Paul Krugman | Biden, Yellen and the War on Leprechauns – The New York Times

Opinion Columnist

Credit…Illustration by The New York Times; photograph by Thinkstock, via Getty Images

“In the summer of 2016, Ireland’s Central Statistical Office reported something astonishing: The small nation’s gross domestic product had risen 26 percent in the previous year (a number that would later be revised upward). It would have been an amazing achievement if the growth had actually happened.

But it hadn’t, as government officials acknowledged from the beginning. It was, instead, an illusion created by corporate tax games. At the time, I dubbed it “leprechaun economics,” a coinage that has stuck; luckily, the Irish have a sense of humor about themselves.

What really happened? Ireland is a tax haven, with a very low tax rate on corporate profits. This gives multinational corporations an incentive to create Irish subsidiaries, then use creative accounting to ensure that a large share of their reported global profits accrue to those subsidiaries.

In 2015 a few big companies appear to have gotten even more aggressive about their profit-shifting, which led to a surge in the value of production they reported doing in Ireland — a surge that didn’t correspond to anything real.

To understand the big corporate tax reform proposed by the Biden administration, what you need to know is that it’s all about the leprechauns.

One way to think about the huge corporate tax cut Republicans rammed through in 2017 is that its underlying premise was that the leprechauns were real. That is, the tax cut’s architects insisted that corporations had been moving operations abroad to avoid U.S. taxes, and that slashing those taxes would bring millions of jobs back home.

It didn’t happen. In fact, the tax cut had no visible effect on business investment, probably because it was addressing a fake problem. U.S. corporations hadn’t been moving jobs overseas to avoid taxes; they had just been avoiding taxes.

The true impact — or actually lack of impact — of profit taxes on business decisions becomes obvious if you look at where corporations report big overseas earnings.

If they were truly responding to taxes by making large foreign investments that eliminated American jobs, we’d expect to see a lot of their profits coming from major production centers like Germany or China. Instead, more than half of the profits U.S. corporations report from overseas investments come from tiny tax havens, including places like Bermuda and the Cayman Islands where they have no real business at all.

By the way, this isn’t just an American problem. The International Monetary Fund estimates that about 40 percent of the world’s foreign direct investment — basically corporate cross-border investment, as opposed to “portfolio” purchases of stocks and bonds — is “phantom” investment, accounting fictions set up to avoid taxes. That’s why on paper Luxembourg, with just 600,000 people, hosts more foreign investment than the United States does.

So the real problem with U.S. corporate tax policy isn’t loss of jobs, it’s loss of revenue — and the Trump tax cut made that problem worse.

For the most part the Biden administration’s Made in America Tax Plan is an effort to reclaim the revenue lost both as a result of profit-shifting and as a result of the Trump tax cut, in order to help pay for large-scale public investment.”   . . .

Opinion | Who’s the Tax Cheat: The Lady in Jdonaldail or the Man in the White House? – By Nicholas Kristof – The New York Times

By 

Opinion Columnist

Credit…Douglas Healey for The New York Times

“While reading that President Trump had claimed $70,000 in highly dubious tax deductions for hair styling for his television show, I kept thinking about a homeless African-American woman named Tanya McDowell who was imprisoned for misleading officials to get her young son into a better school district.

McDowell was sentenced to five years in prison in 2012, in part for drug offenses and in part for “larceny” because she had claimed her babysitter’s address so her son could attend a better school in Connecticut.

In some sense both Trump and McDowell appear to have cheated on their taxes. McDowell sent her son to a school district without paying taxes there. And according to The Times’s extraordinary reporting, Trump may have illegitimately claimed a $72.9 million refund that the I.R.S. is now trying to recover.

In addition, my ace Times colleague James B. Stewart reported that hair styling is not a deductible expense and that, in any case, Trump’s hair expenses for his “Apprentice” TV shows should have been reimbursed by NBC — in which case Trump may have committed criminal tax fraud.

Credit…Rose M. Prouser/CNN, via Reuters

The bottom line: We imprisoned the homeless tax cheat for trying to get her son a decent education, and we elevated the self-entitled rich guy with an army of lawyers and accountants so that he could monetize the White House as well. (Sure enough, Trump properties then charged the Secret Service enormous sums for hotel rooms and other fees while agents were protecting Trump.)

The larger point is not that Trump is a con artist, although he is, but that the entire tax system is a con. The proper reaction to the revelations about Trump’s taxes is not to fume at the president — although that’s merited — but to demand far-reaching changes in the tax code.

