“tariffs of all kinds are regressive taxes that hike costs for consumers and make it particularly difficult for poorer households to afford basic goods.
Eliminating many tariffs that serve little purpose “would ease financial burdens in a small but real way for American low-income and minority workers and their families, helping to raise their living standards without intensifying competitive pressure””
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“Trump’s tariffs have contributed to inflation and helped to artificially inflate the cost of everything from appliances to housing. About two-thirds of all imports from China are now subject to tariffs when they enter the United States, with the average tariff being 19.3 percent. That’s six times higher than the average tariff on Chinese-made imports before Trump’s haphazard trade war began. That’s certainly not helping poorer Americans improve their standard of living.
But, as Gresser points out, other aspects of the U.S. tariff code are also to blame for imposing regressive taxes on poorer Americans. Under the “Most Favored Nation” (MFN) system of tariffs that are applied to imports from countries with which the U.S. does not have a specific trade deal, many common consumer goods are subject to higher tariffs than their luxury alternatives. Stainless steel spoons are tariffed at a much higher rate than far more expensive sterling silver spoons, for example, and cheap sneakers are charged a tariff more than five times higher than leather dress shoes.”
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“For months, we’ve been treated to headlines promising that the Biden administration is considering lifting Trump’s tariffs. In June, administration officials told The New York Times that lifting tariffs might reduce inflation by a quarter of a percentage point—even though independent studies suggested the effect could be greater. Yet nothing was done, even after Biden promised that corralling inflation was his “top domestic priority.””
“A legal market with high taxes and overly stringent regulations is still a market in which people aren’t arrested and jailed. Rules can be loosened to what people will tolerate, as they have been elsewhere. But New York officials have yet to learn that markets function based on the choices of participants. The wishes of government regulators who want to use them as social-engineering tools and ATMs don’t really matter. Marijuana markets will thrive so long as there are customers to be served. The question is whether they will thrive in the open under light taxes and regulations, or underground to escape the heavy hands of politicians.”
“Klobuchar modeled her bill on Australia’s News Media Bargaining Code, which through a compulsory negotiation and arbitration set-up forces Google and Facebook to pay qualifying Australian news organizations (from both print and broadcast) about $150 million a year. The rationale behind the Australian shakedown and the proposed American one goes like this: News headlines and snippets on Google and Facebook have enabled the companies to convene mass audiences and abscond with billions in advertising revenues that were once the news industry’s near-exclusive franchise. This shift in advertiser preference from newspapers and TV to Google and Facebook has led to financial pain for many (but not all) news vendors. Given journalism’s high value as a public good, Google and Facebook must pay for the damage they’ve caused and help steer the news industry back to something close to the status quo ante.”
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“the Klobuchar bill unjustly punishes the tech giants by making it prop up an industry that has largely failed to address its business problems and has been decaying for decades. It’s not clear whether these subsidies will restore the news business to health, and it appears likely that the act would serve as a prelude to direct government subsidies to save the news — another bad idea. Finally, the bill resembles a reparations package, which is unfair because the tech giants didn’t cause the news industry’s decline. They only contributed to it.
It would be nice to blame all of the news industry’s problems on the tech behemoths, but the undoing of the newspaper industry began well before the web’s advent. Newspaper circulation’s per capita decline started in the post-WWII era, as did the industry’s share of ad spending, thanks to competition from radio and TV. Total advertising revenue peaked in 2005. Some savvy newspaper investors, like Warren Buffett, predicted the industry’s coming decline in 1992, a good half-decade before the commercial Internet was a thing. The newspaper audience and ad buyers had already begun migrating to other mediums, like TV and cable.
One enduring myth of the Internet’s rise is that it caught the news industry by surprise. But that just isn’t so. The historical record shows that starting in the 1970s, they invested deeply and experimented widely on the electronic delivery of news and ads to homes (Viewtron, QUBE, Extravision, Gateway, Interchange, and many other systems) in hopes of inventing something like the web. What prevented them from dominating the electronic space was that the emerging, off-the-shelf technology and the open architecture of the Internet allowed open entry into the news and advertising market — no government licenses or big newsprint presses were required. Winning in this arena meant competing with all comers, and the news business proved to be a bad competitor. Google, which was founded in 1998, had the best ideas on how to sell ads in the space, and by 2012 its ad revenue surpassed that of the entire U.S. newspaper industry.
