NDN Blog

Trump’s Tax Plan Is Aimed At the 2018 and 2020 Elections, Not U.S. Competitiveness

President Trump wants to cut the tax rate for all American businesses to 15 percent, and damn the deficit. If you believe him, any damage from higher deficits will be minor compared to the benefits for US competitiveness, economic efficiency, and tax fairness. The truth is, those claims are nonsense; and the real agenda here is the 2018 and 2020 elections. Without substantial new stimulus, the GOP will likely face voters in 2018 with a very weak economy – and tax cuts, especially for business, are the only form of stimulus most Republicans will tolerate. Moreover, if everything falls into place, just right, deep tax cuts for businesses could spur enough additional capital spending to help Trump survive the 2020 election.

Let’s review the economic case for major tax relief for American companies. It’s undeniable that the current corporate tax is inefficient – but does it actually make U.S. businesses less competitive? The truth is, there’s no evidence of any such effects. In fact, the post-tax returns on business investments are higher in the United States than in any advanced country except Australia, and the productivity of businesses is also higher here than in any advanced country except Norway and Luxembourg.

The critics are right that the 35 percent marginal tax rate on corporate profits is higher than in most countries. But as the data on comparative post-tax returns suggest, that marginal tax rate has less impact on investment and jobs than the “effective tax rate,” which is the actual percentage of net profits that businesses pay. On that score, the GAO reports that U.S. businesses pay an average effective tax rate of just 14 percent, which tells us that U.S. businesses get to use special provisions that protect 60 percent of their profits from tax (14 percent = 40 percent of 35 percent).

Tax experts are certainly correct that a corporate tax plan that closed special provisions and used the additional revenues to lower the 35 percent tax rate would make the overall economy a little more efficient. But lowering the rate alone while leaving most of those provisions in place would have almost no impact on the economy’s efficiency – and the political point of Trump’s plan depends on not paying to lower the tax rate.

Finally, would a 15 percent tax rate on hundreds of billions of dollars in business profits help most Americans, as the White House insists, since 52 percent of us own stock in U.S. corporations directly or through mutual funds? The data show that most shareholders would gain very little, because with 91 percent of all U.S. stock held by the top 10 percent, most shareholders own very little stock.

Moreover, the proposed 15 percent tax rate would cover not only public corporations but also all privately-held businesses whose profits are currently taxed at the personal tax rate of their owners. So, Trump’s plan would slash taxes not only for public corporations from Goldman Sachs to McDonald’s, but also for every partnership of doctors or lawyers, every hedge fund and private equity fund, and every huge family business from Koch Industries and Bechtel, to the Trump Organization.

There is no doubt that the President’s tax plan would provide enormous windfalls for the richest people in the country. Beyond that, it may or may not sustain growth through the next two elections, since even the best conservative economists commonly overstate the benefits of cutting tax rates. But the truth is, there aren’t many other options that a Republican Congress would accept.

This post was originally published on Dr. Shapiro's blog.

 

Release: Still no 2017 budget from GOP, or 2018 proposal from the White House

“As the White House releases an outline for the revenue side of its budget today, it is important to remember that the governing party has still not yet completed a budget that was due on October 1st, 2016, nor has it proposed one that is due on October 1st, 2017. Even by Washington standards this struggle by the GOP to manage the most elemental part of our running our government is deeply worrisome.

While the President’s revenue outline today is a late but welcome development, it cannot be given serious consideration outside the eventual full budget proposal that is usually submitted to Congress in February. Budgets are about making hard choices among competing priorities, and reconciling revenue and spending proposals. No grading on a curve here for our inexperienced President – the President’s first budget is extraordinarily late, and from what we’ve seen so far not terribly serious or thought through. If our President wants to regain some of the ground he has lost in his wobbly first 100 days, he would be wise to focus on getting the budget from 2016 that is already seven months late completed, and his first budget, already months late, released for consideration by Congress.”