We interrupt this column for a quiz question: What county in the United States has the highest rate of tax audits?

The answer is Humphreys County in rural Mississippi, where three-quarters of the population is Black and more than one-third lives below the poverty line, according to ProPublica and Tax Notes. Tax collectors go after Humphreys County, where the median annual household income is $28,500, because the government targets audits on poor families using the earned-income tax credit, an antipoverty program, rather than on real estate tycoons who pay their daughters (that’s you, Ivanka!) questionable consulting fees to reduce taxes.

The five counties with the highest audit rates in the United States, according to Tax Notes, are all predominately African-American counties in the South.

Meanwhile, zillionaires claim enormous tax deductions for donating expensive art to their own private “museums” located on their own property. That’s the kind of scam that works if you’re a billionaire, but not so well if you’re my old friend Mike, who is homeless and once gave his food stamp card to a friend to buy groceries for him. The government responded by suspending Mike’s food stamps.

Tax cheats thrive because Congress has slashed the I.R.S. budget, so that the risk of audits for people earning more than $1 million per year plunged by 81 percent from 2011 to 2019. The I.R.S. has opened audits on only 0.03 percent of returns reporting income of more than $10 million in 2018 (that percentage probably will rise), according to the Center for American Progress.

Need more evidence of systemic unfairness? Trump is still holding on to the almost $73 million that he appears to have bilked out of the I.R.S. a decade ago, even though the I.R.S. is contesting his maneuvers. For wealthy people like Trump, taxes become something like a long negotiation.

An undocumented immigrant housekeeper who had worked for the Trump Organization posted tax statements on Twitter showing that she had paid more federal income taxes than Trump himself had in many years. And by one estimate, the failure of wealthy Americans to pay their fair share forces everyone else to pay an extra 15 percent in taxes.

At the same time, almost one-fifth of American families with children report that they can’t afford to give their kids enough food.

A starting point for a fairer system would be auditing the wealthy as aggressively as impoverished Black workers in rural Mississippi. The economists Natasha Sarin and Lawrence Summers estimate that 70 percent of tax underpayment is by the top 1 percent and conclude that tougher enforcement by the I.R.S. could raise $1 trillion over a decade.

Investing in the I.R.S. to go after rich tax cheats not only promotes fairness but also pays for itself: Each additional dollar spent on enforcement brings in about $24.

Remember Leona Helmsley, the wealthy hotel owner who was prosecuted for cheating on her taxes? She sadly had a point when she reportedly scoffed: “We don’t pay taxes. Only the little people pay taxes.”

On the bright side, Helmsley ended up in prison. I generally believe that in America we over-incarcerate, but I’m appalled that we treat a man with a gilded life and $70,000 in hair styling deductions more gently than a mom who cheats to try to give her son a better future.”   -30-

Opinion | The I.R.S. Is Outgunned – By Natasha Sarin – The New York Times

By 

Dr. Sarin is an assistant professor at Penn Law and the Wharton School of Business.

Credit…Al Drago for The New York Times

“The president of the United States paid less in federal taxes than all but the poorest Americans the year he was elected. This is in large part because he lost more money than nearly anybody else in this country for years, a troubling fact given his promise to “run America like his business.”

But the responsibility for his meager $750 tax bill does not lie with President Trump alone, nor with his tax advisers. Instead, the newest revelations put a very famous face on a problem that has long existed: The wealthy aren’t paying what they owe, and our tax system allows it.

This is not a new problem, but it is one that has gotten worse in the last decade, the result of a partisan attack on the I.R.S. that has deprived it of the resources it needs to police evasion aggressively. In the last decade, the I.R.S.’s budget has fallen (in real terms) by nearly 15 percent. Its enforcement budget has fallen 25 percent over this period, and its work force has been slashed by 20 percent.

These grim numbers do not even take into account the growth in the economy and the increasing complexity of tax returns. In fact, as a share of gross tax collections, the I.R.S. budget is down nearly 50 percent from its peak in 1993.

As my work with the former Treasury Secretary Lawrence Summers shows, the result of this underinvestment is that the I.R.S. today cannot administer tax laws effectively. Based on current trends, in the next decade the I.R.S. will fail to collect an estimated $7.5 trillion in owed tax. That “tax gap” corresponds to nearly 3 percent of G.D.P. annually.

The beneficiaries of a gutted I.R.S. are the elite. Even if all taxpayers were equally likely to evade their liabilities, the benefits to the top 1 percent from underpaying would still be significant: 1 percent of this $7.5 trillion, or $75 billion. But the top 1 percent share of the tax gap is at least 30 times this amount, more than $2 trillion in the coming decade.