The rise of Google and then Facebook did parallel the decline of newspaper revenues, but it would be a mistake to say one caused the other. As analyst Kamil Franek points out, Google and Facebook did not build their success by “stealing” newspaper advertising. They did it by disrupting the advertising universe with systems that allowed for more efficient and cheaper ways to attract prospective customers. For better than a century, the ad business had followed the dictum attributed to department store magnate John Wanamaker, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” Internet advertising deflated Wanamaker’s wisdom by making it knowable which half was wasted. Web advertisers could finally measure the successes of their campaigns and refine where to advertise next. The web also proved to be a bargain for advertisers, as better and better ad performance became cheaper and cheaper: Total advertising as a percentage of GDP dropped 25 percent between the 1990s and the aughts. Google also created new places to advertise, such as on games and on smartphones. Benedict Evans, another analyst, holds that somewhere between two-thirds and three-quarters of Google and Facebook’s ad business came from companies that had placed no print advertising outside of the Yellow Pages.”
“Democrats’ new climate, health care, and tax package — known as the Inflation Reduction Act — includes nearly $80 billion in new funding for the IRS, which is supposed to help the chronically underfunded agency staff back up and boost enforcement measures to collect unpaid taxes from wealthy Americans.
The funding has become a political flashpoint in recent days among conservatives and some business groups, who have falsely claimed that the IRS will use the money to hire an “army” of 87,000 new agents who will target average taxpayers.”
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“Administration officials have reiterated that they will focus enforcement efforts on wealthy Americans and large corporations.”
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“The IRS’s budget has been cut by nearly 20 percent since 2010, impacting the agency’s ability to staff up and modernize half-century-old technology. In 2010, the IRS had about 94,000 employees. That number dipped to about 78,000 employees in 2021. Some of the agency’s computers still run on COBOL, a programming language that dates back to the 1960s.
Since 2010, the agency’s enforcement staff has declined by 30 percent, according to IRS officials, and audit rates for the wealthiest taxpayers have seen the biggest declines because of years of underfunding. The new bill is an attempt to change that.”
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“The new funding is intended to help reduce the “tax gap,” or the difference between what people pay in taxes and what they owe in taxes, which the Treasury Department estimates is about $600 billion annually. The new money could help the IRS increase revenue by about $200 billion over the next decade, according to a Congressional Budget Office estimate, although the exact amount is hard to calculate and highly uncertain.
Natasha Sarin, a counselor for tax policy and implementation at the Treasury Department, said that for Americans making less than $400,000 a year, their chances of being audited wouldn’t increase from typical levels in recent years.
Instead, Sarin said, average taxpayers should have an improved experience filing their taxes because the funds would allow the agency to add staff. In the first half of 2021, there were fewer than 15,000 employees available to answer nearly 200 million calls, which is one person for every 13,000 calls, according to Treasury Department figures.”
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“As a result of reduced staffing at the IRS, audit rates of individual income tax returns decreased for all income levels from 2010 to 2019, according to a recent Government Accountability Office report. Audit rates decreased the most for taxpayers with incomes of $200,000 or more.”
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“A 2018 analysis by ProPublica found that while audits had declined most dramatically for the wealthy, the IRS continued to audit the lowest-income filers — recipients of anti-poverty tax credits, including the earned income tax credit — at relatively high rates.
Over the last decade, audit rates for multimillionaires have decreased by twice as much as audit rates for the lowest-income families who receive the EITC because it requires more resources to go after top earners, Sarin said.
The funding should allow the IRS to better target wealthy earners who aren’t paying their taxes because the agency will be able to upgrade its technology, Sarin said, reducing the chances that compliant taxpayers would be audited.
Janet Yellen, the Treasury secretary, reaffirmed similar commitments in a letter to the IRS commissioner last week.
“Contrary to the misinformation from opponents of this legislation, small business or households earning $400,000 per year or less will not see an increase in the chances that they are audited,” Yellen wrote.”
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“Budget cuts and reduced capacity have led to a significant backlog of unprocessed tax forms. As of the beginning of August, the IRS had a backlog of 9.7 million unprocessed individual 2021 returns.”
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“Sarin said the IRS would focus on hiring employees who have experience working with complex tax filings from large corporations and high-net-worth individuals. Audits of average taxpayers follow a significantly different process, she said.”
