“A corporation’s book profits are actually an unhelpful metric when it comes to assessing what its tax liability should be. While the tax code is far from perfect, many deductions and credits that reduce liabilities serve an important purpose and help make the tax code fairer. Calculating a corporation’s income before factoring these in makes as much sense as complaining that a kid with a summer job gets to avoid paying regular income taxes because of the “standard deduction loophole.”
For example, consider net operating loss (NOL) carryforwards and carrybacks, one of the most common culprits behind these sensational headlines. These are normal features of a smart policy that allows corporations to pay taxes based on a realistic view of their cash flow over time.
Imagine a start-up business that spends two years developing its feature product, only to release it in the next year. If that business ran a deficit of $2 million the previous two years, then made a $1 million profit the third year, it has not actually made a profit in the long term. Disallowing NOL deductions from being carried forward would mean that the business would face corporate income tax liability despite having, thus far, lost money.”
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“NOL carryforwards were one reason Amazon had no federal tax liability when those articles appeared a couple years back. Another was the research and development (R&D) tax credit, long a bipartisan favorite. The Obama administration in 2012 identified the R&D credit as a crucial element of business tax reform, claiming that businesses undervalue R&D in the absence of the credit as the social benefit is far greater. It’s deeply disingenuous to incentivize R&D, then wag your finger when businesses respond to the incentives the R&D credit provides.
Then there’s accelerated depreciation. One of the most positive changes in the 2017 tax reform law was the introduction of full expensing of capital investments, which allowed businesses to bypass the complicated system of asset depreciation that requires them to recoup the value of capital investments over timelines as long as decades. Huffing and puffing that businesses use full expensing to zero out their tax liabilities is absurd, because it merely accelerates tax deductions businesses would receive anyway. In other words, the long-term “cost” of accelerated depreciation in terms of revenue reduction is zero. The difference is that businesses, which prefer cash on hand to cash down the line, are then able to reinvest the value of the deduction immediately rather than waiting years to receive the tax benefit.”
“The vaccines that millions of Americans receive every day are the result of a global system of research, development, manufacturing, and trade. Forcing those networks to be concentrated within the United States wouldn’t make those supply chains more robust, but would leave Americans vulnerable to the accountability problems that seem endemic to federal government contracting.”
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” It’s true, of course, that the federal government paid billions of dollars to Pfizer and other vaccine manufacturers in the form of advance-purchase agreements last year. But that’s a different situation—one that effectively promised prize money but still put the onus on private companies to deliver vaccines that worked. While certainly not an ideal arrangement from a libertarian point of view, it’s far better than an industrial policy that directs public funds to companies that hire the best lobbyists.”
“this problem of an overcomplicated system that makes it hard for people to access benefits isn’t limited to the stimulus checks. For many government benefits, lots of people who are eligible don’t get it — often because they have no idea how to sign up.”
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“the federal government needs to make its assistance programs simpler and more accessible. Some headway was actually made on this issue in the recent stimulus plan — Biden’s child allowance converted the existing child tax credit into a near-universal benefit sent to eligible recipients every month, making the program both more generous and accessible. But that’s a one-year fix, and there’s much more work to be done on this front.”
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“it’s not enough to pass programs that help them in principle; the government actually has to build the infrastructure to get that help into their hands.
For example, the IRS was made responsible for sending out the stimulus checks and publicizing eligibility, but it doesn’t have a budget for public outreach or marketing. It could easily have been given one along with the responsibility of sending the checks out.”
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“Some policy thinkers favor giving every American a federal bank account, which would simultaneously solve the problem of underbanking — where poor people, who aren’t profitable for the banking system to seek out as customers, struggle with access to basic financial services — and the problem of sending out stimulus checks and benefits. In principle, the government could respond to recessions, pandemics, and disasters of every kind by just dropping some money in our Fed Accounts.”
“The city of Stockton, California, embarked on a bold experiment two years ago: It decided to distribute $500 a month to 125 people for 24 months — with no strings attached and no work requirements. The people were randomly chosen from neighborhoods at or below the city’s median household income, and they were free to spend the money any way they liked. Meanwhile, researchers studied what impact the cash had on their lives.
The results from the first year of the experiment, which spanned from February 2019 to February 2020, are now in.”
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“The most eye-popping finding is that the people who received the cash managed to secure full-time jobs at more than twice the rate of people in a control group, who did not receive cash. Within a year, the proportion of cash recipients who had full-time jobs jumped from 28 percent to 40 percent. The control group saw only a 5 percent jump over the same period.
The researchers wrote in their report that the money gave recipients the stability they needed to set goals, take risks, and find new jobs. One man in his 30s had been eligible for a real estate license for over a year but hadn’t gotten it because he just couldn’t afford to take time off work. Thanks to the freedom offered by the extra $500 per month, he said, his life was “converted 360 degrees … because I have more time and net worth to study … to achieve my goals.””
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“Cash recipients reported being less anxious and depressed than the control group. On average, the recipients “experienced clinically and statistically significant improvements in their mental health that the control group did not — moving from likely having a mild mental health disorder to likely mental wellness over the year-long intervention,” according to the researchers.
The cash also enabled recipients to help their family and friends. For example, one woman used the cash to help her siblings buy school clothes for their kids and to help her daughter-in-law pay for car insurance. Another bought diapers for her grandchildren.”
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“The Stockton experiment was a small study with only 125 cash recipients, so the findings should be seen as offering supporting evidence on the effectiveness of cash programs rather than as definitive standalone proof.”
“What’s irritating, though, is that many of the best free market ideas for helping working families have not been tried.
What would happen if we actually stopped providing tax incentives for employer-sponsored health insurance? Or if we allowed people to pick less expensive insurance plans that didn’t cover chiropractic bills and dermatology visits but did provide the kind of coverage they were most likely to use and would most likely cause them financial strain if they didn’t have? The annual savings for the average family from this type of policy change would likely surpass any child allowance.