To understand this magnitude, consider this: If the I.R.S. were able to collect the unpaid taxes that the top 1 percent owe — absent any increases in top tax rates or new system of wealth taxation — enough revenue would be generated to wipe out student debt for most people in this country.

Why are the wealthy skirting the tax laws most aggressively? It’s a feature of our tax collection system. Compliance rates for ordinary wage and salary workers are 99 percent because their taxes are automatically withheld. In contrast, richer Americans are more likely to have items like capital gains, rental income and proprietorship income — and the I.R.S. estimates that up to 55 percent of the income from such sources can be unreported, and thus untaxed.”

Part 2: Tax Records Reveal How Fame Gave Trump a $427 Million Lifeline – By Mike McIntire, Russ Buettner and Susanne Craig – The New York Times

Tax records show that “The Apprentice” rescued Donald J. Trump, bringing him new sources of cash and a myth that would propel him to the White House.

“From the back seat of a stretch limousine heading to meet the first contestants for his new TV show “The Apprentice,” Donald J. Trump bragged that he was a billionaire who had overcome financial hardship.

“I used my brain, I used my negotiating skills and I worked it all out,” he told viewers. “Now, my company is bigger than it ever was and stronger than it ever was.”

It was all a hoax.

Months after that inaugural episode in January 2004, Mr. Trump filed his individual tax return reporting $89.9 million in net losses from his core businesses for the prior year. The red ink spilled from everywhere, even as American television audiences saw him as a savvy business mogul with the Midas touch.

Twelve years later, that image of the self-made, self-saved mogul, beamed into the national consciousness, would help fuel Mr. Trump’s improbable election to the White House.

But while the story of “The Apprentice” is by now well known, the president’s tax returns reveal another grand twist that has never been truly told — how the popularity of that fictional alter ego rescued him, providing a financial lifeline to reinvent himself yet again. And then how, in an echo of the boom-and-bust cycle that has defined his business career, he led himself toward the financial shoals he must navigate today.

Mr. Trump’s genius, it turned out, wasn’t running a company. It was making himself famous — Trump-scale famous — and monetizing that fame.

By analyzing the tax records, The New York Times was able to place a value on Mr. Trump’s celebrity. While the returns show that he earned some $197 million directly from “The Apprentice” over 16 years — roughly in line with what he has claimed — they also reveal that an additional $230 million flowed from the fame associated with it.”

18 Revelations From a Trove of Trump Tax Records – By David Leonhardt – The New York Times

“The New York Times has obtained tax-return data for President Trump and his companies that covers more than two decades. Mr. Trump has long refused to release this information, making him the first president in decades to hide basic details about his finances. His refusal has made his tax returns among the most sought-after documents in recent memory.

Among the key findings of The Times’s investigation:

  • Mr. Trump paid no federal income taxes in 11 of 18 years that The Times examined. In 2017, after he became president, his tax bill was only $750.

  • He has reduced his tax bill with questionable measures, including a $72.9 million tax refund that is the subject of an audit by the Internal Revenue Service.

  • Many of his signature businesses, including his golf courses, report losing large amounts of money — losses that have helped him to lower his taxes.

  • The financial pressure on him is increasing as hundreds of millions of dollars in loans he personally guaranteed are soon coming due.

  • Even while declaring losses, he has managed to enjoy a lavish lifestyle by taking tax deductions on what most people would consider personal expenses, including residences, aircraft and $70,000 in hairstyling for television.

  • Ivanka Trump, while working as an employee of the Trump Organization, appears to have received “consulting fees” that also helped reduce the family’s tax bill.

  • As president, he has received more money from foreign sources and U.S. interest groups than previously known. The records do not reveal any previously unreported connections to Russia.

It is important to remember that the returns are not an unvarnished look at Mr. Trump’s business activity. They are instead his own portrayal of his companies, compiled for the I.R.S. But they do offer the most detailed picture yet available.

Below is a deeper look at the takeaways. The main article based on the investigation contains much more information, as does a timeline of the president’s finances. Dean Baquet, the executive editor, has written a note explaining why The Times is publishing these findings.”

(then there is more)

Trump’s Taxes Show Chronic Losses and Years of Income Tax Avoidance – By Russ Buettner, Susanne Craig and Mike McIntire – The New York Times

The Times obtained Donald Trump’s tax information extending over more than two decades, revealing struggling properties, vast write-offs, an audit battle and hundreds of millions in debt coming due.

