Time To Refocus On Taxes

Trump Cheerleads House Republicans’ Effort To Pass Tax Cuts Thursday

The President Tweeted multiple times today about tax cuts (or rather, TAX CUTS!) as he headed home from his long Asia trip. And House leadership is pushing for a vote Thursday. That would be a week ahead of Paul Ryan’s self-imposed deadline of Thanksgiving.

But there’s still wrangling to be done. Roll Call does the math: 9 Republican Representatives are expected to vote against the plan right now, all of them from California, New Jersey and New York: high tax states that would get slammed by the elimination of the deduction for state and local taxes. At least 3 other Republicans from those states are on the fence. Meaning if all other Republicans vote “yes”, it’d clear right now by 10 votes. (There might be a few Democrats who would vote “yes” but probably only if the bill was already a guaranteed pass). The former Tea Partiers, who now call themselves the “Freedom Caucus” are somewhat of a wild card. Virulently anti-deficit spending during the Obama Administration, they seem to be backing off a bit despite the new tax bill adding at least $1.5-trillion in debt, but how far…?

Assuming the House does vote this week, it’ll once again be voting on a bill before the Congressional Budget Office has time to give an official assessment of its impact. The CBO says that’s because it hasn’t gotten final numbers yet from the Joint Committee on Taxation. At the same time, the Committee just issued it’s own report, contending pretty much everybody will make out just fine under the House plan.



Things Trump/Republicans Say About Tax Cuts That Seem To Make Sense, But Totally Don’t

Since the issue of tax reform involves so many moving parts, we’re starting a continuing series today that will pick one aspect, examine the Republican talking points, and assess how valid they are.

We will also remind you as we launch this, that Republicans like to talk about their tax plan as if it’s a done deal. It’s not. It’s just a proposal right now. People who know a lot more about tax policy than we do feel there’s a high-percentage chance it won’t pass at all. They point to the fact that Trump/Congress could not pass Obamacare repeal, and this is much more nuanced and complex.

We don’t agree. While we do believe many Americans have woken up to the fact that tax cuts do not typically pay for themselves, and not many Americans put tax reform at the top of their list of the nation’s to-do list, giving people free money is still an easier sell than taking their health care away.

Not to mention the fact that we have the “pen in hand” President: he’ll sign anything. No critical eye: he just wants the “win”.

Part 1: “Americans Are The Highest Taxed People In The World”

Trump really likes to say this. A lot. If true, it would be a great argument for tax relief. And if you look at it selectively, from certain obscure angles, at certain types of taxes, he’s not lying, exactly, But put the entire tax picture together and there’s no validity to his statement. For both individuals and corporations. Today we’ll tackle individuals:

If you limit the discussion to income tax, then yes, U.S. rates are relatively high. According to the Brookings Institution affiliated Tax Policy Center, about 1/2 of all taxes in the U.S. are collected in the form of income tax, compared to about 1/3, on average, for other developed countries. However, most other countries have some form of VAT or national sales tax, and for many that’s their primary source of taxes. In the U.S. that tax rate is zero because it doesn’t exist. Taxes on goods and services in the U.S. are pretty much the lowest of any developed country (as you can see from the chart below).

One reason countries like national sales taxes is the tax gets built into the price of a product, so consumers don’t really ever see how much they’re paying in taxes. (Ronald Reagan rejected a proposal on the grounds that this was shady and would lead Congress to Congress to raise taxes a lot since they like to do that and would even more if they wouldn’t be held as accountable. He was almost certainly right about that.)

Factor all those things together and the U.S. tax burden is way below most industrialized nations. About 1/4 of GDP compared to 1/3 on average for developed countries.

So when Trump says your personal taxes are among the highest in the world, he’s lying.



Trump Wants To Be China

Trump early this morning Tweeted a promise he’d have a “major statement” upon his return from the Philippines, but gave no hint as to what it might be. We can’t wait!

Meanwhile, forget about Trump’s comments about Putin’s trustworthiness, the major takeaway for us from Trump’s Asia trip is this: not only did he completely fall for President Xi’s orchestrated adoration in Beijing, Trump is also smitten by China’s trade practices. The President speaking warmly of President Xi’s ability to exploit his trading partners (an image Xi himself is working hard–though not completely effectively–to reverse).

Of course, that’s also why regional partners for the most part don’t want to do business with China, and were really open to doing business with the United States. But not anymore. Singapore’s Prime Minister Lee Hsien Loong put it well during a recent visit to Washington: “I think it is not the right time to start new, ambitious trade negotiations. The announced policy of this administration is to work bilaterally, and I think the belief is that bilaterally you are bigger than any other partners….As a result of which I think not that many partners will be keen to work with you bilaterally.”


Why Yard Signs Are Important, And A Few Other Musings About Roy Moore

The New Yorker’s Charles Bethea has a particularly significant observation: he didn’t see a single yard sign supporting Roy Moore anywhere around the Republican Senate candidate’s home town of Gadsden, Alabama, and plenty of those for his opponent, Doug Jones.

We’ve often talked about yard signs as unheralded election indicators: and one of the first reasons we became convinced Trump could win. Because anybody who’d take the trouble to put up a yard sign is pretty much a 100% signed-sealed-and-delivered vote. Anybody who’d take a yard sign down, might not be a vote at all.

538 did a really interesting and detailed analysis of voters in Alabama (where no Democrat has won any statewide office since 2008). It found that in order for Jones to win he would need to win about 90% of the black vote, 35% of the white vote and 70% of everybody else. But that assumes a similar proportion of voters as in previous statewide elections. Just as people staying home benefited Trump, they could hurt Moore.

Republican Alabama Senate Nominee Roy Moore

One Professor at the University of Alabama Law School suggests Republicans in Congress could expel Moore immediately after he’s seated. But that strikes us as the kind of thing people like to talk about, but almost never really happens. And also as the worst possible outcome.

The special election for the seat vacated by Jeff Sessions happens on December 12th.

Meanwhile, the Birmingham News’ website strongly condemned Moore, stating simply what’s becoming a common refrain: “we believe these women“.

That as a 5th woman came forth saying Moore sexually assaulted her when she was a teenager. Beverly Young Nelson made her accusation accompanied by well-known lawyer, Gloria Allred, who apparently was thinking the same thing we were yesterday: some kind of photo would really help press the case against Moore. Nelson came as close as she could: a handwritten note wishing her a “Merry Christmas”.


2 Quick, But Important Items

• Attorney General Jeff Sessions is thinking of naming a special counsel to take a run at the Clintons. Even though Hillary isn’t President. This possibility strikes us as really dangerous, because regardless of what you may think of the Clinton Foundation, it sure could look like somebody using their office to go after political enemies, something we don’t usually associate with the U.S.

• And the motive behind the alleged murder of a Green Beret by two Navy Seals in Mali, Africa is becoming clearer. According to this dramatic report by The Daily Beast, the Seals were skimming from a fund set up to pay local informants. The two Seals are being investigated in Logan Melgar’s death.


The Chaos Report Is Traveling…We’re attending an international digital Journalism conference in Korea, so for the rest of this week, the format of the report will be somewhat different, and the time we publish every morning might be a bit off.

We ask for your understanding: we are a very lean operation and would not be undertaking this journey if we did not strongly believe it will enhance our ability to report to you dependably on both the critical circumstances on the Korean Peninsula, and digital news in general. We will return to our regular format next week. Thank you for your continued backing.