What if we had occupational licensing reforms and allowed people to run small businesses out of their home without fear that the local health department will shut them down? These would give families another path to upward mobility.
What if we stopped making childcare more expensive through government regulations, such as demanding that daycare workers have unnecessary masters degrees and mandating child-to- staff ratios instead of just allowing parents to decide whom they trust with their children?
What if we changed zoning rules so that families could rent out extra rooms in their homes or allowed extended families to more easily live together? What if zoning rules didn’t keep residential properties so far away from commercial properties, in turn requiring that children be driven everywhere?
What if—and here is an idea whose resonance has become even more apparent in recent months—we had real school choice? What if parents didn’t have to worry about buying a more expensive home in order to get their children access to a better school district? Or what if we allowed them to choose a charter school or private school when the public schools in their neighborhood didn’t perform (or even open in person)?
What if instead of continuing to subsidize the bloated higher education industry, we simply offered flexible vouchers to low-income students, letting them spend the money in a way that would allow them to quickly and efficiently gain the job skills they wanted?”
“the White House released its first budget request. It has asked Congress to approve a $1.52 trillion budget, including $769 billion in non-defense discretionary spending (a 16 percent increase over fiscal year 2021) and $753 billion in defense spending (a 1.7 percent increase).”
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“Biden’s budget request includes huge funding boosts for federal agencies. The Associated Press reports he’s asking for a 41 percent boost in Education Department funding, and a 23 percent increase in spending on the Department of Health and Human Services. The government’s climate change efforts would get a $14 billion bump, while appropriations for the Department of Housing and Urban Development would jump 15 percent.”
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“White House budget requests are political documents, and this will kick off months of negotiations. The topline $1.5 trillion figure could shrink somewhat.”
“even a quite generous accounting still suggests that only a little more than half of the bill is targeted at anything that meets the definition of infrastructure, and that includes projects like $111 billion for drinking water and $328 billion for upgrading military health facilities and other federal buildings. As Politico notes, those sorts of projects involve some amount of physical building and construction but have never been previously categorized as infrastructure.
The plan also includes a lot of spending on stuff that doesn’t even remotely count as infrastructure. For example, the proposal includes about $590 billion for vaguely defined job training, research and development, and industrial policy, as well as another $400 billion for expanding and supporting home health care. That’s about $1 trillion in non-infrastructure spending in a supposed infrastructure bill.”
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“even if you just confine your analysis to the parts of the bill that are actually infrastructure, what you find is that it’s chock-full of provisions that almost seem intentionally designed to make big infrastructure projects much slower to complete and much more expensive.
As Reason’s Christian Britschgi wrote, the plan includes “Buy American” and prevailing wage provisions that would drive up the already-high costs of infrastructure and funnel a lot of money to the unions that support Biden, and that Biden has repeatedly said he supports. To the extent that American infrastructure has problems, it’s partly because of comparatively high construction costs that make projects more difficult to build. Instead of attempting to solve that problem, Biden’s infrastructure plan would make it worse.”
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“at its heart, it’s not really an infrastructure plan. It’s a payoff plan for Biden’s labor allies. And that helps explain the non-infrastructure parts of the plan too. The $400 billion for home health care would heavily benefit the Service Employees International Union.”
“Just 12 percent of global chip manufacturing is now based in the US, compared to the 37 percent share that the country had in 1990, according to research SIA conducted with the Boston Consulting Group. The primary reasons for this decline are, according to UCLA supply chain professor Christopher Tang, the low cost of production in other countries and chemical processes with less stringent regulation abroad.
“We never had a coordinated plan, meaning these are free markets. So any companies can ship anything outside the country,” Tang explained. “So now is a wake-up call. We have shifted virtually everything, so now it’s an empty vault.”
There are many ideas for how to boost high-tech manufacturing in the US. Some, like Tang, say that part of the key is boosting the number of US students who study STEM and creating more high-tech jobs in the field. Another strategy up for consideration is beefing up US “industrial policy,” which would have the government take a more active role in encouraging high-tech industries in the US, whether through tax benefits, direct investment in research, or government subsidies. In his presidential campaign, Biden even proposed wielding the government’s power to buy these supplies directly from US manufacturers. Now with his supply chain review, Biden appears to be taking a first step toward pursuing that goal.”
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“In part, a Biden administration official told Politico, the goal is to ensure that the US isn’t too reliant on other countries and to make US-based supply chains more resilient. In his executive order calling for a review, Biden mentioned everything from another pandemic to a cyberattack to “climate shocks and extreme weather events” as examples of crises that could make it more difficult to get much-needed supplies in the future.”
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“Following the supply chain review, the goal isn’t necessarily that the US produces all or even most of a particular product or its subcomponents, experts told Recode. Instead, it’s about making sure the country has stockpiles; coordinated supply chains of needed supplies and components from different parts of the world; and enough domestic manufacturing to ensure the US can weather another crisis.
But the task of building new high-tech manufacturing in the US would be a tall order.”
“For a good chunk of the 20th century, American towns offered grand community swimming pools as symbols of leisure and civic pride. They were testaments to public investment.
But then desegregation happened and the pools had to be integrated. Rather than open them up to everyone, town after town simply shut them down. And not only did they close the pools, they nuked their parks departments and effectively abandoned public investment altogether. So in the end, Black Americans didn’t get to enjoy the pools, but neither did white people who were motivated by self-destructive racial ideologies.
This, McGhee argues, is the story of American politics in microcosm. The entire country is now one giant drained pool. Too many Americans have too easily accepted the lie animating so much of our history, namely that politics is a zero-sum contest in which one group’s gain must be another group’s loss.”