“Donald J. Trump paid $750 in federal income taxes the year he won the presidency. In his first year in the White House, he paid another $750.

He had paid no income taxes at all in 10 of the previous 15 years — largely because he reported losing much more money than he made.

As the president wages a re-election campaign that polls say he is in danger of losing, his finances are under stress, beset by losses and hundreds of millions of dollars in debt coming due that he has personally guaranteed. Also hanging over him is a decade-long audit battle with the Internal Revenue Service over the legitimacy of a $72.9 million tax refund that he claimed, and received, after declaring huge losses. An adverse ruling could cost him more than $100 million.

The tax returns that Mr. Trump has long fought to keep private tell a story fundamentally different from the one he has sold to the American public. His reports to the I.R.S. portray a businessman who takes in hundreds of millions of dollars a year yet racks up chronic losses that he aggressively employs to avoid paying taxes. Now, with his financial challenges mounting, the records show that he depends more and more on making money from businesses that put him in potential and often direct conflict of interest with his job as president.”

Trump’s Payroll Tax Cut Would Dwarf the 2008 Bank Bailout – The New York Times

“WASHINGTON — Almost overnight, President Trump has gone from insisting the economy would not need fiscal help to weather the coronavirus to proposing a stimulus plan that would cost more than the 2008 Wall Street bank bailout or the 2009 stimulus bill aimed at digging the United States out of a deep recession.

The centerpiece of Mr. Trump’s stimulus proposal, which remains a work in progress, is a temporary tax cut that by itself would add nearly $1 trillion to the national debt: a suspension of all Social Security payroll taxes through the end of the year. Some economists have cheered the idea as the right move at a fraught moment when workers are quarantined, schools are closing and large gatherings are being canceled.

But others — including those who have called for aggressive congressional action — say the plan would be an inefficient way of stoking consumer demand at a time of supply shortages and a growing number of quarantines.

Lawmakers on both sides of the aisle have given the proposal a cool reception. Senator Charles E. Grassley of Iowa, the Republican chairman of the Senate Finance Committee, told reporters on Wednesday that he did not see a need for immediate action on a payroll tax cut. Representative Steny H. Hoyer of Maryland, the second-ranking Democrat in the House, said Wednesday that the proposal was a “nonstarter.” “

Opinion | When a Traffic Ticket Costs $13,000 – The New York Times

By Emily Reina Dindial and Ronald J. Lampard

Ms. Dindial is lawyer for the A.C.L.U. Mr. Lampard is a lawyer for the American Legislative Exchange Council.

A motorist waiting as a police officer writes a citation.CreditStan Lim/Digital First Media — The Press-Enterprise, via Getty Images

For most people living in America, transportation is central to daily life. About 83 percent of Americans report that they regularly drive a car multiple times a week. Yet millions of drivers across the country have had their licenses suspended — taking away their ability to drive to work, school, the grocery store or the doctor — essentially because they are poor.

In 2014, Leah Jackson was ticketed for obstructing traffic in Ostego, Minn., after turning left at a red light. That kind of thing happens to many people. But, as Ms. Jackson explained to state lawmakers in 2018 testimony, she had just started a new job and hadn’t yet received a paycheck, so she couldn’t pay the $135 fine right away.

A few months later, she was pulled over, told her driver’s license was suspended for an unpaid ticket and cited for driving with a suspended license — a new $200 ticket. Her job responsibilities as a retail store manager required her to make bank runs and other deliveries, so she kept driving in order to keep her job. In less than a month, she received two more tickets for driving with a suspended license. After accounting for the additional tickets and the resulting increase in her monthly insurance premiums, her debt from the initial infraction spiraled into more than $13,000 over four and a half years.

The criminal justice system too often produces a self-perpetuating cycle, particularly for the poorest people, who can’t pay fines or hire lawyers to make charges go away. In 39 states, you can lose your driving privileges if you’re unable to pay a court fine or fee, for things as minor as a traffic violation. But a bipartisan effort is growing to end the fundamentally unjust practice of wealth-based suspensions.

Opinion | Macron’s Moment of Truth – By Sylvie Kauffmann – The New York Times

Quote

By Sylvie Kauffmann
Ms. Kauffmann is the editorial director of Le Monde.

Dec. 6, 2018

225

Image
President Emmanuel Macron, center, inspecting the damage from protests over a planned fuel tax increase in Paris this month.CreditCreditEtienne Laurent/EPA, via Shutterstock
“PARIS — He was the savior of Europe. A 39-year-old maverick who rescued France from the populist tide, the newcomer who crushed his far-right opponent Marine Le Pen in a TV debate on the eve of a presidential election. The leader who would make liberal democracy great again. The visionary who had a plan to jump start the European Union. A 21st-century John Kennedy. Some joked that he could walk on water.

