall with drug cartel money assetsImage result for senator cruz paying for wall with drug cartel money assets el chapoImage result for senator cruz paying for wall with drug cartel money assetsImage result for senator cruz paying for wall with drug cartel money assets el chapoImage result for senator cruz paying for wall with drug cartel money assets el chapoImage result for United states / Mexico Southern Border Fence barrier or wallImage result for map of miles of United states / Mexico Southern Border Fence barrier or wallImage result for Mexico Southern Border FenceImage result for Mexico Southern Border FenceImage result for Mexico Southern Border FenceImage result for United states / Mexico Southern Border Fence barrier or wall

Is a wall an expensive, ineffective solution to border security?

How we can build Trump’s border wall

Is Trump’s Wall Possible?

Trump Maintains Mexico Will Pay for Border Wall

Donald Trump’s ‘Simple’ Response to How He Will Get Mexico To Pay for Wall

BREAKING: Trump’s ENTIRE Wall Just Got Paid For By ONE Person & You Won’t Believe Who!

Senator Ted Cruz Has a Great Plan to Pay for the Wall! Watch!

BREAKING Ted Cruz Teams With Trump, Figures Out PERFECT Way To Pay For Border Wall… – News

Inside the Homes of the Biggest Drug Kingpins

How El Chapo Became World’s Biggest Drug Lord

10 Massive TRUMP Walls That Already Exist

Sessions: Fed To Cut “Sanctuary Cities” Funding- Full Q & A

Mexico–United States barrier

From Wikipedia, the free encyclopedia

Border fence near El Paso, Texas

Border fence between San Diego‘s border patrol offices in California (left) and Tijuana, Mexico (right)

The Mexico–United States barrier is a series of walls and fences along the Mexico–United States border aimed at preventingillegal crossings from Mexico into the United States and vice versa.[1] The barrier is not one continuous structure, but a grouping of relatively short physical walls, secured in between with a “virtual fence” which includes a system of sensors and cameras monitored by the United States Border Patrol.[2] As of January 2009, U.S. Customs and Border Protection reported that it had more than 580 miles (930 km) of barriers in place.[3]The total length of the continental border is 1,989 miles (3,201 km).

Background

Two men scale the border fence into Mexico near Douglas, Arizona, in 2009

Two men scale the border fence into Mexico near Douglas, Arizona, in 2009

The barriers were built from 1994 as part of three larger “Operations” to taper transportation of illegal drugs manufactured in Latin America and immigration: Operation Gatekeeper in California, Operation Hold-the-Line[4] in Texas, and Operation Safeguard[5] in Arizona.

96.6 per cent of apprehensions by the Border Patrol in 2010 occurred at the southwest border.[6] The number of Border Patrol apprehensions declined 61% from 1,189,000 in 2005 to 723,840 in 2008 to 463,000 in 2010. The decrease in apprehensions may be due to a number of factors including changes in U.S. economic conditions and border enforcement efforts. Border apprehensions in 2010 were at their lowest level since 1972.[6] In March 2017 there were 17,000 apprehensions, which was the fifth month in a row of decline. In December 2016 apprehensions were at 58,478.[7]

The 1,954-mile (3,145 km) border between the United States and Mexico traverses a variety of terrains, including urban areas and deserts. The barrier is located on both urban and uninhabited sections of the border, areas where the most concentrated numbers of illegal crossings and drug trafficking have been observed in the past. These urban areas include San Diego, California and El Paso, Texas. As of August 29, 2008, the U.S. Department of Homeland Security had built 190 miles (310 km) of pedestrian border fence and 154.3 miles (248.3 km) of vehicle border fence, for a total of 344.3 miles (554.1 km) of fence. The completed fence is mainly in New Mexico, Arizona, and California, with construction underway in Texas.[8]

U.S. Customs and Border Protection reported that it had more than 580 miles (930 km) of fence in place by the second week of January 2009.[3] Work is still under way on fence segments in Texas and on the Border Infrastructure System in California.

The border fence is not one continuous structure and is actually a grouping of short physical walls that stop and start, secured in between with “virtual fence” which includes a system of sensors and cameras monitored by Border Patrol Agents.[2]

As a result of the effect of the barrier, there has been a marked increase in the number of people trying to illegally cross the Sonoran Desert and crossing over the Baboquivari Mountain in Arizona.[9] Such illegal immigrants must cross 50 miles (80 km) of inhospitable terrain to reach the first road, which is located in the Tohono O’odhamIndian Reservation.[9][10]

Status

Aerial view of El Paso, Texas and Ciudad Juárez, Chihuahua; the border can clearly be seen as it divides the two cities at night

Aerial view of El Paso, Texas (on the left) and Ciudad Juárez, Chihuahua (on the right), the border can clearly be seen as it divides the two cities at night

The wall in Tijuana, Mexico.

U.S. RepresentativeDuncan Hunter, a Republican from California and the then-chairman of the House Armed Services Committee, proposed a plan to the House on November 3, 2005 calling for the construction of a reinforced fence along the entire United States–Mexican border. This would also have included a 100-yard (91 m) border zone on the U.S. side. On December 15, 2005, Congressman Hunter’s amendment to the Border Protection, Anti-terrorism, and Illegal Immigration Control Act of 2005 (H.R. 4437) passed in the House. This plan called for mandatory fencing along 698 miles (1,123 km) of the 1,954-mile (3,145-km) border.[11] On May 17, 2006 the U.S. Senate proposed with Comprehensive Immigration Reform Act of 2006 (S. 2611) what could be 370 miles (600 km) of triple layered-fencing and a vehicle fence. Although that bill died in committee, eventually the Secure Fence Act of 2006 was passed by Congress and signed by President George W. Bush on October 26, 2006.[12]

The government of Mexico and ministers of several Latin American countries condemned the plans. Rick Perry, governor of Texas, also expressed his opposition saying that instead of closing the border it should be opened more and through technology support legal and safe migration.[13] The barrier expansion was also opposed by a unanimous vote of the Laredo, Texas City Council.[14] Laredo’s Mayor, Raul G. Salinas, was concerned about defending his town’s people by saying that the Bill which included miles of border wall would devastate Laredo. He stated “These are people that are sustaining our economy by forty percent, and I am gonna [sic] close the door on them and put [up] a wall? You don’t do that. It’s like a slap in the face.” He hoped that Congress would revise the Bill to better reflect the realities of life on the border.[15] There are no plans to build border fence in Laredo at this time.[citation needed]However, there is a large Border Patrol presence in Laredo.

Secure Fence Act

H.R. 6061, the “Secure Fence Act of 2006“, was introduced on September 13, 2006. It passed through the U.S. House of Representatives on September 14, 2006 with a vote of 283–138.

On September 29, 2006, by a vote of 80–19 the U.S. Senate confirmed H.R. 6061 authorizing, and partially funding the “possible” construction of 700 miles (1,125 km) of physical fence/barriers along the border. The very broad support implied that many assurances were been made by the Administration—to the Democrats, Mexico, and the pro “Comprehensive immigration reform” minority within the GOP—that Homeland Security would proceed very cautiously. Secretary of Homeland SecurityMichael Chertoff, announced that an eight-month test of the virtual fence he favored would precede any construction of a physical barrier.

On October 26, 2006, President George W. Bush signed H.R. 6061 which was voted upon and passed by the 109th Congress of the United States.[16] The signing of the bill came right after a CNN poll showed that most Americans “prefer the idea of more Border Patrol agents to a 700-mile (1,125-kilometer) fence.”[17] The Department of Homeland Security has a down payment of $1.2 billion marked for border security, but not specifically for the border fence.

As of January 2010, the fence project had been completed from San Diego, California to Yuma, Arizona.[dubious ] From there it continued into Texas and consisted of a fence that was 21 feet (6.4 m) tall and 6 feet (1.8 m) deep in the ground, cemented in a 3-foot (0.91 m)-wide trench with 5000 psi (345 bar; 352 kg/cm²) concrete. There were no fatalities during construction, but there were 4 serious injuries with multiple aggressive acts against building crews. There was one reported shooting with no injury to a crew member in Mexicali region. All fence sections are south of the All-American Canal, and have access roads giving border guards the ability to reach any point easily, including the dunes area where a border agent was killed 3 years before and is now sealed off.

The Republican Party’s 2012 platform stated that “The double-layered fencing on the border that was enacted by Congress in 2006, but never completed, must finally be built.”[18] The Secure Fence Act’s costs were estimated at $6 billion,[19] more than the Customs and Border Protection’s entire annual discretionary budget of $5.6 billion.[20] The Washington Office on Latin America noted on its Border Fact Check site in about the year 2013 that the cost of complying with the Secure Fence Act’s mandate was the reason it had not been completely fulfilled.[21]

Rethinking the expansion

In January 2007 incoming House Majority Leader Steny H. Hoyer (D-MD) announced that Congress would revisit the fence plan, with committee chairs holding up funding until a comprehensive border security plan was presented by the United States Department of Homeland Security. Then the Republican senators from Texas, John Cornyn and Kay Bailey Hutchison, advocated revising the plan, as well.[14]

The REAL ID Act, attached as a rider to a supplemental appropriations bill funding the wars in Iraq and Afghanistan, decreed, “Not withstanding any other provision of law, the Secretary of Homeland Security shall have the authority to waive all legal requirements such Secretary, in such Secretary’s sole discretion, determines necessary to ensure expeditious construction of the barriers and roads.” Secretary Chertoff used his new power to “waive in their entirety” the Endangered Species Act, the Migratory Bird Treaty Act, the National Environmental Policy Act, the Coastal Zone Management Act, the Clean Water Act, the Clean Air Act, and the National Historic Preservation Act to extend triple fencing through the Tijuana River National Estuarine Research Reserve near San Diego.[22] The Real ID Act further stipulates that the Secretary’s decisions are not subject to judicial review, and in December 2005 a federal judge dismissed legal challenges by the Sierra Club, the Audubon Society, and others to Chertoff’s decision.[citation needed]

Secretary Chertoff exercised his waiver authority on April 1, 2008. In June 2008, the U.S. Supreme Court declined to hear the appeal of a lower court ruling upholding the waiver authority in a case filed by the Sierra Club.[23] In September 2008 a federal district court judge in El Paso dismissed a similar lawsuit brought by El Paso County, Texas.[24]

By January 2009, U.S. Customs and Border Protection and Homeland Security had spent $40 million on environmental analysis and mitigation measures aimed at blunting any possible adverse impact that the fence might have on the environment. On January 16, 2009, DHS announced it was pledging an additional $50 million for that purpose, and signed an agreement with the U.S. Department of the Interior for utilization of the additional funding.[25]

Expansion freeze

On March 16, 2010, the Department of Homeland Security announced that there would be a halt to expand the “virtual fence” beyond two pilot projects in Arizona.[26]

Contractor Boeing Corporation had numerous delays and cost overruns. Boeing had initially used police dispatching software that was unable to process all of the information coming from the border. The $50 million of remaining funding would be used for mobile surveillance devices, sensors, and radios to patrol and protect the border. At the time, the Department of Homeland Security had spent $3.4 billion on border fences and had built 640 miles (1,030 km) of fences and barriers as part of the Secure Border Initiative.[26]

Local efforts

In response to a perceived lack of will on the part of the federal government to build a secure border fence, and a lack of state funds, Arizona officials plan to launch a website allowing donors to help fund a state border fence.[citation needed]

Piecemeal fencing has also been established. In 2005, under its president, Ramón H. Dovalina, Laredo Community College, located on the border, obtained a 10-foot fence built by the United States Marine Corps. The structure was not designed as a border barrier per se but was intended to divert smugglers and illegal immigrants to places where the authorities can halt entrance into the United States.[27]

Trump administration

Further information: Executive Order 13767

Donald Trump signing Executive Order 13767

Throughout his 2016 presidential campaign, Donald Trump called for the construction of a much larger and fortified wall along the Mexico–United States border, and claimed Mexico will pay for its construction, estimated at $8 to $12 billion, while others state there are enough uncertainties to drive up the cost between $15 to $25 billion.[28][29][30][31] In January 2017, Mexican President Enrique Peña Nieto said the country would not pay,[32][28] and later compared then President-elect Trump’s rhetoric to the former Dictator of Italy Benito Mussolini.[33] On January 25, 2017, the Trump administration signed a Border Security and Immigration Enforcement Improvements Executive Order, 13767 to commence the building of the border wall.[34]In response, Peña Nieto gave a national televised address confirming they would not pay, adding “Mexico doesn’t believe in walls”, and cancelled a scheduled meeting with Trump at the White House.[35][36]

In March 2017, President Donald Trump submitted a budget amendment for fiscal year (FY) 2017 that included an extra $3 billion for border security and immigration enforcement. Trump’s FY 2018 Budget Blueprint increases discretionary funds for the Department of Homeland Security (DHS) by $2.8 billion (to $44.1 billion). DHS would be the agency in charge of building the border wall.[7]

DHS Secretary John F. Kelly told the Senate Homeland Security and Governmental Affairs Committee during a hearing that the Budget Blueprint “includes $2.6 billion for high-priority border security technology and tactical infrastructure, including funding to plan, design and construct the border wall.” Specific details will come in mid-May 2017, he said.[7]

According to Homeland Preparedness News, “Former members of U.S. Customs and Border Protection downplayed the idea that a wall alone would be enough to strengthen the U.S. southern border in a Senate hearing on [April 4, 2017], framing it as part of a broader strategy.”[37]

One vocal critic of the wall is U.S. Senator Claire McCaskill (D-MO). She said during the hearing that while Americans want a secure border, she has “not met anyone that says the most effective way is to build a wall across the entirety of our southern border. The only one who keeps talking about that is President Trump.”[37]

Controversy

The barrier has been criticized for being easy to get around. Some methods include digging under it (sometimes using complex tunnel systems), climbing the fence (using wire cutters to remove barbed-wire) or locating and digging holes in vulnerable sections of the wall. Many Latin-Americans have also traveled by boat through the Gulf of Mexico or the Pacific Coast.

Divided land

Tribal lands of three indigenous nations would be divided by the proposed border fence.[38][39]

On January 27, 2008, a U.S. Native American human rights delegation, which included Margo Tamez (Lipan Apache-Jumano Apache) and Teresa Leal (Opata-Mayo) reported the removal of the official International Boundary obelisks of 1848 by the U.S. Department of Homeland Security in the Las Mariposas, Sonora-Arizona sector of the Mexico–U.S. border.[40][41] The obelisks were moved southward approximately 20 meters, onto the property of private landowners in Sonora, as part of the larger project of installing the 18-foot (5.5 m) steel barrier wall.[42]

The proposed route for the border fence would divide the campus of the University of Texas at Brownsville into two parts, according to Antonio N. Zavaleta, a vice president of the university.[43] There have been campus protests against the wall by students who feel it will harm their school.[2] In August 2008, UT-Brownsville reached an agreement with the U.S. Department of Homeland Security for the university to construct a portion of the fence across and adjacent to its property. The final agreement, which was filed in federal court on Aug 5 and formally signed by the Texas Southmost College Board of Trustees later that day, ended all court proceedings between UTB/TSC and DHS. On August 20, 2008, the university sent out a request for bids for the construction of a 10-foot (3.0 m) high barrier that incorporates technology security for its segment of the border fence project. The southern perimeter of the UTB/TSC campus will be part of a laboratory for testing new security technology and infrastructure combinations.[44] The border fence segment on the UTB campus was substantially completed by December 2008.[45]

Hidalgo County

In the spring of 2007 more than 25 landowners, including a corporation and a school district, from Hidalgo and Starr County in Texas refused border fence surveys, which would determine what land was eligible for building on, as an act of protest.[46]

In July 2008, Hidalgo County and Hidalgo County Drainage District No. 1 entered into an agreement with the U.S. Department of Homeland Security for the construction of a project that combines the border fence with a levee to control flooding along the Rio Grande. Construction of two of the Hidalgo County fence segments are under way; five more segments are scheduled to be built during the fall of 2008; the Hidalgo County section of the border fence will constitute 22 miles (35 km) of combined fence and levee.[47]

Mexico’s condemnations

Mexico-United States barrier at the pedestrian border crossing in Tijuana

Mexico-United States barrier at the pedestrian border crossing in Tijuana

In 2006, the Mexican government vigorously condemned the Secure Fence act of 2006. Mexico has also urged the U.S. to alter its plans for expanded fences along their shared border, saying that it would damage the environment and harm wildlife.[48]

In June 2007, it was announced that a section of the barrier had been mistakenly built from 1 to 6 feet (2 meters) inside Mexican territory. This will necessitate the section being moved at an estimated cost of over $3 million (U.S.).[49]

In 2012, then presidential candidate of Mexico Enrique Peña Nieto was campaigning in Tijuana at the Playas de Monumental, less than 600 yards (550 m) from the U.S.–Mexico border adjacent to Border Field State Park. In one of his speeches he criticized the U.S. government for building the barriers, and asked for them to be removed. Ultimately, he mocked Ronald Reagan’s “Tear down this wall!” speech from Berlin in 1987.[citation needed]

Migrant deaths

The Wall at the border of Tijuana, Mexico and San Diego. The crosses represent migrants who died in the crossing attempt. Some identified, some not. Surveillance tower in the background.

Between 1994 and 2007, there were around 5,000 Migrant deaths along the Mexico–United States border, according to a document created by the Human Rights National Commission of Mexico, also signed by the American Civil Liberties Union.[50] Between 43 and 61 people died trying to cross the Sonoran Desert from October 2003 to May 2004; three times that of the same period the previous year.[9] In October 2004 the Border Patrol announced that 325 people had died crossing the entire border during the previous 12 months.[51] Between 1998 and 2004, 1,954 persons are officially reported to have died along the US-Mexico border. Since 2004, the bodies of 1,086 migrants have been recovered in the southern Arizona desert.[52]

U.S. Border Patrol Tucson Sector reported on October 15, 2008 that its agents were able to save 443 undocumented immigrants from certain death after being abandoned by their smugglers, during FY 2008, while reducing the number of deaths by 17% from 202 in FY 2007 to 167 in FY 2008. Without the efforts of these agents, hundreds more could have died in the deserts of Arizona.[53] According to the same sector, border enhancements like the wall have allowed the Tucson Sector agents to reduce the number of apprehensions at the borders by 16% compared with fiscal year 2007.[54]

Environmental impact

"Wildlife-friendly" border wall in Brownsville, Texas, which would allow wildlife to cross the border. A young man climbs wall using horizontal beams for foot support.

“Wildlife-friendly” border wall in Brownsville, Texas, which would allow wildlife to cross the border. A young man climbs wall using horizontal beams for foot support.

In April 2008, the Department of Homeland Security announced plans to waive more than 30 environmental and cultural laws to speed construction of the barrier. Despite claims from then Homeland Security Chief Michael Chertoff that the department would minimize the construction’s impact on the environment, critics in Arizona and Texas asserted the fence endangered species and fragile ecosystems along the Rio Grande. Environmentalists expressed concern about butterfly migration corridors and the future of species of local wildcats, the ocelot, the jaguarundi, and the jaguar.[55]

U.S. Customs and Border Protection (CBP) conducted environmental reviews of each pedestrian and vehicle fence segment covered by the waiver, and published the results of this analysis in Environmental Stewardship Plans (ESPs).[56] Although not required by the waiver, CBP has conducted the same level of environmental analysis (in the ESPs) that would have been performed before the waiver (in the “normal” NEPA process) to evaluate potential impacts to sensitive resources in the areas where fence is being constructed.

ESPs completed by CBP contain extremely limited surveys of local wildlife. For example, the ESP for border fence built in the Del Rio Sector included a single survey for wildlife completed in November 2007, and only “3 invertebrates, 1 reptile species, 2 amphibian species, 1 mammal species, and 21 bird species were recorded.” The ESPs then dismiss the potential for most adverse effects on wildlife, based on sweeping generalizations and without any quantitative analysis of the risks posed by border barriers. Approximately 461 acres (187 ha) of vegetation will be cleared along the impact corridor. From the Rio Grande Valley ESP: “The impact corridor avoids known locations of individuals of Walker’s manioc and Zapata bladderpod, but approaches several known locations of Texas ayenia. For this reason, impacts on federally listed plants are anticipated to be short-term, moderate, and adverse.” This excerpt is typical of the ESPs in that the risk to endangered plants is deemed short-term without any quantitative population analysis.[citation needed]

By August 2008, more than 90 percent of the southern border in Arizona and New Mexico had been surveyed. In addition, 80 percent of the California/Mexico border has been surveyed.[8]

See also

https://en.wikipedia.org/wiki/Mexico%E2%80%93United_States_barrier

Story 3: Trump’s Latest Tax Proposal — Good But Not Great — Missed Opportunity To Transition From An Income Tax Based System To A Broad Based Consumption Tax — FairTax or Fair Tax Less — Forget The Republican Establishment Border Adjustment Tax — Videos 

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FNN: President Trump’s NEW Tax Plan REVEALED – FULL Press Conference feat. Mnuchin and Cohn

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UNVEILED: TRUMP’S TAX PLAN

Trump calls for dramatic tax cuts for individuals and businesses

The Main Highlights In Trump’s Sweeping Tax Reform Proposal

Tyler Durden's picture

In brief, the tax reform was largely in line with what was leaked and what was expected. Small surprises: the tax bracket for high income earners was 2% more (at 35%) than what Trump campaigned on, and the standard deduction has been doubled so that no married couple pays tax on their first 24k earned, Citi notes.

As expected, no mention of border adjustment taxes. The plan also looks to repeal real estate taxes, alternative minimum tax and the death tax. Territorial taxes are also included. As we type, Mnuchin and Cohn are answering their last question.

Below is the actual tax from the White House:

2017 Tax Reform for Economic Growth and American Jobs

The Biggest Individual And Business Tax Cut in American History

Goals For Tax Reform

  • Grow the economy and create millions of jobs
  • Simplify our burdensome tax code
  • Provide tax relief to American families—especially middle-income families
  • Lower the business tax rate from one of the highest in the world to one of the lowest

Individual Reform

  • Tax relief for American families, especially middle-income families:
    • Reducing the 7 tax brackets to 3 tax brackets of to%, 25% and 35%
    • Doubling the standard deduction
    • Providing tax relief for families with child and dependent care expenses
  • Simplification:
    • Eliminate targeted tax breaks that mainly benefit the wealthiest taxpayers
    • Protect the home ownership and charitable gift tax deductions
    • Repeal the Alternative Minimum Tax
    • Repeal the death tax
  • Repeal the 3.8% Obamacare tax that hits small businesses and investment income

Business Reform

  • 15% business tax rate
  • Territorial tax system to level the playing field for American companies
  • One-time tax on trillions of dollars held overseas
  • Eliminate tax breaks for special interests

Process

Throughout the month of May, the Trump Administration will hold listening sessions with stakeholders to receive their input and will continue working with the House and Senate to develop the details of a plan that provides massive tax relief, creates jobs, and makes America more competitive—and can pass both chambers.

A few additional observations from Citi:

What didn’t Mnuchin or Cohn tell us, in addition to the details noted above:

  • Did not specify if the plan would be “revenue neutral,” which is needed to get permanent policy.
  • Mnuchin didn’t talk about how dynamic scoring could play a hand in implementation during the official press conference but he did touch on this in an earlier appearance for The Hill. Dynamic analysis accounts for the macroeconomic impacts of tax, spending, and regulatory policy, while dynamic scoring uses dynamic analysis in estimating the budgetary impact of proposed policy changes. Ultimately, the Trump Administration believes policies will generate growth above 3.0%YoY, which can pay for the plan. The challenge is that it has to sell this view to Congress.
  • Did not discuss border adjustment taxes (BAT) during the official conference but did brush on this during his appearance on The Hill.  Mnuchin said “we don’t think it works in its current form” but there will be ongoing discussions on this. Ryan also acknowledged the BAT needed work.

When asked by The Hill editor-in-chief as to whether or not he’s reached out to any centrist Democrats for input on the plan, Mnuchin declined to comment on the “specifics.” He “hopes Democrats won’t get in way.”

Ryan said several times Wednesday that Republicans plan to use reconciliation as a vehicle for tax reform. This point is very important but to illustrate this, one has to understand the reconciliation process.

The Center on Budget and Policy Priorities helps define it. Created by the Congressional Budget Act of 1974, reconciliation allows for expedited consideration of certain tax, spending, and debt limit legislation. In the Senate, reconciliation bills are approved with a simple majority of 51. To start the reconciliation process, the House and Senate must agree on a budget resolution that includes “reconciliation directives” for specified committees in the House and Senate. Those committees must report legislation by a certain date that does one or more of the following:

  • Increases or decreases spending (outlays) by specified amounts over a specified time;
  • Increases or decreases revenues by specified amounts over a specified time
  • Raises or lowers the public debt limit by a specified amount.

Republicans could pursue tax reform under the budget reconciliation process, meaning the Senate could pass bills related to the budget – but reconciliation requires the long-term savings. Post 10y, scoring has to indicate that the bill will be revenue neutral or revenue positive or it doesn’t work.

That looks to be exactly why Republicans wanted to prioritize healthcare reform: the Congressional Budget Office estimated the American Health Care Act would reduce federal deficits by USD337 billion over the next 10y. Given that tax reform estimates signal a revenue burden, various political analysts posit that Republicans have been looking to repeal Obamacare to pay for some parts of tax reform.

Without healthcare reform, Republicans could face challenges getting a revenue neutral, long-term tax reform.

  • The Tax Policy Center estimates Trump’s plan for a 15% corporate tax rate would decrease federal revenues by USD2.3tn between 2016 and 2026. Trump’s campaign tax plan for corporations and individuals could cause revenue to drop by roughly USD6tn between 2016 and 2026, according to the projections.
  • The Tax Policy Center is left-leaning but is being heard out. Even Senate Finance Chairman Orrin Hatch has said a 15% corporate tax would increase the deficit and if the overall plan doesn’t include border adjustment tax – or borrow funds via healthcare reform – Republicans will have to find revenue streams.

* * *

Some parting thoughts:: as Time’s Zeke Miller notes this Trump tax plan is the same as the one released last fall. “If his team has been working on it for the last 6mos, we didn’t see it 2day.”

Additionally, while the proposed tax plan does not raise taxes on hedge fund managers, as Trump vowed during his campaign, courtesy of the cut in LLC tax rates, it will likely lower the taxes many if not all HF managers pay.

And, of course, with the state deduction gone, it means that for many Americans the net effect will be to raise, not lower the amount of tax owed.

* * *

Of course the crucial question is – with The White House targeting deductions to help pay for tax plan (but mortgage/charitable are protected), how does this not blow up deficit?

Perhaps the most concerning aspect is the apparent expectations management that is being undertaken this morning:

The White House’s presentation will be “pretty broad in the principles,” said Marc Short, Trump’s director of legislative affairs.

In the coming weeks, Trump will solicit more ideas on how to improve it, Short said. The specifics should start to come this summer.

Short said the administration did not want to set a firm timeline, after demanding a quick House vote on a health care bill and watching it fail.

But, Short added, “I don’t see this sliding into 2018.”

The biggest question is – will this be enough to satisfy the market? For now the answer is no, because as Citi adds the market isn’t jumping around on this but there is a bid in US fixed income, taking USDJPY down towards 111.25. All in all, a classic buy the rumor, sell the news on an underdelivered (but fairly presented as such) “big announcement” from the Trump Administration.

http://www.zerohedge.com/news/2017-04-26/mnuchincohn-unveil-trumps-biggest-tax-cut-ever-tax-reform-plan-live-feed

The Internal Revenue Service has recently released new data on individual income taxes for calendar year 2014, showing the number of taxpayers, adjusted gross income, and income tax shares by income percentiles.[1]

The data demonstrates that the U.S. individual income tax continues to be very progressive, borne mainly by the highest income earners.

  • In 2014, 139.6 million taxpayers reported earning $9.71 trillion in adjusted gross income and paid $1.37 trillion in individual income taxes.
  • The share of income earned by the top 1 percent of taxpayers rose to 20.6 percent in 2014. Their share of federal individual income taxes also rose, to 39.5 percent.
  • In 2014, the top 50 percent of all taxpayers paid 97.3 percent of all individual income taxes while the bottom 50 percent paid the remaining 2.7 percent.
  • The top 1 percent paid a greater share of individual income taxes (39.5 percent) than the bottom 90 percent combined (29.1 percent).
  • The top 1 percent of taxpayers paid a 27.1 percent individual income tax rate, which is more than seven times higher than taxpayers in the bottom 50 percent (3.5 percent).

Reported Income and Taxes Paid Both Increased Significantly in 2014

Taxpayers reported $9.71 trillion in adjusted gross income (AGI) on 139.5 million tax returns in 2014. Total AGI grew by $675 billion from the previous year’s levels. There were 1.2 million more returns filed in 2014 than in 2013, meaning that average AGI rose by $4,252 per return, or 6.5 percent.

Meanwhile, taxpayers paid $1.37 trillion in individual income taxes in 2014, an 11.5 percent increase from taxes paid in the previous year. The average individual income tax rate for all taxpayers rose from 13.64 percent to 14.16 percent. Moreover, the average tax rate increased for all income groups, except for the top 0.1 percent of taxpayers, whose average rate decreased from 27.91 percent to 27.67 percent.

The most likely explanation behind the higher tax rates in 2014 is a phenomenon known as “real bracket creep.” [2] As incomes rise, households are pushed into higher tax brackets, and are subject to higher overall tax rates on their income. On the other hand, the likely reason why the top 0.1 percent of households saw a slightly lower tax rate in 2014 is because a higher portion of their income consisted of long-term capital gains, which are subject to lower tax rates.[3]

The share of income earned by the top 1 percent rose to 20.58 percent of total AGI, up from 19.04 percent in 2013. The share of the income tax burden for the top 1 percent also rose, from 37.80 percent in 2013 to 39.48 percent in 2014.

Top 1% Top 5% Top 10% Top 25% Top 50% Bottom 50% All Taxpayers
Table 1. Summary of Federal Income Tax Data, 2014
Number of Returns 1,395,620 6,978,102 13,956,203 34,890,509 69,781,017 69,781,017 139,562,034
Adjusted Gross Income ($ millions) $1,997,819 $3,490,867 $4,583,416 $6,690,287 $8,614,544 $1,094,119 $9,708,663
Share of Total Adjusted Gross Income 20.58% 35.96% 47.21% 68.91% 88.73% 11.27% 100.00%
Income Taxes Paid ($ millions) $542,640 $824,153 $974,124 $1,192,679 $1,336,637 $37,740 $1,374,379
Share of Total Income Taxes Paid 39.48% 59.97% 70.88% 86.78% 97.25% 2.75% 100.00%
Income Split Point $465,626 $188,996 $133,445 $77,714 $38,173
Average Tax Rate 27.16% 23.61% 21.25% 17.83% 15.52% 3.45% 14.16%
 Note: Does not include dependent filers

High-Income Americans Paid the Majority of Federal Taxes

In 2014, the bottom 50 percent of taxpayers (those with AGIs below $38,173) earned 11.27 percent of total AGI. This group of taxpayers paid approximately $38 billion in taxes, or 2.75 percent of all income taxes in 2014.

In contrast, the top 1 percent of all taxpayers (taxpayers with AGIs of $465,626 and above) earned 20.58 percent of all AGI in 2014, but paid 39.48 percent of all federal income taxes.

In 2014, the top 1 percent of taxpayers accounted for more income taxes paid than the bottom 90 percent combined. The top 1 percent of taxpayers paid $543 billion, or 39.48 percent of all income taxes, while the bottom 90 percent paid $400 billion, or 29.12 percent of all income taxes.

Figure 1.

High-Income Taxpayers Pay the Highest Average Tax Rates

The 2014 IRS data shows that taxpayers with higher incomes pay much higher average individual income tax rates than lower-income taxpayers.[4]

The bottom 50 percent of taxpayers (taxpayers with AGIs below $38,173) faced an average income tax rate of 3.45 percent. As household income increases, the IRS data shows that average income tax rates rise. For example, taxpayers with AGIs between the 10th and 5th percentile ($133,445 and $188,996) pay an average rate of 13.7 percent – almost four times the rate paid by those in the bottom 50 percent.

The top 1 percent of taxpayers (AGI of $465,626 and above) paid the highest effective income tax rate, at 27.2 percent, 7.9 times the rate faced by the bottom 50 percent of taxpayers.

Figure 2.

Taxpayers at the very top of the income distribution, the top 0.1 percent (with AGIs over $2.14 million), paid an even higher average tax rate, of 27.7 percent.

