Sunday, December 24, 2017

Taxes Are Last Step Not First

[This blog post contains both a Gazette column, immediately below, and the earlier blog post from which it was drawn, following the column.]

Decisions Must Come Before Taxes

Nicholas Johnson

The Gazette, January 3, 2018, p. A5
[link to location on Gazette Web site.]

The worst thing about tax cut discussions is the “Oh, look at the squirrel” distraction from what we should be talking about.

Example? Cutting Iowa employers’ taxes can’t create more jobs when employers say their real problem is a shortage of skilled workers.

If a skilled workforce is needed, it’s time to increase, not slash, funding for the state’s universities and community colleges that create those workers.

What is your vision for America?

Some believe we are a nation of 320 million rugged individualists, where everyone is obliged to pull themselves up by their own bootstraps — even those without boots. As Grover Norquist revealed, “My goal is to get government down to the size where we can drown it in the bathtub.”

Others believe those benefiting from a community are morally obliged to care for everyone in the human family. Some cite Jesus’ urging us to provide food, drink, clothing, health care, and prison visits for “the least of these.”

Until we decide whether we want an America of rugged individualism or humanitarianism, little agreement on public policy can follow.

This newspaper is full of reporting and opinion about our plethora of policy challenges — affordable housing, education, environment, flood control, health care, homelessness, hunger, jobs, net neutrality, refugees, transportation, water quality. The Gazette’s Iowa Ideas project explores some answers.

Lynda Waddington recently described Philip Alston’s U.N. report on U.S. poverty and human rights. Read his comparative rankings for U.S. infant mortality (highest), water and sanitation (36th in the world), incarceration rate (highest), youth poverty (highest), poverty and inequality (35th of 37). [Philip Alston, "Statement on Visit to the USA on Extreme Poverty and Human Rights," United Nations, Office of the High Commissioner Human Rights, December 15, 2017.]

We built this America. Is it the nation and state you want? No? Then fix it. How do we do that? In order:

1. Don’t start with tax talk.

2. Decide whether we’re rugged individualists or humanitarians.

3. Provide enforcement of metrics for the values and society we want — for ourselves and “the least of these” — not just aspirations.

4. Develop public policies that can reach those goals.

5. Calculate their costs.

6. Explore ways of accomplishing goals through education and training, philanthropy and volunteerism, churches and trade unions, corporate policies and cost avoidance, other innovative approaches.

7. Propose a tax code, consistent with community values, sufficient to provide the remaining, necessary public funding. And remember:
• No tax cuts until there are surpluses and declining debt.

• When corporations and the wealthy have trillions of dollars they don’t use, don’t hand them more.

• Consumer spending drives 70 percent of the economy. If stimulus is needed, give the money to the bottom 80 percent who will spend it.
8. Vote.

Philip Alston reports that only 64 percent of Americans bother to register, and many of them don’t vote. In Canada and the U.K., 91 percent register, 96 percent in Sweden, nearly 99 percent in Japan.

Could that possibly be a part of our problem?
• Nicholas Johnson is a former law professor and commissioner on the Federal Communications Commission. Comments:

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Original Blog Post

Why Would You Want to Do That?

Introduction. It's not easy losing weight, and I wanted to share my accomplishment with my doctor.

"Got my weight down to 215 pounds," I proudly said, "and my new goal is 210" -- before I realized what would surely come next. It did.

"Why would you want to do that?" he asked. It was not the first time during the previous near-forty years he'd uttered those words.

If medical treatment was essential he'd provide it. Otherwise, if he thought a patient had a touch of anxiety about their health, he believed some exercise and a sense of calm and well being were often as good as, and always cheaper than, any pills he could prescribe.

He appeared puzzled. "Don't you experience the joy of eating?" he continued. "Why deprive yourself of that pleasure?"

"I just thought it might be better for my health," I mumbled. Whereupon he brought out the morbidity and mortality data to reassure me that the additional five pounds would provide no statistically significant difference in my health or longevity.

Follow the Money. I thought again of his words when reading about the Republicans' plan to put $1.5 trillion on a credit card and then hand over the cash to billionaires. "Why would you want to do that?"