“The policies overall aim to push American consumers and industry away from reliance on fossil fuels. The biggest share of the funding goes to tax credits and rebates for a host of renewable technologies — solar panels, wind turbines, heat pumps, energy efficiency, and electric vehicles. It includes incentives for companies to manufacture more of that technology in the United States. The law will also put funding into energy efficiency at industrial sites that can help lower the sector’s hefty carbon footprint, while dedicating some funds to forest and coastal restoration.
The IRA also breaks new ground on other problematic areas of the climate crisis. It sets the first methane fee that penalizes fossil fuel companies for excess emissions of the especially powerful climate pollutant. Another substantial part of the funding helps disadvantaged communities with monitoring and cleaning up pollution, and builds their resilience to climate impacts.
Beyond cutting climate pollution, the clean energy investments could also make a dent in inflation. According to Robbie Orvis, senior director at Energy Innovation, rising energy prices have driven roughly a third of the 9 percent rise in the overall Consumer Price Index this past year. By helping Americans become less reliant on fossil fuels, the spending helps ease the global oil crunch and cut consumer bills.”
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“The agreement also includes a 15 percent minimum tax on corporations with profits over $1 billion. Senate Democrats note that while the current corporate tax rate is 21 percent, dozens of major companies, including AT&T, Amazon, and ExxonMobil, pay much less than that. Originally, the provision was expected to raise $313 billion, though new carveouts were added to win Sen. Kyrsten Sinema’s (D-AZ) vote, which give manufacturers and private equity firms more leeway when it comes to the new minimum tax rate. Those changes are likely to reduce the revenue this measure will bring in.
There is also a 1 percent excise tax on corporations’ stock buybacks, which are currently not subject to any taxes at all. That excise tax is estimated to raise roughly $73 billion in revenue.”
“I interviewed a prominent tax attorney who had spent years at the IRS and she confirmed what others have reported. When the IRS determines that someone owes money, it sends out threatening letters, but then the targeted person has no actual recourse or due process. The IRS hotline only is capable of handling a tiny percentage of calls.
One typically must spend hours on hold to speak to someone at the IRS, only to receive incomplete and conflicting answers. The agency doesn’t have a modern online system that allows taxpayers to handle most of these matters efficiently. In the past, if the IRS issued a levy it would include the name of a revenue officer that a taxpayer could contact. Now the IRS uses bots—and it typically takes months to get an answer via mail.
Here’s a typical scenario. The IRS determines that you owe a large sum of money. You and your accountant can’t get through to an agent. The agency places a lien on your property, freezes your bank account, or garnishes your wages. The only way to resolve the issue is to hire an attorney and spend thousands of dollars to get your day in court.”
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“Only a tiny portion of the new spending goes for improvements in the agency’s customer-service system or for technology upgrades.”
“”Contrary to the misinformation from opponents of this legislation,” Treasury Secretary Janet Yellen wrote in a letter to IRS Commissioner Charles Rettig Wednesday, “small business or households earning $400,000 per year or less will not see an increase in the chances that they are audited.” Rettig had echoed the language of his boss in a letter of attempted reassurance to the Senate on August 4, albeit with more wiggle room (italicized):
“These resources are absolutely not about increasing audit scrutiny on small businesses or middle-income Americans. As we’ve been planning, our investment of these enforcement resources is designed around the Department of the Treasury’s directive that audit rates will not rise relative to recent years for households making under $400,000.””
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“none of these assurances live in the text of the Inflation Reduction Act (IRA) itself. One Republican amendment “to prevent the use of additional Internal Revenue Service Funds from being used for audits of taxpayers with taxable incomes below $400,000″ was voted down on party lines. You’ll just have to take Democrats’ word for it.”
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“In a September 2021 letter, CBO Director Phillip L. Swagel estimated that boosting IRS funding by $80 billion would increase tax revenues by $200 billion (the number would later rise to $207 billion, before settling at $204 billion), adding that “the proposal…would return audit rates to the levels of about 10 years ago; the rate would rise for all taxpayers” (italics mine), though “higher-income taxpayers would face the largest increase.”
This remains the CBO prediction, which otherwise Democrats are happy to tout for the $204 billion revenue increase and $124 billion net reduction to the deficit ($204 billion minus the $80 billion cost).”
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“The “tax gap” that the IRS seeks to close includes large amounts from the under-$400,000 club.”