Appendix

Year Total Top 0.1% Top 1% Top
5%
Between
5% & 10%
Top 10% Between 10% & 25% Top 25% Between 25% & 50% Top 50% Bottom 50%
Table 2. Number of Federal Individual Income Tax Returns Filed 1980–2014 (Thousands)
Source: Internal Revenue Service.
1980 93,239 932 4,662 4,662 9,324 13,986 23,310 23,310 46,619 46,619
1981 94,587 946 4,729 4,729 9,459 14,188 23,647 23,647 47,293 47,293
1982 94,426 944 4,721 4,721 9,443 14,164 23,607 23,607 47,213 47,213
1983 95,331 953 4,767 4,767 9,533 14,300 23,833 23,833 47,665 47,665
1984 98,436 984 4,922 4,922 9,844 14,765 24,609 24,609 49,218 49,219
1985 100,625 1,006 5,031 5,031 10,063 15,094 25,156 25,156 50,313 50,313
1986 102,088 1,021 5,104 5,104 10,209 15,313 25,522 25,522 51,044 51,044
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
1987 106,155 1,062 5,308 5,308 10,615 15,923 26,539 26,539 53,077 53,077
1988 108,873 1,089 5,444 5,444 10,887 16,331 27,218 27,218 54,436 54,436
1989 111,313 1,113 5,566 5,566 11,131 16,697 27,828 27,828 55,656 55,656
1990 112,812 1,128 5,641 5,641 11,281 16,922 28,203 28,203 56,406 56,406
1991 113,804 1,138 5,690 5,690 11,380 17,071 28,451 28,451 56,902 56,902
1992 112,653 1,127 5,633 5,633 11,265 16,898 28,163 28,163 56,326 56,326
1993 113,681 1,137 5,684 5,684 11,368 17,052 28,420 28,420 56,841 56,841
1994 114,990 1,150 5,749 5,749 11,499 17,248 28,747 28,747 57,495 57,495
1995 117,274 1,173 5,864 5,864 11,727 17,591 29,319 29,319 58,637 58,637
1996 119,442 1,194 5,972 5,972 11,944 17,916 29,860 29,860 59,721 59,721
1997 121,503 1,215 6,075 6,075 12,150 18,225 30,376 30,376 60,752 60,752
1998 123,776 1,238 6,189 6,189 12,378 18,566 30,944 30,944 61,888 61,888
1999 126,009 1,260 6,300 6,300 12,601 18,901 31,502 31,502 63,004 63,004
2000 128,227 1,282 6,411 6,411 12,823 19,234 32,057 32,057 64,114 64,114
The IRS changed methodology, so data above and below this line not strictly comparable
2001 119,371 119 1,194 5,969 5,969 11,937 17,906 29,843 29,843 59,685 59,685
2002 119,851 120 1,199 5,993 5,993 11,985 17,978 29,963 29,963 59,925 59,925
2003 120,759 121 1,208 6,038 6,038 12,076 18,114 30,190 30,190 60,379 60,379
2004 122,510 123 1,225 6,125 6,125 12,251 18,376 30,627 30,627 61,255 61,255
2005 124,673 125 1,247 6,234 6,234 12,467 18,701 31,168 31,168 62,337 62,337
2006 128,441 128 1,284 6,422 6,422 12,844 19,266 32,110 32,110 64,221 64,221
2007 132,655 133 1,327 6,633 6,633 13,265 19,898 33,164 33,164 66,327 66,327
2008 132,892 133 1,329 6,645 6,645 13,289 19,934 33,223 33,223 66,446 66,446
2009 132,620 133 1,326 6,631 6,631 13,262 19,893 33,155 33,155 66,310 66,310
2010 135,033 135 1,350 6,752 6,752 13,503 20,255 33,758 33,758 67,517 67,517
2011 136,586 137 1,366 6,829 6,829 13,659 20,488 34,146 34,146 68,293 68,293
2012 136,080 136 1,361 6,804 6,804 13,608 20,412 34,020 34,020 68,040 68,040
2013 138,313 138 1,383 6,916 6,916 13,831 20,747 34,578 34,578 69,157 69,157
2014 139,562 140 1,396 6,978 6,978 13,956 20,934 34,891 34,891 69,781 69,781
Year Total Top 0.1% Top 1% Top 5% Between 5% & 10% Top 10% Between 10% & 25% Top 25% Between 25% & 50% Top 50% Bottom 50%
Table 3. Adjusted Gross Income of Taxpayers in Various Income Brackets, 1980–2014 ($Billions)
Source: Internal Revenue Service.
1980 $1,627 $138 $342 $181 $523 $400 $922 $417 $1,339 $288
1981 $1,791 $149 $372 $201 $573 $442 $1,015 $458 $1,473 $318
1982 $1,876 $167 $398 $207 $605 $460 $1,065 $478 $1,544 $332
1983 $1,970 $183 $428 $217 $646 $481 $1,127 $498 $1,625 $344
1984 $2,173 $210 $482 $240 $723 $528 $1,251 $543 $1,794 $379
1985 $2,344 $235 $531 $260 $791 $567 $1,359 $580 $1,939 $405
1986 $2,524 $285 $608 $278 $887 $604 $1,490 $613 $2,104 $421
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
1987 $2,814 $347 $722 $316 $1,038 $671 $1,709 $664 $2,374 $440
1988 $3,124 $474 $891 $342 $1,233 $718 $1,951 $707 $2,658 $466
1989 $3,299 $468 $918 $368 $1,287 $768 $2,054 $751 $2,805 $494
1990 $3,451 $483 $953 $385 $1,338 $806 $2,144 $788 $2,933 $519
1991 $3,516 $457 $943 $400 $1,343 $832 $2,175 $809 $2,984 $532
1992 $3,681 $524 $1,031 $413 $1,444 $856 $2,299 $832 $3,131 $549
1993 $3,776 $521 $1,048 $426 $1,474 $883 $2,358 $854 $3,212 $563
1994 $3,961 $547 $1,103 $449 $1,552 $929 $2,481 $890 $3,371 $590
1995 $4,245 $620 $1,223 $482 $1,705 $985 $2,690 $938 $3,628 $617
1996 $4,591 $737 $1,394 $515 $1,909 $1,043 $2,953 $992 $3,944 $646
1997 $5,023 $873 $1,597 $554 $2,151 $1,116 $3,268 $1,060 $4,328 $695
1998 $5,469 $1,010 $1,797 $597 $2,394 $1,196 $3,590 $1,132 $4,721 $748
1999 $5,909 $1,153 $2,012 $641 $2,653 $1,274 $3,927 $1,199 $5,126 $783
2000 $6,424 $1,337 $2,267 $688 $2,955 $1,358 $4,314 $1,276 $5,590 $834
The IRS changed methodology, so data above and below this line not strictly comparable
2001 $6,116 $492 $1,065 $1,934 $666 $2,600 $1,334 $3,933 $1,302 $5,235 $881
2002 $5,982 $421 $960 $1,812 $660 $2,472 $1,339 $3,812 $1,303 $5,115 $867
2003 $6,157 $466 $1,030 $1,908 $679 $2,587 $1,375 $3,962 $1,325 $5,287 $870
2004 $6,735 $615 $1,279 $2,243 $725 $2,968 $1,455 $4,423 $1,403 $5,826 $908
2005 $7,366 $784 $1,561 $2,623 $778 $3,401 $1,540 $4,940 $1,473 $6,413 $953
2006 $7,970 $895 $1,761 $2,918 $841 $3,760 $1,652 $5,412 $1,568 $6,980 $990
2007 $8,622 $1,030 $1,971 $3,223 $905 $4,128 $1,770 $5,898 $1,673 $7,571 $1,051
2008 $8,206 $826 $1,657 $2,868 $905 $3,773 $1,782 $5,555 $1,673 $7,228 $978
2009 $7,579 $602 $1,305 $2,439 $878 $3,317 $1,740 $5,058 $1,620 $6,678 $900
2010 $8,040 $743 $1,517 $2,716 $915 $3,631 $1,800 $5,431 $1,665 $7,096 $944
2011 $8,317 $737 $1,556 $2,819 $956 $3,775 $1,866 $5,641 $1,716 $7,357 $961
2012 $9,042 $1,017 $1,977 $3,331 $997 $4,328 $1,934 $6,262 $1,776 $8,038 $1,004
2013 $9,034 $816 $1,720 $3,109 $1,034 $4,143 $2,008 $6,152 $1,844 $7,996 $1,038
2014 $9,709 $986 $1,998 $3,491 $1,093 $4,583 $2,107 $6,690 $1,924 $8,615 $1,094
Year Total Top 0.1% Top 1% Top 5% Between 5% & 10% Top 10% Between 10% & 25% Top 25% Between 25% & 50% Top 50% Bottom 50%
Table 4. Total Income Tax after Credits, 1980–2014 ($Billions)
Source: Internal Revenue Service.
1980 $249 $47 $92 $31 $123 $59 $182 $50 $232 $18
1981 $282 $50 $99 $36 $135 $69 $204 $57 $261 $21
1982 $276 $53 $100 $34 $134 $66 $200 $56 $256 $20
1983 $272 $55 $101 $34 $135 $64 $199 $54 $252 $19
1984 $297 $63 $113 $37 $150 $68 $219 $57 $276 $22
1985 $322 $70 $125 $41 $166 $73 $238 $60 $299 $23
1986 $367 $94 $156 $44 $201 $78 $279 $64 $343 $24
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
1987 $369 $92 $160 $46 $205 $79 $284 $63 $347 $22
1988 $413 $114 $188 $48 $236 $85 $321 $68 $389 $24
1989 $433 $109 $190 $51 $241 $93 $334 $73 $408 $25
1990 $447 $112 $195 $52 $248 $97 $344 $77 $421 $26
1991 $448 $111 $194 $56 $250 $96 $347 $77 $424 $25
1992 $476 $131 $218 $58 $276 $97 $374 $78 $452 $24
1993 $503 $146 $238 $60 $298 $101 $399 $80 $479 $24
1994 $535 $154 $254 $64 $318 $108 $425 $84 $509 $25
1995 $588 $178 $288 $70 $357 $115 $473 $88 $561 $27
1996 $658 $213 $335 $76 $411 $124 $535 $95 $630 $28
1997 $727 $241 $377 $82 $460 $134 $594 $102 $696 $31
1998 $788 $274 $425 $88 $513 $139 $652 $103 $755 $33
1999 $877 $317 $486 $97 $583 $150 $733 $109 $842 $35
2000 $981 $367 $554 $106 $660 $164 $824 $118 $942 $38
The IRS changed methodology, so data above and below this line not strictly comparable
2001 $885 $139 $294 $462 $101 $564 $158 $722 $120 $842 $43
2002 $794 $120 $263 $420 $93 $513 $143 $657 $104 $761 $33
2003 $746 $115 $251 $399 $85 $484 $133 $617 $98 $715 $30
2004 $829 $142 $301 $467 $91 $558 $137 $695 $102 $797 $32
2005 $932 $176 $361 $549 $98 $647 $145 $793 $106 $898 $33
2006 $1,020 $196 $402 $607 $108 $715 $157 $872 $113 $986 $35
2007 $1,112 $221 $443 $666 $117 $783 $170 $953 $122 $1,075 $37
2008 $1,029 $187 $386 $597 $115 $712 $168 $880 $117 $997 $32
2009 $863 $146 $314 $502 $101 $604 $146 $749 $93 $842 $21
2010 $949 $170 $355 $561 $110 $670 $156 $827 $100 $927 $22
2011 $1,043 $168 $366 $589 $123 $712 $181 $893 $120 $1,012 $30
2012 $1,185 $220 $451 $699 $133 $831 $193 $1,024 $128 $1,152 $33
2013 $1,232 $228 $466 $721 $139 $860 $203 $1,063 $135 $1,198 $34
2014 $1,374 $273 $543 $824 $150 $974 $219 $1,193 $144 $1,337 $38
Year Total Top 0.1% Top 1% Top 5% Between 5% & 10% Top 10% Between 10% & 25% Top 25% Between 25% & 50% Top 50% Bottom 50%
Table 5. Adjusted Gross Income Shares, 1980–2014 (percent of total AGI earned by each group)
Source: Internal Revenue Service.
1980 100% 8.46% 21.01% 11.12% 32.13% 24.57% 56.70% 25.62% 82.32% 17.68%
1981 100% 8.30% 20.78% 11.20% 31.98% 24.69% 56.67% 25.59% 82.25% 17.75%
1982 100% 8.91% 21.23% 11.03% 32.26% 24.53% 56.79% 25.50% 82.29% 17.71%
1983 100% 9.29% 21.74% 11.04% 32.78% 24.44% 57.22% 25.30% 82.52% 17.48%
1984 100% 9.66% 22.19% 11.06% 33.25% 24.31% 57.56% 25.00% 82.56% 17.44%
1985 100% 10.03% 22.67% 11.10% 33.77% 24.21% 57.97% 24.77% 82.74% 17.26%
1986 100% 11.30% 24.11% 11.02% 35.12% 23.92% 59.04% 24.30% 83.34% 16.66%
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
1987 100% 12.32% 25.67% 11.23% 36.90% 23.85% 60.75% 23.62% 84.37% 15.63%
1988 100% 15.16% 28.51% 10.94% 39.45% 22.99% 62.44% 22.63% 85.07% 14.93%
1989 100% 14.19% 27.84% 11.16% 39.00% 23.28% 62.28% 22.76% 85.04% 14.96%
1990 100% 14.00% 27.62% 11.15% 38.77% 23.36% 62.13% 22.84% 84.97% 15.03%
1991 100% 12.99% 26.83% 11.37% 38.20% 23.65% 61.85% 23.01% 84.87% 15.13%
1992 100% 14.23% 28.01% 11.21% 39.23% 23.25% 62.47% 22.61% 85.08% 14.92%
1993 100% 13.79% 27.76% 11.29% 39.05% 23.40% 62.45% 22.63% 85.08% 14.92%
1994 100% 13.80% 27.85% 11.34% 39.19% 23.45% 62.64% 22.48% 85.11% 14.89%
1995 100% 14.60% 28.81% 11.35% 40.16% 23.21% 63.37% 22.09% 85.46% 14.54%
1996 100% 16.04% 30.36% 11.23% 41.59% 22.73% 64.32% 21.60% 85.92% 14.08%
1997 100% 17.38% 31.79% 11.03% 42.83% 22.22% 65.05% 21.11% 86.16% 13.84%
1998 100% 18.47% 32.85% 10.92% 43.77% 21.87% 65.63% 20.69% 86.33% 13.67%
1999 100% 19.51% 34.04% 10.85% 44.89% 21.57% 66.46% 20.29% 86.75% 13.25%
2000 100% 20.81% 35.30% 10.71% 46.01% 21.15% 67.15% 19.86% 87.01% 12.99%
The IRS changed methodology, so data above and below this line not strictly comparable
2001 100% 8.05% 17.41% 31.61% 10.89% 42.50% 21.80% 64.31% 21.29% 85.60% 14.40%
2002 100% 7.04% 16.05% 30.29% 11.04% 41.33% 22.39% 63.71% 21.79% 85.50% 14.50%
2003 100% 7.56% 16.73% 30.99% 11.03% 42.01% 22.33% 64.34% 21.52% 85.87% 14.13%
2004 100% 9.14% 18.99% 33.31% 10.77% 44.07% 21.60% 65.68% 20.83% 86.51% 13.49%
2005 100% 10.64% 21.19% 35.61% 10.56% 46.17% 20.90% 67.07% 19.99% 87.06% 12.94%
2006 100% 11.23% 22.10% 36.62% 10.56% 47.17% 20.73% 67.91% 19.68% 87.58% 12.42%
2007 100% 11.95% 22.86% 37.39% 10.49% 47.88% 20.53% 68.41% 19.40% 87.81% 12.19%
2008 100% 10.06% 20.19% 34.95% 11.03% 45.98% 21.71% 67.69% 20.39% 88.08% 11.92%
2009 100% 7.94% 17.21% 32.18% 11.59% 43.77% 22.96% 66.74% 21.38% 88.12% 11.88%
2010 100% 9.24% 18.87% 33.78% 11.38% 45.17% 22.38% 67.55% 20.71% 88.26% 11.74%
2011 100% 8.86% 18.70% 33.89% 11.50% 45.39% 22.43% 67.82% 20.63% 88.45% 11.55%
2012 100% 11.25% 21.86% 36.84% 11.03% 47.87% 21.39% 69.25% 19.64% 88.90% 11.10%
2013 100% 9.03% 19.04% 34.42% 11.45% 45.87% 22.23% 68.10% 20.41% 88.51% 11.49%
2014 100% 10.16% 20.58% 35.96% 11.25% 47.21% 21.70% 68.91% 19.82% 88.73% 11.27%
Year Total Top 0.1% Top 1% Top 5% Between 5% & 10% Top 10% Between 10% & 25% Top 25% Between 25% & 50% Top 50% Bottom 50%
Table 6. Total Income Tax Shares, 1980–2014 (percent of federal income tax paid by each group)
Source: Internal Revenue Service.
1980 100% 19.05% 36.84% 12.44% 49.28% 23.74% 73.02% 19.93% 92.95% 7.05%
1981 100% 17.58% 35.06% 12.90% 47.96% 24.33% 72.29% 20.26% 92.55% 7.45%
1982 100% 19.03% 36.13% 12.45% 48.59% 23.91% 72.50% 20.15% 92.65% 7.35%
1983 100% 20.32% 37.26% 12.44% 49.71% 23.39% 73.10% 19.73% 92.83% 7.17%
1984 100% 21.12% 37.98% 12.58% 50.56% 22.92% 73.49% 19.16% 92.65% 7.35%
1985 100% 21.81% 38.78% 12.67% 51.46% 22.60% 74.06% 18.77% 92.83% 7.17%
1986 100% 25.75% 42.57% 12.12% 54.69% 21.33% 76.02% 17.52% 93.54% 6.46%
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
1987 100% 24.81% 43.26% 12.35% 55.61% 21.31% 76.92% 17.02% 93.93% 6.07%
1988 100% 27.58% 45.62% 11.66% 57.28% 20.57% 77.84% 16.44% 94.28% 5.72%
1989 100% 25.24% 43.94% 11.85% 55.78% 21.44% 77.22% 16.94% 94.17% 5.83%
1990 100% 25.13% 43.64% 11.73% 55.36% 21.66% 77.02% 17.16% 94.19% 5.81%
1991 100% 24.82% 43.38% 12.45% 55.82% 21.46% 77.29% 17.23% 94.52% 5.48%
1992 100% 27.54% 45.88% 12.12% 58.01% 20.47% 78.48% 16.46% 94.94% 5.06%
1993 100% 29.01% 47.36% 11.88% 59.24% 20.03% 79.27% 15.92% 95.19% 4.81%
1994 100% 28.86% 47.52% 11.93% 59.45% 20.10% 79.55% 15.68% 95.23% 4.77%
1995 100% 30.26% 48.91% 11.84% 60.75% 19.62% 80.36% 15.03% 95.39% 4.61%
1996 100% 32.31% 50.97% 11.54% 62.51% 18.80% 81.32% 14.36% 95.68% 4.32%
1997 100% 33.17% 51.87% 11.33% 63.20% 18.47% 81.67% 14.05% 95.72% 4.28%
1998 100% 34.75% 53.84% 11.20% 65.04% 17.65% 82.69% 13.10% 95.79% 4.21%
1999 100% 36.18% 55.45% 11.00% 66.45% 17.09% 83.54% 12.46% 96.00% 4.00%
2000 100% 37.42% 56.47% 10.86% 67.33% 16.68% 84.01% 12.08% 96.09% 3.91%
The IRS changed methodology, so data above and below this line not strictly comparable
2001 100% 15.68% 33.22% 52.24% 11.44% 63.68% 17.88% 81.56% 13.54% 95.10% 4.90%
2002 100% 15.09% 33.09% 52.86% 11.77% 64.63% 18.04% 82.67% 13.12% 95.79% 4.21%
2003 100% 15.37% 33.69% 53.54% 11.35% 64.89% 17.87% 82.76% 13.17% 95.93% 4.07%
2004 100% 17.12% 36.28% 56.35% 10.96% 67.30% 16.52% 83.82% 12.31% 96.13% 3.87%
2005 100% 18.91% 38.78% 58.93% 10.52% 69.46% 15.61% 85.07% 11.35% 96.41% 3.59%
2006 100% 19.24% 39.36% 59.49% 10.59% 70.08% 15.41% 85.49% 11.10% 96.59% 3.41%
2007 100% 19.84% 39.81% 59.90% 10.51% 70.41% 15.30% 85.71% 10.93% 96.64% 3.36%
2008 100% 18.20% 37.51% 58.06% 11.14% 69.20% 16.37% 85.57% 11.33% 96.90% 3.10%
2009 100% 16.91% 36.34% 58.17% 11.72% 69.89% 16.85% 86.74% 10.80% 97.54% 2.46%
2010 100% 17.88% 37.38% 59.07% 11.55% 70.62% 16.49% 87.11% 10.53% 97.64% 2.36%
2011 100% 16.14% 35.06% 56.49% 11.77% 68.26% 17.36% 85.62% 11.50% 97.11% 2.89%
2012 100% 18.60% 38.09% 58.95% 11.22% 70.17% 16.25% 86.42% 10.80% 97.22% 2.78%
2013 100% 18.48% 37.80% 58.55% 11.25% 69.80% 16.47% 86.27% 10.94% 97.22% 2.78%
2014 100% 19.85% 39.48% 59.97% 10.91% 70.88% 15.90% 86.78% 10.47% 97.25% 2.75%
Year Total Top 1% Top 5% Top 10% Top 25% Top 50%
Table 7. Dollar Cut-Off, 1980–2014 (Minimum AGI for Tax Returns to Fall into Various Percentiles; Thresholds Not Adjusted for Inflation)
1980 $80,580 $43,792 $35,070 $23,606 $12,936
1981 $85,428 $47,845 $38,283 $25,655 $14,000
1982 $89,388 $49,284 $39,676 $27,027 $14,539
1983 $93,512 $51,553 $41,222 $27,827 $15,044
1984 $100,889 $55,423 $43,956 $29,360 $15,998
1985 $108,134 $58,883 $46,322 $30,928 $16,688
1986 $118,818 $62,377 $48,656 $32,242 $17,302
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
1987 $139,289 $68,414 $52,921 $33,983 $17,768
1988 $157,136 $72,735 $55,437 $35,398 $18,367
1989 $163,869 $76,933 $58,263 $36,839 $18,993
1990 $167,421 $79,064 $60,287 $38,080 $19,767
1991 $170,139 $81,720 $61,944 $38,929 $20,097
1992 $181,904 $85,103 $64,457 $40,378 $20,803
1993 $185,715 $87,386 $66,077 $41,210 $21,179
1994 $195,726 $91,226 $68,753 $42,742 $21,802
1995 $209,406 $96,221 $72,094 $44,207 $22,344
1996 $227,546 $101,141 $74,986 $45,757 $23,174
1997 $250,736 $108,048 $79,212 $48,173 $24,393
1998 $269,496 $114,729 $83,220 $50,607 $25,491
1999 $293,415 $120,846 $87,682 $52,965 $26,415
2000 $313,469 $128,336 $92,144 $55,225 $27,682
The IRS changed methodology, so data above and below this line not strictly comparable
2001 $1,393,718 $306,635 $132,082 $96,151 $59,026 $31,418
2002 $1,245,352 $296,194 $130,750 $95,699 $59,066 $31,299
2003 $1,317,088 $305,939 $133,741 $97,470 $59,896 $31,447
2004 $1,617,918 $339,993 $140,758 $101,838 $62,794 $32,622
2005 $1,938,175 $379,261 $149,216 $106,864 $64,821 $33,484
2006 $2,124,625 $402,603 $157,390 $112,016 $67,291 $34,417
2007 $2,251,017 $426,439 $164,883 $116,396 $69,559 $35,541
2008 $1,867,652 $392,513 $163,512 $116,813 $69,813 $35,340
2009 $1,469,393 $351,968 $157,342 $114,181 $68,216 $34,156
2010 $1,634,386 $369,691 $161,579 $116,623 $69,126 $34,338
2011 $1,717,675 $388,905 $167,728 $120,136 $70,492 $34,823
2012 $2,161,175 $434,682 $175,817 $125,195 $73,354 $36,055
2013 $1,860,848 $428,713 $179,760 $127,695 $74,955 $36,841
2014 $2,136,762 $465,626 $188,996 $133,445 $77,714 $38,173
Source: Internal Revenue Service.
Year Total Top 0.1% Top 1% Top 5% Between 5% & 10% Top 10% Between 10% & 25% Top 25% Between 25% & 50% Top 50% Bottom 50%
Table 8. Average Tax Rate, 1980–2014 (Percent of AGI Paid in Income Taxes)
Source: Internal Revenue Service.
1980 15.31% 34.47% 26.85% 17.13% 23.49% 14.80% 19.72% 11.91% 17.29% 6.10%
1981 15.76% 33.37% 26.59% 18.16% 23.64% 15.53% 20.11% 12.48% 17.73% 6.62%
1982 14.72% 31.43% 25.05% 16.61% 22.17% 14.35% 18.79% 11.63% 16.57% 6.10%
1983 13.79% 30.18% 23.64% 15.54% 20.91% 13.20% 17.62% 10.76% 15.52% 5.66%
1984 13.68% 29.92% 23.42% 15.57% 20.81% 12.90% 17.47% 10.48% 15.35% 5.77%
1985 13.73% 29.86% 23.50% 15.69% 20.93% 12.83% 17.55% 10.41% 15.41% 5.70%
1986 14.54% 33.13% 25.68% 15.99% 22.64% 12.97% 18.72% 10.48% 16.32% 5.63%
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
1987 13.12% 26.41% 22.10% 14.43% 19.77% 11.71% 16.61% 9.45% 14.60% 5.09%
1988 13.21% 24.04% 21.14% 14.07% 19.18% 11.82% 16.47% 9.60% 14.64% 5.06%
1989 13.12% 23.34% 20.71% 13.93% 18.77% 12.08% 16.27% 9.77% 14.53% 5.11%
1990 12.95% 23.25% 20.46% 13.63% 18.50% 12.01% 16.06% 9.73% 14.36% 5.01%
1991 12.75% 24.37% 20.62% 13.96% 18.63% 11.57% 15.93% 9.55% 14.20% 4.62%
1992 12.94% 25.05% 21.19% 13.99% 19.13% 11.39% 16.25% 9.42% 14.44% 4.39%
1993 13.32% 28.01% 22.71% 14.01% 20.20% 11.40% 16.90% 9.37% 14.90% 4.29%
1994 13.50% 28.23% 23.04% 14.20% 20.48% 11.57% 17.15% 9.42% 15.11% 4.32%
1995 13.86% 28.73% 23.53% 14.46% 20.97% 11.71% 17.58% 9.43% 15.47% 4.39%
1996 14.34% 28.87% 24.07% 14.74% 21.55% 11.86% 18.12% 9.53% 15.96% 4.40%
1997 14.48% 27.64% 23.62% 14.87% 21.36% 12.04% 18.18% 9.63% 16.09% 4.48%
1998 14.42% 27.12% 23.63% 14.79% 21.42% 11.63% 18.16% 9.12% 16.00% 4.44%
1999 14.85% 27.53% 24.18% 15.06% 21.98% 11.76% 18.66% 9.12% 16.43% 4.48%
2000 15.26% 27.45% 24.42% 15.48% 22.34% 12.04% 19.09% 9.28% 16.86% 4.60%
The IRS changed methodology, so data above and below this line not strictly comparable
2001 14.47% 28.17% 27.60% 23.91% 15.20% 21.68% 11.87% 18.35% 9.20% 16.08% 4.92%
2002 13.28% 28.48% 27.37% 23.17% 14.15% 20.76% 10.70% 17.23% 8.00% 14.87% 3.86%
2003 12.11% 24.60% 24.38% 20.92% 12.46% 18.70% 9.69% 15.57% 7.41% 13.53% 3.49%
2004 12.31% 23.06% 23.52% 20.83% 12.53% 18.80% 9.41% 15.71% 7.27% 13.68% 3.53%
2005 12.65% 22.48% 23.15% 20.93% 12.61% 19.03% 9.45% 16.04% 7.18% 14.01% 3.51%
2006 12.80% 21.94% 22.80% 20.80% 12.84% 19.02% 9.52% 16.12% 7.22% 14.12% 3.51%
2007 12.90% 21.42% 22.46% 20.66% 12.92% 18.96% 9.61% 16.16% 7.27% 14.19% 3.56%
2008 12.54% 22.67% 23.29% 20.83% 12.66% 18.87% 9.45% 15.85% 6.97% 13.79% 3.26%
2009 11.39% 24.28% 24.05% 20.59% 11.53% 18.19% 8.36% 14.81% 5.76% 12.61% 2.35%
2010 11.81% 22.84% 23.39% 20.64% 11.98% 18.46% 8.70% 15.22% 6.01% 13.06% 2.37%
2011 12.54% 22.82% 23.50% 20.89% 12.83% 18.85% 9.70% 15.82% 6.98% 13.76% 3.13%
2012 13.11% 21.67% 22.83% 20.97% 13.33% 19.21% 9.96% 16.35% 7.21% 14.33% 3.28%
2013 13.64% 27.91% 27.08% 23.20% 13.40% 20.75% 10.11% 17.28% 7.31% 14.98% 3.30%
2014 14.16% 27.67% 27.16% 23.61% 13.73% 21.25% 10.37% 17.83% 7.48% 15.52% 3.45%
  1. For data prior to 2001, all tax returns that have a positive AGI are included, even those that do not have a positive income tax liability. For data from 2001 forward, returns with negative AGI are also included, but dependent returns are excluded.
  2. Income tax after credits (the measure of “income taxes paid” above) does not account for the refundable portion of EITC. If it were included, the tax share of the top income groups would be higher. The refundable portion is classified as a spending program by the Office of Management and Budget and therefore is not included by the IRS in these figures.
  3. The only tax analyzed here is the federal individual income tax, which is responsible for more than 25 percent of the nation’s taxes paid (at all levels of government). Federal income taxes are much more progressive than federal payroll taxes, which are responsible for about 20 percent of all taxes paid (at all levels of government), and are more progressive than most state and local taxes.
  4. AGI is a fairly narrow income concept and does not include income items like government transfers (except for the portion of Social Security benefits that is taxed), the value of employer-provided health insurance, underreported or unreported income (most notably that of sole proprietors), income derived from municipal bond interest, net imputed rental income, and others.
  5. The unit of analysis here is that of the tax return. In the figures prior to 2001, some dependent returns are included. Under other units of analysis (like the Treasury Department’s Family Economic Unit), these returns would likely be paired with parents’ returns.
  6. These figures represent the legal incidence of the income tax. Most distributional tables (such as those from CBO, Tax Policy Center, Citizens for Tax Justice, the Treasury Department, and JCT) assume that the entire economic incidence of personal income taxes falls on the income earner.

[1] Individual Income Tax Rates and Tax Shares, Internal Revenue Service Statistics of Income, http://www.irs.gov/uac/SOI-Tax-Stats-Individual-Income-Tax-Rates-and-Tax-Shares.

[2] See Congressional Budget Office, The Budget and Economic Outlook: 2017 to 2027, Jan. 2017, https://www.cbo.gov/sites/default/files/115th-congress-2017-2018/reports/52370-outlook.pdf.

[3] There is strong reason to believe that capital gains realizations were unusually depressed in 2013, due to the increase in the top capital gains tax rate from 15 percent to 23.8 percent. In 2013, capital gains accounted for 26.6 percent of the income of taxpayers with over $1 million in AGI received, compared to 31.7 percent in 2014 (these calculations apply for net capital gains reported on Schedule D). Table 1.4, Publication 1304, “Individual Income Tax Returns 2014,” Internal Revenue Service, https://www.irs.gov/uac/soi-tax-stats-individual-income-tax-returns-publication-1304-complete-report.

[4] Here, “average income tax rate” is defined as income taxes paid divided by adjusted gross income.


Download Summary of the Latest Federal Income Tax Data, 2016 Update (PDF) Download Summary of the Latest Federal Income Tax Data, 2016 Update (EXCEL)

https://taxfoundation.org/summary-latest-federal-income-tax-data-2016-update/

Federal Spending, Budget, and Debt

 

THE ISSUE


In 2015, the national debt reached $18.8 trillion and exceeded 100 percent of everything the economy produced in goods and services, as defined by gross domestic product (GDP). Publicly held debt (the debt borrowed in credit markets, excluding Social Security’s trust fund, for example) is alarmingly high at 74 percent of GDP. These high debt levels were last seen after the U.S. had engaged in wartime spending following World War II. However, if mandatory spending—especially health care spending—continues to grow faster than the economy, then the level of debt will grow even higher.

High federal debt puts the United States at risk for a number of harmful economic consequences, including slower economic growth, a weakened ability to respond to unexpected challenges, and possibly a debt-driven financial crisis. Furthermore, most of the debt issued is to pay for more consumption spending. Unlike spending on investments, consumption financed through debt will lower the standard of living for future generations.

Deficits fell in 2015 primarily because the economy is slowly improving, which brings in additional revenues and lowers spending on countercyclical programs like the Supplemental Nutrition Assistance Program (SNAP or food stamps). Also, discretionary spending caps implemented under the Budget Control Act of 2011 helped restrain the growth in spending. Finally, deficits during the recession were also partly driven by the stimulus bill and other temporary measures.

Lawmakers should not take this short-term and modest deficit improvement as a signal to grow complacent about reining in exploding spending. Deficits are on the rise again, beginning in 2016, and within a decade they are projected to exceed $1 trillion annually. The Congressional Budget Office projects that interest on the debt alone will exceed the nation’s defense budget (not including spending on war or other emergencies) before the end of the decade.

The nation’s long-term spending trajectory remains on a fiscal collision course. Total spending has exploded by 25 percent since 2004, even after inflation, and some programs have grown far more than that. Defense spending, however, is being cut. Social Security, Medicare, and Medicaid are so large and growing that they are on track to overwhelm the federal budget. These major entitlement programs, together with interest on the debt, are driving 85 percent of the projected growth in government spending over the next decade. The Affordable Care Act, or Obamacare, further adds to the problem, increasing entitlement spending by nearly $2 trillion in just 10 years. The long-term unfunded obligations in the nation’s major entitlement programs loom like an even darker cloud over the U.S. economy. Demographic and economic factors will combine to drive spending in Medicare, Medicaid (including Obamacare), and Social Security to unsustainable heights. The major entitlements and interest on the debt are on track to devour all tax revenues in fewer than 20 years.

solutions_2016_federal-budget-1

Over the 75-year long-term horizon, the combined unfunded obligations arising from promised benefits in Medicare and Social Security alone exceed $50 trillion. The federal unfunded obligations arising from Medicaid, and even from veterans’ benefits, are unknown but would likely add many trillions more to this figure. By some estimates, the U.S. federal government’s combined unfunded obligations already exceed $200 trillion in today’s dollars. Figures such as these are simply unfathomable.

While the Budget Control Act of 2011 and sequestration are modestly restraining the discretionary budget, Congress continues to fund too many programs that represent corporate welfare. Corporate welfare and crony capitalism waste taxpayer resources by spending resources taken for the public benefit on a narrower, well-connected interest group instead. Taxation creates economic distortions. Excess taxation, that goes beyond what is necessary to pay for constitutional government, needlessly wastes taxpayer and economic resources. Every dollar spent by the federal government for the benefit of a well-connected interest group is a dollar that is no longer available to American families and businesses to spend and invest to meet their own needs and wants. Corporate welfare spending is especially morally concerning when government spends resources that belong to the next generation of Americans to fund consumption spending today—or, in other words, when spending makes current Americans better off at the expense of future Americans.

solutions_2016_federal-budget-2

Moreover, mandatory or automatic spending—especially on entitlements—continues to grow nearly unabated. Without any changes, mandatory spending, including net interest, will consume three-fourths of the budget in just one decade.

If Washington fails to begin the important reform process, we could one day find ourselves teetering on the edge of a Greece-style meltdown. To forestall such an eventuality, lawmakers should eliminate waste, duplication, and inappropriate spending; privatize functions better left to the private sector; and leave areas best managed on the local level to states and localities. They should change the entitlement programs so that they become more affordable and help those with the greatest needs. Congress should also fully fund national defense—a core constitutional function of government. Lawmakers should build on the success of the Budget Control Act of 2011 by limiting all non-interest spending with a firm cap that targets those spending levels necessary to reach balance before the end of the decade.

It is not too late to solve the growing spending and debt crisis, but the clock is ticking.

 

RECOMMENDATIONS


Cut Spending Now and Enforce Spending Caps. Congress should cut non-defense discretionary spending, first by enforcing the Budget Control Act’s spending caps with sequestration. Next, Congress should eliminate federal spending for programs that are unneeded or can hardly be considered federal priorities and are more appropriate for state and local governments or the private sector, like federal energy subsidies and loan guarantees to businesses. Examples of areas where cuts can be made include:

  • TIGER grants (National Infrastructure Investment Grants);
  • The Market Access Program;
  • The New Starts Program;
  • The Technology Innovation Program; and
  • Department of Energy (DOE) loan programs and loan guarantees.

Reject Tax Hikes and Pursue Growth-Oriented Tax Reform. There is a growing consensus that a simpler, flatter tax code—one with fewer, lower marginal rates and only essential deductions—is one of the best ways to promote growth. Heritage analysts favor an even bolder approach with a single rate on spent income. In any case, as long as government must tax, it should do so with the least possible burden on and interference with free-market choices. Higher taxes on small businesses and on investment capital always weaken the economy. Revenue will grow when the economy grows, but higher spending and taxes will reduce growth. The most effective way to spur economic recovery is to increase the incentives that drive growth.

Reform Entitlements. Congress should begin by repealing Obamacare, which would add nearly $2 trillion to federal spending over the decade. The costs of Medicare, Medicaid, and Social Security are on course to overwhelm the federal budget. Every year of delay raises the cost of reform and gives near-retirees less time to adjust their retirement strategies. Lawmakers should restructure these programs by changing the incentives that drive their excessive spending. Then Congress should take these programs off autopilot and set a budget for each major entitlement with an obligation to adjust them as necessary to keep each program within budget and protected from insolvency.

Empower the States and the Private Sector. Since the beginning of the 20th century, the federal government’s domestic activities have expanded well beyond what the Founders envisioned, leading to ever more centralized government, smothering the creativity of states and localities, and pushing federal spending to its current unsustainable levels. Even when Washington allows states to administer the programs, it taxes families, subtracts a hefty administrative cost, and sends the remaining revenues back to state and local governments with specific rules dictating how they may and may not spend the money.

solutions_2016_federal-budget-3

Instead of performing many functions poorly, Congress should focus on the limited set of functions intrinsic to the federal government’s responsibilities. Most highway, education, justice, and economic development programs should be devolved to state and local governments, which have the flexibility to tailor local programs to local needs. Government ownership of business also crowds out private companies and encourages protected entities to take unnecessary risks. After promising profits, government-owned businesses frequently lose billions of dollars, leaving taxpayers to foot the bill. Any government function that can also be found in the yellow pages may be a candidate for privatization.

Reform the Federal Budget Process. The federal budget’s focus on just 10 years ahead diverts lawmakers from dealing with the mounting long-term challenges, such as retirement programs. Likewise, the lack of firm budget controls and enforcement procedures makes fiscal discipline easy to evade. Reforming the budget process is therefore an implicit part of reforming the budget itself. Congress should estimate and publish the projected cost over 75 years of any proposed policy or funding level for each significant federal program. Any major policy change should also be scored over this long-term horizon. In addition to calculating the costs of proposed congressional actions without regard to the economy’s response to those actions (known as “static” scoring), the government should require a parallel calculation that takes that response into account (known as “dynamic” scoring) to make more practical and useful fiscal information available to Congress when it decides whether to pursue certain actions.

Although Congress must make substantial cuts in current and future spending, it must not compromise its first constitutional responsibility: to ensure that national defense is fully funded to protect America and its interests at home and around the globe.

 

FACTS AND FIGURES


  • Government spending per household reached $29,867 in 2015 and is projected to rise by over 50 percent in only one decade to $48,088 per household in 2025.
  • No American family could spend and borrow as Congress does. If it could, a median-income family with $54,000 in yearly earnings would spend $61,000 in 2013, putting $7,000 on a credit card. This family’s total debt would already be over $300,000.
  • To set aside enough money today to pay the current debt and future unfunded costs just from Social Security and Medicare, each person in America today, including their children, would owe more than $210,000.
  • At $18.8 trillion, the national debt now amounts to $125,000 for every tax-filing household in America.

 

SELECTED ADDITIONAL RESOURCES


David S. Addington, “Federal Budget: What Congress Must Do to Control Spending and Create Jobs,” Heritage Foundation Issue Brief No. 3538, March 14, 2012.

Romina Boccia, “7 Priorities for the 2016 Congressional Budget Resolution,” Heritage Foundation Issue Brief No. 4635, March 11, 2015.