The top 1% of Americans own 40% of the country's wealth -- more than the total owned by the bottom 90% combined, more than anytime in the last 50 years. Worldwide, the total wealth of 62 families exceeds that of 3.4 billion people. [Christopher Ingraham, "The Richest 1 Percent Now Owns More of the Country's Wealth Than at Any Time in the Past 50 Years," The Washington Post, December 6, 2017.] [Photo credit: Kalynn Hines, "Why Are All American Houses Like Mansions?" Quora.]

It's hard to get a precise number on the dollar value of the wealth of individuals in the 1%. It depends on which economist you ask, what is and isn't counted, means vs. medians, and what year you use. But here are some (approximate) numbers from 2007 (obviously there have been substantial increases during the last 10 years of a soaring stock market).
Top 1% -- $14,000,000
Top 5% -- $1,250,000
Middle Fifth -- $110,000
Bottom Fifth -- -$14,000 (debt)
Joshua Kennon, "How Much Money Does It Take to be In the Top 1% of Wealth and Net Worth in the United States," Thoughts on Business, Politics, and Life, Table 3, November 14, 2011.

Even more significant is the near-two-trillion dollars of cash (and cash equivalents) held by American corporations (one-third of it by the top 5; 72% held overseas). [Matt Krantz, "A Third of Cash is Held by 5 U.S. Companies," USA Today, May 22, 2016.]

"OK, so what's your point?" you ask.

Ultimately, I want to address why a discussion of taxes is not the right place to begin. But since that's where the nation's dialog is at the moment, let's deal with it.

1. There's a "National Debt Clock" that increases by the second. On December 23, 2017, at 7:30 p.m. CT, the national debt was $20.6 trillion and growing. If massive tax cuts might sometime be appropriate, this is not that time.

2. If there ever were to be rational tax cuts they should come after the national debt is significantly reduced, and from balanced budget surpluses. Putting the cost of tax cuts on a credit card makes no more sense that paying for wars of choice with debt.

3. Why mention individuals' wealth and corporations' cash reserves? Because when there are trillions in cash sitting on the sidelines and bank loan rates are relatively low, there is no compelling rationale for handing out more cash to those who already have access to more than they can use.

4. Using the funds to improve the environment and the lives of those at the bottom of the wealth pyramid would not only create more human happiness per dollar, but would also more effectively boost an economy 70% dependent upon consumer spending. The wealthy already have most of what they need or want, and tend to invest, rather than spend, any excess income. [Photo credit: unknown; file photo.]

5. If the idea of helping the bottom 50% is not appealing, the money could at least better be used to carry out President Trump's expressed support for massive, essential, overdue, infrastructure projects.

In short, "Why would you want to do that?" It doesn't make economic sense.

But economics -- more specifically taxes -- is not where this conversation should begin.

Where To Begin? Imagine this breakfast table conversation:
"What are your plans for the day?"

"Oh, I thought I'd go down to the bank and borrow some money."

"How much?"

"Maybe $10,000, maybe $25,000. I don't know."

"Tell me now, why would you want to borrow that much money?"

"I don't know. I was just thinking I'd like to have more money."

"But you wouldn't have more money. After paying off the loan and interest you'd have less money. What are you going to do with the money anyway?"

"Just have it. I haven't really thought about what I'd actually do with the money."
That's one unlikely breakfast conversation. This one is more likely:
"We have to fix that big hole in the roof. How are we going to pay for it?

Insurance should cover most of it. And what better use for our "rainy day fund"? "Rainy day fund," get it?

Yeah, I get it. It's just that right now I don't find it funny. What if we need more?

Once we find out how much it's going to be, if we don't have enough I can always go down to the bank for a loan.
Where do you start? You start with your desire for a warm, dry house, and the ongoing maintenance to keep it that way. Then you address how you're going to pay for it.

That's how it ought to be with all governmental budgets -- city, county, state, and our federal budget. You don't ignore economic growth, the need for revenue, and tax policy. It's just that you don't start there.

You start with the most fundamental question. From your answer to that one the answers to the others will more easily flow.

Do you believe you have an obligation -- or if not, at least a desire and willingness -- to create an America that is a large, caring community in which no one is invisible? Or, do you find more appealing a country of individuals, with everyone on their own, where "greed is good," pollution is acceptable as long as it's profitable, and everyone must "pull themselves up by their bootstraps" -- regardless of whether or not they have boots -- until they, like you, can say, "I've got mine, Jack"?