That was 2017. Eighteen months into his presidential term, Emmanuel Macron, faced with an uprising by a leaderless army of working poor in yellow vests and by violence unseen since the student riots of May 1968, is struggling to take back control of his country. The charismatic young president was jeered by protesters who tried to chase his car this week when he visited a public building set afire by rioters in Le Puy-en-Velay, in south-central France. “Macron, démission” — “Macron, resign” — has become the rallying cry of these modern-day sans-culottes, whose anger is directed at him, personally.

In a rare show of humility, Mr. Macron admitted a month ago that he had “failed to reconcile the people with its leaders.” Little did he suspect that the anger would turn into hatred, of the kind thrown in the face of dictators by the Arab Spring. As a fourth Saturday of protests looms, in spite of an olive branch offered by the government, nobody can predict whether this revolt will eventually give way to dialogue or degenerate into an even more profound and dangerous crisis.

What went wrong? Two sets of factors have come into play. One is not specific to France: an insurrectional wave that is now a familiar feature of Western democracies shaken by the disruptions of globalization, the aftermath of the 2008 economic crisis and the inability of our traditional political parties to adjust to these new challenges. Brexit, Donald Trump’s election, an emergence of the far right in Germany and a victory of anti-system parties in Italy — all, though less violent, are part of the same dynamics. Emmanuel Macron was initially seen as a bulwark against this trend. More determined than his predecessors, he would reform France with a progressive agenda that would do away with the injustices of the old world.”

via Opinion | Macron’s Moment of Truth – The New York Times

I love this piece by Silvie Kauffmann, but I found a comment which has a different view, which I also endorsed. It it difficult, to like two views that seem opposed to each other.

Guillaume
Times Pick

Emmanuel Macron has clearly miscalculated. He’s doing exactly what he said he would during the campaign. The carbon tax was also on most parties’ platform (especially on the left). However that was not enough for France to accept it. He may have thought he should cram as many reforms as he could early in his mandate. But he will have to change his plans.

For the past 20 years, all French governments have tried to reform but had to back down because of protests. The irony is that Ms. Kauffmann and her fellow French journalists bear a lot of responsibility.

Where in Le Monde columns can one read that France has not had a balanced budget since 1974? That government spending in France measured as the percentage of GDP is the highest in the western world? That public social spending is the highest in the OECD? That the income inequality is not that high and has been stable for 20 years? French people don’t understand the need for reforms and how urgent they are. The only things they hear from journalists is that Macron cares only about the rich and there is money in France and you just have to take it.

The truth is that the only way to maintain the generous French welfare state is to balance the budget and broaden the tax base by reducing unemployment and fostering economic growth. Ms. Kauffman should make that case.

Emmanuel Macron’s Unwanted New Title: ‘President of the Rich’ – By Adam Nossiter – NYT

Quote

By Adam Nossiter
Nov. 1, 2017

34
“PARIS — From the all-powerful president with the infallible touch, Emmanuel Macron has become the “president of the rich,” an elitist dispensing fiscal goodies to the wealthy. At least that is what parliamentarians, some economists, television interviewers and newspapers have been calling him in recent weeks.

Barely six months into his presidency, Mr. Macron has been brought down from the heights to places many French are deeply suspicious of: the corporate suite and the banker’s office. Over and over that unflattering label — “president of the rich” — has been affixed to the young leader.

“You are committing violence with your policy. It’s you that are going after the poor to give to the rich!” thundered François Ruffin, a firebrand of the leftist France Unbowed party.

Mr. Macron was guilty of a “heavy moral, economic, and historical sin,” the best-selling economist Thomas Piketty wrote in the newspaper Le Monde.”

via Emmanuel Macron’s Unwanted New Title: ‘President of the Rich’ – The New York Times

David Lindsay:

Macron has really fucked up, to use an old French expression. I have also read and posted the hyperlink to the article on the asset tax he reduced on the wealthiest individuals, as one of his first acts as prime minister. He really blew the visuals on that one, and then, apparently, he has never heard of making a gas tax either revenue neutral, or only to raise money for public transportation. If he continues to rule like a deaf emperor, he will fail, which is horrible, since we need his leadership now for fighting climate change, containing Russia, and hearding the cats of the free world during the great vacuum of Trumpism.