Romina Boccia, “Debt Limit: Options and the Way Forward,” Heritage Foundation Backgrounder No. 2844, September 18, 2013.

Romina Boccia, “How the United States’ High Debt Will Weaken the Economy and Hurt Americans,” Heritage Foundation Backgrounder No. 2768, February 12, 2013.

Romina Boccia, “A Scary Thought: Could America Become the Next Greece?” originally published in the National Interest, July 16, 2015.

John Gray, “The Appropriations Process: Spending Caps Explained,” Heritage Foundation Issue Brief No. 4434, July 20, 2015.

Paul Winfree, Romina Boccia, Curtis S. Dubay, and Michael Sargent, “Blueprint for Congressional Fiscal Action in the Remainder of 2015,” Heritage Foundation Backgrounder No. 3052, September 2, 2015.

http://solutions.heritage.org/the-economy/federal-spending-budget-and-debt/

A Blueprint for Balance: A Federal Budget for 2017

February 23, 2016 2 min read Download Report
The Heritage Foundation

Select a Section 1/0

The Blueprint for Balance provides detailed recommendations for the annual congressional budget. Congress needs to drive down spending – including through reform of entitlement programs – to a balanced budget, while maintaining a strong national defense, and without raising taxes.

While Congress cannot solve everything at once, it can and must take opportunities through the annual budget and appropriations process to make a down payment of putting the government’s finances back in order. They can do this by immediately reducing discretionary spending and taking meaningful steps to reduce mandatory spending by reforming those programs.

The Blueprint:

  • Balances the budget while reducing taxes. The Blueprint reaches primary balance (i.e., without including interest of the debt) within the first year and eliminates deficits by 2023 without counting any benefits from growing the economy (that would result in balance even sooner). The budget stays in surplus while allowing the nation to begin reducing the national debt. It does this while completely eliminating over $1.3 trillion in the tax revenues included in Obamacare.
  • Reforms Entitlement Programs. Entitlement spending is growing on autopilot, consuming more and more of the federal budget each year. Tens of trillions in unfunded obligations are threatening younger generations with massive tax increases and undue burdens of debt. This blueprint would: repeal Obamacare; modernize Medicare by transitioning to a premium-support system and making key reforms to meet  demographic, fiscal, and structural challenges;  cap the federal allotment for Medicaid and give states greater flexibility in designing benefits and administering the program;  and make common sense reforms to Social Security to ensure seniors are protected from poverty in retirement while accounting for increased life expectancy and reducing the growth in benefits.
  • Reduces the National Debt. The Blueprint would reduce debt held by the public by $9.3 trillion over the decade, when compared to current Congressional Budget Office projections. As a percentage of the economy, debt would fall from a projected 75.6% in 2016 to a more sustainable rate of 52.5% in 2026, and continue falling from there.
  • Responsibly Brings Spending Under Control. The federal government cannot continue to spend at a rate faster than the economy grows. Over the next decade, the Heritage budget would reduce the growth in spending to an average rate of 1.7% annually, well below the nearly 5% annual growth rate under CBO’s baseline projection.
  • Reigns in Interest Spending. Net interest spending is projected to quadruple over the next decade if no action is taken. By 2024 the nation would be spending more on interest payments on the debt than on national defense. By stabilizing the debt, this budget reins in the cost of servicing the debt, freeing up resources for other national priorities.
  • Fully Funds National Defense. The Blueprint prioritizes national defense capabilities by moving resources from less critical domestic programs to funding the federal government’s core constitutional role fully. With continued and rising tensions across all corners of the globe, fully funding national defense must be a top priority.
  • Provides the Framework for Budget Process Reform. The Blueprint takes immediate steps towards implementing change in the budget process. These include: enacting a statutory spending cap enforced by sequestration to curb excessive spending growth; moving  towards a balanced budget amendment to constrain future attempts at circumventing budget caps; eliminating the use of changes in mandatory programs (CHIMPs) as a tool to evade discretionary spending limits; stopping spending on unauthorized programs and reducing spending for those programs that Congress reauthorizes; putting government-sponsored enterprises (GSEs) on budget to accurately account for the budgetary impacts and risks of these programs; and implementing use fair-value accounting to more accurately report the risks Congress assumes and the subsidies it provides through federal credit programs, like student loans.

Authors

The Heritage Foundation

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The Pronk Pops Show 870, April 10, 2017: Story 1: Will President Trump Boldly Cut Taxes and Spending? — A Competitive Race Towards Lower Taxes And Less Government Spending: Replace All Income Based Taxes (All Income, Capital Gain and Payroll Taxes) With Broad-Based Consumption Tax With A Progressive Tax Prebate ( FairTax 23% Less Prebate or Fair Tax Less 20% Less $1,000 Per Month or $12,000 Per Year Prebate) And Real Cuts of 5% Per Year In Government Spending To Balance The Budget In 8 Years Or Less To Pay For Tax Cuts!) — Cut Taxes and Spending — Videos — Story 2: Stagnating United States Economy — The Great Stagnation –Videos

Posted on April 10, 2017. Filed under: American History, Blogroll, Breaking News, Budgetary Policy, Communications, Congress, Countries, Culture, Currencies, Donald J. Trump, Donald J. Trump, Donald Trump, Donald Trump, Economics, Elections, Employment, Fiscal Policy, Foreign Policy, Free Trade, Government Dependency, Government Spending, History, House of Representatives, Labor Economics, Law, Media, Medicare, Monetary Policy, News, Philosophy, Photos, Politics, Polls, President Trump, Raymond Thomas Pronk, Scandals, Senate, Tax Policy, Taxation, Taxes, Trade Policy, U.S. Dollar, Unemployment, United States of America, Videos, Wealth, Welfare Spending, Wisdom | Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , |

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Story 1: Will President Trump Boldly Cut Taxes and Spending?  — A Competitive Race Towards Lower Taxes And Less Government Spending:  Replace All Income Based Taxes (All Income, Capital Gain and Payroll Taxes) With Broad-Based Consumption Tax With Generous Tax Prebate ( FairTax or Fair Tax Less!) And Real Cuts of  5% Per Year In Government Spending To Balance The Budget In 8 Years Or Less To Pay For Tax Cuts!) — Cut Taxes and Spending — Videos —  

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Donald Trump: Simplify the Tax Code

Donald Trump: I pay as little as possible in taxes

Is Donald Trump serious about tax reform?

Sean Spicer: Trump wants to get tax reform right

Will tax reform really happen by August?

Dan Mitchell Discussing GOP Tax Plan and Corporate Rate Reduction

What Tax Reform Could Look Like Under Donald Trump | Squawk Box | CNBC

#Eakinomics – 4 Key Questions on Dynamic Scoring

What is Dynamic Scoring?

Trump Pushes ‘Major Border Tax’ to Keep Jobs in U.S.

Ryan Unexpectedly Joins Forces With Bannon on Border Tax

Kudlow: Freedom Caucus & Trump’s base is opposed to Border Adjustment Tax

Sen. Perdue: Border Adjustment Tax would “shutdown economic growth”

Sen. Tom Cotton: “I have serious concerns” w/ Border Adjustment Tax

Americans Need a Progressive Consumption Tax

Sen. Strange: “I would not” vote for a Border Adjustment Tax

Milton Friedman – Why Tax Reform Is Impossible

Milton Friedman – Is tax reform possible?

CNBC: Steve Forbes on Border Adjustment Tax – “Don’t Do It” 2.8.17

Meg Whitman: Border Adjustment Tax Will Not Create Jobs | CNBC

Art Laffer: Border tax is a major mistake

Border Tax Fight Is Economists Vs. Everybody Else | Squawk Box | CNBC

Dan Mitchell Discussing GOP Tax Plan and Corporate Rate Reduction

What is a Border Adjustment?

Border Tax: What You Need to Know

Will a border adjustment tax help American businesses?

Will a border adjustment tax kill free trade?

Border adjustment tax political suicide?

Fox Pol:l 73% Want Tax Reform This Year – Cavuto

Could the border tax debate stall tax reform?

Is A Border Adjustment Tax A Good Idea?

Border Adjustment Tax: Trump’s MAGA Ace

President Donald Trump Begins First Week By Meeting With Top Business Leaders | NBC News

Dan Mitchell Fretting about GOP Border-Adjustable Tax Plan

FairTax: Fire Up Our Economic Engine (Official HD)

Pence on the Fair Tax

Freedom from the IRS! – FairTax Explained in Details

The FairTax: It’s Time

Dan Mitchell explains the fair tax

Six Reasons Why the Capital Gains Tax Should Be Abolished

Is America’s Tax System Fair?

Sen. Moran Discusses FairTax Legislation on U.S. Senate Floor

What’s Killing the American Dream?

Robert Wolf: Border adjustment not going to happen

Paul Ryan on why he’s confident about tax reform

1/26/17 Border Adjustment Taxes, Tax Reform & Trade: Panel 1

1/26/17 Border Adjustment Taxes, Tax Reform and Trade: Panel 2 Part 2

Border Tax Adjustment and Corporate Tax Reforms: Panel 1

Border Tax Adjustment and Corporate Tax Reforms: Panel 2

Breaking Down The Republican Plan For A Border Tax | CNBC

Harvard Professor: Trump’s Border Tax ‘Misunderstood’

Making Sense Of The 20 Percent Tax Proposal | Morning Joe | MSNBC

Proposed Tax Package A Dramatic Cut Even With A Border Tax?

Treasury Secretary Steve Mnuchin On Tax Reform, Growth, Border Tax, China (Full) | Squawk Box | CNBC

Wilbur Ross On Border Tax: Something Will Be Found To Fill Trillion-Dollar Hole | Squawk Box | CNBC

Trump ditches tax reform plan he campaigned on and considers series of new options – including payroll tax cut in bid to woo Democrats

  • Trump had campaigned on rapid tax reform and a so-called border adjustment tax, which would effectively levy a duty on imports 
  • Now all options are back on the table as he tries to have a reform plan which will get Republican support 
  • There are signs the president will be willing to work with Democrats too as White House officials hold ‘listening sessions’ with the opposition 
  • One plan being considered is a cut in the payroll tax, which would benefit middle-earners and could garner Democratic support 

President Donald Trump has scrapped the tax plan he campaigned on and is going back to the drawing board in a search for Republican consensus behind legislation to overhaul the U.S. tax system.

The administration’s first attempt to write legislation is in its early stages and the White House has kept much of it under wraps. But it has already sprouted the consideration of a series of unorthodox proposals including a drastic cut to the payroll tax, aimed at appealing to Democrats.

Some view the search for new options as a result of Trump’s refusal to set clear parameters for his plan and his exceedingly challenging endgame: reducing tax rates enough to spur faster growth without blowing up the budget deficit.

Administration officials say it’s now unlikely that a tax overhaul will meet the August deadline set by Treasury Secretary Steve Mnuchin.

Off plan: Donald Trump is abandoning the tax overhaul he campaigned on 

Off plan: Donald Trump is abandoning the tax overhaul he campaigned on

Tough deadline: Steven Mnuchin, the Treasury Secretary who was at the table when Trump was briefed on the Syria missile strikes, had set an the August deadline for tax reform

Tough deadline: Steven Mnuchin, the Treasury Secretary who was at the table when Trump was briefed on the Syria missile strikes, had set an the August deadline for tax reform

But the ambitious pace to figure out a plan reflects Trump’s haste to move quickly past a bruising failure to broker a compromise within his own party on how to replace the health insurance law enacted under President Barack Obama.

The White House is trying to learn the lessons from health care. Rather than accepting a bill written by the lawmakers, White House officials are taking a more active role.

Administration officials have signaled that they want to pass tax legislation with only Republican votes, yet they’ve also held listening sessions with House Democrats.

White House aides say the goal is to cut tax rates sharply enough to improve the economic picture in depressed rural and industrial pockets of the country where many Trump voters live.

But the administration so far has swatted down alternative ways for raising revenues, such as a carbon tax, to offset lower rates.

Trump, who brands himself as a deal-maker, has not said which trade-offs he might accept and he has remained noncommittal on the leading blueprint, from Rep. Kevin Brady, chairman of the Ways and Means Committee.

Brady, a Republican from Texas, has proposed a border adjustment system, which would eliminate corporate deductions on imports, to raise $1 trillion over 10 years that could fund lower corporate tax rates.

But that possibility has rankled retailers who say it would lead to higher prices and threaten millions of jobs, while some lawmakers have worried that the system would violate World Trade Organization rules.

Brady has said he intends to amend the blueprint but has not spelled out how he would do so.

Other options are being shopped on Capitol Hill.

One circulating this past week would change the House Republican plan to eliminate much of the payroll tax and cut corporate tax rates. This would require a new dedicated funding source for Social Security.

The change, proposed by a GOP lobbyist with close ties to the Trump administration, would transform Brady’s plan on imports into something closer to a value-added tax by also eliminating the deduction of labor expenses.

This would bring it in line with WTO rules and generate an additional $12 trillion over 10 years, according to budget estimates.

Those additional revenues could then enable the end of the 12.4 percent payroll tax, split evenly between employers and employees, that funds Social Security, while keeping the health insurance payroll tax in place.

This approach would give a worker earning $60,000 a year an additional $3,720 in take-home pay, a possible win that lawmakers could highlight back in their districts even though it would involve changing the funding mechanism for Social Security, according to the lobbyist, who asked for anonymity to discuss the proposal without disrupting early negotiations.

Although some billed this as a bipartisan solution, and President Barack Obama did temporarily cut the payroll tax after the Great Recession, others note it probably would run into firm opposition from Democrats who are loathe to be seen as undermining Social Security.

The White House would not comment on the plan, but said a value-added tax based on consumption is not under consideration ‘as of now,’ according to a White House statement.

The lack of detail about how to significantly rewrite tax laws for the first time in 30 years may provide Trump some time to build consensus among Republicans. But without Trump laying down his hand, lawmakers appear reluctant to back a plan that will likely stir controversy.

How will markets react? Stocks rallied after the election on the promise of lower taxes and fewer regulations, but the Dow has dipped 1.2 percent over the past month

How will markets react? Stocks rallied after the election on the promise of lower taxes and fewer regulations, but the Dow has dipped 1.2 percent over the past month

Stock markets take a hit after Trump’s healthcare defeat

‘Because there are trade-offs, congressmen need cover from the president to withstand the lobbyists and constituents who are going to complain,’ said Bill Gale, an economist at the Brookings Institution who worked at the White House Council of Economic Advisers during President George H.W. Bush’s administration.

The Trump administration appears to have shut out the economists who helped assemble one of his campaign’s tax overhaul plans, which independent analyses show would have increased the budget deficit.

‘It’s a little frustrating that they feel they have to write a new tax plan when they have a tax plan,’ said Steven Moore, an economist at the conservative Heritage Foundation who helped formulate tax policy for the Trump campaign.

Rob Portman, the Republican senator from Ohio, a member of the Senate Finance Committee, said that all of the trial balloons surfacing in public don’t represent the work that’s being done behind the scenes.

‘It’s not really what’s going on,’ Portman said. ‘What’s going on is they’re working with on various ideas.’

Investors are beginning to show some doubts that Trump can deliver. Stocks rallied after his election on the promise of lower taxes and fewer regulations, but the Dow Jones Industrial Average has dipped 1.2 percent over the past month as the path for health care and tax revisions has become muddied.

‘The White House is going to need its own clear direction, or it’s going to need to defer to Congress, but saying that your plan is forthcoming and then not producing a plan kind of puts everything in stasis,’ said Alan Cole, an economist at the conservative Tax Foundation.

http://www.dailymail.co.uk/news/article-4396916/Trump-taxes-President-scraps-tax-plan-timetable-threatened.html#ixzz4dsZ74tNb
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Why the Border Adjustment Tax Should Be Killed

The BAT is a bad idea. There are far better ways to shrink the federal budget deficit.

March 18, 2017

“Anytime I hear border adjustment, I don’t love it,” Donald Trump told The Wall Street Journal shortly before his inauguration, noting that the proposed border adjustment tax was “too complicated.”

Trump isn’t always right when he makes off-the-cuff remarks such as that, but this time he was. The proposed border adjustment tax is so complicated that even its advocates can’t agree on how its disruptive effects on the U.S. economy will play out, and there’s nothing to love about that. The BAT is a bad idea, and it should be scrapped. And while taking it off the table will bring more red ink to the federal budget, there are better ways to stanch the bleeding than subjecting the economy to the trauma of a BAT.

Despite protestations to the contrary, the border adjustment levy is a tax hike embedded in the program of tax reductions that House Republicans put forward last June under the rubric of “A Better Way.” It’s there, presumably, to help offset the effect of the administration’s planned cuts, since the Republicans’ stated aim is to keep those cuts revenue-neutral. Barron’s fully supports the goal of not adding to deficits that, before too long, will be running above $1 trillion a year, given repeated warnings from the nonpartisan Congressional Budget Office about the risk of a financial crisis, due to exploding debt.

The attraction of a BAT is that it could generate an estimated $100 billion a year in revenue. There may be reasons to challenge that estimate, but we’ll accept it for now. There are, however, better ways to slash the fiscal deficit by $100 billion a year than the Better Way plan, and most fall under the heading of spending cuts.

President Trump has spoken about “waste, fraud, and abuse” in “every agency” of the federal government. Indeed, he promised that “we will cut so much, your head will spin.” He should therefore find plenty to love in our proposed reductions in spending. Just for starters, if all corporate welfare were cut from the budget, as much as $100 billion a year could be saved, about matching the total expected from the BAT.

The president also favors slashing the top rate on corporate income to 15% from 35%. Barron’s has proposed a more modest cut, to 22% (“Cut the Top U.S. Corporate Tax Rate to 22%,” Nov. 26, 2016). The Republican package calls for a reduction to 20%, which is close enough to our original proposal and which we believe should boost revenue rather than shrink it.

A list of potential cuts and revenue enhancements, totaling $200 billion, is in the table at the bottom of this page.

THE BETTER WAY PLAN, as noted, would reduce the top federal tax rate on corporate profits to 20% from 35%—which is all to the good. The proposed tax cut would not only be revenue-neutral; it would probably be revenue-enhancing.

In a study released this month by the London-based Centre for Policy Studies, analyst Daniel Mahoney traces the effect on revenue from Britain’s cuts in the corporate tax rate over a 34-year period. According to his calculations, the take from the corporate tax has added three-tenths of a percentage point annually to gross domestic product since rates were slashed.

Similarly, last year, in calling for a maximum U.S. rate of 22%, we traced the significant decline in the average top rate on corporate income for 19 countries in the Organization for Economic Cooperation and Development, which includes the U.S. and the United Kingdom. Over 33 years, their average tax take as a share of GDP rose six-tenths of a percentage point.

While that might not sound like much, every tenth of a percentage point of U.S. nominal GDP is worth $18.9 billion. So if revenue from the corporate tax rises by, say, three-tenths of a percentage point, to 2.5%—a conservative guess—that increase would translate into a bonus of nearly $57 billion a year in revenue. That alone gets us more than halfway to the $100 billion value of a BAT.

The idea of a revenue-enhancing cut in the corporate income tax was put forward in 1978, when economist Arthur Laffer was first cited as arguing that some rate decreases could generate enough added economic growth that the government wouldn’t lose revenue over the long run—and might, in fact, even gain revenue. Laffer also noted that most tax hikes generate less revenue than a conventional “static” analysis indicates, and that most tax cuts lose less.

Laffer’s “dynamic” analysis covered all of the behavioral changes likely to result from a cut. To begin with, if the tax collector claims a lower share of income, there is an incentive to produce more income. Second, a lower rate means there’s less incentive to spend time and effort avoiding the tax.

Corporations don’t pay taxes; only people do. And there is a tendency to forget that if a corporation nets more profits as a result of a lower tax, those funds will soon take the form of salaries, dividends, and capital gains, and will be taxed in those forms.

The second factor, less tax avoidance, applies with special force to a rollback of corporate taxes. As we noted last year, bringing down the top rate to 22% from 35% would dramatically reduce corporate flight to low-tax jurisdictions in the rest of the world.

Following the publication of our article, the CBO released a study confirming that U.S corporate tax rates are among the highest in the world. Among the Group of 20 countries—including Japan, China, Russia, Germany, France, Canada, and the U.K.—the U.S. is No. 1, 3, and 4, respectively, in “top statutory corporate tax rate,” “average corporate tax rate,” and “effective corporate tax rate.” The Better Way plan would narrow this gap significantly and make the U.S. more competitive.

But when it comes to the Better Way plan for cutting tax rates on personal income, Barron’s believes that there would be a loss of revenue even after taking into account behavioral changes. The revenue reduction from the proposed personal income-tax cuts has been estimated, on a static basis, at an average of $98 billion a year. We can assume that dynamic losses would run 10% less, or $88 billion, mainly because lower taxes are likely to encourage people to work.

Still, $88 billion a year is a huge loss of revenue. Barron’s proposes that the Better Way plan consider splitting the difference and going halfway on the tax cut, thus saving $44 billion.

THE REVENUE-ENHANCING corporate tax cut would include a special kicker in the form of the border adjustment tax. The BAT would deny corporations the ability to deduct the cost of imports from their taxable income, while all income earned from exports would be exempt from the 20% levy.

This means that companies selling imported goods in the domestic market would be taxed on the sale’s full proceeds—not just on the profit earned—which could more than offset the gains from the corporate tax reduction. At the same time, as noted, there would be no tax on the sale of exports.

The GOP’s Big Three Key players in the border adjustment tax debate: Senate Majority Leader Mitch McConnell, above, and House Speaker Paul Ryan and President Donald Trump, below. McConnell has said that he hasn’t made up his mind about the levy. Alex Wong/Getty Images

The BAT would bring uncertainty and disruption to the U.S. economy, making it hard to predict whether it really would raise $100 billion annually in revenue. The basic idea is that, because the U.S. imports more than it exports, the export exemption would be more than offset by hitting imports hard. Regardless of how it shakes out, the value of the transactions affected by the BAT is huge.

The U.S. trade deficit—the difference between exports and imports—ran at just 3.4% of real GDP in 2016, much lower than the 5.5% peak of 2005. But the actual gross flows of exports and imports are much larger than the difference between the two flows. Exports last year were valued at $2.2 trillion, or 12.8% of real GDP, and imports at $2.7 trillion, or 16.2% (see chart). Given those magnitudes, the tax plan is likely to require massive readjustments throughout the economy.

That’s why major importers, like Wal-Mart Stores, are objecting—and why exporters are clearly pleased. As you might expect, then, the BAT is pitting exporters against importers, creating needless discord at a time when the country is surely suffering from more discord than it can handle.

THE POSITION PAPER for the Better Way asserts that by “exempting exports and taxing imports,” the BAT does “not” consist of the “addition of a new tax.” But of course, the BAT’s designers know that imports normally exceed exports by about $500 billion a year. Apply a back-of-the-envelope 20% to that $500 billion, and you get the hoped-for $100 billion in revenue. So the maneuver of “exempting exports and taxing imports” certainly looks and sounds like a new tax.

The Better Way statement also argues that there is an imbalance in the tax treatment of imports and exports that the BAT must remedy. “In the absence of border adjustments,” it states, “exports from the United States implicitly bear the cost of the U.S. income tax, while imports do not bear any federal income tax cost. This amounts to a self-imposed unilateral penalty on American exports and a self-imposed unilateral subsidy for U.S. imports.”

Ryan strongly supports the tax. Chip Somodevilla/Getty Images

But all other countries impose this “implicit cost” on exports through their own corporate income tax. And since the Better Way would slash America’s top rate to 20%, this implicit cost would finally become competitive with that of other nations.

Some supporters of the BAT like it precisely because it would help exports and penalize imports. The mercantilist view of economics implicit in that aim was discredited in Adam Smith’s 1776 treatise, The Wealth of Nations. And apart from the massive dislocations that will occur if imports shrink, this calls into question whether the projected $100 billion a year in revenue is realistic. As Alan Greenspan once wisely said, “Whatever you tax, you get less of.”

Then again, whether we really will get fewer imports depends a lot on the exchange value of the dollar. Other supporters of the BAT predict that the dollar will respond by appreciating against other currencies, conforming to the dictates of textbook fundamentals. If the dollar appreciates enough, the advantage to exporters and disadvantage to importers will be nullified. Without getting into the technicalities of how all this would work, we concede that it is all quite possible.

But as currency analysts and traders can tell you, exchange rates are subject to all kinds of forces and can spend long periods flouting textbook fundamentals. So whether the dollar will really strengthen in response to the BAT is anyone’s guess. But even if it does, a much stronger greenback would bring other disruptions. American investors with holdings denominated in foreign currencies would take a huge hit. And America’s tourist industries, which are already hurting from what the Los Angeles Times has called a “Trump slump,” would be hurt even more, as the cost of traveling to the States jumps.

There are other questions. Would the World Trade Organization challenge the BAT? Might our trading partners respond in ways that would be unfavorable to us? The border adjustment tax is an experiment in Rube Goldberg economics that the U.S. can do without.

SINCE REVENUE NEUTRALITY is the goal of the Better Way package, what about making up for the $100 billion a year in revenue that the border adjustment tax is supposed to generate?

Whether this tax really will raise as much as $100 billion depends on how imports and exports respond, which is hard to predict. Also, the reduction in the corporate income tax would probably be revenue-enhancing and could generate more than $50 billion in annual revenue.

The president has declared that “anytime I hear border adjustment, I don’t love it” and has voiced concern that it’s overly complicated. Michael Reynolds/Getty Images

We note that the full title of the House Republican plan is “A Better Way: Our Vision for a Confident America,” which leaves room for a vision that includes cost-cutting, along with tax-cutting.

It’s actually possible to reduce outlays by as much as $8.6 trillion over the next 10 years, as we pointed out in Barron’s Prescription for U.S. Economic Growth” (Dec. 24, 2016).

That discussion revealed much low-hanging fruit. For example, the Medicare system is rife with “improper payments,” which Medicare itself estimates at 11% of its spending in 2016. That’s probably a low estimate, because those who get improperly paid tend to keep these payments hidden. Barron’s calculated that if the improper-payment rate could be halved, it would save more than $400 billion over 10 years.

That would contribute $40 billion a year to the $100 billion shortfall from forgoing the BAT. To that we add $65 billion, and perhaps as much as $100 billion, by eliminating corporate welfare.

The Better Way statement properly criticizes the tax code for being “littered with hundreds of preferences and subsidies that pick winners and losers” and “direct resources to politically favored interests.” Spending on corporate welfare is another form of subsidy that picks winners and losers and directs funds to politically favored interests.

IN A 2012 PAPER, “Corporate Welfare in the Federal Budget,” the Cato Institute identified nearly $100 billion worth of yearly spending on corporate handouts, broadly defined, that could be ended. At Barron’s request, Cato senior fellow Chris Edwards updated the scoring on just 10 of the institute’s 40 categories of corporate welfare and came up with $66 billion in potential cuts.

High on Edwards’ list: farm subsidy programs, which redistribute taxpayer money to relatively rich agribusinesses and landowners. That the farm industry receives subsidies makes about as much sense as channeling funds to the restaurant industry, which could well be riskier than farming, based on its high failure rate. This form of corporate welfare goes back to the Great Depression of the 1930s. But whatever argument might have been made for it then hardly applies today, with the yearly tab currently at $25 billion.

Also on the corporate welfare list: pork-barrel handouts administered by the Department of Housing and Urban Development, totaling $13 billion, which go under the heading of “community development,” and which distribute funds to such recipients as museums, recreational facilities, and parking lots. Whatever one may think about the worthiness of these projects, they are better left to states and localities.

Another $10 billion could be saved by abolishing the Universal Service Fund, through which the Federal Communications Commission subsidizes telecommunications companies, among others. A creation of the Telecommunications Act of 1996, this attempt to pick winners and losers is more unnecessary than ever in this dynamic and competitive industry.

PRESIDENT TRUMP PROMISED to “drain the swamp” of Washington’s special interests. One route toward that admirable goal would be to cut corporate welfare. Trump should repeat his objections to a border adjustment tax that would favor the interests of some businesses over others. He can help make U.S. corporations great again by weaning them off subsidies and reducing their tax burdens.

http://www.barrons.com/articles/why-the-border-adjustment-tax-should-be-killed-1489814286

Concerns About The ‘Border Adjustable’ Tax Plan From The House GOP, Part I

The Republicans in the House of Representatives, led by Ways & Means Chairman Kevin Brady and Speaker Paul Ryan, have proposed a “Better Way” tax plan that has many very desirable features.

And there are many other provisions that would reduce penalties on work, saving, investment, and entrepreneurship. No, it’s not quite a flat tax, which is the gold standard of tax reform, but it is a very pro-growth initiative worthy of praise.

That being said, there is a feature of the plan that merits closer inspection. The plan would radically change the structure of business taxation by imposing a 20 percent tax on all imports and providing a special exemption for all export-related income. This approach, known as “border adjustability,” is part of the plan to create a “destination-based cash flow tax” (DBCFT).

When I spoke about the Better Way plan at the Heritage Foundation last month, I highlighted the good features of the plan in the first few minutes of my brief remarks, but raised my concerns about the DBCFT in my final few minutes.

Allow me to elaborate on those comments with five specific worries about the proposal.

Concern #1: Is the DBCFT protectionist?

It certainly sounds protectionist. Here’s how the Financial Times described the plan.

The border tax adjustment would work by denying US companies their current ability to deduct import costs from their taxable income, meaning companies selling imported products would effectively be taxed on the full value of the sale rather than just the profit. Export revenues, meanwhile, would be excluded from company tax bases, giving net exporters the equivalent of a subsidy that would make them big beneficiaries of the change.

Charles Lane of the Washington Post explains how it works.

…the DBCFT would impose a flat 20 percent tax only on earnings from sales of output consumed within the United States… It gets complicated, but the upshot is that the cost of imported supplies would no longer be deductible from taxable income, while all revenue from exports would be. This would be a huge incentive to import less and export more, significant change indeed for an economy deeply dependent on global supply chains.

That certainly sounds protectionist as well. A tax on imports and a special exemption for exports.

But proponents say there’s no protectionism because the tax is neutral if the benchmark is where products are consumed rather than where income is earned. Moreover, they claim exchange rates will adjust to offset the impact of the tax changes. Here’s how Lane explains the issue.

…the greenback would have to rise 25 percent to offset what would be a new 20 percent tax on imported inputs — propelling the U.S. currency to its highest level on record. The international consequences of that are unforeseeable, but unlikely to be totally benign for everyone. Bear in mind that many other countries — China comes to mind — can and will manipulate exchange rates to protect their own short-term interests.

For what it’s worth, I accept the argument that the dollar will rise in value, thus blunting the protectionist impact of border adjustability. It would remain to be seen, though, how quickly or how completely the value of the dollar would change.

Concern #2: Is the DBCFT compliant with WTO obligations?

The United States is part of the World Trade Organization (WTO) and we have ratified various agreements designed to liberalize world trade. This is great for the global economy, but it might not be good news for the Better Way plan because WTO rules only allow border adjustability for indirect taxes like a credit-invoice value-added tax. The DBCFT, by contrast, is a version of a corporate income tax, which is a direct tax.

The column by Charles Lane explains one of the specific problems.

Trading partners could also challenge the GOP plan as a discriminatory subsidy at the World Trade Organization. That’s because it includes a deduction for wages paid by U.S.-located firms, importers and exporters alike — a break that would obviously not be available to competitors abroad.

Advocates argue that the DBCFT is a consumption-base tax, like a VAT. And since credit-invoice VATs are border adjustable, they assert their plan also should get the same treatment. But the WTO rules say that only “indirect” taxes are eligible for border adjustability. The New York Times reports that the WTO therefore would almost surely reject the plan.

Michael Graetz, a tax expert at the Columbia Law School, said he doubted that argument would prevail in Geneva. “W.T.O. lawyers do not take the view that things that look the same economically are acceptable,” Mr. Graetz said.

A story in the Wall Street Journal considers the potential for an adverse ruling from the World Trade Organization.

Even though it’s economically similar to, and probably better than, the value-added taxes (VATs) many other countries use, it may be illegal under World Trade Organization rules. An international clash over taxes is something the world can ill afford when protectionist sentiment is already running high. …The controversy is over whether border adjustability discriminates against trade partners. …the WTO operates not according to economics but trade treaties, which generally treat tax exemptions on exports as illegal unless they are consumption taxes, such as the VAT. …the U.S. has lost similar disputes before. In 1971 it introduced a tax break for exporters that, despite several revamps, the WTO ruled illegal in 2002.

And a Washington Post editorial is similarly concerned.

Republicans are going to have to figure out how to make such a huge de facto shift in the U.S. tax treatment of imports compliant with international trade law. In its current iteration, the proposal would allow corporations to deduct the costs of wages paid within this country — a nice reward for hiring Americans and paying them well, which for complex reasons could be construed as a discriminatory subsidy under existing World Trade Organization doctrine.

Concern #3: Is the DBCFT a stepping stone to a VAT?

If the plan is adopted, it will be challenged. And if it is challenged, it presumably will be rejected by the WTO. At that point, we would be in uncharted territory.

Would that force the folks in Washington to entirely rewrite the tax system? Would they be more surgical and just repeal border adjustability? Would they ignore the WTO, which would give other nations the right to impose tariffs on American exports?

One worrisome option is that they might simply turn the DBCFT into a subtraction-method value-added tax (VAT) by tweaking the law so that employers no longer could deduct  expenses for labor compensation. This change would be seen as more likely to get approval from the WTO since credit-invoice VATs are border adjustable.

This possibility is already being discussed. The Wall Street Journal story about the WTO issue points out that there is a relatively simple way of making the DBCFT fit within America’s trade obligations, and that’s to turn it into a value-added tax.

One way to avoid such a confrontation would be to revise the cash flow tax to make it a de facto VAT.

The Economistshares this assessment.

…unless America switches to a full-fledged VAT, border adjustability may also be judged to breach World Trade Organisation rules.

Steve Forbes is blunt about this possibility.

One tax initiative that should be strangled before it sees the light of day is to give a tax rebate to exporters and to impose taxes on imports. …It’s a bad idea. Why do we want to make American consumers pay more for products while subsidizing foreign buyers? It also could put us on the slippery slope to our own VAT.

And that’s not a slope we want to be on. Unless the income tax is fully repealed (sadly not an option), a VAT would be a recipe for turning America into a European-style welfare state.

Concern #4: Does the DBCFT undermine tax competition and give politicians more ability to increase tax burdens?

Alan Auerbach, an academic from California who previously was an adviser for John Kerry and also worked at the Joint Committee on Taxation when Democrats controlled Capitol Hill, is the main advocate of a DBCFT (the New York Timeswrote that he is the “principal intellectual champion” of the idea).

He wrote a paper several years ago for the Center for American Progress, a hard-left group closely associated with Hillary Clinton. Auerbach explicitly argued that this new tax scheme is good because politicians no longer would feel any pressure to lower tax rates.

This…alternative treatment of international transactions that would relieve the international pressure to reduce rates while attracting foreign business activity to the United States. It addresses concerns about the effect of rising international competition for multinational business operations on the sustainability of the current corporate tax system. With rising international capital flows, multinational corporations, and cross-border investment, countries’ tax rates and tax structures are of increasing importance. Indeed, part of the explanation for declining corporate tax rates abroad is competition among countries for business activity. …my proposed reforms…builds on the [Obama] Administration’s approach…and alleviates the pressure to reduce the corporate tax rate.

This is very troubling. Tax competition is a very valuable liberalizing force in the world economy. It partially offsets the public choice pressures on politicians to over-tax and over-spend. If governments no longer had to worry that taxable activity could escape across national borders, they would boost tax rates and engage in more class warfare.

Also, it’s worth noting that the so-called Marketplace Fairness Act, which is designed to undermine tax competition and create a sales tax cartel among American states, uses the same “destination-based” model as the DBCFT.

Concern #5: Does the DBCFT create needless conflict and division among supporters of tax reform?

As I pointed out in my remarks at the Heritage Foundation, there’s normally near-unanimous support from the business community for pro-growth tax reforms.

That’s not the case with the DBCFT.

The Washington Examiner reports on the divisions in the business community.

Major retailers are skeptical of the House Republican plan to revamp the tax code, fearing that the GOP call to border-adjust corporate taxes could harm them even if they win a significant cut to their tax rate. As a result, retailers, oil refiners and other industries that import goods to sell in the U.S. could provide a major obstacle to the Republican effort to reform taxes. …The effect of the border adjustment, retailers fear, would be that the goods they import to sell to consumers would face a 20 percent mark-up, one that would force retailers like Walmart, the Home Depot and Sears…to raise prices and lose customers.

A story from CNBC highlights why retailers are so concerned.