If we're not just talking about professions of belief on Sunday, but the supporting evidence of action throughout the week, there is a discouraging quantity of evidence that a substantial number of Americans, and their elected representatives, are somewhere between a willingness to accept, and an enthusiasm for, the second choice.

So, let's pause for a moment to examine where America may have holes in its roof -- and its safety net.

I am indebted to The Gazette's Lynda Waddington for bringing to my attention Philip Alston, "Statement on Visit to the USA on Extreme Poverty and Human Rights," United Nations, Office of the High Commissioner Human Rights, December 15, 2017. (Mr. Alston is the United Nations Special Rapporteur on Extreme Poverty and Human Rights.) Lynda Waddington, "American Poverty is On Display," The Gazette, December 23, 2017, p. A5 (not yet available online).

When Philip Alston crawled up there on America's roof to take a look, here are some of the things he found.
In talking with people in the different states and territories I was frequently asked how the US compares with other states. While such comparisons are not always perfect, a cross-section of statistical comparisons provides a relatively clear picture of the contrast between the wealth, innovative capacity, and work ethic of the US, and the social and other outcomes that have been attained.
  • By most indicators, the US is one of the world’s wealthiest countries.
  • It spends more on national defense than China, Saudi Arabia, Russia, United Kingdom, India, France, and Japan combined.
  • US health care expenditures per capita are double the OECD average and much higher than in all other countries. But there are many fewer doctors and hospital beds per person than the OECD average.
  • US infant mortality rates in 2013 were the highest in the developed world.
  • Americans can expect to live shorter and sicker lives, compared to people living in any other rich democracy, and the “health gap” between the U.S. and its peer countries continues to grow.
  • U.S. inequality levels are far higher than those in most European countries.
  • Neglected tropical diseases, including Zika, are increasingly common in the USA. It has been estimated that 12 million Americans live with a neglected parasitic infection. A 2017 report documents the prevalence of hookworm in Lowndes County, Alabama.
  • The US has the highest prevalence of obesity in the developed world.
  • In terms of access to water and sanitation the US ranks 36th in the world.
  • America has the highest incarceration rate in the world, ahead of Turkmenistan, El Salvador, Cuba, Thailand and the Russian Federation. Its rate is nearly 5 times the OECD average.
  • The youth poverty rate in the United States is the highest across the OECD with one quarter of youth living in poverty compared to less than 14% across the OECD.
  • The Stanford Center on Poverty and Inequality ranks the most well-off countries in terms of labor markets, poverty, safety net, wealth inequality, and economic mobility. The US comes in last of the top 10 most well-off countries, and 18th amongst the top 21.
  • In the OECD the US ranks 35th out of 37 in terms of poverty and inequality.
  • According to the World Income Inequality Database, the US has the highest Gini rate (measuring inequality) of all Western Countries.
  • The Stanford Center on Poverty and Inequality characterizes the US as “a clear and constant outlier in the child poverty league.” US child poverty rates are the highest amongst the six richest countries – Canada, the United Kingdom, Ireland, Sweden and Norway.
  • About 55.7% of the U.S. voting-age population cast ballots in the 2016 presidential election. In the OECD, the U.S. placed 28th in voter turnout, compared with an OECD average of 75%. Registered voters represent a much smaller share of potential voters in the U.S. than just about any other OECD country. Only about 64% of the U.S. voting-age population (and 70% of voting-age citizens) was registered in 2016, compared with 91% in Canada (2015) and the UK (2016), 96% in Sweden (2014), and nearly 99% in Japan (2014).
Is that really the country you want? Or is it just kind of what happened while we were watching the Superbowl game, neither voting nor otherwise paying attention?

That's where we need to begin. What kind of country do we want? Is it inevitable, or at least OK, that we are accelerating climate change, that some people are just going to have to sleep on the streets, go without healthcare, lack adequate nutrition, education, job training, and the dignity that comes from at least some kind of regular work?

There is no secret sauce. It's clear what we could do, and how to do it. Other countries have offered us examples of how to create a caring nation -- one in which everyone has healthcare and meaningful work to do, one in which free public education extends beyond the 12th grade, one in which there's always someone to care for those without family or friends. Indeed, we accomplished some of these things ourselves coming out from under the Great Depression of the 1930s.

Until we candidly confront the kind of country we have become, decide we want a change, and fashion the programs that can bring it about, we can't begin to address how much it will cost, the best ways to pay for it -- and how to restructure our tax system.

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