“Despite the bill’s name, independent analysts have found it will have virtually no impact on inflation. In reality, it is a pared-down version of what Biden originally pitched as the “Build Back Better” plan—it leaves aside much of the original bill’s spending, but it maintains a huge corporate tax increase, huge spending on green energy initiatives, and a plan to swell the ranks of IRS agents. What was originally a roughly $4 trillion proposal that would have relied heavily on borrowing ended up being something of a rarity in Washington: a bill that will raise more revenue than it spends.
And where will it get that revenue? Quite possibly from you. Households earning as little as $50,000 annually are more likely to see a tax increase than a tax break from the legislation.
In the final hours before the House vote, the Joint Committee on Taxation (JCT) completed a breakdown of how the bill’s corporate tax increases would affect households at various income levels. The JTC, a nonpartisan number-crunching agency within Congress, found that households earning between $50,000 and $75,000 are more likely to see a tax increase than a tax decrease next year.
Higher-earning households are more likely to see tax increases, but households earning more than $1 million next year are actually far more likely than lower-earning households to get a tax break.
That fits with what The Tax Foundation, a tax policy think tank, found when it analyzed the bill. The Inflation Reduction Act will “would also reduce average after-tax incomes for taxpayers across every income quintile over the long run,” the Tax Foundation reported on Wednesday. Those tax increases will reduce long-term economic output by about 0.2 percent and could eliminate 29,000 jobs, the group found.”
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” Tax increases on corporations get passed along from the board room table to the kitchen table in a variety of ways: lower pay for workers, higher prices for consumers, and smaller investment returns for shareholders.”
“After Manchin agreed with Senate Majority Leader Chuck Schumer on the party-line tax, health care and energy bill, the West Virginia Democrat found himself bargaining with fellow moderate Sen. Kyrsten Sinema. Both hard-nosed negotiators, the Arizona Democrat’s business-friendly tax-approach clashed sharply with Manchin’s more progressive positions on taxes.
Manchin sought to target the wealthy and ended up agreeing with Schumer to target the so-called carried interest loophole that allows some people to pay lower tax rates on investment income. He also signed off on a corporate minimum tax package that most Democrats believed Sinema supported.
Ultimately, Sinema took a scalpel to the corporate minimum tax and scuttled any changes to carried interest, which Manchin called particularly “painful.” Triangulating between them through all of it: Schumer, whose job was harmonizing the views of the very public Manchin with an often-silent Sinema.”
“In March, DeSantis signed into law H.B. 1577, which described itself as “an act relating to parental rights in education.” The bill limits discussions of sexual orientation and gender identity in public school instruction and authorizes parents to sue school districts that break the vaguely written rules.
Walt Disney Company CEO Bob Chapek initially tried to keep the company publicly neutral on the bill. But after it passed, Chapek and Disney, responding to pressure from the company’s employees, both spoke out against H.B. 1577.
Irked by the criticism, DeSantis and Florida’s Republican-controlled legislature took aim at the Reedy Creek Improvement District (RCID), which state lawmakers established in 1967 to give Disney substantial autonomy within the nearly 40 square miles it owns in Orange and Osceola counties. The special district allows Disney to control zoning, construction, infrastructure, emergency services, and taxation to pay for all of it.
While Florida has more than 1,800 special districts, Republicans targeted Disney by restricting the bill to districts established prior to 1968. DeSantis made it clear when he signed the bill that it was punishment for criticism of H.B. 1577. “You’re a corporation in Burbank, California, and you’re going to marshal your economic might to attack the parents of my state,” he said. “We view that as a provocation, and we’re going to fight back.” The bill would dissolve the RCID and five other pre-1968 districts in 2023.
While DeSantis and other Florida Republicans seem to view the RCID as an undeserved privilege, it freed Orange and Osceola counties, along with their taxpayers, from responsibility for Disney’s massive park. For instance, Disney pays the Orange County Sheriff’s Office millions of dollars each year for policing services. Orange County Mayor Jerry L. Demings said it would be “catastrophic” for the county’s budget if it had to pay for first-responder services in the park. DeSantis suggested in May that the state could take over the district.
The RCID also has $1 billion in bond debt. In an April statement to bondholders, Reedy Creek representatives said the district cannot be dissolved under Florida law unless those debts are paid off.
What happens next is not entirely clear, although an early attempt by a group of nearby taxpayers to sue DeSantis was dismissed due to lack of standing. Some First Amendment scholars suggested that Disney could challenge the law as a form of unconstitutional viewpoint discrimination.”