…retailers are nervous. Very nervous. …About 95 percent of clothing and shoes sold in the U.S. are manufactured overseas, which means imports make up a vast majority of many U.S. retailers’ merchandise. …If the GOP plan were adopted as it’s currently laid out, Gap pays 20 percent corporate tax on the $5 profit from the sweater, or $1. Plus, 20 percent tax on the $80 cost it paid for that sweater from the overseas supplier, or $16. That means the tax goes from $1.75 to $17 for that sweater, more than three times the profit on that sweater. Talk about a hit to margins. …Retailers certainly aren’t taking a lot of comfort in the economic theory of dollar appreciation. …the tax reform plan will dilute specialty retailers’ earnings by an average of 132 percent. …Athletic manufacturers could take a 40 percent earnings hit… Gap, Carter’s , Urban Outfitters , Fossil and Under Armour are most at risk under the plan.

And here’s another article from the Washington Examiner that explains why folks in the energy industry are concerned.

…the border adjustment would raise costs for refiners that import oil. In turn, that could raise prices for consumers. The border adjustment would amount to a $10-a-barrel tax on imported crude oil, raising costs for drivers buying gasoline by up to 25 cents a gallon, the energy analyst group PIRA Energy Group warned this week. The report warned of a “potential huge impact across the petroleum industry,” even while noting that the tax reform plan faces many obstacles to passage.

Concern #6: What happens when other nations adopt their versions of a DBCFT?

Advocates of the DBCFT plausibly argue that if the WTO somehow approves their plan, then other nations will almost certainly copy the new American system.

That will be a significant blow to tax competition, which would be very bad news for the global economy.

But is also has negative implications for the fight to protect America from a VAT. The main selling point for advocates of the DBCFT is that we need a border-adjustable tax to offset the supposed advantage that other nations have because of border-adjustable VATs (both Paul Krugman and I agree that this is nonsense, but it still manages to be persuasive for some people).

So what happens when other nations turn their corporate income taxes into DBCFTs, which presumably will happen? We’re than back where we started and misguided people will say we need our own VAT to balance out the VATs in other nations.

The bottom line is that a DBCFT is not the answer to America’s wretched business tax system. There are simply too many risks associated with this proposal. I’ll elaborate tomorrow in Part II and also explain some good ways of pursuing tax reform without a DBCFT.

https://www.forbes.com/sites/danielmitchell/2017/01/03/concerns-about-theborder-adjustable-tax-plan-from-the-house-gop-part-i/2/#1edd1775d9e8

MAR 27,2017

Chairman Brady Acknowledges “Valid Concerns” About the Border Adjustment Tax Harming U.S. Businesses

Post by Freedom Partners

After months of insisting that a trillion-dollar Border Adjustment Tax (BAT) on American consumers is the best and only way to achieve pro-growth tax reform without adding to the deficit, Ways and Means Chairman Kevin Brady acknowledged that importers fearful of the new tax have “valid concerns.”

The proposed BAT from House Republicans would mean a new 20 percent tax on everything imported into the U.S., raising up to $1.2 trillion of new government revenue in the form of higher prices, shouldered by consumers. In effect, the regressive tax could undercut positive economic outcomes from lower rates and a simplified tax code through tax reform.

According to Chairman Brady, House Republicans need to “make sure that we allay the valid concerns of those that are importing today,” CNBC reports.

 Freedom Partners Vice President of Policy Nathan Nascimento issued the following statement:

“Some of the ‘valid concerns’ that Chairman Brady acknowledges include a devastating new trillion-dollar tax hike, higher costs on everyday goods, fewer jobs, and less economic opportunity. We hope to work with the administration and Congress to get pro-growth tax reform done, but a 20 percent tax hike on all imports would only undermine the point of tax reform – which is to provide much-needed relief for taxpayers and the economy. A massive tax hike on all imports is bad policy, and Americans deserve a better plan that can unite lawmakers in both the House and Senate behind comprehensive tax reform.”

U.S. manufacturers would be threatened by increased complexity and disruptions to supply chains, resulting in increased costs, fewer sales, and job loss. “Anytime I hear border adjustment, I don’t love it … And it’s too complicated,” President Donald Trump told The Wall Street Journal earlier this year.

Americans for Prosperity has already identified more than $2 trillion in wasteful spending, unnecessary programs, and corporate welfare that ought to be eliminated before any new tax on U.S. consumers. Freedom Partners and its coalition allies support the efforts of Congress and the administration to bring comprehensive tax reform to reality in a way that protects all Americans from a massive tax hike.

READ: Border Adjustment Tax Myth vs. Fact

U.S. Businesses Facing Massive Tax Increases Under A Border-Adjusted Tax System Have “Valid Concerns”

Wall Street Journal: “Some Retailers And Other Big Importers … Warn Of Tax Bills That Would Exceed Profits, Forcing Them To Pass Costs To Consumers. ”Cody Lusk, president of the American International Automobile Dealers Association, says his members are shocked that a Republican Congress is proposing a 20% tax on imports.” (Richard Rubin, “GOP Plan To Overhaul Tax Code Gets Held Up At The Border,” Wall Street Journal, 2/7/17)

LUSK: “We view this as a very, very serious potential blow to the auto sector and the economy.” (Richard Rubin, “GOP Plan To Overhaul Tax Code Gets Held Up At The Border,” Wall Street Journal, 2/7/17)

Financial Times: Border Tax Threatens To Devastate Importers Through Soaring Tax Bills. “Yet for Mr. Woldenberg the hope has turned to horror. Republicans are still promising the most sweeping changes since the Reagan reforms of 1986. But the only firm proposal on the table — from the House of Representatives — threatens to devastate his 150-person business because it includes a 20 per cent tax on imports … The problem for Mr. Woldenberg is that his goods come from China — 98 per cent of the products he sells in the US are imported. US factories could not produce them with the same low costs and specialized skills, he says. So he would have no choice but to pay the import levy. He estimates it would send his tax bill soaring to 165 per cent of earnings.” (Barney Jopson, Sam Fleming & Shawn Donnan, “Trump And The Tax Plan Threatening To Split Corporate America,” Financial Times, 2/13/17)

RICK WOLDENBERG: “To preserve cash flow I [would have to] raise my prices by a third, expect volume to go down by 40 per cent, and fire one out of five people.” (Barney Jopson, Sam Fleming & Shawn Donnan, “Trump And The Tax Plan Threatening To Split Corporate America,” Financial Times, 2/13/17)

RBC Capital Markets: Major Retailers Would Face Tax Bills That Exceed Their Operating Profits. “Major retailers like Wal-Mart, Best Buy, Costco and Dollar Tree would face tax bills that exceed their operating profits under House Republicans’ plans to create a ‘border adjustable’ business tax, RBC Capital Markets said. The investment bank sided with retailers in a debate over the proposal, saying in a research note it would have a ‘seriously adverse’ impact on them. ‘If the US moves to a border-adjusted tax system, most of our retailers would be forced to raise prices (and revenues) or meaningfully change their import/domestic sourcing mix, or their earnings would be materially reduced,’ it said.” (Brian Faler, “RBC Capital Markets: GOP Border-Adjustment Plan Bad For Retailers,” POLITICO Pro, 12/12/16)

POLITICO: “Retailers Fear Massive Tax Increases Under House Republican Tax Plan” “Many retailers fear that, even with Republicans promising to slash the corporate tax rate, they will still face big tax increases that in some cases will exceed their profits. On high alert over the proposal, retailers have begun a big lobbying campaign on the Hill, warning lawmakers and their aides that any tax hikes will get passed on to their constituents in the form of higher prices.” (Brian Faler, “Retailers Fear Massive Tax Increases Under House Republican Tax Plan,” POLITICO, 11/23/16)

The National Retail Federation Warns That A Border Tax Could Shut Businesses Down Completely. “‘Our members have told us that the import tax could be as high as five times their profits,’ said David French, chief lobbyist for the National Retail Federation. ‘I don’t know how viable some retailers would be in the face of this import tax.’” (Brian Faler, “Retailers Fear Massive Tax Increases Under House Republican Tax Plan,” POLITICO, 11/23/16)

POLITICO Pro: “Some Of The Biggest Losers Would Be Retailers Like Walmart, Best Buy And Home Depot That Import Massive Amounts Of Goods And Materials On Which They Would Suddenly Have To Pay Taxes.” “The border adjustment plan would affect individual companies differently, depending in part on how much they import and export. Some of the biggest losers would be retailers like Walmart, Best Buy and Home Depot that import massive amounts of goods and materials on which they would suddenly have to pay taxes.” (Brian Faler, “Some Companies May Never Pay Taxes Under Border-Adjustment Tax Plan,” POLITICO Pro, 1/9/17)

Axios: Cowen Research Released A Study Highlighting Some Of The Big Name Companies That Will Be Hurt By The Border Adjustments High Tax Hikes. “Cowen Research published a report Thursday that estimates the effect of the reform plan, and other planned measures, like eliminating the deductibility of interest and a headline corporate tax cut, on different industries and companies. Here are some of the big-name firms Cowen says will be hurt by reform: 1. Apple: The world’s largest company would see its tax bill jump because it won’t be able to deduct the expense of assembly abroad. 2. Constellation Brands: The largest beer importer in America will not be able to expense the cost of goods it brings across the border, like its Corona brand. 3. Gap: Between 50% and 80% of the retailer’s cost of the goods its sells comes from abroad. Walmart: 4. Walmart’s low margins means that it may not be able to survive a tax hike on imported goods without raising prices. 5. Target: Will suffer from the same conundrum as Walmart, but will be worse off since less of its revenue comes from domestically-sourced groceries. J.C. Penney: The department store has high debt loads, and interest on debt will not be deductible under the Republican plan. (Christopher Matthews, “These Companies Will Be Hit Hardest By GOP Tax Reform,” Axios, 1/27/17)

Border Adjustment Tax Would Result In Higher Costs For Hard-Working Families

Christian Science Monitor: Border Tax Could Raise Car Prices By Thousands Of Dollars. “Michigan-based Baum & Associates says that a border tax–one that applies not only to vehicles imported from factories abroad but also to foreign-made vehicle parts–could increase sticker prices by as much as $17,000 … Most increases would be smaller, but still very substantial. Volvo, for example, would need to up its prices by more than $7,500 to accommodate a border tax. Volkswagen wouldn’t be far behind, with increases of around $6,800. Even Detroit brands would see price upticks: Ford’s would climb $285, and General Motors’ would rise by nearly $1,000. Fiat Chrysler would have to boost prices by closer to $2,000.” (Richard Read, “How Trump’s Border Tax Could Raise Car Prices By Thousands Of Dollars,Christian Science Monitor, 2/8/17)

Auto Sales Would Plummet Under A Border Adjustment Tax. “A report from UBS Securities says that the higher car prices would slash U.S. auto sales by about 2 million vehicles per year. That would more than erase the increased capacity and almost certainly result in layoffs.” (Richard Read, “How Trump’s Border Tax Could Raise Car Prices By Thousands Of Dollars,Christian Science Monitor, 2/8/17)

More Than A Hundred American Businesses Are Opposing The Republican Border Tax: “Don’t Make Hard-Working Families Pay More On Essential Products.” “Nike, Rite Aid, The Gap, Best Buy and Abercrombie & Fitch have joined a new advocacy group aimed at killing House Republicans’ plans to create a border adjustable business tax. They are some of the more than 100 companies and trade associations behind Americans for Affordable Products, an organization launched today that is pushing lawmakers to dump a plan to begin taxing imports as part of a broader tax-code rewrite. The groups, which rely on imports, fear the House Republican plan will mean huge tax increase even as Republicans promise to simultaneously slash the corporate tax rate … Other well-known companies joining the effort include Target, Walmart, QVC, Petco, AutoZone, Macy’s and Levi Strauss.” (Brian Faler, “Border Adjustment Tax Opponents Launch New Group Targeting GOP Proposal,” Politico, 2/01/17)

“A Sweeping Tax Reform Proposal Meant To Boost U.S. Manufacturing Faces Mounting Pressure From Industries That Rely Heavily On Imported Goods …” “A sweeping tax reform proposal meant to boost U.S. manufacturing faces mounting pressure from industries that rely heavily on imported goods as President-elect Donald Trump and congressional Republicans work to finalize new tax legislation. As Republican members of the House of Representatives tax committee prepared to discuss tax reform this week, the panel received a letter from 81 industry groups rejecting the proposal known as ‘border adjustability.’ A lynchpin of the House Republican ‘Better Way’ agenda and viewed favorably by Trump’s team, the policy would help manufacturers by exempting export revenues from corporate taxes. But it would tax imports, hitting import-dependent industries.” (David Morgan, “U.S. Tax Reform Proposal On Border Trade Faces Growing Opposition,” Reuters, 12/15/16)

“Companies That Rely On Global Supply Chains Would Face Huge Business Challenges Caused By Increased Taxes And Increased Cost Of Goods.” “In a Dec. 13 letter to House Ways and Means Chairman Kevin Brady and incoming top Democrat Richard Neal, groups representing the auto and retailing industries, among others, said: ‘Companies that rely on global supply chains would face huge business challenges caused by increased taxes and increased cost of goods.’ They warned of ‘reductions in employment, reduced capital investments and higher prices for consumers’ as potential consequences.” (David Morgan, “U.S. Tax Reform Proposal On Border Trade Faces Growing Opposition,” Reuters, 12/15/16)

CNBC: Coach CEO Victor Luis Acknowledged That “Any Border Tax Will Lead To Higher Prices For The Consumer.” “If we see this border adjustment in an economy where 70 percent of GDP is driven by consumption that is driven on imports, any border tax will lead to higher prices for the consumer … That’s just a reality that we’ll have to face if it comes to that.” (Rachel Cao, “Coach CEO: Any Border Tax Will Lead To Higher Prices For The Consumer,” CNBC, 1/31/17)

National Retail Federation: The Border Adjustment Tax Could Cost The Average Family $1,700 In Just The First Year. “The imposition of a ‘border adjustment tax,’ a key provision of a pending House tax reform proposal, would end up seriously harming U.S. consumers. NRF analysis indicates that this plan could cost the average family $1,700 in the first year alone if the border adjustment provision is enacted. While economic theory suggests that trade flow of imports and exports would balance out over the long run due to offsetting exchange rate and price adjustments, there is no consensus as to the degree or the timing of these adjustments. In the near term, consumers would be left to pick up the significant tab while hoping that the economic theory proves out.” (Mark Mathews, “Border Adjustment Tax Would Cost American Households Up To $1,700 In First Year Alone,” National Retail Federation, 2/3/17)

NRF: Annual Family’s Savings Could Be Wiped Out By Nearly A Third. “For the average family, 27 percent of their savings (income after taxes and expenditures) could evaporate with the cost increases caused by the border tax.” (Mark Mathews, “Border Adjustment Tax Would Cost American Households Up To $1,700 In First Year Alone,” National Retail Federation, 2/3/17)

  • “Unmarried adults without children currently have only $443 left over annually after taxes and expenditures. If the border adjustment tax were enacted, they could see an $836 increase in costs — nearly 200 percent higher than their annual savings.”
  • “One-parent households, which are already in the red, could see an additional $1,000 added to their debt burden as they do what they can to make ends meet. Their apparel and footwear bills would increase by $271
  • “The average family (married with children) could see their apparel costs (including shoes) increase by $437 a year.”
  • “Single people could see their annual gasoline bills rise by $189, a whopping 43 percent of their annual average savings.”
  • “Married couples with children could see their annual gasoline bill could increase by over $400.”

CNBC: “The Republicans’ Plan To Enact A Border Adjustment Tax Will Leave Consumers Digging Deeper Into Their Pockets,” Increasing The Price Of Everyday Goods Like Clothes And Shoes By 20 Percent. “It will force consumers to pay as much as 20 percent more for the products they need. Gasoline is estimated to go up as much as 35 cents a gallon,’ said ‘Americans for Affordable Products’ advisor Brian Dodge … ‘Common household goods, apparel, things that people count on every day, pajamas, will cost more and really just so a certain, select group of corporations can avoid paying taxes forever. We think that’s bad policy…” (Michelle Fox, “Consumers Could See 20% Price Hike With Border Adjustment Tax, Retail Group Says,” CNBC, 2//17)

Economists And Analysts Weigh-In Against Border Adjustments

Dan Mitchell, Cato Institute: “I’ve Never Understood Why Politicians Think It’s A Good Idea To Have Higher Taxes On What Americans Consume And Lower Taxes On What Foreigners Consume.” (Dan Mitchell, “A Remarkably Good And Reasonably Bold Tax Reform Plan From House Republicans,” International Liberty, 6/25/16)

President Of The New York Fed Bill Dudley: “… There Could Be A Lot Of Unintended Consequences.” “Another prominent critic of a ‘border adjustment tax’ emerged Tuesday: the president of the New York Federal Reserve. Bill Dudley was asked by Macy’s CEO Terry Lundgren at a meeting of the National Retail Federation trade group what he thinks of the idea of a border adjustment tax, which involves taxing imports at 20 percent, while making U.S. exports tax-free. … ‘I think that it will lead to a lot of changes in the value of the dollar, the price of imported goods in the U.S., and I’m not sure that would all happen very smoothly,’ Dudley said. ‘I also think there could be a lot of unintended consequences.’” (Michelle Caruso-Cabrera, “NY Fed’s Dudley Sees ‘A Lot Of Unintended Consequences’ From Border-Tax Plan,” CNBC, 1/17/17)

Stephen Moore, Heritage Foundation: Border Tax Unlikely To Be Enacted. “A Heritage Foundation economist who advised President Trump’s campaign said he doubts a proposal from House Republicans to tax imports and exempt exports will gain traction.” (Naomi Jagoda, “Trump Campaign Adviser: Border Tax Unlikely To Be Enacted,” The Hill, 2/7/17)

MOORE: “I think it’s a distraction.” (Naomi Jagoda, “Trump Campaign Adviser: Border Tax Unlikely To Be Enacted,” The Hill, 2/7/17)

Steve Forbes: Border Adjustment Amounts To “Sneaky, Anti-Consumer Tax.” “This levy will cost American consumers at least a trillion dollars over the next ten years …  Prices for everyday items, such as socks, shoes and household appliances, will go up. So will tech devices like the iPad, not to mention automobiles and trucks. Gasoline? Millions of Americans will pay an additional 30 cents or more per gallon at the pump. Lower-income and struggling middle-class Americans will get hit the hardest.” (Steve Forbes, “OMG! House Republicans Are Preparing To Hit Consumers With A Horrible New Tax That Will Harm Trump And Hurt The Economy,” Forbes, 1/11/17)

POLITICO Pro: “Trump Adviser Larry Kudlow Slams Border-Adjustment Tax Plans.” “An economic adviser to President-elect Donald Trump slammed plans to create a so-called border adjustable business tax, and predicted it could kill efforts to overhaul the tax code. The House Republican proposal is overly complicated …  said Larry Kudlow, who helped write Trump’s tax-reform plans.” (Brian Faler, “Trump Adviser Larry Kudlow Slams Border-Adjustment Tax Plans,” POLITICO Pro, 1/12/17)

KUDLOW: “That is an exercise in government planning and complexity that I believe is doomed to fail … I think the whole corporate tax reform, which is the most important pro-growth measure, will go down the drain over this … There’s a problem that exists, but this is not the right solution …” (Brian Faler, “Trump Adviser Larry Kudlow Slams Border-Adjustment Tax Plans,” POLITICO Pro, 1/12/17)

KUDLOW: “GOP’s Border Adjustment Tax Is ‘Voodoo Economics” “President-elect Donald Trump is correct to criticize the House Republican plan to tax cross-border trade … said Larry Kudlow, who served as a senior economic adviser to Trump’s campaign…’I hate to say this, but it’s ‘voodoo economics’” (R. Williams, “Larry Kudlow: GOP’s Border Adjustment Tax Is ‘Voodoo Economics,” Newsmax, 1/17/17)

https://freedompartners.org/latest-news/chairman-brady-acknowledges-valid-concerns-border-adjustment-tax-harming-u-s-businesses/

Concerns about the”Border Adjustable” Tax Plan from the House GOP, Part II

I wrote yesterday to praise the Better Way tax plan put forth by House Republicans, but I added a very important caveat: The “destination-based” nature of the revised corporate income tax could be a poison pill for reform.

I listed five concerns about a so-called destination-based cash flow tax (DBCFT), most notably my concerns that it would undermine tax competition (folks on the left think it creates a “race to the bottom” when governments have to compete with each other) and also that it could (because of international trade treaties) be an inadvertent stepping stone for a government-expanding value-added tax.

Brian Garst of the Center for Freedom and Prosperity has just authored a new study on the DBCFT. Here’s his summary description of the tax.

The DBCFT would be a new type of corporate income tax that disallows any deductions for imports while also exempting export-related revenue from taxation. This mercantilist system is based on the same “destination” principle as European value-added taxes, which means that it is explicitly designed to preclude tax competition.

Since CF&P was created to protect and promote tax competition, you won’t be surprised to learn that the DBCFT’s anti-tax competition structure is a primary objection to this new tax.

First, the DBCFT is likely to grow government in the long-run due to its weakening of international tax competition and the loss of its disciplinary impact on political behavior. … Tax competition works because assets are mobile. This provides pressure on politicians to keep rates from climbing too high. When the tax base shifts heavily toward immobile economic activity, such competition is dramatically weakened. This is cited as a benefit of the tax by those seeking higher and more progressive rates. …Alan Auerbach, touts that the DBCFT “alleviates the pressure to reduce the corporate tax rate,” and that it would “alter fundamentally the terms of international tax competition.” This raises the obvious question—would those businesses and economists that favor the DBCFT at a 20% rate be so supportive at a higher rate?

Brian also shares my concern that the plan may morph into a VAT if the WTO ultimately decides that is violates trade rules.

Second, the DBCFT almost certainly violates World Trade Organization commitments. …Unfortunately, it is quite possible that lawmakers will try to “fix” the tax by making it into an actual value-added tax rather than something that is merely based on the same anti-tax competition principles as European-style VATs. …the close similarity of the VAT and the DBCFT is worrisome… Before VATs were widely adopted, European nations featured similar levels of government spending as the United States… Feeding at least in part off the easy revenue generate by their VATs, European nations grew much more drastically over the last half century than the United States and now feature higher burdens of government spending. The lack of a VAT-like revenue engine in the U.S. constrained efforts to put the United States on a similar trajectory as European nations.

And if you’re wondering why a VAT would be a bad idea, here’s a chart from Brian’s paper showing how the burden of government spending in Europe increased once that tax was imposed.

In the new report, Brian elaborates on the downsides of a VAT.

If the DBCFT turns into a subtraction-method VAT, its costs would be further hidden from taxpayers. Workers would not easily understand that their employers were paying a big VAT withholding tax (in addition to withholding for income tax). This makes it easier for politicians to raise rates in the future. …Keep in mind that European nations have corporate income tax systems in addition to their onerous VAT regimes.

And he points out that those who support the DBCFT for protectionist reasons will be disappointed at the final outcome.

…if other nations were to follow suit and adopt a destination-based system as proponents suggest, it will mean more taxes on U.S. exports. Due to the resulting decline in competitive downward pressure on tax rates, the long-run result would be higher tax burdens across the board and a worse global economic environment.

Brian concludes with some advice for Republicans.

Lawmakers should always consider what is likely to happen once the other side eventually returns to power, especially when they embark upon politically risky endeavors… In this case, left-leaning politicians would see the DBCFT not as something to be undone, but as a jumping off point for new and higher taxes. A highly probable outcome is that the United States’ corporate tax environment becomes more like that of Europe, consisting of both consumption and income taxes. The long-run consequences will thus be the opposite of what today’s lawmakers hope to achieve. Instead of a less destructive tax code, the eventual result could be bigger government, higher taxes, and slower economic growth.

Amen.

My concern with the DBCFT is partly based on theoretical objections, but what really motivates me is that I don’t want to accidentally or inadvertently help statists expand the size and scope of government. And that will happen if we undermine tax competition and/or set in motion events that could lead to a value-added tax.

Let’s close with three hopefully helpful observations.

Helpful Reminder #1: Congressional supporters want a destination-based system as a “pay for” to help finance pro-growth tax reforms, but they should keep in mind that leftists want a destination-based system for bad reasons.

Based on dozens of conversations, I think it’s fair to say that the supporters of the Better Way plan don’t have strong feelings for destination-based taxation as an economic principle. Instead, they simply chose that approach because it is projected to generate $1.2 trillion of revenue and they want to use that money to “pay for” the good tax cuts in the overall plan.

That’s a legitimate choice. But they also should keep in mind why other people prefer that approach. Folks on the left want a destination-based tax system because they don’t like tax competition. They understand that tax competition restrains the ability of governments to over-tax and over-spend. Governments in Europe chose destination-based value-added taxes to prevent consumers from being able to buy goods and services where VAT rates are lower. In other words, to neuter tax competition. Some state governments with high sales taxes in the United States are pushing a destination-based system for sales taxes because they want to hinder consumers from buying goods and services from states with low (or no) sales taxes. Again, their goal is to cripple tax competition.

Something else to keep in mind is that leftist supporters of the DBCFT also presumably see the plan as being a big step toward achieving a value-added tax, which they support as the most effective way of enabling bigger government in the United States.

Helpful Reminder #2: Choosing the right tax base (i.e., taxing income only one time, otherwise known as a consumption-base system) does not require choosing a destination-based approach.

The proponents of the Better Way plan want a “consumption-base” tax. This is a worthy goal. After all, that principle means a system where economic activity is taxed only one time. But that choice is completely independent of the decision whether the tax system should be “origin-based” or “destination-based.”

The gold standard of tax reform has always been the Hall-Rabushka flat tax, which is a consumption-base tax because there is no double taxation of income that is saved and invested. It also is an “origin-based” tax because economic activity is taxed (only one time!) where income is earned rather than where income is consumed.

The bottom line is that you can have the right tax base with either an origin-based system or a destination-based system.

Helpful Reminder #3: The good reforms of the Better Way plan can be achieved without the downside risks of a destination-based tax system.

The Tax Foundation, even in rare instances when I disagree with its conclusions, always does very good work. And they are the go-to place for estimates of how policy changes will affect tax receipts and the economy. Here is a chart with their estimates of the revenue impact of various changes to business taxation in the Better Way plan. As you can see, the switch to a destination-based system (“border adjustment”) pulls in about $1.2 trillion over 10 years. And you can also see all the good reforms (expensing, rate reduction, etc) that are being financed with the various “pay fors” in the plan.

I am constantly asked how the numbers can work if “border adjustment” is removed from the plan. That’s a very fair question.

But there are lots of potential answers, including:

  • Make a virtue out of necessity by reducing government revenue by $1.2 trillion.
  • Reduce the growth of government spending to generate offsetting savings.
  • Find other “pay fors” in the tax code (my first choice would be the healthcare exclusion).
  • Reduce the size of the tax cuts in the Better Way plan by $1.2 trillion.

I’m not pretending that any of these options are politically easy. If they were, the drafters of the Better Way plan probably would have picked them already. But I am suggesting that any of those options would be better than adopting a destination-based system for business taxation.

Ultimately, the debate over the DBCFT is about how different people assess political risks. House Republicans advocating the plan want good things, and they obviously think the downside risks in the future are outweighed by the ability to finance a larger level of good tax reforms today. Skeptics appreciate that those proponents want good policy, but we worry about the long-run consequences of changes that may (especially when the left sooner or late regains control) enable bigger government.

P.S. This is not the first time that advocates of good policy have bickered with each other. During the 2016 nomination battle, Rand Paul and Ted Cruz proposed tax reform plans that fixed many of the bad problems in the tax code. But they financed some of those changes by including value-added taxes in their plans. In the short run, either plan would have been much better than the current system. But I was critical because I worried that the inclusion of VATs would eventually give statists a tool to further increase the burden of government.

https://www.cato.org/blog/concerns-about-theborder-adjustable-tax-plan-house-gop-part-ii

THE CORNER THE ONE AND ONLY. Speaker Ryan’s Use of Reporters’ Recorders to Explain His Border Tax Was Cute — But Misleading

Faced with growing opposition to their border-adjustment tax, congressional Republicans are nonetheless on the offensive trying to sell it. I have expressed my many reasons for opposing the tax, including my disbelief that Republicans would support a massive tax increase alongside what is otherwise a pro-growth tax reform. While they oppose tax increases to pay for spending increases in other contexts and usually make the case that spending increases should be paid for by spending cuts, Republicans continue to push for this massive new source of revenue, in spite of the distortions it would introduce.

Until now, supporters of the tax have used many questionable arguments. For instance, they claim we shouldn’t worry about the protectionist aspect of a tax that imposes a 20 percent rate to imports but exempts exports under the hope that the U.S. dollar will adjust fully and quickly. However, there are reasons to believe that while the U.S. currency will adjust, it won’t adjust fully (Federal Reserve Board chairwoman Janet Yellen is only the latest one to stress that point), it won’t adjust as quickly as they claim (especially if the tax is challenged under the World Trade Organization as the Europeans have warned is going to be the case), and it won’t result in unicorns and rainbows.

But the latest misguided statements about the border-adjustment tax comes from House speaker Paul Ryan — who ought to know better. During a press conference last week, he repeated the claim that United States was at a disadvantage because other countries’ exports are exempted from taxes while U.S. goods aren’t. [Ryan] noted that most other countries already border-adjust their taxes and tax goods based on whether they were consumed in their jurisdiction.

That comment is bound to confuse reporters because, as Mr. Ryan must know, no other country border-adjusts their corporate income tax. They border-adjust their Value Added Tax. Conflating the two is misleading, to say the least.

Ryan continued:

The Speaker picked up two reporters’ recorders to give an example of how goods are taxed currently. He suggested one was American-made and the other was Japanese-made. Early on, he dropped one of the recorders, saying “oops” and receiving laughter from the reporters. “Here’s what Japan does when they make this tape recorder: When they send it for export they take the tax off of it, and then it comes to America and it’s not taxed, and it comes through to compete against our good, which was taxed. Theirs was untaxed twice,” Ryan said. “When America makes something, like a tape recorder, we tax it, and then we send it to Japan. As it enters Japan it’s taxed again, to compete against their tape recorder,” he continued. “So we are doing it to ourselves. We are hurting our manufacturing and jobs. We are putting a bias against making things in America in the tax code. . . . That is why we think this is very important. This is good manufacturing policy.”

Oh boy, where do I begin? First, it is true that U.S. companies are at a disadvantage but it is not because of other countries’ tax codes. It is because our corporate-income-tax system has the highest rate of all OECD countries and because, unlike most of our competitors, it taxes U.S. companies’ profits no matter where they are earned in the world. The solution to this disadvantage is to reduce the rates and move to a territorial system. Oh, and by the way, unlike what Ryan and other proponents of a border-adjustment tax would like you to believe, you do not need to move to an expansive destination-based-cash-flow tax to have a territorial tax.

Now let me address the cute tape-recorder example used by the speaker. It is totally misleading because it conflates foreign countries corporate tax and VAT taxes and it paints a picture that is incorrect. For instance, he claims that Japanese exports are exempt from taxes. No, Japanese products exported to the U.S. are exempt from the Japanese VAT but the Japanese company is still paying U.S. corporate tax on its U.S. profits. And you know what? In that sense, the Japanese export is treated exactly like the U.S. goods sold in the U.S. In other words, the playing field is even! I repeat: Japanese goods in the U.S. are taxed like U.S. goods in the U.S.

How about U.S. exports in Japan? Well, it gets hit by the Japanese VAT in Japan and by the Japanese corporate tax but so are Japanese goods sold in Japan. Again, the only disadvantage faced by U.S. companies selling tape recorders abroad comes from the U.S. tax system, which requires that income earned in Japan be taxed by Uncle Sam at 35 percent after benefiting from a tax credit for tax paid in Japan. If the U.S. company decides to keep its Japanese income outside the U.S., the U.S. rate won’t apply.

Dan Mitchell explains why the VAT doesn’t change the terms of trade in this video.

Finally, economists have debunked the idea implied by the speaker that foreign VATs give an advantage to foreign exports — and therefor boost foreign exports. It is simply not true. It follows that imposing a border-adjustment tax in the U.S. will not boost U.S. exports either. Period.

Let me summarize this for you:

  • No, other countries do not border-adjust their corporate income tax.
  • Comparing other countries’ VATs and our corporate tax is problematic to say the least.
  • No, foreign exports sold in the U.S. do not have an advantage over U.S. goods sold in the U.S. Foreign VATs do not boost foreign exports.
  • A border tax in the U.S. will not boost our exports but it will hurt consumers and many U.S. retailers.
  • The disadvantage faced by U.S. companies exporting goods abroad comes from the terrible worldwide tax and high rates of the U.S. tax regime, not from other countries’ tax system.
  • The way to fix the U.S. disadvantage is not to create a new expansive tax that would penalize imports in the U.S. — including imports for the benefit of U.S. domestic companies — and would penalize U.S. consumers.
  • The solution is to reform our corporate-tax rate by lowering the rate and moving to an origin-based territorial-tax regime. http://www.nationalreview.com/corner/445034/paul-ryan-border-adjustment-tax-mistake

Who’s Afraid of a Big BAT Tax?

The Border Adjustment Tax, a proposal favored by House Speaker Paul Ryan, has aroused serious opposition from Republican senators.

Joshua Roberts / Reuters

Donald Trump is feeling good about taxes. In his gonzo press conference last Thursday, he assured Americans that “very historic tax reform” is absolutely on track and is going to be—wait for it!—“big league.” The week before, he told a bunch of airline CEOs that “big league” reform was “way head of schedule” and that his people would be announcing something “phenomenal” in “two or three weeks.” And at his Orlando pep rally this past weekend, he gushed about his idea for a punitive 35 percent border tax on products manufactured overseas. The magic is happening, people. And soon America’s tax code will be the best, most beautiful in the world.

But here’s the thing. What Trump doesn’t know about the legislative process could overflow the pool at Mar-a Lago. And when it comes to tax reform, even minor changes make Congress lose its mind. Weird fault lines appear, and the next thing you know, warring factions have painted their faces blue and vowed to die on the blood-soaked battlefield before allowing this marginal rate to change or that loophole to close.

Such drama has, in fact, already begun over the proposal percolating in the House. At issue: a provision known as the border adjustment tax—let’s call it BAT—which, shrunk to its essence, incentivizes domestic manufacturing by slapping a 20 percent levy on imports, while making U.S. companies’ export-revenues tax deductible.

BAT fans—most notably House Speaker Paul Ryan and Ways and Means Chairman Kevin Brady—pitch the provision as an economically elegant twofer: an America-First measure that discourages companies from moving operations overseas while creating a revenue stream ($1 trillion every decade or so) that allows the overall corporate tax rate to be slashed.

Opponents—most vocally Senators David Perdue and Tom Cotton—argue that a BAT is another grubby government cash grab that will ultimately hurt consumers when, say, Walmart has to jack up the prices of underwear, bananas, and Playstations. In a February 8 letter to colleagues, Perdue, who spent four decades in the business world, charged that the BAT is “regressive, hammers consumers, and shuts down economic growth.”Thus the battle lines are drawn. And, make no mistake, this will not be some bush-league, penny-ante skirmish. Behind the legislative factions are amassing some of the heaviest hitters in corporate America, ready to spend millions to sway debate on behalf of their team.Roughly speaking, companies that do a lot of exporting dig the BAT (think: Boeing, Merck, and Dow Chemical) while import-dependent retailers (including Target, Nike, and, yes, Walmart) fear it will destroy their bottom lines. The oil industry isn’t feeling much BAT love either. The Koch brothers want it dead, like, yesterday.At this point, anti-BATers have an edge. Why? Partly, because the provision is super complicated and almost impossible to explain in terms that don’t sound like something a coven of economists vomited up. Ask BAT fans why the provision won’t, in fact, hurt retailers or consumers, and you’re instantly hip-deep in talk of currency revaluation, purchasing power, and territorial taxation. Last Wednesday, one day after Paul Ryan tried to educate Senate Republicans on the wonders of BAT at their weekly policy lunch, Tom Cotton (who represents Walmart’s home state of Arkansas) snarked on the Senate floor, “Some ideas are so stupid only an intellectual could believe them.”
This is in no way to suggest that the pro-BAT arguments are wrong. They simply don’t push the same buttons as anti-BAT warnings that Congress is poised to screw consumers in order to fund big tax cuts for corporations.For the past few weeks, in fact, an anti-BAT coalition called Americans for Affordable Products has been busy hawking this exact message. “This is a consumer tax—a means by which House Republicans are paying for other tax deductions,” asserted AAP member Brian Dodge. “It’s not about America First. It’s not a trade-deficit reduction tool. It is a pay-for.”AAP is lobbying lawmakers and staffers and doing public outreach. Last Wednesday, it dispatched eight CEOs to chat with Trump and Vice President Pence. “We view our job as leading a large education campaign,” said Dodge. “We believe the more that lawmakers understand about this proposal, the less inclined they’ll be to support it.”Of course, BAT fans are gearing up as well and promise to be equally aggressive. The day after the AAP roll out, the American Made Coalition launched, with an eye toward helping Ryan’s office spread the good word. “It takes time to educate both policy makers and businesses on what’s on the table,” said Brian Reardon, an adviser to the group.There is no place for subtlety in this war. Part of BAT supporters’ argument is that, without the provision, tax overhaul will implode altogether. Message: Get on board or kiss your once-in-a-lifetime reform opportunity good-bye.It’s a question of Senate math. To pass with a simple majority (and avoid a filibuster by Democrats), the GOP’s plan must go through under the procedure known as reconciliation. But to qualify for reconciliation, the package–which slashes both corporate and upper-bracket taxes–cannot blow a hole in the long-term budget. Without the $1 trillion in revenues from BAT, say advocates, there’s no way that hole can be plugged.“This is the only way at these rates and keeping things revenue neutral,” insisted a senior Republican aide. There is no other viable option. Period. End of story.But anti-BATers are eyeing a different Senate equation. To amass even a simple majority of votes, the BAT can lose only two of the 52 Republican members. (Unless Democrats cross the aisle, of course.) In addition to Cotton’s and Perdue’s open hostility, Senators John Boozman, Mike Rounds, John Cornyn, Tim Scott, and Mike Lee have all expressed reservations. “I have real concerns that this piece of the House blueprint will cause more disruption than necessary,” Lee said. “Will the dollar suddenly shoot up by 20 percent? Will U.S. manufacturers have to redo their international supply chains? These are all open questions.”