-Simon Rosenberg, President, NDN

 

Column: Dems should put Russia, corruption and tax returns on agenda w/Trump

Today, US News and World Report published Simon's latest column,“Standing Firm.” In the column Simon recommends that in the coming negotiations with President Trump on a wide variety of issues – including the budget, debt ceiling, infrastructure, improving the Affordable Care Act and even matters of war and peace – Democrats should add three more important issues to the agenda:

1. Full presidential cooperation with the various probes into Russian interference in U.S. politics.
2. Commonplace financial transparency - release of tax returns, public audit of Trump's holdings.
3. Cessation of presidential use of his private businesses for matters of state.

To continue reading, please refer to the US News link. You can Simon's previous US News columns here.

Column: The RNC’s Russia Problem

Friends,

Today US News published Simon's latest column,“The RNC's Russia Problem: The RNC Should Take The Lead In Preventing Future Interference In Our Elections.”

An excerpt –

"The main purpose of the two congressional investigations into the Russian campaign to interfere in America's electoral process is to prevent such a campaign from ever happening again. There are legitimate reasons to be concerned about future reoccurrences. Just today, Facebook closed 30,000 accounts in France, ones it determined were spreading misinformation in the run up to the French election. So these malevolent efforts by foreign governments to interfere in the democratic processes of important Western powers continue and remain a serious threat to sovereignty and security of the United States.

As policymakers forge an appropriate response to this ongoing threat, the Republican National Committee has a particularly important role to play in future efforts to protect this part of America's homeland. For as we've learned in recent weeks, the RNC was at the center of two of the most important components of the Russian campaign – the penetration of Trump's campaign by the Russian government, and the normalization and use of Russian disinformation."

To continue reading, please refer to the US News link. You can Simon's previous US News columns here.

Be sure to also read Simon's statement on Secretary of State Tillerson's meetings with Putin and Lavrov as well as his statement on the White House and Department of Homeland Security to release their plan to protect US elections from future interference by foreign powers.

Release: Tillerson failed to make Russian interference in US elections central to his mtgs w/Lavrov, Putin

“Based on his statements in his Moscow press conference this afternoon, Secretary of State Tillerson failed to make the issue of Russia’s interference in US politics and its ongoing efforts to disrupt the politics of our European allies central to his meetings with Russian President Putin and Foreign Minister Lavrov today. In his opening statement describing the talks he did not mention these ongoing and serious aggressions by Russia. They only came up when Tillerson was queried by a reporter, and his exact words were “we touched on it briefly.”

A direct Russian attack on the American homeland is not peripheral to the US-Russian relationship. Failure by Tillerson to make this far-ranging interference campaign central to these talks and to publicly condemn Russia for their aggressive actions here and in Europe is a tacit sign of approval of these efforts by the Trump Administration. It is also an invitation for Russia and other nations to attempt these kind of interference campaigns again in future elections here and abroad.

I for one reject the argument that what is happening in Syria and North Korea is more important than Russian’s extensive and ongoing efforts to undermine democracy in the US and Europe. These efforts should have been given equal weight to these other global challenges, and should have been central to the talks today. It is another disturbing sign of how Donald Trump’s admiration and relationship for Russia is interfering with his ability to be an effective President for the American people.

A few days ago NDN called on the White House and The Department of Homeland Security to release their plans to prevent the kind of interference we saw in 2016 from happening in this upcoming election cycle, including the special election in Georgia next week. The apparent failure of Tillerson to make these matters central to the talks today makes the production of such a go-forward strategy by the WH even more urgent.”

-Simon Rosenberg, President, NDN

 

Simon's New Weekly Column in US News and World Report

Simon is writing a weekly guest column for US News & World Report. You can find previous versions here and below. (Updated Friday 10/6/17)

US News & World Report Columns

Make ACA Sign-Ups an Annual Civic Ritual, US News & World Report, 10/6/17. Simon makes the case that our nation's elected officials and other responsible community leaders should make signing people up for health insurance an annual event, helping blunt Trump's malevolent cuts in marketing the ACA. 