With the provision’s Senate prospects iffy, there’s less incentive for House conservatives to support something that smells even faintly like a tax. Both the current chairman of the Freedom Caucus, Mark Meadows, and the former chairman, Jim Jordan, have said they’d like reform done without a BAT.

“My reasoning is very basic,” Jordan told me. “Why in the world would we want to add another revenue stream?” You can debate the impact on exchange rates and purchasing power all day, said Jordan, but that doesn’t address many conservatives’ core objection. “We come at it from fundamental perspective,” he said. “The idea that you’re going to add an entirely new tax is a big problem.”

(BAT fans, for the record, dispute that this is a new tax. It is, they insist, replacing the existing system with an entirely new, far superior one that must be looked at, as Reardon put it, “holistically.”)

The only thing everyone can agree on is that this will be a long, ugly fight. If Trump drops his tariff idea and embraces BAT, it could boost the cause. But even then, he’d need to do major arm-twisting to get Senate skeptics on board (especially with the likes of Walmart and the Kochs twisting the other arm.) Like it or not, this is what the political big leagues are like: slow, messy, and infuriating.

The up side for Trump: He’ll have time to throw a lot more pep rallies on this topic before anything gets decided.

https://www.theatlantic.com/politics/archive/2017/02/border-adjustment-tax-congress/517287/

The Internal Revenue Service has recently released new data on individual income taxes for calendar year 2014, showing the number of taxpayers, adjusted gross income, and income tax shares by income percentiles.[1]

The data demonstrates that the U.S. individual income tax continues to be very progressive, borne mainly by the highest income earners.

  • In 2014, 139.6 million taxpayers reported earning $9.71 trillion in adjusted gross income and paid $1.37 trillion in individual income taxes.
  • The share of income earned by the top 1 percent of taxpayers rose to 20.6 percent in 2014. Their share of federal individual income taxes also rose, to 39.5 percent.
  • In 2014, the top 50 percent of all taxpayers paid 97.3 percent of all individual income taxes while the bottom 50 percent paid the remaining 2.7 percent.
  • The top 1 percent paid a greater share of individual income taxes (39.5 percent) than the bottom 90 percent combined (29.1 percent).
  • The top 1 percent of taxpayers paid a 27.1 percent individual income tax rate, which is more than seven times higher than taxpayers in the bottom 50 percent (3.5 percent).

Reported Income and Taxes Paid Both Increased Significantly in 2014

Taxpayers reported $9.71 trillion in adjusted gross income (AGI) on 139.5 million tax returns in 2014. Total AGI grew by $675 billion from the previous year’s levels. There were 1.2 million more returns filed in 2014 than in 2013, meaning that average AGI rose by $4,252 per return, or 6.5 percent.

Meanwhile, taxpayers paid $1.37 trillion in individual income taxes in 2014, an 11.5 percent increase from taxes paid in the previous year. The average individual income tax rate for all taxpayers rose from 13.64 percent to 14.16 percent. Moreover, the average tax rate increased for all income groups, except for the top 0.1 percent of taxpayers, whose average rate decreased from 27.91 percent to 27.67 percent.

The most likely explanation behind the higher tax rates in 2014 is a phenomenon known as “real bracket creep.” [2] As incomes rise, households are pushed into higher tax brackets, and are subject to higher overall tax rates on their income. On the other hand, the likely reason why the top 0.1 percent of households saw a slightly lower tax rate in 2014 is because a higher portion of their income consisted of long-term capital gains, which are subject to lower tax rates.[3]

The share of income earned by the top 1 percent rose to 20.58 percent of total AGI, up from 19.04 percent in 2013. The share of the income tax burden for the top 1 percent also rose, from 37.80 percent in 2013 to 39.48 percent in 2014.

Top 1% Top 5% Top 10% Top 25% Top 50% Bottom 50% All Taxpayers
Table 1. Summary of Federal Income Tax Data, 2014
Number of Returns 1,395,620 6,978,102 13,956,203 34,890,509 69,781,017 69,781,017 139,562,034
Adjusted Gross Income ($ millions) $1,997,819 $3,490,867 $4,583,416 $6,690,287 $8,614,544 $1,094,119 $9,708,663
Share of Total Adjusted Gross Income 20.58% 35.96% 47.21% 68.91% 88.73% 11.27% 100.00%
Income Taxes Paid ($ millions) $542,640 $824,153 $974,124 $1,192,679 $1,336,637 $37,740 $1,374,379
Share of Total Income Taxes Paid 39.48% 59.97% 70.88% 86.78% 97.25% 2.75% 100.00%
Income Split Point $465,626 $188,996 $133,445 $77,714 $38,173
Average Tax Rate 27.16% 23.61% 21.25% 17.83% 15.52% 3.45% 14.16%
 Note: Does not include dependent filers

High-Income Americans Paid the Majority of Federal Taxes

In 2014, the bottom 50 percent of taxpayers (those with AGIs below $38,173) earned 11.27 percent of total AGI. This group of taxpayers paid approximately $38 billion in taxes, or 2.75 percent of all income taxes in 2014.

In contrast, the top 1 percent of all taxpayers (taxpayers with AGIs of $465,626 and above) earned 20.58 percent of all AGI in 2014, but paid 39.48 percent of all federal income taxes.

In 2014, the top 1 percent of taxpayers accounted for more income taxes paid than the bottom 90 percent combined. The top 1 percent of taxpayers paid $543 billion, or 39.48 percent of all income taxes, while the bottom 90 percent paid $400 billion, or 29.12 percent of all income taxes.

Figure 1.

High-Income Taxpayers Pay the Highest Average Tax Rates

The 2014 IRS data shows that taxpayers with higher incomes pay much higher average individual income tax rates than lower-income taxpayers.[4]

The bottom 50 percent of taxpayers (taxpayers with AGIs below $38,173) faced an average income tax rate of 3.45 percent. As household income increases, the IRS data shows that average income tax rates rise. For example, taxpayers with AGIs between the 10th and 5th percentile ($133,445 and $188,996) pay an average rate of 13.7 percent – almost four times the rate paid by those in the bottom 50 percent.

The top 1 percent of taxpayers (AGI of $465,626 and above) paid the highest effective income tax rate, at 27.2 percent, 7.9 times the rate faced by the bottom 50 percent of taxpayers.

Figure 2.

Taxpayers at the very top of the income distribution, the top 0.1 percent (with AGIs over $2.14 million), paid an even higher average tax rate, of 27.7 percent.

Appendix

Year Total Top 0.1% Top 1% Top
5%
Between
5% & 10%
Top 10% Between 10% & 25% Top 25% Between 25% & 50% Top 50% Bottom 50%
Table 2. Number of Federal Individual Income Tax Returns Filed 1980–2014 (Thousands)
Source: Internal Revenue Service.
1980 93,239 932 4,662 4,662 9,324 13,986 23,310 23,310 46,619 46,619
1981 94,587 946 4,729 4,729 9,459 14,188 23,647 23,647 47,293 47,293
1982 94,426 944 4,721 4,721 9,443 14,164 23,607 23,607 47,213 47,213
1983 95,331 953 4,767 4,767 9,533 14,300 23,833 23,833 47,665 47,665
1984 98,436 984 4,922 4,922 9,844 14,765 24,609 24,609 49,218 49,219
1985 100,625 1,006 5,031 5,031 10,063 15,094 25,156 25,156 50,313 50,313
1986 102,088 1,021 5,104 5,104 10,209 15,313 25,522 25,522 51,044 51,044
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
1987 106,155 1,062 5,308 5,308 10,615 15,923 26,539 26,539 53,077 53,077
1988 108,873 1,089 5,444 5,444 10,887 16,331 27,218 27,218 54,436 54,436
1989 111,313 1,113 5,566 5,566 11,131 16,697 27,828 27,828 55,656 55,656
1990 112,812 1,128 5,641 5,641 11,281 16,922 28,203 28,203 56,406 56,406
1991 113,804 1,138 5,690 5,690 11,380 17,071 28,451 28,451 56,902 56,902
1992 112,653 1,127 5,633 5,633 11,265 16,898 28,163 28,163 56,326 56,326
1993 113,681 1,137 5,684 5,684 11,368 17,052 28,420 28,420 56,841 56,841
1994 114,990 1,150 5,749 5,749 11,499 17,248 28,747 28,747 57,495 57,495
1995 117,274 1,173 5,864 5,864 11,727 17,591 29,319 29,319 58,637 58,637
1996 119,442 1,194 5,972 5,972 11,944 17,916 29,860 29,860 59,721 59,721
1997 121,503 1,215 6,075 6,075 12,150 18,225 30,376 30,376 60,752 60,752
1998 123,776 1,238 6,189 6,189 12,378 18,566 30,944 30,944 61,888 61,888
1999 126,009 1,260 6,300 6,300 12,601 18,901 31,502 31,502 63,004 63,004
2000 128,227 1,282 6,411 6,411 12,823 19,234 32,057 32,057 64,114 64,114
The IRS changed methodology, so data above and below this line not strictly comparable
2001 119,371 119 1,194 5,969 5,969 11,937 17,906 29,843 29,843 59,685 59,685
2002 119,851 120 1,199 5,993 5,993 11,985 17,978 29,963 29,963 59,925 59,925
2003 120,759 121 1,208 6,038 6,038 12,076 18,114 30,190 30,190 60,379 60,379
2004 122,510 123 1,225 6,125 6,125 12,251 18,376 30,627 30,627 61,255 61,255
2005 124,673 125 1,247 6,234 6,234 12,467 18,701 31,168 31,168 62,337 62,337
2006 128,441 128 1,284 6,422 6,422 12,844 19,266 32,110 32,110 64,221 64,221
2007 132,655 133 1,327 6,633 6,633 13,265 19,898 33,164 33,164 66,327 66,327
2008 132,892 133 1,329 6,645 6,645 13,289 19,934 33,223 33,223 66,446 66,446
2009 132,620 133 1,326 6,631 6,631 13,262 19,893 33,155 33,155 66,310 66,310
2010 135,033 135 1,350 6,752 6,752 13,503 20,255 33,758 33,758 67,517 67,517
2011 136,586 137 1,366 6,829 6,829 13,659 20,488 34,146 34,146 68,293 68,293
2012 136,080 136 1,361 6,804 6,804 13,608 20,412 34,020 34,020 68,040 68,040
2013 138,313 138 1,383 6,916 6,916 13,831 20,747 34,578 34,578 69,157 69,157
2014 139,562 140 1,396 6,978 6,978 13,956 20,934 34,891 34,891 69,781 69,781
Year Total Top 0.1% Top 1% Top 5% Between 5% & 10% Top 10% Between 10% & 25% Top 25% Between 25% & 50% Top 50% Bottom 50%
Table 3. Adjusted Gross Income of Taxpayers in Various Income Brackets, 1980–2014 ($Billions)
Source: Internal Revenue Service.
1980 $1,627 $138 $342 $181 $523 $400 $922 $417 $1,339 $288
1981 $1,791 $149 $372 $201 $573 $442 $1,015 $458 $1,473 $318
1982 $1,876 $167 $398 $207 $605 $460 $1,065 $478 $1,544 $332
1983 $1,970 $183 $428 $217 $646 $481 $1,127 $498 $1,625 $344
1984 $2,173 $210 $482 $240 $723 $528 $1,251 $543 $1,794 $379
1985 $2,344 $235 $531 $260 $791 $567 $1,359 $580 $1,939 $405
1986 $2,524 $285 $608 $278 $887 $604 $1,490 $613 $2,104 $421
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
1987 $2,814 $347 $722 $316 $1,038 $671 $1,709 $664 $2,374 $440
1988 $3,124 $474 $891 $342 $1,233 $718 $1,951 $707 $2,658 $466
1989 $3,299 $468 $918 $368 $1,287 $768 $2,054 $751 $2,805 $494
1990 $3,451 $483 $953 $385 $1,338 $806 $2,144 $788 $2,933 $519
1991 $3,516 $457 $943 $400 $1,343 $832 $2,175 $809 $2,984 $532
1992 $3,681 $524 $1,031 $413 $1,444 $856 $2,299 $832 $3,131 $549
1993 $3,776 $521 $1,048 $426 $1,474 $883 $2,358 $854 $3,212 $563
1994 $3,961 $547 $1,103 $449 $1,552 $929 $2,481 $890 $3,371 $590
1995 $4,245 $620 $1,223 $482 $1,705 $985 $2,690 $938 $3,628 $617
1996 $4,591 $737 $1,394 $515 $1,909 $1,043 $2,953 $992 $3,944 $646
1997 $5,023 $873 $1,597 $554 $2,151 $1,116 $3,268 $1,060 $4,328 $695
1998 $5,469 $1,010 $1,797 $597 $2,394 $1,196 $3,590 $1,132 $4,721 $748
1999 $5,909 $1,153 $2,012 $641 $2,653 $1,274 $3,927 $1,199 $5,126 $783
2000 $6,424 $1,337 $2,267 $688 $2,955 $1,358 $4,314 $1,276 $5,590 $834
The IRS changed methodology, so data above and below this line not strictly comparable
2001 $6,116 $492 $1,065 $1,934 $666 $2,600 $1,334 $3,933 $1,302 $5,235 $881
2002 $5,982 $421 $960 $1,812 $660 $2,472 $1,339 $3,812 $1,303 $5,115 $867
2003 $6,157 $466 $1,030 $1,908 $679 $2,587 $1,375 $3,962 $1,325 $5,287 $870
2004 $6,735 $615 $1,279 $2,243 $725 $2,968 $1,455 $4,423 $1,403 $5,826 $908
2005 $7,366 $784 $1,561 $2,623 $778 $3,401 $1,540 $4,940 $1,473 $6,413 $953
2006 $7,970 $895 $1,761 $2,918 $841 $3,760 $1,652 $5,412 $1,568 $6,980 $990
2007 $8,622 $1,030 $1,971 $3,223 $905 $4,128 $1,770 $5,898 $1,673 $7,571 $1,051
2008 $8,206 $826 $1,657 $2,868 $905 $3,773 $1,782 $5,555 $1,673 $7,228 $978
2009 $7,579 $602 $1,305 $2,439 $878 $3,317 $1,740 $5,058 $1,620 $6,678 $900
2010 $8,040 $743 $1,517 $2,716 $915 $3,631 $1,800 $5,431 $1,665 $7,096 $944
2011 $8,317 $737 $1,556 $2,819 $956 $3,775 $1,866 $5,641 $1,716 $7,357 $961
2012 $9,042 $1,017 $1,977 $3,331 $997 $4,328 $1,934 $6,262 $1,776 $8,038 $1,004
2013 $9,034 $816 $1,720 $3,109 $1,034 $4,143 $2,008 $6,152 $1,844 $7,996 $1,038
2014 $9,709 $986 $1,998 $3,491 $1,093 $4,583 $2,107 $6,690 $1,924 $8,615 $1,094
Year Total Top 0.1% Top 1% Top 5% Between 5% & 10% Top 10% Between 10% & 25% Top 25% Between 25% & 50% Top 50% Bottom 50%
Table 4. Total Income Tax after Credits, 1980–2014 ($Billions)
Source: Internal Revenue Service.
1980 $249 $47 $92 $31 $123 $59 $182 $50 $232 $18
1981 $282 $50 $99 $36 $135 $69 $204 $57 $261 $21
1982 $276 $53 $100 $34 $134 $66 $200 $56 $256 $20
1983 $272 $55 $101 $34 $135 $64 $199 $54 $252 $19
1984 $297 $63 $113 $37 $150 $68 $219 $57 $276 $22
1985 $322 $70 $125 $41 $166 $73 $238 $60 $299 $23
1986 $367 $94 $156 $44 $201 $78 $279 $64 $343 $24
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
1987 $369 $92 $160 $46 $205 $79 $284 $63 $347 $22
1988 $413 $114 $188 $48 $236 $85 $321 $68 $389 $24
1989 $433 $109 $190 $51 $241 $93 $334 $73 $408 $25
1990 $447 $112 $195 $52 $248 $97 $344 $77 $421 $26
1991 $448 $111 $194 $56 $250 $96 $347 $77 $424 $25
1992 $476 $131 $218 $58 $276 $97 $374 $78 $452 $24
1993 $503 $146 $238 $60 $298 $101 $399 $80 $479 $24
1994 $535 $154 $254 $64 $318 $108 $425 $84 $509 $25
1995 $588 $178 $288 $70 $357 $115 $473 $88 $561 $27
1996 $658 $213 $335 $76 $411 $124 $535 $95 $630 $28
1997 $727 $241 $377 $82 $460 $134 $594 $102 $696 $31
1998 $788 $274 $425 $88 $513 $139 $652 $103 $755 $33
1999 $877 $317 $486 $97 $583 $150 $733 $109 $842 $35
2000 $981 $367 $554 $106 $660 $164 $824 $118 $942 $38
The IRS changed methodology, so data above and below this line not strictly comparable
2001 $885 $139 $294 $462 $101 $564 $158 $722 $120 $842 $43
2002 $794 $120 $263 $420 $93 $513 $143 $657 $104 $761 $33
2003 $746 $115 $251 $399 $85 $484 $133 $617 $98 $715 $30
2004 $829 $142 $301 $467 $91 $558 $137 $695 $102 $797 $32
2005 $932 $176 $361 $549 $98 $647 $145 $793 $106 $898 $33
2006 $1,020 $196 $402 $607 $108 $715 $157 $872 $113 $986 $35
2007 $1,112 $221 $443 $666 $117 $783 $170 $953 $122 $1,075 $37
2008 $1,029 $187 $386 $597 $115 $712 $168 $880 $117 $997 $32
2009 $863 $146 $314 $502 $101 $604 $146 $749 $93 $842 $21
2010 $949 $170 $355 $561 $110 $670 $156 $827 $100 $927 $22
2011 $1,043 $168 $366 $589 $123 $712 $181 $893 $120 $1,012 $30
2012 $1,185 $220 $451 $699 $133 $831 $193 $1,024 $128 $1,152 $33
2013 $1,232 $228 $466 $721 $139 $860 $203 $1,063 $135 $1,198 $34
2014 $1,374 $273 $543 $824 $150 $974 $219 $1,193 $144 $1,337 $38
Year Total Top 0.1% Top 1% Top 5% Between 5% & 10% Top 10% Between 10% & 25% Top 25% Between 25% & 50% Top 50% Bottom 50%
Table 5. Adjusted Gross Income Shares, 1980–2014 (percent of total AGI earned by each group)
Source: Internal Revenue Service.
1980 100% 8.46% 21.01% 11.12% 32.13% 24.57% 56.70% 25.62% 82.32% 17.68%
1981 100% 8.30% 20.78% 11.20% 31.98% 24.69% 56.67% 25.59% 82.25% 17.75%
1982 100% 8.91% 21.23% 11.03% 32.26% 24.53% 56.79% 25.50% 82.29% 17.71%
1983 100% 9.29% 21.74% 11.04% 32.78% 24.44% 57.22% 25.30% 82.52% 17.48%
1984 100% 9.66% 22.19% 11.06% 33.25% 24.31% 57.56% 25.00% 82.56% 17.44%
1985 100% 10.03% 22.67% 11.10% 33.77% 24.21% 57.97% 24.77% 82.74% 17.26%
1986 100% 11.30% 24.11% 11.02% 35.12% 23.92% 59.04% 24.30% 83.34% 16.66%
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
1987 100% 12.32% 25.67% 11.23% 36.90% 23.85% 60.75% 23.62% 84.37% 15.63%
1988 100% 15.16% 28.51% 10.94% 39.45% 22.99% 62.44% 22.63% 85.07% 14.93%
1989 100% 14.19% 27.84% 11.16% 39.00% 23.28% 62.28% 22.76% 85.04% 14.96%
1990 100% 14.00% 27.62% 11.15% 38.77% 23.36% 62.13% 22.84% 84.97% 15.03%
1991 100% 12.99% 26.83% 11.37% 38.20% 23.65% 61.85% 23.01% 84.87% 15.13%
1992 100% 14.23% 28.01% 11.21% 39.23% 23.25% 62.47% 22.61% 85.08% 14.92%
1993 100% 13.79% 27.76% 11.29% 39.05% 23.40% 62.45% 22.63% 85.08% 14.92%
1994 100% 13.80% 27.85% 11.34% 39.19% 23.45% 62.64% 22.48% 85.11% 14.89%
1995 100% 14.60% 28.81% 11.35% 40.16% 23.21% 63.37% 22.09% 85.46% 14.54%
1996 100% 16.04% 30.36% 11.23% 41.59% 22.73% 64.32% 21.60% 85.92% 14.08%
1997 100% 17.38% 31.79% 11.03% 42.83% 22.22% 65.05% 21.11% 86.16% 13.84%
1998 100% 18.47% 32.85% 10.92% 43.77% 21.87% 65.63% 20.69% 86.33% 13.67%
1999 100% 19.51% 34.04% 10.85% 44.89% 21.57% 66.46% 20.29% 86.75% 13.25%
2000 100% 20.81% 35.30% 10.71% 46.01% 21.15% 67.15% 19.86% 87.01% 12.99%
The IRS changed methodology, so data above and below this line not strictly comparable
2001 100% 8.05% 17.41% 31.61% 10.89% 42.50% 21.80% 64.31% 21.29% 85.60% 14.40%
2002 100% 7.04% 16.05% 30.29% 11.04% 41.33% 22.39% 63.71% 21.79% 85.50% 14.50%
2003 100% 7.56% 16.73% 30.99% 11.03% 42.01% 22.33% 64.34% 21.52% 85.87% 14.13%
2004 100% 9.14% 18.99% 33.31% 10.77% 44.07% 21.60% 65.68% 20.83% 86.51% 13.49%
2005 100% 10.64% 21.19% 35.61% 10.56% 46.17% 20.90% 67.07% 19.99% 87.06% 12.94%
2006 100% 11.23% 22.10% 36.62% 10.56% 47.17% 20.73% 67.91% 19.68% 87.58% 12.42%
2007 100% 11.95% 22.86% 37.39% 10.49% 47.88% 20.53% 68.41% 19.40% 87.81% 12.19%
2008 100% 10.06% 20.19% 34.95% 11.03% 45.98% 21.71% 67.69% 20.39% 88.08% 11.92%
2009 100% 7.94% 17.21% 32.18% 11.59% 43.77% 22.96% 66.74% 21.38% 88.12% 11.88%
2010 100% 9.24% 18.87% 33.78% 11.38% 45.17% 22.38% 67.55% 20.71% 88.26% 11.74%
2011 100% 8.86% 18.70% 33.89% 11.50% 45.39% 22.43% 67.82% 20.63% 88.45% 11.55%
2012 100% 11.25% 21.86% 36.84% 11.03% 47.87% 21.39% 69.25% 19.64% 88.90% 11.10%
2013 100% 9.03% 19.04% 34.42% 11.45% 45.87% 22.23% 68.10% 20.41% 88.51% 11.49%
2014 100% 10.16% 20.58% 35.96% 11.25% 47.21% 21.70% 68.91% 19.82% 88.73% 11.27%
Year Total Top 0.1% Top 1% Top 5% Between 5% & 10% Top 10% Between 10% & 25% Top 25% Between 25% & 50% Top 50% Bottom 50%
Table 6. Total Income Tax Shares, 1980–2014 (percent of federal income tax paid by each group)
Source: Internal Revenue Service.
1980 100% 19.05% 36.84% 12.44% 49.28% 23.74% 73.02% 19.93% 92.95% 7.05%
1981 100% 17.58% 35.06% 12.90% 47.96% 24.33% 72.29% 20.26% 92.55% 7.45%
1982 100% 19.03% 36.13% 12.45% 48.59% 23.91% 72.50% 20.15% 92.65% 7.35%
1983 100% 20.32% 37.26% 12.44% 49.71% 23.39% 73.10% 19.73% 92.83% 7.17%
1984 100% 21.12% 37.98% 12.58% 50.56% 22.92% 73.49% 19.16% 92.65% 7.35%
1985 100% 21.81% 38.78% 12.67% 51.46% 22.60% 74.06% 18.77% 92.83% 7.17%
1986 100% 25.75% 42.57% 12.12% 54.69% 21.33% 76.02% 17.52% 93.54% 6.46%
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
1987 100% 24.81% 43.26% 12.35% 55.61% 21.31% 76.92% 17.02% 93.93% 6.07%
1988 100% 27.58% 45.62% 11.66% 57.28% 20.57% 77.84% 16.44% 94.28% 5.72%
1989 100% 25.24% 43.94% 11.85% 55.78% 21.44% 77.22% 16.94% 94.17% 5.83%
1990 100% 25.13% 43.64% 11.73% 55.36% 21.66% 77.02% 17.16% 94.19% 5.81%
1991 100% 24.82% 43.38% 12.45% 55.82% 21.46% 77.29% 17.23% 94.52% 5.48%
1992 100% 27.54% 45.88% 12.12% 58.01% 20.47% 78.48% 16.46% 94.94% 5.06%
1993 100% 29.01% 47.36% 11.88% 59.24% 20.03% 79.27% 15.92% 95.19% 4.81%
1994 100% 28.86% 47.52% 11.93% 59.45% 20.10% 79.55% 15.68% 95.23% 4.77%
1995 100% 30.26% 48.91% 11.84% 60.75% 19.62% 80.36% 15.03% 95.39% 4.61%
1996 100% 32.31% 50.97% 11.54% 62.51% 18.80% 81.32% 14.36% 95.68% 4.32%
1997 100% 33.17% 51.87% 11.33% 63.20% 18.47% 81.67% 14.05% 95.72% 4.28%
1998 100% 34.75% 53.84% 11.20% 65.04% 17.65% 82.69% 13.10% 95.79% 4.21%
1999 100% 36.18% 55.45% 11.00% 66.45% 17.09% 83.54% 12.46% 96.00% 4.00%
2000 100% 37.42% 56.47% 10.86% 67.33% 16.68% 84.01% 12.08% 96.09% 3.91%
The IRS changed methodology, so data above and below this line not strictly comparable
2001 100% 15.68% 33.22% 52.24% 11.44% 63.68% 17.88% 81.56% 13.54% 95.10% 4.90%
2002 100% 15.09% 33.09% 52.86% 11.77% 64.63% 18.04% 82.67% 13.12% 95.79% 4.21%
2003 100% 15.37% 33.69% 53.54% 11.35% 64.89% 17.87% 82.76% 13.17% 95.93% 4.07%
2004 100% 17.12% 36.28% 56.35% 10.96% 67.30% 16.52% 83.82% 12.31% 96.13% 3.87%
2005 100% 18.91% 38.78% 58.93% 10.52% 69.46% 15.61% 85.07% 11.35% 96.41% 3.59%
2006 100% 19.24% 39.36% 59.49% 10.59% 70.08% 15.41% 85.49% 11.10% 96.59% 3.41%
2007 100% 19.84% 39.81% 59.90% 10.51% 70.41% 15.30% 85.71% 10.93% 96.64% 3.36%
2008 100% 18.20% 37.51% 58.06% 11.14% 69.20% 16.37% 85.57% 11.33% 96.90% 3.10%
2009 100% 16.91% 36.34% 58.17% 11.72% 69.89% 16.85% 86.74% 10.80% 97.54% 2.46%
2010 100% 17.88% 37.38% 59.07% 11.55% 70.62% 16.49% 87.11% 10.53% 97.64% 2.36%
2011 100% 16.14% 35.06% 56.49% 11.77% 68.26% 17.36% 85.62% 11.50% 97.11% 2.89%
2012 100% 18.60% 38.09% 58.95% 11.22% 70.17% 16.25% 86.42% 10.80% 97.22% 2.78%
2013 100% 18.48% 37.80% 58.55% 11.25% 69.80% 16.47% 86.27% 10.94% 97.22% 2.78%
2014 100% 19.85% 39.48% 59.97% 10.91% 70.88% 15.90% 86.78% 10.47% 97.25% 2.75%
Year Total Top 1% Top 5% Top 10% Top 25% Top 50%
Table 7. Dollar Cut-Off, 1980–2014 (Minimum AGI for Tax Returns to Fall into Various Percentiles; Thresholds Not Adjusted for Inflation)
1980 $80,580 $43,792 $35,070 $23,606 $12,936
1981 $85,428 $47,845 $38,283 $25,655 $14,000
1982 $89,388 $49,284 $39,676 $27,027 $14,539
1983 $93,512 $51,553 $41,222 $27,827 $15,044
1984 $100,889 $55,423 $43,956 $29,360 $15,998
1985 $108,134 $58,883 $46,322 $30,928 $16,688
1986 $118,818 $62,377 $48,656 $32,242 $17,302
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
1987 $139,289 $68,414 $52,921 $33,983 $17,768
1988 $157,136 $72,735 $55,437 $35,398 $18,367
1989 $163,869 $76,933 $58,263 $36,839 $18,993
1990 $167,421 $79,064 $60,287 $38,080 $19,767
1991 $170,139 $81,720 $61,944 $38,929 $20,097
1992 $181,904 $85,103 $64,457 $40,378 $20,803
1993 $185,715 $87,386 $66,077 $41,210 $21,179
1994 $195,726 $91,226 $68,753 $42,742 $21,802
1995 $209,406 $96,221 $72,094 $44,207 $22,344
1996 $227,546 $101,141 $74,986 $45,757 $23,174
1997 $250,736 $108,048 $79,212 $48,173 $24,393
1998 $269,496 $114,729 $83,220 $50,607 $25,491
1999 $293,415 $120,846 $87,682 $52,965 $26,415
2000 $313,469 $128,336 $92,144 $55,225 $27,682
The IRS changed methodology, so data above and below this line not strictly comparable
2001 $1,393,718 $306,635 $132,082 $96,151 $59,026 $31,418
2002 $1,245,352 $296,194 $130,750 $95,699 $59,066 $31,299
2003 $1,317,088 $305,939 $133,741 $97,470 $59,896 $31,447
2004 $1,617,918 $339,993 $140,758 $101,838 $62,794 $32,622
2005 $1,938,175 $379,261 $149,216 $106,864 $64,821 $33,484
2006 $2,124,625 $402,603 $157,390 $112,016 $67,291 $34,417
2007 $2,251,017 $426,439 $164,883 $116,396 $69,559 $35,541
2008 $1,867,652 $392,513 $163,512 $116,813 $69,813 $35,340
2009 $1,469,393 $351,968 $157,342 $114,181 $68,216 $34,156
2010 $1,634,386 $369,691 $161,579 $116,623 $69,126 $34,338
2011 $1,717,675 $388,905 $167,728 $120,136 $70,492 $34,823
2012 $2,161,175 $434,682 $175,817 $125,195 $73,354 $36,055
2013 $1,860,848 $428,713 $179,760 $127,695 $74,955 $36,841
2014 $2,136,762 $465,626 $188,996 $133,445 $77,714 $38,173
Source: Internal Revenue Service.
Year Total Top 0.1% Top 1% Top 5% Between 5% & 10% Top 10% Between 10% & 25% Top 25% Between 25% & 50% Top 50% Bottom 50%
Table 8. Average Tax Rate, 1980–2014 (Percent of AGI Paid in Income Taxes)
Source: Internal Revenue Service.
1980 15.31% 34.47% 26.85% 17.13% 23.49% 14.80% 19.72% 11.91% 17.29% 6.10%
1981 15.76% 33.37% 26.59% 18.16% 23.64% 15.53% 20.11% 12.48% 17.73% 6.62%
1982 14.72% 31.43% 25.05% 16.61% 22.17% 14.35% 18.79% 11.63% 16.57% 6.10%
1983 13.79% 30.18% 23.64% 15.54% 20.91% 13.20% 17.62% 10.76% 15.52% 5.66%
1984 13.68% 29.92% 23.42% 15.57% 20.81% 12.90% 17.47% 10.48% 15.35% 5.77%
1985 13.73% 29.86% 23.50% 15.69% 20.93% 12.83% 17.55% 10.41% 15.41% 5.70%
1986 14.54% 33.13% 25.68% 15.99% 22.64% 12.97% 18.72% 10.48% 16.32% 5.63%
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
1987 13.12% 26.41% 22.10% 14.43% 19.77% 11.71% 16.61% 9.45% 14.60% 5.09%
1988 13.21% 24.04% 21.14% 14.07% 19.18% 11.82% 16.47% 9.60% 14.64% 5.06%
1989 13.12% 23.34% 20.71% 13.93% 18.77% 12.08% 16.27% 9.77% 14.53% 5.11%
1990 12.95% 23.25% 20.46% 13.63% 18.50% 12.01% 16.06% 9.73% 14.36% 5.01%
1991 12.75% 24.37% 20.62% 13.96% 18.63% 11.57% 15.93% 9.55% 14.20% 4.62%
1992 12.94% 25.05% 21.19% 13.99% 19.13% 11.39% 16.25% 9.42% 14.44% 4.39%
1993 13.32% 28.01% 22.71% 14.01% 20.20% 11.40% 16.90% 9.37% 14.90% 4.29%
1994 13.50% 28.23% 23.04% 14.20% 20.48% 11.57% 17.15% 9.42% 15.11% 4.32%
1995 13.86% 28.73% 23.53% 14.46% 20.97% 11.71% 17.58% 9.43% 15.47% 4.39%
1996 14.34% 28.87% 24.07% 14.74% 21.55% 11.86% 18.12% 9.53% 15.96% 4.40%
1997 14.48% 27.64% 23.62% 14.87% 21.36% 12.04% 18.18% 9.63% 16.09% 4.48%
1998 14.42% 27.12% 23.63% 14.79% 21.42% 11.63% 18.16% 9.12% 16.00% 4.44%
1999 14.85% 27.53% 24.18% 15.06% 21.98% 11.76% 18.66% 9.12% 16.43% 4.48%
2000 15.26% 27.45% 24.42% 15.48% 22.34% 12.04% 19.09% 9.28% 16.86% 4.60%
The IRS changed methodology, so data above and below this line not strictly comparable
2001 14.47% 28.17% 27.60% 23.91% 15.20% 21.68% 11.87% 18.35% 9.20% 16.08% 4.92%
2002 13.28% 28.48% 27.37% 23.17% 14.15% 20.76% 10.70% 17.23% 8.00% 14.87% 3.86%
2003 12.11% 24.60% 24.38% 20.92% 12.46% 18.70% 9.69% 15.57% 7.41% 13.53% 3.49%
2004 12.31% 23.06% 23.52% 20.83% 12.53% 18.80% 9.41% 15.71% 7.27% 13.68% 3.53%
2005 12.65% 22.48% 23.15% 20.93% 12.61% 19.03% 9.45% 16.04% 7.18% 14.01% 3.51%
2006 12.80% 21.94% 22.80% 20.80% 12.84% 19.02% 9.52% 16.12% 7.22% 14.12% 3.51%
2007 12.90% 21.42% 22.46% 20.66% 12.92% 18.96% 9.61% 16.16% 7.27% 14.19% 3.56%
2008 12.54% 22.67% 23.29% 20.83% 12.66% 18.87% 9.45% 15.85% 6.97% 13.79% 3.26%
2009 11.39% 24.28% 24.05% 20.59% 11.53% 18.19% 8.36% 14.81% 5.76% 12.61% 2.35%
2010 11.81% 22.84% 23.39% 20.64% 11.98% 18.46% 8.70% 15.22% 6.01% 13.06% 2.37%
2011 12.54% 22.82% 23.50% 20.89% 12.83% 18.85% 9.70% 15.82% 6.98% 13.76% 3.13%
2012 13.11% 21.67% 22.83% 20.97% 13.33% 19.21% 9.96% 16.35% 7.21% 14.33% 3.28%
2013 13.64% 27.91% 27.08% 23.20% 13.40% 20.75% 10.11% 17.28% 7.31% 14.98% 3.30%
2014 14.16% 27.67% 27.16% 23.61% 13.73% 21.25% 10.37% 17.83% 7.48% 15.52% 3.45%
  1. For data prior to 2001, all tax returns that have a positive AGI are included, even those that do not have a positive income tax liability. For data from 2001 forward, returns with negative AGI are also included, but dependent returns are excluded.
  2. Income tax after credits (the measure of “income taxes paid” above) does not account for the refundable portion of EITC. If it were included, the tax share of the top income groups would be higher. The refundable portion is classified as a spending program by the Office of Management and Budget and therefore is not included by the IRS in these figures.
  3. The only tax analyzed here is the federal individual income tax, which is responsible for more than 25 percent of the nation’s taxes paid (at all levels of government). Federal income taxes are much more progressive than federal payroll taxes, which are responsible for about 20 percent of all taxes paid (at all levels of government), and are more progressive than most state and local taxes.
  4. AGI is a fairly narrow income concept and does not include income items like government transfers (except for the portion of Social Security benefits that is taxed), the value of employer-provided health insurance, underreported or unreported income (most notably that of sole proprietors), income derived from municipal bond interest, net imputed rental income, and others.
  5. The unit of analysis here is that of the tax return. In the figures prior to 2001, some dependent returns are included. Under other units of analysis (like the Treasury Department’s Family Economic Unit), these returns would likely be paired with parents’ returns.
  6. These figures represent the legal incidence of the income tax. Most distributional tables (such as those from CBO, Tax Policy Center, Citizens for Tax Justice, the Treasury Department, and JCT) assume that the entire economic incidence of personal income taxes falls on the income earner.

[1] Individual Income Tax Rates and Tax Shares, Internal Revenue Service Statistics of Income, http://www.irs.gov/uac/SOI-Tax-Stats-Individual-Income-Tax-Rates-and-Tax-Shares.

[2] See Congressional Budget Office, The Budget and Economic Outlook: 2017 to 2027, Jan. 2017, https://www.cbo.gov/sites/default/files/115th-congress-2017-2018/reports/52370-outlook.pdf.

[3] There is strong reason to believe that capital gains realizations were unusually depressed in 2013, due to the increase in the top capital gains tax rate from 15 percent to 23.8 percent. In 2013, capital gains accounted for 26.6 percent of the income of taxpayers with over $1 million in AGI received, compared to 31.7 percent in 2014 (these calculations apply for net capital gains reported on Schedule D). Table 1.4, Publication 1304, “Individual Income Tax Returns 2014,” Internal Revenue Service, https://www.irs.gov/uac/soi-tax-stats-individual-income-tax-returns-publication-1304-complete-report.

[4] Here, “average income tax rate” is defined as income taxes paid divided by adjusted gross income.

https://taxfoundation.org/summary-latest-federal-income-tax-data-2016-update/

Story 2: Stagnating United States Economy — The Great Stagnation — Videos —

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National Income and Product Accounts
Gross Domestic Product: Fourth Quarter and Annual 2016 (Third Estimate)
Corporate Profits: Fourth Quarter and Annual 2016
Real gross domestic product (GDP) increased at an annual rate of 2.1 percent in the fourth quarter of
2016 (table 1), according to the "third" estimate released by the Bureau of Economic Analysis. In the
third quarter of 2016, real GDP increased 3.5 percent.

The GDP estimate released today is based on more complete source data than were available for the
"second" estimate issued last month.  In the second estimate, the increase in real GDP was 1.9 percent.
With this third estimate for the fourth quarter, the general picture of economic growth remains largely
the same; personal consumption expenditures (PCE) increased more than previously estimated (see
"Updates to GDP" on page 2).

Real GDP: Percent Change from Preceding Quarter
Real gross domestic income (GDI) increased 1.0 percent in the fourth quarter, compared with an
increase of 5.0 percent in the third. The average of real GDP and real GDI, a supplemental measure of
U.S. economic activity that equally weights GDP and GDI, increased 1.5 percent in the fourth quarter,
compared with an increase of 4.3 percent in the third quarter (table 1).

The increase in real GDP in the fourth quarter reflected positive contributions from PCE, private
inventory investment, residential fixed investment, nonresidential fixed investment, and state and local
government spending that were partly offset by negative contributions from exports and federal
government spending. Imports, which are a subtraction in the calculation of GDP, increased (table 2).

The deceleration in real GDP in the fourth quarter reflected downturns in exports and in federal
government spending, an acceleration in imports, and a deceleration in nonresidential fixed investment
that were partly offset by accelerations in private inventory investment and in PCE, and upturns in
residential fixed investment and in state and local government spending.

Current-dollar GDP increased 4.2 percent, or $194.1 billion, in the fourth quarter to a level of $18,869.4
billion. In the third quarter, current-dollar GDP increased 5.0 percent, or $225.2 billion (table 1 and
table 3).

The price index for gross domestic purchases increased 2.0 percent in the fourth quarter, compared
with an increase of 1.5 percent in the third quarter (table 4). The PCE price index increased 2.0 percent,
compared with an increase of 1.5 percent. Excluding food and energy prices, the PCE price index
increased 1.3 percent, compared with an increase of 1.7 percent (appendix table A).


Updates to GDP

The upward revision to the percent change in real GDP primarily reflected upward revisions to PCE and
to private inventory investment that were partly offset by downward revisions to nonresidential fixed
investment and to exports. Imports, which are a subtraction in the calculation of GDP, were revised
upward. For more information, see the Technical Note. For information on updates to GDP, see the
"Additional Information" section that follows.

                                       Advance Estimate          Second Estimate            Third Estimate

                                                     (Percent change from preceding quarter)
Real GDP                                     1.9                       1.9                       2.1
Current-dollar GDP                           4.0                       3.9                       4.2
Real GDI                                     ---                       ---                       1.0
Average of Real GDP and Real GDI             ---                       ---                       1.5
Gross domestic purchases price index         2.0                       1.9                       2.0
PCE price index                              2.2                       1.9                       2.0


2016 GDP

Real GDP increased 1.6 percent in 2016 (that is, from the 2015 annual level to the 2016 annual level),
compared with an increase of 2.6 percent in 2015 (table 1).

The increase in real GDP in 2016 reflected positive contributions from PCE, residential fixed investment,
state and local government spending, exports, and federal government spending that were partly offset
by negative contributions from private inventory investment and nonresidential fixed investment.
Imports, which are a subtraction in the calculation of GDP, increased (table 2).

The deceleration in real GDP from 2015 to 2016 reflected downturns in private inventory investment
and in nonresidential fixed investment and decelerations in PCE, in residential fixed investment, and in
state and local government spending that were partly offset by a deceleration in imports and
accelerations in federal government spending and in exports.

Current-dollar GDP increased 3.0 percent, or $532.5 billion, in 2016 to a level of $18,569.1 billion,
compared with an increase of 3.7 percent, or $643.5 billion, in 2015 (table 1 and table 3).

Real GDI increased 1.6 percent in 2016, compared with an increase of 2.5 percent in 2015 (table 1).

The price index for gross domestic purchases increased 1.0 percent in 2016, compared with an increase
of 0.4 percent in 2015 (table 4).

During 2016 (that is, measured from the fourth quarter of 2015 to the fourth quarter of 2016), real GDP
increased 2.0 percent, compared with an increase of 1.9 percent during 2015.  The price index for gross
domestic purchases increased 1.5 percent during 2016, compared with an increase of 0.4 percent during
2015.  Real GDI increased 1.9 percent during 2016, compared with an increase of 1.5 percent during
2015 (table 7).


Corporate Profits (table 12)

Profits from current production (corporate profits with inventory valuation adjustment and capital
consumption adjustment) increased $11.2 billion in the fourth quarter of 2016, compared with an
increase of $117.8 billion in the third quarter.

Profits of domestic financial corporations increased $26.5 billion in the fourth quarter, compared with
an increase of $50.1 billion in the third. Profits of domestic nonfinancial corporations decreased $60.4
billion, in contrast to an increase of $66.4 billion. The estimate of nonfinancial corporate profits in the
fourth quarter was reduced by a $4.95 billion ($19.8 billion at an annual rate) settlement between a U.S.
subsidiary of Volkswagen and the federal and state governments. For more information, see the FAQ,
"What are the effects of the Volkswagen buyback deal on GDP and the national accounts?”. The
rest-of-the-world component of profits increased $45.1 billion, compared with an increase of $1.3 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 fourth quarter, receipts increased $9.1 billion, and payments decreased
$36.0 billion.

In 2016, profits from current production decreased $2.3 billion, compared with a decrease of $64.0
billion in 2015. Profits of domestic financial corporations increased $20.5 billion, compared with an
increase of $8.5 billion. Profits of domestic nonfinancial corporations decreased $47.0 billion, compared
with a decrease of $47.3 billion. The rest-of-the-world component of profits increased $24.3 billion, in
contrast to a decrease of $25.2 billion.


                                      *          *          *
                           Next release:  April 28, 2017 at 8:30 A.M. EDT
                   Gross Domestic Product:  First Quarter 2017 (Advance 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 scheduleNIPA 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/gdpnewsrelease.htm 

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The Pronk Pops Show 866, April 3, 2017, Breaking News — Story 1: Obamagate Surveillance/Spying Scandal Spreading — Abuse of Power By Former National Security Adviser Susan Rice — Requested Revealing or Unmasking of American Citizen Identities Including Trump and Trump Campaign and Transition Teams For 7 Months (July 2016 – January 2017) — The Smoking Gun — What Did President Obama Know and When Did He Know It? — Videos — Story 2: Lying Lunatic Left Democratic National Committee Chair Tom Perez Cracks up — Trump Didn’t Win Election — Videos —

Posted on April 3, 2017. Filed under: American History, Blogroll, Breaking News, Communications, Congress, Constitutional Law, Corruption, Crime, Culture, Donald J. Trump, Donald J. Trump, Donald Trump, Donald Trump, Elections, Foreign Policy, Freedom of Speech, Government, Government Spending, High Crimes, Hillary Clinton, History, House of Representatives, Human, Illegal Immigration, Immigration, Language, Law, Legal Immigration, Life, News, Obama, Politics, Polls, President Barack Obama, President Trump, Presidential Appointments, Progressives, Radio, Raymond Thomas Pronk, Scandals, Senate, Trump Surveillance/Spying, United States of America, Videos | Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , |

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Breaking News — Story 1: Obamagate Surveillance/Spying Scandal Spreading — Abuse of Power By Former National Security Adviser Susan Rice — Requested Revealing or Unmasking of American Citizen Identities Including Trump and Trump Campaign and Transition Teams For 7 Months (July 2016 – January 2017) — The Smoking Gun — Videos — 

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Rice asked for Trump transition associates to be unmasked

Where does the Susan Rice story go from here?

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Furious AG Sessions: we will convict some people to make the leaking stop

Susan Rice Unmasked Trump Team, 1566

Published on Apr 3, 2017

This video is about Susan Rice Unmasked Trump Team, 1566

President Obama’s National Security Advisor, Susan Rice, deliberately unmasked President-Elect Donald Trump, and other incoming Trump officials, according to reporter Michael Chernovich.
Furthermore, Chernovich learned that New York Times reporter Maggie Haberman has had this story for at least 48 hours, and has chosen to sit on it in an effort to protect the reputation of Obama.
According to Chernovich:
“The White House Counsel’s office identified Rice as the person responsible for the unmasking after examining Rice’s document log requests.”
“The reports Rice requested to see are kept under tightly-controlled conditions. Each person must log her name before being granted access to them.”
According to Chernovich two other people close to Obama had authorization to unmask the names of Americans as well: CIA Director John Brennan and then-Attorney General Loretta Lynch.
Yesterday, Fox News announced that House Intelligence Committee Chairman Devin Nunes, R-Calif, knew who unmasked General Michael Flynn, saying that the person was:
“… very well known, very high up, very senior in the intelligence world.”
I had speculated that that person may have been Jeh Johnson, the former Director of Homeland Security. We will see in the morning if the Fox report confirms that it was indeed Susan Rice.
If it was Rice, that puts the source of this felonious conduct right at the door of former President Obama.

Susan Rice On Unmasking Of Trump Team, ‘I Know Nothing’

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Obama Official Admits They Were Surveilling Trump & His Team, Unmasking Names & Leaking Intel

Team Obama Gets Caught Committing Political Espionage, Spying on Trump & His Team

Susan Rice Reportedly “Unmasked” Trump in Incidental Data Collection

Trump Proven 100% Right about Obama Admin “Wiretapping”(Surveilling) Him & His Team

 Donald Trump’s Administration was Wiretapped | Rand Paul

Susan Rice, Ben Rhodes, John Brennan are suspects: James Comey Intelligence Hearing @ congressRand Paul Calls For Susan Rice To Testify On Unmasking Trump Officials

Susan Rice requested to unmask names of Trump transition officials, sources say

Multiple sources tell Fox News that Susan Rice, former national security adviser under then-President Barack Obama, requested to unmask the names of Trump transition officials caught up in surveillance.

The unmasked names, of people associated with Donald Trump, were then sent to all those at the National Security Council, some at the Defense Department, then-Director of National Intelligence James Clapper and then-CIA Director John Brennan – essentially, the officials at the top, including former Rice deputy Ben Rhodes.

The names were part of incidental electronic surveillance of candidate and President-elect Trump and people close to him, including family members, for up to a year before he took office.

It was not clear how Rice knew to ask for the names to be unmasked, but the question was being posed by the sources late Monday.

Such amazing reporting on unmasking and the crooked scheme against us by @foxandfriends. “Spied on before nomination.” The real story.

“What I know is this …  If the intelligence community professionals decide that there’s some value, national security, foreign policy or otherwise in unmasking someone, they will grant those requests,” former Obama State Department spokeswoman and Fox News contributor Marie Harf told Fox News’ Martha MacCallum on “The First 100 Days. “And we have seen no evidence … that there was partisan political notice behind this and we can’t say that unless there’s actual evidence to back that up.”

White House Press Secretary Sean Spicer, asked about the revelations at Monday’s briefing, declined to comment specifically on what role Rice may have played or officials’ motives.

“I’m not going to comment on this any further until [congressional] committees have come to a conclusion,” he said, while contrasting the media’s alleged “lack” of interest in these revelations with the intense coverage of suspected Trump-Russia links.

When names of Americans are incidentally collected, they are supposed to be masked, meaning the name or names are redacted from reports – whether it is international or domestic collection, unless it is an issue of national security, crime or if their security is threatened in any way. There are loopholes and ways to unmask through backchannels, but Americans are supposed to be protected from incidental collection. Sources told Fox News that in this case, they were not.

This comes in the wake of Evelyn Farkas’ television interview last month in which the former Obama deputy secretary of defense said in part: “I was urging my former colleagues and, frankly speaking, the people on the Hill – it was more actually aimed at telling the Hill people, get as much information as you can, get as much intelligence as you can, before President Obama leaves the administration.”

Meanwhile, Fox News also is told that House Intelligence Committee Chairman Devin Nunes knew about unmasking and leaking back in January, well before President Trump’s tweet in March alleging wiretapping.

Nunes has faced criticism from Democrats for viewing pertinent documents on White House grounds and announcing their contents to the press. But sources said “the intelligence agencies slow-rolled Nunes. He could have seen the logs at other places besides the White House SCIF [secure facility], but it had already been a few weeks. So he went to the White House because he could protect his sources and he could get to the logs.”

As the Obama administration left office, it also approved new rules that gave the NSA much broader powers by relaxing the rules about sharing intercepted personal communications and the ability to share those with 16 other intelligence agencies.

Rice is no stranger to controversy. As the U.S. Ambassador to the UN, she appeared on several Sunday news shows to defend the adminstration’s later debunked claim that the Sept. 11, 2012 attacks on a U.S. consulate in Libya was triggered by an Internet video.

Rice also told ABC News in 2014 that Army Sgt. Bowe Bergdahl “served the United States with honor and distinction” and that he “wasn’t simply a hostage; he was an American prisoner of war captured on the battlefield.”

Bergdahl is currently facing court-martial on charges of desertion and misbehavior before the enemy for allegedly walking off his post in Afghanistan.

http://www.foxnews.com/politics/2017/04/03/susan-rice-requested-to-unmask-names-trump-transition-officials-sources-say.html

JULIEGRACE BRUFKE,  Capitol Hill Reporter

GOP Kentucky Sen. Rand Paul said he believes former National Security Advisor Susan Rice should testify before Congress on her request to unmask the names of Trump transition officials collected during routine intelligence-gathering operations.

Paul argued the situation should not be downplayed, saying reforms need to be made to prevent individuals from being blackmailed on personal aspects of their lives through unmasking. He noted there was nothing stopping the former administration from looking through Trump officials and national security advisors’ conversations during the transition window.

“If it is allowed, we shouldn’t be allowing it, but I don’t think should just discount how big a deal it is that Susan Rice was looking at these,” he told reporters Monday. “And she needs to be asked, ‘Did President Obama ask her to do this? Was this a directive from President Obama?  I think she should testify under oath on this.”

Paul said he has long thought there are too many people with the ability to unmask individuals.

“The law says you can’t reverse target people, but how would you know that once you get inside the brain and the people that are unmasking people,” Paul continued. “So, what if I decided to unmask and I’m there and I only unmask the conversations of my Democrat opponents — shouldn’t there be more restrictions for unmasking people in the political process?”

He said he believes there should be two individuals at the top of the agency to allow for identities to be unmasked. Paul noted the process is indiscriminate, noting the United States previously captured every phone call in Italy for a month.

“Basically there’s no Fourth Amendment when you use these kinds of things, you go with a lower standard because we’ve got to protect the country and we don’t care about spying on foreigners,” he said, adding there are said to be millions of Americans caught up in the country’s foreign targeting.

Paul said the president did not bring up the matter on their golf trip Sunday, but he voiced his opinion on the matter.

http://dailycaller.com/2017/04/03/rand-paul-calls-for-susan-rice-to-testify-on-unmasking-trump-officials/#ixzz4dDyYjidj

Top Obama Adviser Sought Names of Trump Associates in Intel

By Eli Lake

APRIL 3, 2017 10:13 AM EDT

White House lawyers last month learned that the former national security adviser Susan Rice requested the identities of U.S. persons in raw intelligence reports on dozens of occasions that connect to the Donald Trump transition and campaign, according to U.S. officials familiar with the matter.

The pattern of Rice’s requests was discovered in a National Security Council review of the government’s policy on “unmasking” the identities of individuals in the U.S. who are not targets of electronic eavesdropping, but whose communications are collected incidentally. Normally those names are redacted from summaries of monitored conversations and appear in reports as something like “U.S. Person One.”

The National Security Council’s senior director for intelligence, Ezra Cohen-Watnick, was conducting the review, according to two U.S. officials who spoke with Bloomberg View on the condition of anonymity because they were not authorized to discuss it publicly. In February Cohen-Watnick discovered Rice’s multiple requests to unmask U.S. persons in intelligence reports that related to Trump transition activities. He brought this to the attention of the White House General Counsel’s office, who reviewed more of Rice’s requests and instructed him to end his own research into the unmasking policy.

The intelligence reports were summaries of monitored conversations — primarily between foreign officials discussing the Trump transition, but also in some cases direct contact between members of the Trump team and monitored foreign officials. One U.S. official familiar with the reports said they contained valuable political information on the Trump transition such as whom the Trump team was meeting, the views of Trump associates on foreign policy matters and plans for the incoming administration.

Rice did not respond to an email seeking comment on Monday morning. Her role in requesting the identities of Trump transition officials adds an important element to the dueling investigations surrounding the Trump White House since the president’s inauguration.

Both the House and Senate intelligence committees are probing any ties between Trump associates and a Russian influence operation against Hillary Clinton during the election. The chairman of the House intelligence committee, Representative Devin Nunes, is also investigating how the Obama White House kept tabs on the Trump transition after the election through unmasking the names of Trump associates incidentally collected in government eavesdropping of foreign officials.

Rice herself has not spoken directly on the issue of unmasking. Last month when she was asked on the “PBS NewsHour” about reports that Trump transition officials, including Trump himself, were swept up in incidental intelligence collection, Rice said: “I know nothing about this,” adding, “I was surprised to see reports from Chairman Nunes on that account today.”

Rice’s requests to unmask the names of Trump transition officials do not vindicate Trump’s own tweets from March 4 in which he accused Obama of illegally tapping Trump Tower. There remains no evidence to support that claim.

But Rice’s multiple requests to learn the identities of Trump officials discussed in intelligence reports during the transition period does highlight a longstanding concern for civil liberties advocates about U.S. surveillance programs. The standard for senior officials to learn the names of U.S. persons incidentally collected is that it must have some foreign intelligence value, a standard that can apply to almost anything. This suggests Rice’s unmasking requests were likely within the law.

The news about Rice also sheds light on the strange behavior of Nunes in the last two weeks. It emerged last week that he traveled to the White House last month, the night before he made an explosive allegation about Trump transition officials caught up in incidental surveillance. At the time he said he needed to go to the White House because the reports were only on a database for the executive branch. It now appears that he needed to view computer systems within the National Security Council that would include the logs of Rice’s requests to unmask U.S. persons.

The ranking Democrat on the committee Nunes chairs, Representative Adam Schiff, viewed these reports on Friday. In comments to the press over the weekend he declined to discuss the contents of these reports, but also said it was highly unusual for the reports to be shown only to Nunes and not himself and other members of the committee.

Indeed, much about this is highly unusual: if not how the surveillance was collected, then certainly how and why it was disseminated.

https://www.bloomberg.com/view/articles/2017-04-03/top-obama-adviser-sought-names-of-trump-associates-in-intel

White House logs indicate Susan Rice consumed unmasked intel on Trump associates

by Sara Carter and John Solomon

Computer logs that former President Obama’s team left behind in the White House indicate his national security adviser Susan Rice accessed numerous intelligence reports during Obama’s last seven months in office that contained National Security Agency intercepts involving Donald Trump and his associates, Circa has learned.

Intelligence sources said the logs discovered by National Security Council staff suggested Rice’s interest in the NSA materials, some of which included unmasked Americans’ identities, appeared to begin last July around the time Trump secured the GOP nomination and accelerated after Trump’s election in November launched a transition that continued through January.

The exact national security justifications for Rice accessing the reports isn’t clear and may require additional documentation that the House and Senate intelligence committees have requested from the NSA, America’s lead agency in spying on foreign powers.

Rice has not returned repeated calls for comment from Circa. But in an interview with PBS recently, she said she had no idea what House Intelligence Committee chairman Devin Nunes was talking about when he said Obama officials were monitoring Trump associates after the election.

Both the Republican chairman and Democratic vice chairman of the Housing Intelligence Committee have been shown the documents discovered by the NSC over the last 10 days.

But Circa reported last week that Obama opened the door for his political aides like Rice to more easily gain access to unmasked Americans’ names in NSA intercepts through a series of rule changes beginning in 2011.

http://circa.com/politics/accountability/white-house-logs-indicate-susan-rice-consumed-unmasked-intel-on-trump-associates

Obama adviser Ben Rhodes claims Obama didn’t spy on Americans — instantly receives brutal fact check

Chris Enloe

President Donald Trump took to Twitter early on Saturday to bash NBC News anchor Chuck Todd for reporting on the investigation into alleged collusion between Trump’s campaign and Russia instead of focusing on “Obama surveillance.”

Trump tweeted:

When will Sleepy Eyes Chuck Todd and @NBCNews start talking about the Obama SURVEILLANCE SCANDAL and stop with the Fake Trump/Russia story?

But Ben Rhodes, who served as a senior national security adviser for former President Barack Obama, took issue with Trump’s claim that the Obama administration surveyed him.

“There is no Obama SURVEILLANCE SCANDAL even when you capitalize the words,” he tweeted at Trump.

However, Twitter was quick to hit back at Rhodes, given the Obama administration’s record of surveillance — which isn’t the best. Under Obama’s leadership, domestic spying became a key issue after they were caught spying on journalists from the Associated Press and Fox News correspondent James Rosen.

The Obama administration was even forced to weather a massive NSA spying scandal after NSA contractor Edward Snowden leaked thousands of NSA documents, which revealed government collection programs like PRISM.

Needless to say, no one was buying Rhodes’ lies.

http://www.theblaze.com/news/2017/04/01/obama-adviser-ben-rhodes-claims-obama-didnt-spy-on-americans-instantly-receives-brutal-fact-check/

Global surveillance disclosures (2013–present)

From Wikipedia, the free encyclopedia
“Global surveillance disclosures” redirects here. For disclosures published before those of Edward Snowden, see Global surveillance disclosures (1970–2013).

Ongoing news reports in the international media have revealed operational details about the United States National Security Agency (NSA) and its international partners’ global surveillance[1] of foreign nationals and US citizens. The reports mostly emanate from a cache of top secret documents leaked by ex-NSA contractor Edward Snowden, which he obtained whilst working for Booz Allen Hamilton, one of the largest contractors for defense and intelligence in the United States.[2] In addition to a trove of US federal documents, Snowden’s cache reportedly contains thousands of Australian, British and Canadian intelligence files that he had accessed via the exclusive “Five Eyes” network. In June 2013, the first of Snowden’s documents were published simultaneously by The Washington Post and The Guardian, attracting considerable public attention.[3] The disclosure continued throughout 2013, and a small portion of the estimated full cache of documents was later published by other media outlets worldwide, most notably The New York Times (United States), the Canadian Broadcasting Corporation, the Australian Broadcasting Corporation, Der Spiegel (Germany), O Globo (Brazil), Le Monde (France), L’espresso (Italy), NRC Handelsblad (the Netherlands), Dagbladet (Norway), El País (Spain), and Sveriges Television (Sweden).[4]

These media reports have shed light on the implications of several secret treaties signed by members of the UKUSA community in their efforts to implement global surveillance. For example, Der Spiegel revealed how the German Bundesnachrichtendienst (BND) transfers “massive amounts of intercepted data to the NSA”,[5] while Swedish Television revealed the National Defence Radio Establishment (FRA) provided the NSA with data from its cable collection, under a secret treaty signed in 1954 for bilateral cooperation on surveillance.[6]Other security and intelligence agencies involved in the practice of global surveillance include those in Australia (ASD), Britain (GCHQ), Canada (CSEC), Denmark (PET), France (DGSE), Germany (BND), Italy (AISE), the Netherlands (AIVD), Norway (NIS), Spain (CNI), Switzerland (NDB), Singapore (SID) as well as Israel (ISNU), which receives raw, unfiltered data of US citizens that is shared by the NSA.[7][8][9][10][11][12][13][14]

On June 14, 2013, United States prosecutorscharged Edward Snowden with espionage and theft of government property.[15] In late July 2013, he was granted a one-year temporary asylum by the Russian government,[16] contributing to a deterioration of Russia–United States relations.[17][18] On August 6, 2013, US President Barack Obama made a public appearance on national television where he told Americans that “We don’t have a domestic spying program” and that “There is no spying on Americans”.[19] Towards the end of October 2013, the British Prime Minister David Cameron warned The Guardiannot to publish any more leaks, or it will receive a DA-Notice.[20] In November 2013, a criminal investigation of the disclosure was being undertaken by Britain’s Metropolitan Police Service.[21] In December 2013, The Guardian editor Alan Rusbridger said: “We have published I think 26 documents so far out of the 58,000 we’ve seen.”[22]

The extent to which the media reports have responsibly informed the public is disputed. In January 2014, Obama said that “the sensational way in which these disclosures have come out has often shed more heat than light”[23] and critics such as Sean Wilentz have noted that many of the Snowden documents released do not concern domestic surveillance.[24] In its first assessment of these disclosures, the Pentagon concluded that Snowden committed the biggest “theft” of U.S. secrets in the history of the United States.[25] Sir David Omand, a former director of GCHQ, described Snowden’s disclosure as the “most catastrophic loss to British intelligence ever”.[26]

Background

Barton Gellman, a Pulitzer Prize–winning journalist who led The Washington Posts coverage of Snowden’s disclosures, summarized the leaks as follows:

“Taken together, the revelations have brought to light a global surveillance system that cast off many of its historical restraints after the attacks of Sept. 11, 2001. Secret legal authorities empowered the NSA to sweep in the telephone, Internet and location records of whole populations.”

The disclosure revealed specific details of the NSA’s close cooperation with U.S. federal agencies such as the Federal Bureau of Investigation (FBI)[28][29] and the Central Intelligence Agency (CIA)[30][31] in addition to the agency’s previously undisclosed financial payments to numerous commercial partners and telecommunications companies,[32][33][34] as well as its previously undisclosed relationships with international partners such as Britain,[35][36] France[12][37] Germany,[5][38] and its secret treaties with foreign governments that were recently established for sharing intercepted data of each other’s citizens.[7][39][40][41] The disclosures were made public over the course of several months since June 2013, by the press in several nations from the trove leaked by the former NSA contractor Edward J. Snowden,[42] who obtained the trove while working for Booz Allen Hamilton.[2]

George Brandis, the current Attorney-General of Australia, asserted that Snowden’s disclosure is the “most serious setback for Western intelligence since the Second World War.”[43]

Global surveillance

Main article: Global surveillance

As of December 2013, global surveillance programs include:

Global surveillance programs
Program International contributors and/or partners Commercial partners
United StatesPRISM
United StatesXKeyscore
United KingdomTempora
United KingdomMUSCULAR
GermanyProject 6
Stateroom
Lustre

The NSA was also getting data directly from telecommunications companies codenamed Artifice, Lithium, Serenade, SteelKnight, and X. The real identities of the companies behind these codenames were not included in the Snowden document dump because they were protected as Exceptionally Controlled Information which prevents wide circulation even to those (like Snowden) who otherwise have the necessary security clearance.[65][66]

Disclosures

Although the exact size of Snowden’s disclosure remains unknown, the following estimates have been put up by various government officials:

As a contractor of the NSA, Snowden was granted access to U.S. government documents along with top secret documents of several allied governments, via the exclusive Five Eyes network.[69] Snowden claims that he is currently not in physical possession of any of these documents, after having surrendered all copies to the journalists he met in Hong Kong.[70]

According to his lawyer, Snowden has pledged not to release any documents while in Russia, leaving the responsibility for further disclosures solely to journalists.[71] As of 2014, the following news outlets have accessed some of the documents provided by Snowden: Australian Broadcasting Corporation, Canadian Broadcasting Corporation, Channel 4, Der Spiegel, El Pais, El Mundo, L’espresso, Le Monde, NBC, NRC Handelsblad, Dagbladet, O Globo, South China Morning Post, Süddeutsche Zeitung, Sveriges Television, The Guardian, The New York Times, and The Washington Post.

Historical context

In the 1970s, NSA analyst Perry Fellwock (under the pseudonym “Winslow Peck”) revealed the existence of the UKUSA Agreement, which forms the basis of the ECHELON network, whose existence was revealed in 1988 by Lockheed employee Margaret Newsham.[72][73] Months before the September 11 attacks and during its aftermath, further details of the global surveillance apparatus were provided by various individuals such as the former MI5 official David Shayler and the journalist James Bamford,[74][75] who were followed by:

In the aftermath of Snowden’s revelations, The Pentagon concluded that Snowden committed the biggest theft of U.S. secrets in the history of the United States.[25] In Australia, the coalition government described the leaks as the most damaging blow dealt to Australian intelligence in history.[43] Sir David Omand, a former director of GCHQ, described Snowden’s disclosure as the “most catastrophic loss to British intelligence ever”.[26]

Timeline

The Mira hotel in Hong Kong, where Edward Snowden hosted his first meeting with Glenn Greenwald, Laura Poitras, and journalist Ewen MacAskill of The Guardian[86]

In April 2012, NSA contractor Edward Snowden began downloading documents.[87] That year, Snowden had made his first contact with journalist Glenn Greenwald of The Guardian and he contacted documentary filmmaker Laura Poitras in January 2013.[88][89]

2013

May

In May 2013, Snowden went on temporary leave from his position at the NSA, citing the pretext of receiving treatment for his epilepsy. Towards the end of May, he traveled to Hong Kong.[90][91] Greenwald, Poitras and the Guardian’s defence and intelligence correspondent Ewen MacAskill flew to Hong Kong to meet Snowden.

June

After the U.S.-based editor of The Guardian, Janine Gibson, held several meetings in New York City, it was decided that Greenwald, Poitras and the Guardians defence and intelligence correspondent Ewen MacAskill would fly to Hong Kong to meet Snowden. On June 5, in the first media report based on the leaked material,[92]The Guardian exposed a top secret court order showing that the NSA had collected phone records from over 120 million Verizon subscribers.[93] Under the order, the numbers of both parties on a call, as well as the location data, unique identifiers, time of call, and duration of call were handed over to the FBI, which turned over the records to the NSA.[93] According to The Wall Street Journal, the Verizon order is part of a controversial data program, which seeks to stockpile records on all calls made in the U.S., but does not collect information directly from T-Mobile US and Verizon Wireless, in part because of their foreign ownership ties.[94]

On June 6, 2013, the second media disclosure, the revelation of the PRISM surveillance program (which collects the e-mail, voice, text and video chats of foreigners and an unknown number of Americans from Microsoft, Google, Facebook, Yahoo, Apple and other tech giants),[95][96][97][98] was published simultaneously by The Guardian and The Washington Post.[86][99]

Slide from a 2008 NSA presentation about XKeyscore, showing a worldmap with the locations of XKeyscore servers

Der Spiegel revealed NSA spying on multiple diplomatic missions of the European Union (EU) and the United Nations Headquarters in New York.[100][101] During specific episodes within a four-year period, the NSA hacked several Chinese mobile-phone companies,[102] the Chinese University of Hong Kong and Tsinghua University in Beijing,[103] and the Asian fiber-optic network operator Pacnet.[104] Only Australia, Canada, New Zealand and the UK are explicitly exempted from NSA attacks, whose main target in the EU is Germany.[105] A method of bugging encrypted fax machines used at an EU embassy is codenamed Dropmire.[106]

During the 2009 G-20 London summit, the British intelligence agency Government Communications Headquarters (GCHQ) intercepted the communications of foreign diplomats.[107] In addition, GCHQ has been intercepting and storing mass quantities of fiber-optic traffic via Tempora.[108] Two principal components of Tempora are called “Mastering the Internet” (MTI) and “Global Telecoms Exploitation“.[109] The data is preserved for three days while metadata is kept for thirty days.[110] Data collected by GCHQ under Tempora is shared with the National Security Agency (NSA) of the United States.[109]

From 2001 to 2011, the NSA collected vast amounts of metadata records detailing the email and internet usage of Americans via Stellar Wind,[111] which was later terminated due to operational and resource constraints. It was subsequently replaced by newer surveillance programs such as ShellTrumpet, which “processed its one trillionth metadata record” by the end of December 2012.[112]

The NSA follows specific procedures to target non-U.S. persons[113] and to minimize data collection from U.S. persons.[114] These court-approved policies allow the NSA to:[115][116]

  • keep data that could potentially contain details of U.S. persons for up to five years;
  • retain and make use of “inadvertently acquired” domestic communications if they contain usable intelligence, information on criminal activity, threat of harm to people or property, are encrypted, or are believed to contain any information relevant to cybersecurity;
  • preserve “foreign intelligence information” contained within attorney–client communications; and
  • access the content of communications gathered from “U.S. based machine[s]” or phone numbers in order to establish if targets are located in the U.S., for the purposes of ceasing further surveillance.