Stand Firm: Democrats should ask for 3 major things in their coming negotiations with Trump, US News & World Report, 4/20/17. Democrats should put Russia, corruption and tax returns on agenda with Trump. 

The RNC's Russia Problem: The RNC Should Take The Lead In Preventing Future Inference In Our Election Campaigns, US News & World Report, 4/14/17. The RNC helped Russia interfere in our elections. It should now take the lead in making sure it never happens again.

The Age of Innocence: Trump's Fantasy World Crashes Hard Into The Real One, Simon Rosenberg, US News & World report, 4/7/17. Simon argues that Trump's Syria contortions are an example of his fantasy world crashing hard into the real one.

5 Ways Trump Could Stop Obama's Expansion, Simon Rosenberg, US News & World Report, 3/23/17. Simon warns that Trump’s economic policies are more likely than not to derail the long Obama expansion.

Why the Return of WikiLeaks Is a Problem for Trump, Simon Rosenberg, US News & World Report, 3/9/17. The return of Wikileaks this week is a reminder that the Russian campaign against the US is ongoing, not something that happened last summer.  Investigations looking into Russia must take this into account. 

The 'Shackles' Are Off, Simon Rosenberg, US News & World Report, 3/3/17. Simon considers the dangers of Trump's new immigration policies for all Americans not just immigrants.

Steve Bannon, Meet Russell Pearce, US News & World report, 2/21/17. Simon examines how the blowback to Trump's immigration plan could be significant and cause lasting damage to his Presidency.

Has Trump Already Abandoned the Fight Against the Islamic State?, US News & World Report, 2/7/17. In his recent column, Simon wonders if Trump undestands how much his own actions are undermining the fight against IS.

Drawing the Line with Trump, US News & World Report, 1/31/17. In his column, Simon argues that Democrats need to abandon traditional responses to the Trump Presidency, and set new rules of engagement.

The End of Pax Americana?, US News & World Report, 1/26/17. In his column, Simon argues that Trump is signaling a retreat to the very kind of politics – nationalism, protectionism, racism and xenophobia – that brought about actual carnage in much of the world in the 1930s and 1940s.

Chin Up, Democrats, US News & World Report, 1/20/17. In his column, Simon argues that Democrats should have pride in their historic accomplishments and optimism about the future of their politics.

An Independent Audit of Trump's Companies Is Now Necessary, US News & World Report, 1/12/17. In his column, Simon argues that Trump's plan to keep all of his holdings establishes new far weaker norms, encourages public corruption, creates many new terror targets, and exposes the US to exploitation by foreign governments.

The Pernicious Politics of Oil - On Trump's embrace of petro-politics, US News & World Report, 12/16/16. In his column, Simon does a deep dive on why Trump 's embrace of plutocratic petro-politics should be worrisome to liberals everywhere.

Rediscovering the Democrats' North Star, US News & World Report, 12/9/16. In his column, Simon offers some thoughts on the path forward.

Trouble Ahead - 4 Scandals That Could Alter the Trump Presidency, US News & World Report, 12/1/16. In this column, Simon looks at four looming scandals that could alter the trajectory of the Trump Presidency - unprecedented levels of public corruption, collusion with Russia to alter the outcome of the election, the FBI's late intervention and Melania's immigration troubles.

The West Is On The Ballot, Simon Rosenberg, US News & World Report, 11/4/16. In the column Simon argues that Trump isn't running just against Clinton, he's also running against what America has become and the world it has built.

The GOP Should Be Worried About Texas, Simon Rosenberg, US News & World Report, 10/27/16. Demographic trends show the state is on the precipice of going from red to blue.

Why Democrats Dominate, Simon Rosenberg, US News & World Report, 10/20/16. Perhaps the most important political story of the past generation is transformation of Democratic Party into a successful governing party with popular leaders well regarded by the American people.

Calling all Patriots, Simon Rosenberg, US News & World Report, 10/13/16. While in a reflective mood about the future, their nominee and party, Simon suggests two other activities Republicans should swiftly denounce and distance themselves from.