According to Boundless Informant, over 97 billion pieces of intelligence were collected over a 30-day period ending in March 2013. Out of all 97 billion sets of information, about 3 billion data sets originated from U.S. computer networks[117] and around 500 million metadata records were collected from German networks.[118]

In August 2013, it was revealed that the Bundesnachrichtendienst (BND) of Germany transfers massive amounts of metadata records to the NSA.[119]

Der Spiegel disclosed that Germany is the most targeted country of the 27 members of the European Union due to the NSA systematic monitoring and storage of Germany’s telephone and Internet connection data. According to the magazine the NSA stores data from around half a billion communications connections in Germany each month. This data includes telephone calls, emails, mobile-phone text messages and chat transcripts.[120]

On June 11, 2013, The Guardian published a snapshot of the NSA’s global map of electronic data collection for the month of March 2013. Known as the Boundless Informant, the program is used by the NSA to track the amount of data being analyzed over a specific period of time. The color scheme ranges from green (least subjected to surveillance) through yellow and orange to red (most surveillance). Outside the Middle East, only China, Germany, India, Kenya, Colombia, the United Kingdom, and the United States are colored orange or yellow

July[edit]

The NSA gained massive amounts of information captured from the monitored data traffic in Europe. For example, in December 2013, the NSA gathered on an average day metadata from some 15 million telephone connections and 10 million Internet datasets. The NSA also monitored the European Commission in Brussels and monitored EU diplomatic Facilities in Washington and at the United Nations by placing bugs in offices as well as infiltrating computer networks.[121]

The U.S. government made as part of its UPSTREAM data collection program deals with companies to ensure that it had access to and hence the capability to surveil undersea fiber-optic cables which deliver e-mails, Web pages, other electronic communications and phone calls from one continent to another at the speed of light.[122][123]

According to the Brazilian newspaper O Globo, the NSA spied on millions of emails and calls of Brazilian citizens,[124][125] while Australia and New Zealand have been involved in the joint operation of the NSA’s global analytical system XKeyscore.[126][127] Among the numerous allied facilities contributing to XKeyscore are four installations in Australia and one in New Zealand:

O Globo released an NSA document titled “Primary FORNSAT Collection Operations“, which revealed the specific locations and codenames of the FORNSAT intercept stations in 2002.[128]

According to Edward Snowden, the NSA has established secret intelligence partnerships with many Western governments.[127] The Foreign Affairs Directorate (FAD) of the NSA is responsible for these partnerships, which, according to Snowden, are organized such that foreign governments can “insulate their political leaders” from public outrage in the event that these global surveillance partnerships are leaked.[129]

In an interview published by Der Spiegel, Snowden accused the NSA of being “in bed together with the Germans”.[130] The NSA granted the German intelligence agencies BND (foreign intelligence) and BfV (domestic intelligence) access to its controversial XKeyscore system.[131] In return, the BND turned over copies of two systems named Mira4 and Veras, reported to exceed the NSA’s SIGINT capabilities in certain areas.[5] Every day, massive amounts of metadata records are collected by the BND and transferred to the NSA via the Bad Aibling Station near Munich, Germany.[5] In December 2012 alone, the BND handed over 500 million metadata records to the NSA.[132][133]

In a document dated January 2013, the NSA acknowledged the efforts of the BND to undermine privacy laws:

“The BND has been working to influence the German government to relax interpretation of the privacy laws to provide greater opportunities of intelligence sharing”.[133]

According to an NSA document dated April 2013, Germany has now become the NSA’s “most prolific partner”.[133] Under a section of a separate document leaked by Snowden titled “Success Stories”, the NSA acknowledged the efforts of the German government to expand the BND’s international data sharing with partners:

“The German government modifies its interpretation of the G-10 privacy law … to afford the BND more flexibility in sharing protected information with foreign partners.”[50]

In addition, the German government was well aware of the PRISM surveillance program long before Edward Snowden made details public. According to Angela Merkel’s spokesman Steffen Seibert, there are two separate PRISM programs – one is used by the NSA and the other is used by NATO forces in Afghanistan.[134] The two programs are “not identical”.[134]

The Guardian revealed further details of the NSA’s XKeyscore tool, which allows government analysts to search through vast databases containing emails, online chats and the browsing histories of millions of individuals without prior authorization.[135][136][137] Microsoft “developed a surveillance capability to deal” with the interception of encrypted chats on Outlook.com, within five months after the service went into testing. NSA had access to Outlook.com emails because “Prism collects this data prior to encryption.”[47]

In addition, Microsoft worked with the FBI to enable the NSA to gain access to its cloud storage service SkyDrive. An internal NSA document dating from August 3, 2012 described the PRISM surveillance program as a “team sport“.[47]

Even if there is no reason to suspect U.S. citizens of wrongdoing, the CIA‘s National Counterterrorism Center is allowed to examine federal government files for possible criminal behavior. Previously the NTC was barred to do so, unless a person was a terror suspect or related to an investigation.[138]

Snowden also confirmed that Stuxnet was cooperatively developed by the United States and Israel.[139] In a report unrelated to Edward Snowden, the French newspaper Le Monde revealed that France’s DGSE was also undertaking mass surveillance, which it described as “illegal and outside any serious control”.[140][141]

August

Documents leaked by Edward Snowden that were seen by Süddeutsche Zeitung (SZ) and Norddeutscher Rundfunk revealed that several telecom operators have played a key role in helping the British intelligence agency Government Communications Headquarters (GCHQ) tap into worldwide fiber-optic communications. The telecom operators are:

Each of them were assigned a particular area of the international fiber-optic network for which they were individually responsible. The following networks have been infiltrated by GCHQ: TAT-14 (Europe-USA), Atlantic Crossing 1 (Europe-USA), Circe South (France-UK), Circe North (The Netherlands-UK), Flag Atlantic-1, Flag Europa-Asia, SEA-ME-WE 3 (Southeast Asia-Middle East-Western Europe), SEA-ME-WE 4 (Southeast Asia-Middle East-Western Europe), Solas (Ireland-UK), UK-France 3, UK-Netherlands 14, ULYSSES (Europe-UK), Yellow (UK-USA) and Pan European Crossing.[143]

Telecommunication companies who participated were “forced” to do so and had “no choice in the matter”.[143] Some of the companies were subsequently paid by GCHQ for their participation in the infiltration of the cables.[143]According to the SZ, GCHQ has access to the majority of internet and telephone communications flowing throughout Europe, can listen to phone calls, read emails and text messages, see which websites internet users from all around the world are visiting. It can also retain and analyse nearly the entire European internet traffic.[143]

GCHQ is collecting all data transmitted to and from the United Kingdom and Northern Europe via the undersea fibre optic telecommunications cable SEA-ME-WE 3. The Security and Intelligence Division (SID) of Singapore co-operates with Australia in accessing and sharing communications carried by the SEA-ME-WE-3 cable. The Australian Signals Directorate (ASD) is also in a partnership with British, American and Singaporean intelligence agencies to tap undersea fibre optic telecommunications cables that link Asia, the Middle East and Europe and carry much of Australia’s international phone and internet traffic.[144]

The U.S. runs a top-secret surveillance program known as the Special Collection Service (SCS), which is based in over 80 U.S. consulates and embassies worldwide.[145][146] The NSA hacked the United Nations’ video conferencing system in Summer 2012 in violation of a UN agreement.[145][146]

The NSA is not just intercepting the communications of Americans who are in direct contact with foreigners targeted overseas, but also searching the contents of vast amounts of e-mail and text communications into and out of the country by Americans who mention information about foreigners under surveillance.[147] It also spied on the Al Jazeera and gained access to its internal communications systems.[148]

The NSA has built a surveillance network that has the capacity to reach roughly 75% of all U.S. Internet traffic.[149][150][151] U.S. Law-enforcement agencies use tools used by computer hackers to gather information on suspects.[152][153] An internal NSA audit from May 2012 identified 2776 incidents i.e. violations of the rules or court orders for surveillance of Americans and foreign targets in the U.S. in the period from April 2011 through March 2012, while U.S. officials stressed that any mistakes are not intentional.[154][155][156][157][158][159][160]

The FISA Court that is supposed to provide critical oversight of the U.S. government’s vast spying programs has limited ability to do so and it must trust the government to report when it improperly spies on Americans.[161] A legal opinion declassified on August 21, 2013, revealed that the NSA intercepted for three years as many as 56,000 electronic communications a year of Americans not suspected of having links to terrorism, before FISA court that oversees surveillance found the operation unconstitutional in 2011.[162][163][164][165][166] Under the Corporate Partner Access project, major U.S. telecommunications providers receive hundreds of millions of dollars each year from the NSA.[167] Voluntary cooperation between the NSA and the providers of global communications took off during the 1970s under the cover name BLARNEY.[167]

A letter drafted by the Obama administration specifically to inform Congress of the government’s mass collection of Americans’ telephone communications data was withheld from lawmakers by leaders of the House Intelligence Committee in the months before a key vote affecting the future of the program.[168][169]

The NSA paid GCHQ over £100 Million between 2009 and 2012, in exchange for these funds GCHQ “must pull its weight and be seen to pull its weight.” Documents referenced in the article explain that the weaker British laws regarding spying are “a selling point” for the NSA. GCHQ is also developing the technology to “exploit any mobile phone at any time.”[170] The NSA has under a legal authority a secret backdoor into its databases gathered from large Internet companies enabling it to search for U.S. citizens’ email and phone calls without a warrant.[171][172]

The Privacy and Civil Liberties Oversight Board urged the U.S. intelligence chiefs to draft stronger US surveillance guidelines on domestic spying after finding that several of those guidelines have not been updated up to 30 years.[173][174] U.S. intelligence analysts have deliberately broken rules designed to prevent them from spying on Americans by choosing to ignore so-called “minimisation procedures” aimed at protecting privacy[175][176] and used the NSA’s agency’s enormous eavesdropping power to spy on love interests.[177]

After the U.S. Foreign Secret Intelligence Court ruled in October 2011 that some of the NSA’s activities were unconstitutional, the agency paid millions of dollars to major internet companies to cover extra costs incurred in their involvement with the PRISM surveillance program.[178]

Mastering the Internet” (MTI) is part of the Interception Modernisation Programme (IMP) of the British government that involves the insertion of thousands of DPI (deep packet inspection) “black boxes” at various internet service providers, as revealed by the British media in 2009.[179]

In 2013, it was further revealed that the NSA had made a £17.2 million financial contribution to the project, which is capable of vacuuming signals from up to 200 fibre-optic cables at all physical points of entry into Great Britain.[180]

September

The Guardian and The New York Times reported on secret documents leaked by Snowden showing that the NSA has been in “collaboration with technology companies” as part of “an aggressive, multipronged effort” to weaken the encryption used in commercial software, and GCHQ has a team dedicated to cracking “Hotmail, Google, Yahoo and Facebook” traffic.[181][182][183][184][185][186]

Germany’s domestic security agency Bundesverfassungsschutz (BfV) systematically transfers the personal data of German residents to the NSA, CIA and seven other members of the United States Intelligence Community, in exchange for information and espionage software.[187][188][189] Israel, Sweden and Italy are also cooperating with American and British intelligence agencies. Under a secret treaty codenamed “Lustre“, French intelligence agencies transferred millions of metadata records to the NSA.[63][64][190][191]

The Obama Administration secretly won permission from the Foreign Intelligence Surveillance Court in 2011 to reverse restrictions on the National Security Agency’s use of intercepted phone calls and e-mails, permitting the agency to search deliberately for Americans’ communications in its massive databases. The searches take place under a surveillance program Congress authorized in 2008 under Section 702 of the Foreign Intelligence Surveillance Act. Under that law, the target must be a foreigner “reasonably believed” to be outside the United States, and the court must approve the targeting procedures in an order good for one year. But a warrant for each target would thus no longer be required. That means that communications with Americans could be picked up without a court first determining that there is probable cause that the people they were talking to were terrorists, spies or “foreign powers.” The FISC extended the length of time that the NSA is allowed to retain intercepted U.S. communications from five years to six years with an extension possible for foreign intelligence or counterintelligence purposes. Both measures were done without public debate or any specific authority from Congress.[192]

A special branch of the NSA called “Follow the Money” (FTM) monitors international payments, banking and credit card transactions and later stores the collected data in the NSA’s own financial databank “Tracfin”.[193] The NSA monitored the communications of Brazil’s president Dilma Rousseff and her top aides.[194] The agency also spied on Brazil’s oil firm Petrobras as well as French diplomats, and gained access to the private network of the Ministry of Foreign Affairs of France and the SWIFT network.[195]

In the United States, the NSA uses the analysis of phone call and e-mail logs of American citizens to create sophisticated graphs of their social connections that can identify their associates, their locations at certain times, their traveling companions and other personal information.[196] The NSA routinely shares raw intelligence data with Israel without first sifting it to remove information about U.S. citizens.[7][197]

In an effort codenamed GENIE, computer specialists can control foreign computer networks using “covert implants,” a form of remotely transmitted malware on tens of thousands of devices annually.[198][199][200][201] As worldwide sales of smartphones began exceeding those of feature phones, the NSA decided to take advantage of the smartphone boom. This is particularly advantageous because the smartphone combines a myriad of data that would interest an intelligence agency, such as social contacts, user behavior, interests, location, photos and credit card numbers and passwords.[202]

An internal NSA report from 2010 stated that the spread of the smartphone has been occurring “extremely rapidly”—developments that “certainly complicate traditional target analysis.”[202] According to the document, the NSA has set up task forces assigned to several smartphone manufacturers and operating systems, including Apple Inc.‘s iPhone and iOS operating system, as well as Google‘s Android mobile operating system.[202] Similarly, Britain’s GCHQ assigned a team to study and crack the BlackBerry.[202]

An NSA presentation called “Your target is using a BlackBerry? Now what?” shows an intercepted Mexican government e-mail.

Under the heading “iPhone capability”, the document notes that there are smaller NSA programs, known as “scripts”, that can perform surveillance on 38 different features of the iOS 3 and iOS 4 operating systems. These include the mapping feature, voicemail and photos, as well as Google Earth, Facebook and Yahoo! Messenger.[202]

On September 9, 2013, an internal NSA presentation on iPhone Location Services was published by Der Spiegel. One slide shows scenes from Apple’s 1984-themed television commercial alongside the words “Who knew in 1984…”; another shows Steve Jobs holding an iPhone, with the text “…that this would be big brother…”; and a third shows happy consumers with their iPhones, completing the question with “…and the zombies would be paying customers?”[203]

October

On October 4, 2013, The Washington Post and The Guardian jointly reported that the NSA and GCHQ had made repeated attempts to spy on anonymous Internet users who have been communicating in secret via the anonymity network Tor. Several of these surveillance operations involved the implantation of malicious code into the computers of Tor users who visit particular websites. The NSA and GCHQ had partly succeeded in blocking access to the anonymous network, diverting Tor users to insecure channels. The government agencies were also able to uncover the identity of some anonymous Internet users.[204][205][206][207][208][209][210][211][212]

The Communications Security Establishment Canada (CSEC) has been using a program called Olympia to map the communications of Brazil’s Mines and Energy Ministry by targeting the metadata of phone calls and emails to and from the ministry.[213][214]

The Australian Federal Government knew about the PRISM surveillance program months before Edward Snowden made details public.[215][216]

The NSA gathered hundreds of millions of contact lists from personal e-mail and instant messaging accounts around the world. The agency did not target individuals. Instead it collected contact lists in large numbers that amount to a sizable fraction of the world’s e-mail and instant messaging accounts. Analysis of that data enables the agency to search for hidden connections and to map relationships within a much smaller universe of foreign intelligence targets.[217][218][219][220]

The NSA monitored the public email account of former Mexican president Felipe Calderón (thus gaining access to the communications of high-ranking cabinet members), the emails of several high-ranking members of Mexico’s security forces and text and the mobile phone communication of current Mexican president Enrique Peña Nieto.[221][222] The NSA tries to gather cellular and landline phone numbers—often obtained from American diplomats—for as many foreign officials as possible. The contents of the phone calls are stored in computer databases that can regularly be searched using keywords.[223][224]

The NSA has been monitoring telephone conversations of 35 world leaders.[225] The U.S. government’s first public acknowledgment that it tapped the phones of world leaders was reported on October 28, 2013, by the Wall Street Journal after an internal U.S. government review turned up NSA monitoring of some 35 world leaders.[226]GCHQ has tried to keep its mass surveillance program a secret because it feared a “damaging public debate” on the scale of its activities which could lead to legal challenges against them.[227]

The Guardian revealed that the NSA had been monitoring telephone conversations of 35 world leaders after being given the numbers by an official in another U.S. government department. A confidential memo revealed that the NSA encouraged senior officials in such Departments as the White House, State and The Pentagon, to share their “Rolodexes” so the agency could add the telephone numbers of leading foreign politicians to their surveillance systems. Reacting to the news, German leader Angela Merkel, arriving in Brussels for an EU summit, accused the U.S. of a breach of trust, saying: “We need to have trust in our allies and partners, and this must now be established once again. I repeat that spying among friends is not at all acceptable against anyone, and that goes for every citizen in Germany.”[225] The NSA collected in 2010 data on ordinary Americans’ cellphone locations, but later discontinued it because it had no “operational value.”[228]

Under Britain’s MUSCULAR programme, the NSA and GCHQ have secretly broken into the main communications links that connect Yahoo and Googledata centers around the world and thereby gained the ability to collect metadata and content at will from hundreds of millions of user accounts.[229][230][231][232][233]

The mobile phone of German Chancellor Angela Merkel might have been tapped by U.S. intelligence.[234][235][236][237][238][239][240] According to the Spiegel this monitoring goes back to 2002[241][242][243] and ended in the summer of 2013,[226] while The New York Times reported that Germany has evidence that the NSA’s surveillance of Merkel began during George W. Bush‘s tenure.[244] After learning from Der Spiegel magazine that the NSA has been listening in to her personal mobile phone, Merkel compared the snooping practices of the NSA with those of the Stasi.[245] It was reported in March 2014, by Der Spiegel that Merkel had also been placed on an NSA surveillance list alongside 122 other world leaders.[246]

On October 31, 2013, Hans-Christian Ströbele, a member of the German Bundestag, met Snowden in Moscow and revealed the former intelligence contractor’s readiness to brief the German government on NSA spying.[247]

A highly sensitive signals intelligence collection program known as Stateroom involves the interception of radio, telecommunications and internet traffic. It is operated out of the diplomatic missions of the Five Eyes (Australia, Britain, Canada, New Zealand, United States) in numerous locations around the world. The program conducted at U.S. diplomatic missions is run in concert by the U.S. intelligence agencies NSA and CIA in a joint venture group called “Special Collection Service” (SCS), whose members work undercover in shielded areas of the American Embassies and Consulates, where they are officially accredited as diplomats and as such enjoy special privileges. Under diplomatic protection, they are able to look and listen unhindered. The SCS for example used the American Embassy near the Brandenburg Gate in Berlin to monitor communications in Germany’s government district with its parliament and the seat of the government.[240][248][249][250]

Under the Stateroom surveillance programme, Australia operates clandestine surveillance facilities to intercept phone calls and data across much of Asia.[249][251]

In France, the NSA targeted people belonging to the worlds of business, politics or French state administration. The NSA monitored and recorded the content of telephone communications and the history of the connections of each target i.e. the metadata.[252][253] The actual surveillance operation was performed by French intelligence agencies on behalf of the NSA.[63][254] The cooperation between France and the NSA was confirmed by the Director of the NSA, Keith B. Alexander, who asserted that foreign intelligence services collected phone records in “war zones” and “other areas outside their borders” and provided them to the NSA.[255]

The French newspaper Le Monde also disclosed new PRISM and Upstream slides (See Page 4, 7 and 8) coming from the “PRISM/US-984XN Overview” presentation.[256]

In Spain, the NSA intercepted the telephone conversations, text messages and emails of millions of Spaniards, and spied on members of the Spanish government.[257] Between December 10, 2012 and January 8, 2013, the NSA collected metadata on 60 million telephone calls in Spain.[258]

According to documents leaked by Snowden, the surveillance of Spanish citizens was jointly conducted by the NSA and the intelligence agencies of Spain.[259][260]

On October 4, 2013, The Washington Post published a powerpoint presentation leaked by Snowden, showing how the NSA had compromised the Tor encrypted network that is being employed by hundreds of thousands of people to circumvent “nation state internet policies”. By secretly exploiting a JavaScriptplug-in, the NSA was able to uncover the identities of various anonymous Internet users such as dissidents, terrorists, and other targets

November

The New York Times reported that the NSA carries out an eavesdropping effort, dubbed Operation Dreadnought, against the Iranian leader Ayatollah Ali Khamenei. During his 2009 visit to Iranian Kurdistan, the agency collaborated with GCHQ and the U.S.’s National Geospatial-Intelligence Agency, collecting radio transmissions between aircraft and airports, examining Khamenei’s convoy with satellite imagery, and enumerating military radar stations. According to the story, an objective of the operation is “communications fingerprinting”: the ability to distinguish Khamenei’s communications from those of other people in Iran.[261]

The same story revealed an operation code-named Ironavenger, in which the NSA intercepted e-mails sent between a country allied with the United States and the government of “an adversary”. The ally was conducting a spear-phishing attack: its e-mails contained malware. The NSA gathered documents and login credentials belonging to the enemy country, along with knowledge of the ally’s capabilities for attacking computers.[261]

According to the British newspaper The Independent, the British intelligence agency GCHQ maintains a listening post on the roof of the British Embassy in Berlin that is capable of intercepting mobile phone calls, wi-fi data and long-distance communications all over the German capital, including adjacent government buildings such as the Reichstag (seat of the German parliament) and the Chancellery (seat of Germany’s head of government) clustered around the Brandenburg Gate.[262]

Operating under the code-name “Quantum Insert”, GCHQ set up a fake website masquerading as LinkedIn, a social website used for professional networking, as part of its efforts to install surveillance software on the computers of the telecommunications operator Belgacom.[263][264][265] In addition, the headquarters of the oil cartel OPEC were infiltrated by GCHQ as well as the NSA, which bugged the computers of nine OPEC employees and monitored the General Secretary of OPEC.[263]

For more than three years GCHQ has been using an automated monitoring system code-named “Royal Concierge” to infiltrate the reservation systems of at least 350 upscale hotels in many different parts of the world in order to target, search and analyze reservations to detect diplomats and government officials.[266] First tested in 2010, the aim of the “Royal Concierge” is to track down the travel plans of diplomats, and it is often supplemented with surveillance methods related to human intelligence (HUMINT). Other covert operations include the wiretapping of room telephones and fax machines used in targeted hotels as well as the monitoring of computers hooked up to the hotel network.[266]

In November 2013, the Australian Broadcasting Corporation and The Guardian revealed that the Australian Signals Directorate (DSD) had attempted to listen to the private phone calls of the president of Indonesia and his wife. The Indonesian foreign minister, Marty Natalegawa, confirmed that he and the president had contacted the ambassador in Canberra. Natalegawa said any tapping of Indonesian politicians’ personal phones “violates every single decent and legal instrument I can think of—national in Indonesia, national in Australia, international as well”.[267]

Other high-ranking Indonesian politicians targeted by the DSD include:

Carrying the title “3G impact and update”, a classified presentation leaked by Snowden revealed the attempts of the ASD/DSD to keep up to pace with the rollout of 3G technology in Indonesia and across Southeast Asia. The ASD/DSD motto placed at the bottom of each page reads: “Reveal their secrets—protect our own.”[268]

Under a secret deal approved by British intelligence officials, the NSA has been storing and analyzing the internet and email records of UK citizens since 2007. The NSA also proposed in 2005 a procedure for spying on the citizens of the UK and other Five-Eyes nations alliance, even where the partner government has explicitly denied the U.S. permission to do so. Under the proposal, partner countries must neither be informed about this particular type of surveillance, nor the procedure of doing so.[39]

Towards the end of November, The New York Times released an internal NSA report outlining the agency’s efforts to expand its surveillance abilities.[269] The five-page document asserts that the law of the United States has not kept up with the needs of the NSA to conduct mass surveillance in the “golden age” of signals intelligence, but there are grounds for optimism because, in the NSA’s own words:

“The culture of compliance, which has allowed the American people to entrust NSA with extraordinary authorities, will not be compromised in the face of so many demands, even as we aggressively pursue legal authorities…”[270]

The report, titled “SIGINT Strategy 2012–2016″, also said that the U.S. will try to influence the “global commercial encryption market” through “commercial relationships”, and emphasized the need to “revolutionize” the analysis of its vast data collection to “radically increase operational impact”.[269]

On November 23, 2013, the Dutch newspaper NRC Handelsblad reported that the Netherlands was targeted by U.S. intelligence agencies in the immediate aftermath of World War II. This period of surveillance lasted from 1946 to 1968, and also included the interception of the communications of other European countries including Belgium, France, West Germany and Norway.[271] The Dutch Newspaper also reported that NSA infected more than 50,000 computer networks worldwide, often covertly, with malicious spy software, sometimes in cooperation with local authorities, designed to steal sensitive information.[42][272]

On November 23, 2013, the Dutch newspaper NRC Handelsblad released a top secret NSA presentation leaked by Snowden, showing five “Classes of Accesses” that the NSA uses in its worldwide signals intelligence operations.[42][272] These five “Classes of Accesses” are:

 3rd PARTY/LIAISON—refers to data provided by the international partners of the NSA. Within the framework of the UKUSA Agreement, these international partners are known as “third parties”.
 REGIONAL—refers to over 80 regional Special Collection Services (SCS). The SCS is a black budget program operated by the NSA and the CIA, with operations based in many cities such as Athens, Bangkok, Berlin, Brasília, Budapest, Frankfurt, Geneva, Lagos, Milan, New Delhi, Paris, Prague, Vienna, and Zagreb, and others, targeting Central America, the Arabian Peninsula, East Asia, and Continental Europe.
 CNE—an abbreviation for “Computer Network Exploitation“. It is performed by a special cyber-warfare unit of the NSA known as Tailored Access Operations (TAO), which infected over 50,000 computer networks worldwide with malicious software designed to steal sensitive information, and is mostly aimed at Brazil, China, Egypt, India, Mexico, Saudi Arabia, and parts of Eastern Europe
 LARGE CABLE—20 major points of accesses, many of them located within the United States
 FORNSAT—an abbreviation for “Foreign Satellite Collection”. It refers to intercepts from satellites that process data used by other countries such as Britain, Norway, Japan, and the Philippines.

December

According to the classified documents leaked by Snowden, the Australian Signals Directorate (ASD), formerly known as the Defence Signals Directorate, had offered to share intelligence information it had collected with the other intelligence agencies of the UKUSA Agreement. Data shared with foreign countries include “bulk, unselected, unminimised metadata” it had collected. The ASD provided such information on the condition that no Australian citizens were targeted. At the time the ASD assessed that “unintentional collection [of metadata of Australian nationals] is not viewed as a significant issue”. If a target was later identified as being an Australian national, the ASD was required to be contacted to ensure that a warrant could be sought. Consideration was given as to whether “medical, legal or religious information” would be automatically treated differently to other types of data, however a decision was made that each agency would make such determinations on a case-by-case basis.[273] Leaked material does not specify where the ASD had collected the intelligence information from, however Section 7(a) of the Intelligence Services Act 2001 (Commonwealth) states that the ASD’s role is “…to obtain intelligence about the capabilities, intentions or activities of people or organisations outside Australia…”.[274] As such, it is possible ASD’s metadata intelligence holdings was focused on foreign intelligence collection and was within the bounds of Australian law.

The Washington Post revealed that the NSA has been tracking the locations of mobile phones from all over the world by tapping into the cables that connect mobile networks globally and that serve U.S. cellphones as well as foreign ones. In the process of doing so, the NSA collects more than five billion records of phone locations on a daily basis. This enables NSA analysts to map cellphone owners’ relationships by correlating their patterns of movement over time with thousands or millions of other phone users who cross their paths.[275][276][277][278][279][280][281][282]

The Washington Post also reported that both GCHQ and the NSA make use of location data and advertising tracking files generated through normal internet browsing (with cookies operated by Google, known as “Pref”) to pinpoint targets for government hacking and to bolster surveillance.[283][284][285]

The Norwegian Intelligence Service (NIS), which cooperates with the NSA, has gained access to Russian targets in the Kola Peninsula and other civilian targets. In general, the NIS provides information to the NSA about “Politicians”, “Energy” and “Armament”.[286] A top secret memo of the NSA lists the following years as milestones of the Norway–United States of America SIGINT agreement, or NORUS Agreement:

The NSA considers the NIS to be one of its most reliable partners. Both agencies also cooperate to crack the encryption systems of mutual targets. According to the NSA, Norway has made no objections to its requests from the NIS.[287]

On December 5, Sveriges Television reported the National Defence Radio Establishment (FRA) has been conducting a clandestine surveillance operation in Sweden, targeting the internal politics of Russia. The operation was conducted on behalf of the NSA, receiving data handed over to it by the FRA.[288][289] The Swedish-American surveillance operation also targeted Russian energy interests as well as the Baltic states.[290] As part of the UKUSA Agreement, a secret treaty was signed in 1954 by Sweden with the United States, the United Kingdom, Canada, Australia and New Zealand, regarding collaboration and intelligence sharing.[291]

As a result of Snowden’s disclosures, the notion of Swedish neutrality in international politics was called into question.[citation needed] In an internal document dating from the year 2006, the NSA acknowledged that its “relationship” with Sweden is “protected at the TOP SECRET level because of that nation’s political neutrality.”[292] Specific details of Sweden’s cooperation with members of the UKUSA Agreement include:

  • The FRA has been granted access to XKeyscore, an analytical database of the NSA.[293]
  • Sweden updated the NSA on changes in Swedish legislation that provided the legal framework for information sharing between the FRA and the Swedish Security Service.[52]
  • Since January 2013, a counterterrorism analyst of the NSA has been stationed in the Swedish capital of Stockholm[52]
  • The NSA, GCHQ and the FRA signed an agreement in 2004 that allows the FRA to directly collaborate with the NSA without having to consult GCHQ.[52] About five years later, the Riksdag passed a controversial legislative change, briefly allowing the FRA to monitor both wireless and cable bound signals passing the Swedish border without a court order,[294] while also introducing several provisions designed to protect the privacy of individuals, according to the original proposal.[295] This legislation was amended 11 months later,[296] in an effort to strengthen protection of privacy by making court orders a requirement, and by imposing several limits on the intelligence-gathering.[297][298][299]

According to documents leaked by Snowden, the Special Source Operations of the NSA has been sharing information containing “logins, cookies, and GooglePREFID” with the Tailored Access Operations division of the NSA, as well as Britain’s GCHQ agency.[300]

During the 2010 G-20 Toronto summit, the U.S. embassy in Ottawa was transformed into a security command post during a six-day spying operation that was conducted by the NSA and closely coordinated with the Communications Security Establishment Canada (CSEC). The goal of the spying operation was, among others, to obtain information on international development, banking reform, and to counter trade protectionism to support “U.S. policy goals.”[301] On behalf of the NSA, the CSEC has set up covert spying posts in 20 countries around the world.[10]

In Italy the Special Collection Service of the NSA maintains two separate surveillance posts in Rome and Milan.[302] According to a secret NSA memo dated September 2010, the Italian embassy in Washington, D.C. has been targeted by two spy operations of the NSA:

  • Under the codename “Bruneau”, which refers to mission “Lifesaver”, the NSA sucks out all the information stored in the embassy’s computers and creates electronic images of hard disk drives.[302]
  • Under the codename “Hemlock”, which refers to mission “Highlands”, the NSA gains access to the embassy’s communications through physical “implants”.[302]

Due to concerns that terrorist or criminal networks may be secretly communicating via computer games, the NSA, GCHQ, CIA, and FBI have been conducting surveillance and scooping up data from the networks of many online games, including massively multiplayer online role-playing games (MMORPGs) such as World of Warcraft, as well as virtual worlds such as Second Life, and the Xbox gaming console.[303][304][305][306]

The NSA has cracked the most commonly used cellphone encryption technology, A5/1. According to a classified document leaked by Snowden, the agency can “process encrypted A5/1” even when it has not acquired an encryption key.[307] In addition, the NSA uses various types of cellphone infrastructure, such as the links between carrier networks, to determine the location of a cellphone user tracked by Visitor Location Registers.[308]

US district court judge for the District of Columbia, Richard Leon, declared[309][310][311][312][313][314] on December 16, 2013, that the mass collection of metadata of Americans’ telephone records by the National Security Agency probably violates the fourth amendment prohibition of unreasonable searches and seizures.[315] Leon granted the request for a preliminary injunction that blocks the collection of phone data for two private plaintiffs (Larry Klayman, a conservative lawyer, and Charles Strange, father of a cryptologist killed in Afghanistan when his helicopter was shot down in 2011)[316] and ordered the government to destroy any of their records that have been gathered. But the judge stayed action on his ruling pending a government appeal, recognizing in his 68-page opinion the “significant national security interests at stake in this case and the novelty of the constitutional issues.”[315]

However federal judge William H. Pauley III in New York City ruled[317] the U.S. government’s global telephone data-gathering system is needed to thwart potential terrorist attacks, and that it can only work if everyone’s calls are swept in. U.S. District Judge Pauley also ruled that Congress legally set up the program and that it does not violate anyone’s constitutional rights. The judge also concluded that the telephone data being swept up by NSA did not belong to telephone users, but to the telephone companies. He further ruled that when NSA obtains such data from the telephone companies, and then probes into it to find links between callers and potential terrorists, this further use of the data was not even a search under the Fourth Amendment. He also concluded that the controlling precedent is Smith v. Maryland: “Smith’s bedrock holding is that an individual has no legitimate expectation of privacy in information provided to third parties,” Judge Pauley wrote.[318][319][320][321] The American Civil Liberties Union declared on January 2, 2012 that it will appeal Judge Pauley’s ruling that NSA bulk the phone record collection is legal. “The government has a legitimate interest in tracking the associations of suspected terrorists, but tracking those associations does not require the government to subject every citizen to permanent surveillance,” deputy ACLU legal director Jameel Jaffer said in a statement.[322]

In recent years, American and British intelligence agencies conducted surveillance on more than 1,100 targets, including the office of an Israeli prime minister, heads of international aid organizations, foreign energy companies and a European Union official involved in antitrust battles with American technology businesses.[323]

A catalog of high-tech gadgets and software developed by the NSA’sTailored Access Operations (TAO) was leaked by the German news magazine Der Spiegel.[324] Dating from 2008, the catalog revealed the existence of special gadgets modified to capture computer screenshots and USB flash drives secretly fitted with radio transmitters to broadcast stolen data over the airwaves, and fake base stations intended to intercept mobile phone signals, as well as many other secret devices and software implants listed here:

The Tailored Access Operations (TAO) division of the NSA intercepted the shipping deliveries of computers and laptops in order to install spyware and physical implants on electronic gadgets. This was done in close cooperation with the FBI and the CIA.[324][325][326][327][328][329][330] NSA officials responded to the Spiegel reports with a statement, which said: “Tailored Access Operations is a unique national asset that is on the front lines of enabling NSA to defend the nation and its allies. [TAO’s] work is centred on computer network exploitation in support of foreign intelligence collection.”[331]

In a separate disclosure unrelated to Snowden, the French Trésor public, which runs a certificate authority, was found to have issued fake certificates impersonating Google in order to facilitate spying on French government employees via man-in-the-middle attacks.[332]

On December 4, 2013, The Washington Post released an internal NSA chart illustrating the extent of the agency’s mass collection of mobile phone location records, which amounts to about five billion on a daily basis.[275] The records are stored in a huge database known as FASCIA, which received over 27 terabytes of location data within seven months.[333]

2014

January

The NSA is working to build a powerful quantum computer capable of breaking all types of encryption.[334][335][336][337][338] The effort is part of a US$79.7 million research program known as “Penetrating Hard Targets”. It involves extensive research carried out in large, shielded rooms known as Faraday cages, which are designed to prevent electromagnetic radiation from entering or leaving.[335] Currently, the NSA is close to producing basic building blocks that will allow the agency to gain “complete quantum control on two semiconductorqubits“.[335] Once a quantum computer is successfully built, it would enable the NSA to unlock the encryption that protects data held by banks, credit card companies, retailers, brokerages, governments and health care providers.[334]

According to The New York Times, the NSA is monitoring approximately 100,000 computers worldwide with spy software named Quantum. Quantum enables the NSA to conduct surveillance on those computers on the one hand, and can also create a digital highway for launching cyberattacks on the other hand. Among the targets are the Chinese and Russian military, but also trade institutions within the European Union. The NYT also reported that the NSA can access and alter computers which are not connected with the internet by a secret technology in use by the NSA since 2008. The prerequisite is the physical insertion of the radio frequency hardware by a spy, a manufacturer or an unwitting user. The technology relies on a covert channel of radio waves that can be transmitted from tiny circuit boards and USB cards inserted surreptitiously into the computers. In some cases, they are sent to a briefcase-size relay station that intelligence agencies can set up miles away from the target. The technology can also transmit malware back to the infected computer.[42]

Channel 4 and The Guardian revealed the existence of Dishfire, a massive database of the NSA that collects hundreds of millions of text messages on a daily basis.[339] GCHQ has been given full access to the database, which it uses to obtain personal information of Britons by exploiting a legal loophole.[340]

Each day, the database receives and stores the following amounts of data:

  • Geolocation data of more than 76,000 text messages and other travel information[341]
  • Over 110,000 names, gathered from electronic business cards[341]
  • Over 800,000 financial transactions that are either gathered from text-to-text payments or by linking credit cards to phone users[341]
  • Details of 1.6 million border crossings based on the interception of network roaming alerts[341]
  • Over 5 million missed call alerts[341]
  • About 200 million text messages from around the world[339]

The database is supplemented with an analytical tool known as the Prefer program, which processes SMS messages to extract other types of information including contacts from missed call alerts.[341]