How America Prospers in a Global Age, Simon Rosenberg, US News & World Report, 10/6/16. In this op-ed Simon make the case that America has prospered in this new age of globalization, but only with the right policies.

Column: The End of Innocence: Trump's Fantasy World Crashes Hard Into The Real One

Today US News published Simon's latest column,“The End of Innocence: Trump's Fantasy World Crashes Hard Into The Real One.”

An excerpt –

"In the coming days, Trump's willingness to shed his clear admiration for Putin and Russia will be central to our emerging Syria policy, and to Trump's broader foreign policy vision. It is also perhaps the most important indicator of his willingness to shed the childish fantasy world his campaign constructed that is causing his early presidency to fail. Whatever Trump believed about Putin, and whatever transactions have gone down between them, Putin is anathema to the American creed. He is working to weaken America and the West on the global stage, advance autocracy as an alternative to democracy, undermine the global consensus about the need to find a better energy paradigm than one based on fossil fuels and has been Assad's funder and partner and thus is directly responsible for the greatest humanitarian crisis in generations. There is a strong argument to be made that defeating Putinism is the most significant challenge facing our new president. And because of this Trump will have to choose. He can be president of the United States or a friend of Putin's. He cannot be both."

To continue reading, please refer to the US News link. You can Simon's previous US News columns here.
 

NDN Calls on WH/DHS To Release Their Plans for Protecting US Elections from Foreign Interference

Today, the advocacy organization NDN is formally calling on the Trump Administration to release its plans for preventing another Russia style attack on our electoral systems in the 2018 election cycle.

Russia’s interference in our elections in 2016 was among the most serious attacks on the homeland of the United States in recent decades, perhaps in all of American history. The success of the operation will certainly encourage Russia, and perhaps other foreign actors, to try again. Foreign actors will be further encouraged if the American President and his Administration continue to discount the threat, and are not doing all that is required to keep America and its electoral system safe. To deter such activity, and to hopefully to prevent its reoccurrence, the Administration must take steps in the coming days to assure the American people they have a plan and are acting upon it.

This is not some far off issue. Special elections for the House of Representatives have begun this month, and there are primary and general elections in several states in 2017 that are already underway. Systems for monitoring foreign activity and creating real time communication with the DNC, RNC and possibly affected campaigns should have already been put in place by the Trump Administration. It is time for the President to act.

Congressional leaders of both parties should be demanding a clear plan from the Administration. The Chairs of the DNC and RNC should work together this time to create systems for monitoring and sharing information. And this time, the Republican Party should commit to the American people that it will not knowingly use stolen materials and disinformation spread by a foreign power to influence an American election, as it did in 2016. This is not a partisan issue, but an American one, and it is time for the Trump Administration to lead an ambitious, bi-partisan, well-staffed and well-funded effort to prevent foreign interference in our elections.

We hope others will join our call, and encourage the Administration to act without delay.

White House Must Release Its Plan to Protect US Elections from Foreign Interference

I released the following statement today: 

 “With consequential elections coming up this year, and one in a few weeks, it is time for the Trump Administration to release its plan for insuring that the type of interference that happened in 2016 isn’t replicated in these upcoming elections.  Among the issues that must be addressed in the Administration’s plan is real time communications and amelioration efforts with effected political parties and candidates, including the malevolent use of social media and fake news used so extensively in 2016.

 “The success of the Russian effort in 2016 will not just embolden Putin’s government, but perhaps others too.  There is perhaps no greater threat to the homeland today than a new rash of aggressive campaigns from foreign actors to interfere in our election process.  Our Commander-In-Chief has an obligation to spell out what steps his government is taking to protect American democracy, starting with the all-important special election in Georgia-6 in a few weeks.  I hope Senators, Members of the House, the media and leading policy makers will press the Administration in the coming days to reveal its plans.”  

Donald Trump and Paul Ryan's Plan to Put Foreign Investors First

The “Border Adjustment Tax” (BAT) endorsed recently by President Trump is his administration’s first foray into international economics. It is an inauspicious start.

BAT advocates like House Speaker Paul Ryan promise it will cut the trade deficit by making U.S. exports cheaper abroad and foreign imports more expensive here. The truth is, a BAT won’t much affect U.S. exports or imports, and it certainly won’t create jobs. It would produce a large stream of new federal revenues, and it could trigger retaliatory tariffs on some U.S. exports. A BAT also would enrich a great many foreign investors and companies, and leave a lot of American investors and large companies poorer. All told, it’s the kind of “bad deal” that Mr. Trump once railed against.

Mr. Trump and Speaker Ryan never mentioned a BAT until recently, and the reason they like it now is that it’s a cash cow to pay for their sharp cuts in corporate taxes. The Trump-Ryan BAT would give U.S. producers a 20 percent rebate on the wholesale price of any goods or services they export – 20 percent, because that’s the GOP’s preferred corporate tax rate – and impose a 20 percent tax on foreign goods and services imported here from abroad. It would raise trillions of dollars, because we import about $500 billion more per-year than we export.

For conservatives at least, all those revenues should be a red flag. In a populist period, a subsequent President and Congress may well decide to raise corporate taxes — and when they do, the BAT’s fat revenue stream could well go to fund progressive causes.

Mr. Trump still has no Council of Economic Advisers, so maybe he believes that a BAT will spur U.S. exports and create jobs. Even Peter Navarro should to be able to tell him why that won’t happen. At first, a BAT would strengthen demand for U.S. exports and weaken demand for foreign imports here. But those shifts in demand would quickly strengthen the dollar and weaken foreign currencies, perhaps enough to offset the BAT’s initial impact on import and export prices. In theory, the currency movements triggered by the changes in prices brought about by the BAT should restore pre-BAT prices for both imports and exports, so the only change would be a lot of new revenues from taxing net imports.

In practice, the BAT’s impact on the dollar and U.S. trade is a roll of the dice. As Federal Reserve chair Janet Yellen noted recently, no one knows how closely the currency changes will mirror the BAT’s direct effects on prices. If they overshoot, U.S. consumers will pay more for imports; if they undershoot, U.S. export prices won’t fall much. On top of that, no one knows how much of the BAT tax U.S. importers will pass along to American consumers, and how much of the BAT rebates U.S. exporters will pass along to their foreign customers. Finally, painful retaliation might follow, since China and others won’t take kindly to paying a 20 percent tariff on their exports to the United States, and China’s competitors won’t like the BAT’s substantial devaluation in the yuan-dollar exchange rate.

One effect is certain: The BAT will harm U.S. investors and reward foreign investors as the currency changes reduce the dollar value of U.S.-owned assets abroad and increase the foreign-currency value of foreign-owned assets here. The Bureau of Economic Analysis tells us that in the second quarter of 2016, Americans held foreign stocks, corporate and government bonds, and derivatives worth $12.9 trillion; and foreign-owned financial assets in the United States totaled $20.3 trillion.

If we assume the Trump-Ryan BAT leads to a 20 percent increase in the value of the dollar and a corresponding 20 percent decline in the trade-weighted value of foreign currencies, it would reduce the value of U.S.-held financial investments abroad by nearly $2.5 trillion and increase the value of foreign-owned financial investments here by more than $4 trillion. What kind of deal is that, Mr. President?

The trillion-dollar losers will include U.S. investors in European or Asian mutual funds; U.S. companies with profitable foreign subsidiaries, from Microsoft and Facebook to Coca Cola and Pfizer; and U.S. banks that lend to foreign companies. The trillion-dollar winners will include foreign investors with U.S. mutual funds; foreign companies with major American subsidiaries, from Toyota and Anheuser Busch to Unilever and Phillips; and foreign banks who lend to U.S. companies.

Perhaps the best motto for the Trump-Ryan BAT is “Put Foreign Investors First."

This post was originally published on Dr. Shapiro's blog and was a featured op-ed in The Hill.

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