The Privacy and Civil Liberties Oversight Board report on mass surveillance was released on January 23, 2014. It recommends to end the bulk telephone metadata, i.e., bulk phone records – phone numbers dialed, call times and durations, but not call content collection – collection program, to create a “Special Advocate” to be involved in some cases before the FISA court judge and to release future and past FISC decisions “that involve novel interpretations of FISA or other significant questions of law, technology or compliance.”[342][343][344]

According to a joint disclosure by The New York Times, The Guardian, and ProPublica,[345][346][347][348][349] the NSA and GCHQ have begun working together to collect and store data from dozens of smartphoneapplication software by 2007 at the latest. A 2008 GCHQ report, leaked by Snowden asserts that “anyone using Google Maps on a smartphone is working in support of a GCHQ system”. The NSA and GCHQ have traded recipes for various purposes such as grabbing location data and journey plans that are made when a target uses Google Maps, and vacuuming up address books, buddy lists, phone logs and geographic data embedded in photos posted on the mobile versions of numerous social networks such as Facebook, Flickr, LinkedIn, Twitter and other services. In a separate 20-page report dated 2012, GCHQ cited the popular smartphone game “Angry Birds” as an example of how an application could be used to extract user data. Taken together, such forms of data collection would allow the agencies to collect vital information about a user’s life, including his or her home country, current location (through geolocation), age, gender, ZIP code, marital status, income, ethnicity, sexual orientation, education level, number of children, etc.[350][351]

A GCHQ document dated August 2012 provided details of the Squeaky Dolphin surveillance program, which enables GCHQ to conduct broad, real-time monitoring of various social media features and social media traffic such as YouTube video views, the Like button on Facebook, and Blogspot/Blogger visits without the knowledge or consent of the companies providing those social media features. The agency’s “Squeaky Dolphin” program can collect, analyze and utilize YouTube, Facebook and Blogger data in specific situations in real time for analysis purposes. The program also collects the addresses from the billions of videos watched daily as well as some user information for analysis purposes.[352][353][354]

During the 2009 United Nations Climate Change Conference in Copenhagen, the NSA and its Five Eyes partners monitored the communications of delegates of numerous countries. This was done to give their own policymakers a negotiating advantage.[355][356]

The Communications Security Establishment Canada (CSEC) has been tracking Canadian air passengers via free Wi-Fi services at a major Canadian airport. Passengers who exited the airport terminal continued to be tracked as they showed up at other Wi-Fi locations across Canada. In a CSEC document dated May 2012, the agency described how it had gained access to two communications systems with over 300,000 users in order to pinpoint a specific imaginary target. The operation was executed on behalf of the NSA as a trial run to test a new technology capable of tracking down “any target that makes occasional forays into other cities/regions.” This technology was subsequently shared with Canada’s Five Eyes partners – Australia, New Zealand, Britain, and the United States.[357][358][359][360]

On January 27, 2014, The New York Times released[347] an internal NSA document from a 2010 meeting that details the extent of the agency’s surveillance on smartphones. Data collected include phone settings, network connections, Web browsing history, buddy lists, downloaded documents, encryption usage, and user agents. Notice the following line of text at the bottom – “TOP SECRET//COMINT//REL TO USA, FVEY” – which is used to indicated that this top secret document is related to communications intelligence (COMINT), and can be accessed by the USA and its Five Eyes (FVEY) partners in Australia, Britain, Canada, and New Zealand

February

According to research by Süddeutsche Zeitung and TV network NDR the mobile phone of former German chancellor Gerhard Schröder was monitored from 2002 onwards, reportedly because of his government’s opposition to military intervention in Iraq. The source of the latest information is a document leaked by Edward Snowden. The document, containing information about the National Sigint Requirement List (NSRL), had previously been interpreted as referring only to Angela Merkel‘s mobile. However Süddeutsche Zeitung and NDR claim to have confirmation from NSA insiders that the surveillance authorisation pertains not to the individual, but the political post – which in 2002 was still held by Schröder. According to research by the two media outlets, Schröder was placed as number 388 on the list, which contains the names of persons and institutions to be put under surveillance by the NSA.[361][362][363][364]

GCHQ launched a cyber-attack on the activist network “Anonymous“, using denial-of-service attack (DoS) to shut down a chatroom frequented by the network’s members and to spy on them. The attack, dubbed Rolling Thunder, was conducted by a GCHQ unit known as the Joint Threat Research Intelligence Group (JTRIG). The unit successfully uncovered the true identities of several Anonymous members.[365][366][367][368]

The NSA Section 215 bulk telephony metadata program which seeks to stockpile records on all calls made in the U.S. is collecting less than 30 percent of all Americans’ call records because of an inability to keep pace with the explosion in cellphone use according to the Washington Post. The controversial program permits the NSA after a warrant granted by the secret Foreign Intelligence Surveillance Court to record numbers, length and location of every call from the participating carriers.[369][370]

The Intercept reported that the U.S. government is using primarily NSA surveillance to target people for drone strikes overseas. In its report The Intercept author detail the flawed methods which are used to locate targets for lethal drone strikes, resulting in the deaths of innocent people.[371] According to the Washington Post NSA analysts and collectors i.e. NSA personnel which controls electronic surveillance equipment use the NSA’s sophisticated surveillance capabilities to track individual targets geographically and in real time, while drones and tactical units aimed their weaponry against those targets to take them out.[372]

An unnamed US law firm, reported to be Mayer Brown, was targeted by Australia’s ASD. According to Snowden’s documents, the ASD had offered to hand over these intercepted communications to the NSA. This allowed government authorities to be “able to continue to cover the talks, providing highly useful intelligence for interested US customers”.[373][374]

NSA and GCHQ documents revealed that the anti-secrecy organization WikiLeaks and other activist groups were targeted for government surveillance and criminal prosecution. In particular, the IP addresses of visitors to WikiLeaks were collected in real time, and the US government urged its allies to file criminal charges against the founder of WikiLeaks, Julian Assange, due to his organization’s publication of the Afghanistan war logs. The WikiLeaks organization was designated as a “malicious foreign actor”.[375]

Quoting an unnamed NSA official in Germany, Bild am Sonntag reported that whilst President Obama’s order to stop spying on Merkel was being obeyed, the focus had shifted to bugging other leading government and business figures including Interior Minister Thomas de Maiziere, a close confidant of Merkel. Caitlin Hayden, a security adviser to President Obama, was quoted in the newspaper report as saying, “The US has made clear it gathers intelligence in exactly the same way as any other states.”[376][377]

The Intercept reveals that government agencies are infiltrating online communities and engaging in “false flag operations” to discredit targets among them people who have nothing to do with terrorism or national security threats. The two main tactics that are currently used are the injection of all sorts of false material onto the internet in order to destroy the reputation of its targets; and the use of social sciences and other techniques to manipulate online discourse and activism to generate outcomes it considers desirable.[378][379][380][381]

The Guardian reported that Britain’s surveillance agency GCHQ, with aid from the National Security Agency, intercepted and stored the webcam images of millions of internet users not suspected of wrongdoing. The surveillance program codenamed Optic Nerve collected still images of Yahoo webcam chats (one image every five minutes) in bulk and saved them to agency databases. The agency discovered “that a surprising number of people use webcam conversations to show intimate parts of their body to the other person”, estimating that between 3% and 11% of the Yahoo webcam imagery harvested by GCHQ contains “undesirable nudity”.[382]

March

The NSA has built an infrastructure which enables it to covertly hack into computers on a mass scale by using automated systems that reduce the level of human oversight in the process. The NSA relies on an automated system codenamed TURBINE which in essence enables the automated management and control of a large network of implants (a form of remotely transmitted malware on selected individual computer devices or in bulk on tens of thousands of devices). As quoted by The Intercept, TURBINE is designed to “allow the current implant network to scale to large size (millions of implants) by creating a system that does automated control implants by groups instead of individually.”[383] The NSA has shared many of its files on the use of implants with its counterparts in the so-called Five Eyes surveillance alliance – the United Kingdom, Canada, New Zealand, and Australia.

Among other things due to TURBINE and its control over the implants the NSA is capable of:

  • breaking into targeted computers and to siphoning out data from foreign Internet and phone networks
  • infecting a target’s computer and exfiltrating files from a hard drive
  • covertly recording audio from a computer’s microphone and taking snapshots with its webcam
  • launching cyberattacks by corrupting and disrupting file downloads or denying access to websites
  • exfiltrating data from removable flash drives that connect to an infected computer

The TURBINE implants are linked to, and relies upon, a large network of clandestine surveillance “sensors” that the NSA has installed at locations across the world, including the agency’s headquarters in Maryland and eavesdropping bases used by the agency in Misawa, Japan and Menwith Hill, England. Codenamed as TURMOIL, the sensors operate as a sort of high-tech surveillance dragnet, monitoring packets of data as they are sent across the Internet. When TURBINE implants exfiltrate data from infected computer systems, the TURMOIL sensors automatically identify the data and return it to the NSA for analysis. And when targets are communicating, the TURMOIL system can be used to send alerts or “tips” to TURBINE, enabling the initiation of a malware attack. To identify surveillance targets, the NSA uses a series of data “selectors” as they flow across Internet cables. These selectors can include email addresses, IP addresses, or the unique “cookies” containing a username or other identifying information that are sent to a user’s computer by websites such as Google, Facebook, Hotmail, Yahoo, and Twitter, unique Google advertising cookies that track browsing habits, unique encryption key fingerprints that can be traced to a specific user, and computer IDs that are sent across the Internet when a Windows computer crashes or updates.[383][384][385][386][387][388][389][390][391][392][393][394][395][396][397][398]

The CIA was accused by U.S. Senate Intelligence Committee Chairwoman Dianne Feinstein of spying on a stand-alone computer network established for the committee in its investigation of allegations of CIA abuse in a George W. Bush-era detention and interrogation program.[399]

A voice interception program codenamed MYSTIC began in 2009. Along with RETRO, short for “retrospective retrieval” (RETRO is voice audio recording buffer that allows retrieval of captured content up to 30 days into the past), the MYSTIC program is capable of recording “100 percent” of a foreign country’s telephone calls, enabling the NSA to rewind and review conversations up to 30 days and the relating metadata. With the capability to store up to 30 days of recorded conversations MYSTIC enables the NSA to pull an instant history of the person’s movements, associates and plans.[400][401][402][403][404][405]

On March 21, Le Monde published slides from an internal presentation of the Communications Security Establishment Canada, which attributed a piece of malicious software to French intelligence. The CSEC presentation concluded that the list of malware victims matched French intelligence priorities and found French cultural reference in the malware’s code, including the name Babar, a popular French children’s character, and the developer name “Titi”.[406]

The French telecommunications corporation Orange S.A. shares its call data with the French intelligence agency DGSE, which hands over the intercepted data to GCHQ.[407]

The NSA has spied on the Chinese technology company Huawei.[408][409][410] Huawei is a leading manufacturer of smartphones, tablets, mobile phone infrastructure, and WLAN routers and installs fiber optic cable. According to Der Spiegel this “kind of technology […] is decisive in the NSA’s battle for data supremacy.”[411] The NSA, in an operation named “Shotgiant”, was able to access Huawei’s email archive and the source code for Huawei’s communications products.[411] The US government has had longstanding concerns that Huawei may not be independent of the People’s Liberation Army and that the Chinese government might use equipment manufactured by Huawei to conduct cyberespionage or cyberwarfare. The goals of the NSA operation were to assess the relationship between Huawei and the PLA, to learn more the Chinese government’s plans and to use information from Huawei to spy on Huawei’s customers, including Iran, Afghanistan, Pakistan, Kenya, and Cuba. Former Chinese President Hu Jintao, the Chinese Trade Ministry, banks, as well as telecommunications companies were also targeted by the NSA.[408][411]

The Intercept published a document of an NSA employee discussing how to build a database of IP addresses, webmail, and Facebook accounts associated with system administrators so that the NSA can gain access to the networks and systems they administer.[412][413]

At the end of March 2014, Der Spiegel and The Intercept published, based on a series of classified files from the archive provided to reporters by NSA whistleblower Edward Snowden, articles related to espionage efforts by GCHQ and NSA in Germany.[414][415] The British GCHQ targeted three German internet firms for information about Internet traffic passing through internet exchange points, important customers of the German internet providers, their technology suppliers as well as future technical trends in their business sector and company employees.[414][415] The NSA was granted by the Foreign Intelligence Surveillance Court the authority for blanket surveillance of Germany, its people and institutions, regardless whether those affected are suspected of having committed an offense or not, without an individualized court order specifying on March 7, 2013.[415] In addition Germany’s chancellor Angela Merkel was listed in a surveillance search machine and database named Nymrod along with 121 others foreign leaders.[414][415] As The Intercept wrote: “The NSA uses the Nymrod system to ‘find information relating to targets that would otherwise be tough to track down,’ according to internal NSA documents. Nymrod sifts through secret reports based on intercepted communications as well as full transcripts of faxes, phone calls, and communications collected from computer systems. More than 300 ‘cites’ for Merkel are listed as available in intelligence reports and transcripts for NSA operatives to read.”[414]

April

Towards the end of April, Edward Snowden said that the United States surveillance agencies spy on Americans more than anyone else in the world, contrary to anything that has been said by the government up until this point.[416]

May

An article published by Ars Technica shows NSA’s Tailored Access Operations (TAO) employees intercepting a Cisco router.[417]

The Intercept and WikiLeaks revealed information about which countries were having their communications collected as part of the MYSTIC surveillance program. On May 19, The Intercept reported that the NSA is recording and archiving nearly every cell phone conversation in the Bahamas with a system called SOMALGET, a subprogram of MYSTIC. The mass surveillance has been occurring without the Bahamian government’s permission.[418] Aside from the Bahamas, The Intercept reported NSA interception of cell phone metadata in Kenya, the Philippines, Mexico and a fifth country it did not name due to “credible concerns that doing so could lead to increased violence.” WikiLeaks released a statement on May 23 claiming that Afghanistan was the unnamed nation.[419]

In a statement responding to the revelations, the NSA said “the implication that NSA’s foreign intelligence collection is arbitrary and unconstrained is false.”[418]

Through its global surveillance operations the NSA exploits the flood of images included in emails, text messages, social media, videoconferences and other communications to harvest millions of images. These images are then used by the NSA in sophisticated facial recognition programs to track suspected terrorists and other intelligence targets.[420]

June

Vodafone revealed that there were secret wires that allowed government agencies direct access to their networks.[421] This access does not require warrants and the direct access wire is often equipment in a locked room.[421] In six countries where Vodafone operates, the law requires telecommunication companies to install such access or allows governments to do so.[421] Vodafone did not name these countries in case some governments retaliated by imprisoning their staff.[421]Shami Chakrabarti of Liberty said “For governments to access phone calls at the flick of a switch is unprecedented and terrifying. Snowden revealed the internet was already treated as fair game. Bluster that all is well is wearing pretty thin – our analogue laws need a digital overhaul.”[421] Vodafone published its first Law Enforcement Disclosure Report on June 6, 2014.[421] Vodafone group privacy officer Stephen Deadman said “These pipes exist, the direct access model exists. We are making a call to end direct access as a means of government agencies obtaining people’s communication data. Without an official warrant, there is no external visibility. If we receive a demand we can push back against the agency. The fact that a government has to issue a piece of paper is an important constraint on how powers are used.”[421] Gus Hosein, director of Privacy International said “I never thought the telcos would be so complicit. It’s a brave step by Vodafone and hopefully the other telcos will become more brave with disclosure, but what we need is for them to be braver about fighting back against the illegal requests and the laws themselves.”[421]

Above-top-secret documentation of a covert surveillance program named Overseas Processing Centre 1 (OPC-1) (codenamed “CIRCUIT”) by GCHQ was published by The Register. Based on documents leaked by Edward Snowden, GCHQ taps into undersea fiber optic cables via secret spy bases near the Strait of Hormuz and Yemen. BT and Vodafone are implicated.[422]

The Danish newspaper Dagbladet Information and The Intercept revealed on June 19, 2014, the NSA mass surveillance program codenamed RAMPART-A. Under RAMPART-A, ‘third party’ countries tap into fiber optic cables carrying the majority of the world’s electronic communications and are secretly allowing the NSA to install surveillance equipment on these fiber-optic cables. The foreign partners of the NSA turn massive amounts of data like the content of phone calls, faxes, e-mails, internet chats, data from virtual private networks, and calls made using Voice over IP software like Skype over to the NSA. In return these partners receive access to the NSA’s sophisticated surveillance equipment so that they too can spy on the mass of data that flows in and out of their territory. Among the partners participating in the NSA mass surveillance program are Denmark and Germany.[423][424][425]

July

During the week of July 4, a 31-year-old male employee of Germany‘s intelligence service BND was arrested on suspicion of spying for the United States. The employee is suspected of spying on the German Parliamentary Committee investigating the NSA spying scandal.[426]

Former NSA official and whistleblower William Binney spoke at a Centre for Investigative Journalism conference in London. According to Binney, “at least 80% of all audio calls, not just metadata, are recorded and stored in the US. The NSA lies about what it stores.” He also stated that the majority of fiber optic cables run through the U.S., which “is no accident and allows the US to view all communication coming in.”[427]

The Washington Post released a review of a cache provided by Snowden containing roughly 160,000 text messages and e-mails intercepted by the NSA between 2009 and 2012. The newspaper concluded that nine out of ten account holders whose conversations were recorded by the agency “were not the intended surveillance targets but were caught in a net the agency had cast for somebody else.” In its analysis, The Post also noted that many of the account holders were Americans.[428]

On July 9, a soldier working within Germany’s Federal Ministry of Defence (BMVg) fell under suspicion of spying for the United States.[429] As a result of the July 4 case and this one, the German government expelled the CIA station chief in Germany on July 17.[430]

On July 18, former State Department official John Tye released an editorial in The Washington Post, highlighting concerns over data collection under Executive Order 12333. Tye’s concerns are rooted in classified material he had access to through the State Department, though he has not publicly released any classified materials.[431]

August

The Intercept reported that the NSA is “secretly providing data to nearly two dozen U.S. government agencies with a ‘Google-like’ search engine” called ICREACH. The database, The Intercept reported, is accessible to domestic law enforcement agencies including the FBI and the Drug Enforcement Administration and was built to contain more than 850 billion metadata records about phone calls, emails, cellphone locations, and text messages.[432][433]

2015

February

Based on documents obtained from Snowden, The Intercept reported that the NSA and GCHQ had broken into the internal computer network of Gemalto and stolen the encryption keys that are used in SIM cards no later than 2010. As of 2015, the company is the world’s largest manufacturer of SIM cards, making about two billion cards a year. With the keys, the intelligence agencies could eavesdrop on cell phones without the knowledge of mobile phone operators or foreign governments.[434]

March

The New Zealand Herald, in partnership with The Intercept, revealed that the New Zealand government used XKeyscore to spy on candidates for the position of World Trade Organization director general[435] and also members of the Solomon Islands government.[436]

April

In January 2015, the DEA revealed that it had been collecting metadata records for all telephone calls made by Americans to 116 countries linked to drug trafficking. The DEA’s program was separate from the telephony metadata programs run by the NSA.[437] In April, USA Today reported that the DEA’s data collection program began in 1992 and included all telephone calls between the United States and from Canada and Mexico. Current and former DEA officials described the program as the precursor of the NSA’s similar programs.[438] The DEA said its program was suspended in September 2013, after a review of the NSA’s programs and that it was “ultimately terminated.”[437]

2016

January

August

Reaction

Reactions of citizens

The disclosure provided impetus for the creation of social movements against mass surveillance, such as Restore the Fourth, and actions like Stop Watching Us and The Day We Fight Back. On the legal front, the Electronic Frontier Foundation joined a coalition of diverse groups filing suit against the NSA. Several human rights organizations have urged the Obama administration not to prosecute, but protect, “whistleblower Snowden”: Amnesty International, Human Rights Watch, Transparency International, and the Index on Censorship, among others.[442][443][444][445] On the economic front, several consumer surveys registered a drop in online shopping and banking activity as a result of the Snowden revelations.[446]

Reactions of political leaders

United States

File:US President Barack Obama, surveillance activities, June 2013.ogv

On June 7, 2013, President Obama emphasized the importance of surveillance to prevent terrorist attacks

Domestically, President Barack Obama claimed that there is “no spying on Americans”,[447][448] and White House Press Secretary Jay Carney asserted that the surveillance programs revealed by Snowden have been authorized by Congress.[449]

On the international front, U.S. Attorney General Eric Holder stated that “we cannot target even foreign persons overseas without a valid foreign intelligence purpose.”[450]

United Kingdom

Prime Minister David Cameron warned journalists that “if they don’t demonstrate some social responsibility it will be very difficult for government to stand back and not to act.”[451]Deputy Prime MinisterNick Clegg emphasized that the media should “absolutely defend the principle of secrecy for the intelligence agencies”.[452]

Foreign Secretary William Hague claimed that “we take great care to balance individual privacy with our duty to safeguard the public and UK national security.”[453] Hague defended the Five Eyes alliance and reiterated that the British-U.S. intelligence relationship must not be endangered because it “saved many lives”.[454]

Australia

Former Prime Minister Tony Abbott stated that “every Australian governmental agency, every Australian official at home and abroad, operates in accordance with the law”.[455] Abbott criticized the Australian Broadcasting Corporation for being unpatriotic due to its reporting on the documents provided by Snowden, whom Abbott described as a “traitor”.[456][457] Foreign Minister Julie Bishop also denounced Snowden as a traitor and accused him of “unprecedented” treachery.[458] Bishop defended the Five Eyes alliance and reiterated that the Australian–U.S. intelligence relationship must not be endangered because it “saves lives”.[459]

Germany

Lawyers and judges protest boundless monitoring at PRISM debate in Germany, 18 November 2013

In July 2013, Chancellor Angela Merkel defended the surveillance practices of the NSA, and described the United States as “our truest ally throughout the decades”.[460][461] After the NSA’s surveillance on Merkel was revealed, however, the Chancellor compared the NSA with the Stasi.[462] According to The Guardian, Berlin is using the controversy over NSA spying as leverage to enter the exclusive Five Eyes alliance.[463]

Interior Minister Hans-Peter Friedrich stated that “the Americans take our data privacy concerns seriously.”[464] Testifying before the German Parliament, Friedrich defended the NSA’s surveillance, and cited five terrorist plots on German soil that were prevented because of the NSA.[465] However, in April 2014, another German interior minister criticized the United States for failing to provide sufficient assurances to Germany that it had reined in its spying tactics. Thomas de Maiziere, a close ally of Merkel, told Der Spiegel: “U.S. intelligence methods may be justified to a large extent by security needs, but the tactics are excessive and over-the-top.”[466]

Sweden

Minister for Foreign AffairsCarl Bildt, defended the FRA and described its surveillance practices as a “national necessity”.[467]Minister for DefenceKarin Enström said that Sweden’s intelligence exchange with other countries is “critical for our security” and that “intelligence operations occur within a framework with clear legislation, strict controls and under parliamentary oversight.”[468][469]

Netherlands

Interior Minister Ronald Plasterk apologized for incorrectly claiming that the NSA had collected 1.8 million records of metadata in the Netherlands. Plasterk acknowledged that it was in fact Dutch intelligence services who collected the records and transferred them to the NSA.[470][471]

Denmark

The Danish Prime Minister Helle Thorning-Schmidt has praised the American intelligence agencies, claiming they have prevented terrorist attacks in Denmark, and expressed her personal belief that the Danish people “should be grateful” for the Americans’ surveillance.[472] She has later claimed that the Danish authorities have no basis for assuming that American intelligence agencies have performed illegal spying activities towards Denmark or Danish interests.[473]

Review of intelligence agencies

Germany

In July 2013, the German government announced an extensive review of Germany’s intelligence services.[474][475]

United States

In August 2013, the U.S. government announced an extensive review of U.S. intelligence services.[476][477]

United Kingdom

In October 2013, the British government announced an extensive review of British intelligence services.[478]

Canada

In December 2013, the Canadian government announced an extensive review of Canada’s intelligence services.[479]

Criticism

In January 2014, U.S. President Barack Obama said that “the sensational way in which these disclosures have come out has often shed more heat than light”[23] and critics such as Sean Wilentz claimed that “the NSA has acted far more responsibly than the claims made by the leakers and publicized by the press.” In Wilentz’ view “The leakers have gone far beyond justifiably blowing the whistle on abusive programs. In addition to their alarmism about [U.S.] domestic surveillance, many of the Snowden documents released thus far have had nothing whatsoever to do with domestic surveillance.”[24]Edward Lucas, former Moscow bureau chief for The Economist, agreed, asserting that “Snowden’s revelations neatly and suspiciously fits the interests of one country: Russia” and citing Masha Gessen‘s statement that “The Russian propaganda machine has not gotten this much mileage out of a US citizen since Angela Davis‘s murder trial in 1971.”[480]

Bob Cesca objected to The New York Times failing to redact the name of an NSA employee and the specific location where an al Qaeda group was being targeted in a series of slides the paper made publicly available.[481]

Russian journalist Andrei Soldatov argued that Snowden’s revelations had had negative consequences for internet freedom in Russia, as Russian authorities increased their own surveillance and regulation on the pretext of protecting the privacy of Russian users. Snowden’s name was invoked by Russian legislators who supported measures forcing platforms such as Google, Facebook, Twitter and Gmail and YouTube to locate their servers on Russian soil or install SORM black boxes on their servers so that Russian authorities could control them.[482] Soldatov also contended that as a result of the disclosures, international support for having national governments take over the powers of the organizations involved in coordinating the Internet’s global architectures had grown, which could lead to a Balkanization of the Internet that restricted free access to information.[483] The Montevideo Statement on the Future of Internet Cooperation issued in October 2013, by ICANN and other organizations warned against “Internet fragmentation at a national level” and expressed “strong concern over the undermining of the trust and confidence of Internet users globally due to recent revelations”.[484]

In late 2014, Freedom House said “[s]ome states are using the revelations of widespread surveillance by the U.S. National Security Agency (NSA) as an excuse to augment their own monitoring capabilities, frequently with little or no oversight, and often aimed at the political opposition and human rights activists.”[485]

Gallery

Comparison with other leaks

Year Disclosure Size Main source(s) Major publisher(s)
2016 Panama Papers 11.5 million documents “John Doe” Süddeutsche Zeitung, International Consortium of Investigative Journalists, The Guardian, BBC, Le Monde, Tamedia, Falter, La Nación, NDR, WDR, ORF
2013 Global surveillance disclosure 1.5–1.77 million documents[486] Edward Snowden The Guardian, The New York Times, The Washington Post, Der Spiegel, El País, Le Monde, L’espresso, O Globo, ProPublica, Australian Broadcasting Corporation, Canadian Broadcasting Corporation, NRC Handelsblad, Sveriges Television
2010 U.S. Army and U.S. State Department documents 734,885 files Chelsea Manning The Guardian, The New York Times, Der Spiegel, Le Monde, El País, WikiLeaksThe material consisted of:

1971 Pentagon Papers 4,100 pages Daniel Ellsberg The New York Times

See also

https://en.wikipedia.org/wiki/Global_surveillance_disclosures_(2013%E2%80%93present)

Story 2: Lying Lunatic Left Democratic National Committee Chair Tom Perez Cracks up — Videos — 

New DNC chair Tom Perez hits out against Trump and does not recognize the results of elections

DNC Chair Tom Perez Rants That Donald Trump Didn’t Win The Election

Trump Worst President in US History – New Democrat Chairman

Michelle Malkin dishes the dirt on Thomas Perez.

Rachel Maddow Blaming Russia for Brock/Clinton Sabotage of Sanders Social Media, New low

Bernie Sanders Shilling of Russia Fairytale is Shameful Protectionism of Democratic Establishment

Enough with the Democratic Party Doesn’t Get It….They Totally Get It & Keep Playing Us as Fools

DNC Chair Debate Shows Why Party Political Graveyard for True People’s Movement

DNC chair Tom Perez: Literally hours into his presidency Trump proved he was a fraud

Bernie Sanders Speaks On New DNC Chair Tom Perez

Watch: DNC chair Tom Perez becomes unhinged, goes on profanity-laced anti-Trump rant

Newly elected chairman of the Democratic National Committee Tom Perez became unhinged during an event in New Jersey on Friday, where he claimed that President Donald Trump “didn’t win” last year’s presidential election.

During a short speech at an event hosted by the New Jersey Working Families Alliance in Newark on Friday, Perez hailed Democratic opposition to the Republican plan to replace Obamacare and declared that although Jan. 20 — the day Trump became president — was historic, Jan. 21 was even more important because that’s the day “the resistance took over,” while lauding protesters across the nation.

“They marched all over the world and said, “Donald Trump, you don’t stand for our values…Donald Trump you didn’t win the election,’” Perez claimed.

Later in his speech, Perez bashed Trump for “wanting his name on everything,” citing Trump Tower and “Trump steaks,” but noted that when it came to the GOP health care repeal plan, Trump didn’t want to put his name on it.

That’s when Perez made an unbelievable claim.

“Republicans don’t give a sh*t about people,” he said when talking about the GOP health care plan. “That’s what it’s about.”

Perez’s comment incited a thunderous applause and cheers from the crowd.

Prior to being elected DNC chairman earlier this year, Perez served as the labor secretary under former President Barack Obama.

TheBlaze has reached out to the DNC for comment and will update if we receive a response.

http://www.theblaze.com/news/2017/04/01/watch-dnc-chair-tom-perez-becomes-unhinged-goes-on-profanity-laced-anti-trump-rant/

Tom Perez won’t apologize for insulting Trump and GOP leaders. Here’s why.

April 2 at 6:17 PM

On Friday, Democratic National Committee Chairman Tom Perez told activists in New Jersey that their protests were hitting the Trump administration where it hurt. He pointed to Jan. 21, the day of the Women’s March, as the start of a resistance that had been more effective than critics ever expected.

“Women marched all over the world and said: Donald Trump, you don’t stand for our values!” Perez said. “That’s what they said. Donald Trump, you didn’t win this election!” If anyone didn’t want to hear this, Perez had an answer: “I don’t care, because they don’t give a s— about people.”

Hours later, the conservative Daily Caller posted clips of Perez’s remarks for a story that was shared on Facebook more than 18,000 times. Ronna Romney McDaniel, the new chair of the Republican National Committee, demanded an apology for the “dangerous” remarks, snarking that Perez “needs a lesson on how the electoral college works.”

But Perez did not apologize. On Saturday, in Texas, he said exactly the same thing. In an email, Perez spokeswoman Xochitl Hinojosa explained that the DNC chair was not going to stop belittling Trump’s victory.

“Tom has not only pointed out that the Russians interfered in this election to help Donald Trump get elected, but Hillary Clinton won the popular vote by nearly 3 million people,” Hinojosa said. “Since before Trump stepped foot in the Oval Office, his divisive and destructive views had already been rejected by a vast majority of the American people.”

Perez’s speeches, which made news on conservative websites all weekend, reflected the tonal shift — perhaps a permanent one — that Democrats have undergone since their 2016 defeat. Covering Perez’s campaign for DNC chair, I saw firsthand how the affable former labor secretary grew more and more aggressive in the ways he mocked and decried the Trump administration.

That sometimes involved four-letter words. At a speech in Detroit, Perez said Trump graduated from “Makin’ S— Up University,” and at several live-streamed candidate forums, he described the administration’s executive orders on labor rules as “bulls—t.” The New Jersey and Texas speeches were the latest in a string of fiery Perez open mics; they were just the first to cross the radar of conservative media.

Democrats don’t mind the attention. Their new, harsher tone came after Clinton and the entire Democratic Party tried, and failed, to brand Trump as too crude to serve in the White House. As a post-election study by the Wesleyan Media Project found, Clinton’s ad campaign was historically negative and light on policy, with 90 percent of its TV commercials focusing on Trump’s personality. The upshot of those ads was that a President Trump would embarrass Americans. In “Role Models,” viewers saw bewildered children watch Trump on TV as he shoots off insults.

In “Captain Khan,” a well-made ad that dazzled pundits, the father of a Muslim U.S. soldier who had been killed in action in Iraq reflected on how Trump’s insults and threat to ban Muslims from entering the United States made him feel unwelcome in a country he now calls home.

We can cut to the chase: These ads did not work. Compelling, and designed in part to keep educated suburbanites in Clinton’s camp, they were predicated on the theory that voters would see Trump as unacceptable and overcome doubts to vote for the Democrat. In key states, even though majorities of voters viewed Trump unfavorably, pluralities picked him anyway.

The long tail of that experience is that progressives stopped caring about the tone of politics. They felt that Clinton, by failing to strip the bark off Trump’s record and policies, had blown an advantage with voters who saw her as more qualified to be president. In the moment, Michelle Obama’s saying that “when they go low, we go high” mirrored what progressives felt about the campaign. As soon as Clinton lost, it felt like a giant strategic error. (And it never took into account the rumors, fed in conservative media for decades, that Clinton was a foul-mouthed tyrant when the cameras were off.)

Remember “When they go low we go high?”
Yeah, that’s super dead.

Clinton’s approach was summed up in the second presidential debate, which Trump entered at a serious disadvantage, bleeding support after the release of the “Access Hollywood” tape in which he bragged about sexually assaulting a woman. Trump’s solution: bring four women who had accused Bill Clinton of sexual assault to the debate and deflect a question about his own scandal by attacking his opponent’s husband.

Hillary Clinton responded by invoking Trump’s insults.

When I hear something like that, I am reminded of what my friend Michelle Obama advised us all. When they go low, you go high. And, look, if this were just about one video, maybe what he is saying tonight would be understandable. But everyone can draw their own conclusions at this point about whether or not the man in the video or the man on the stage respects women. But he never apologizes for anything to anyone. He never apologized to Mr. And Mrs. Khan, the Gold Star family whose son, Captain Khan, died in the line of duty in Iraq, and Donald insulted and attacked them for weeks over their religion. He never apologized to the distinguished federal judge who was born in Indiana, but Donald said he couldn’t be trusted to be a judge because his parents were “Mexican.” He never apologized to the reporter that he mimicked and mocked on national television and our children were watching. And he never apologized for the racist lie that President Obama was not born in the United States of America. He owes the president an apology and he owes our country an apology and he needs to take responsibility for his actions and his words.

Again, in the moment, this was exactly what Democrats wanted to hear — and what they thought voters wanted to hear. It was inconceivable that the man who perpetuated the “birther” lie could take the presidency. But since then, they’ve seen Trump get away with plenty more insults. More important, they’ve reflected on how Clinton made her response personal, instead of tying Trump to the Republican Party and its policies. And one result was watching Trump take the White House.

This has not just curdled political rhetoric in general; it has emboldened Democrats to make fun of the increasingly unpopular president, and to portray Republicans as dishonest and heartless. One might argue that they’ve always said that about Republicans, but again, the Clinton campaign tried to “go high” about this stuff. In her August 2016 speech condemning the “alt-right,” Clinton noted that House Speaker Paul D. Ryan (R-Wis.) had condemned Trump’s insult of the judge handling his university fraud case and attacked Stephen K. Bannon for his criticism of Ryan’s “social-justice Catholicism.”

Clinton’s reward? Ryan would demand that she fire Catholic staffers whose conversation criticizing right-wing elements in the church was stolen by hackers and released by WikiLeaks. In my coverage of the left, Clinton’s occasional attempts to separate Trump from the broader, “reasonable” Republican Party are remembered as massive strategic errors.

Perez, who endorsed Clinton for president, has more or less embraced that view. Asked whether he would apologize for the “give a s—” line, Hinojosa said Perez stood by his comment completely.

“Tom Perez has said repeatedly, including in New Jersey, that Republican leaders like Donald Trump, Paul Ryan and others in Congress have shown us that they don’t care about the American people, especially when it comes to providing families with affordable health insurance,” she said in the email. “The Republican health-care bill would have taken away coverage from 24 million people, imposed an age tax, and made Americans pay more money for less care. Republicans are making it harder to save for retirement, and one of the first acts under President Trump was to make it harder for homebuyers to afford a mortgage. These actions and many others are further proof that Republican leaders in Washington don’t care about the American people and are only looking out for their wealthy friends.”

There were fewer four-letter words in that statement, but it’s part of a continuum of Trump-era Democratic rhetoric. In 2016, the party learned that voters really did not mind if a candidate was rough or profane. It cost a few voters; to more, it came across as toughness. Democrats no longer shame voters for putting up with Trump’s rhetoric. They portray him as a phony who didn’t earn his victory and is betraying the voters who trusted him. They don’t know if this will work. But they’re sure as s— going to try.

https://www.washingtonpost.com/news/the-fix/wp/2017/04/02/tom-perez-wont-apologize-for-insulting-trump-and-gop-leaders-heres-why/?utm_term=.57211dd7332d

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