Tuesday, December 5, 2017

Santa’s On His Way

Rejoice! Rejoice! Your tax cut is almost here!

All you taxpayers, your standard deduction is going way up! You will be able to deduct thousands more dollars from your income, tax-free! You’ll save big.

Oh, you’re a single filer? Well, you still save, but not big. Although the standard deduction goes up by $5650, the personal exemption of $4050 disappears. That leaves you an extra $1600 sheltered from income tax. If you are an average earner, with an income of about $31,000, you’ll save about $500. A few more cups of coffee every week. But only for a few years, since the individual rate cuts are temporary.

You’re a married couple? Your standard deduction also nearly doubles from $12,700 to $24,000, but you lose two personal exemptions. Say you’re an average household making $51,000 – your savings could be about $700, nothing to sneeze at. Put it away, because the tax cut expires soon.

Your family has children? That’s much more complicated, of course. Now the loss of personal exemptions really hurts. But there’s another wrinkle: the tax credit for each child goes up from $1000 to $1600 in the House bill and to $2000 in the Senate bill. You have two kids and make $75,000? That higher tax credit really helps, bringing your tax bill down more than $1500. Oops, the higher tax credit is also temporary.

Some other goodies in the Republican plan are really sweet. You’ll still only pay a 20% tax on your carried interest earnings, while your neighbors pay up to 39% on their income. You don’t know what carried interest is? Then you probably don’t own a hedge fund, so it’s better not to think about this tax break for the richest Americans.

But congratulations, you don’t have to worry any more about passing on your hard-earned inheritance to your children. The Senate bill doubles the amount to $11 million that you can pass on and the House bill eliminates the estate tax completely. That’s good – but only if you are even richer than most 1%-ers. If not, rejoice for them!

Stop. Let’s get serious. This tax bill is not for you and me, unless we’re among the lucky 1%-ers who are the real beneficiaries of Republican “tax reform”. Just in the final hours before the Senate vote, even more goodies for the very, very wealthy were shoved into the legislation. Although the top rate for income over $500,000 (know anyone like that?) is 39.6%, a few new categories of income will now get a reduced rate of 29.6%: pass-through entities, investments in mortgages held by real estate investment trusts, and certain income from gas and oil operations. That means about $114 billion less revenue. The White House will be rejoicing: much of Trump family income will benefit from these new loopholes.

Have you been hiding billions in off-shore accounts? If so, you can now bring those profits home for less than 15% tax, even lower than the new 20% corporate tax. Good news for those tax cheaters.

But not for you. Those big breaks have to be paid for somehow. Here’s one way: if your employer rewards you a $50 gift card, you’ll have to declare that as income.

There’s not much for us to rejoice about. But wait – if you want smaller government, rejoice, rejoice! Because the new tax bill will cause huge deficits, a law that goes back to the Bush administration mandates automatic cuts in spending in hundreds of government programs. Smaller government, here we come! Isn’t that great?

Unless you want Medicare to pay for some of your health care – the cut is “only” 4%, so just reach more deeply into your pocket for the $25 billion that will be cut. Unless you are a victim of crime – the cut will be $13 billion. Unless you have black lung disease or need Meals on Wheels or care about wildlife restoration, public health, highways, or hundreds of other federal programs, which will all automatically be cut, often to zero, because of this tax bill.

Well, perhaps we just need to postpone our rejoicing. The Republicans say that the best way to help the rest of us is to give billions now to the wealthy and to corporations. They will be so happy that they’ll raise everybody’s wages and create new jobs.

That’s called trickle-down economics. It’s working right now – the economy is booming, big banks are making huge profits, big corporations have trillions of dollars in reserve, and wages are skyrocketing.

Oops, that last part is not true. Average wages have been rising about 2% a year for 7 years, just a bit faster than inflation has eaten those gains up. The rich have been getting a lot richer, corporations have made huge profits, and the middle class has been stuck.

Nothing has been trickling down.

Republicans say this new tax bill will change everything. Trump says about the tax bill, “This is going to cost me a fortune.”

If you believe in Santa Claus, rejoice, rejoice.

What’s next for us? Just take a look at Paul Ryan’s New Year’s resolution – cut Medicare and Social Security.

Steve Hochstadt
Jacksonville IL
Published in the Jacksonville Journal-Courier, December 5, 2017

Tuesday, November 28, 2017

Political Humor, Then and Now

From the earliest age, I heard my parents play records by Tom Lehrer, a mathematician who could sing, play the piano, and write devastating verses about current events and ideas. He stopped performing in public in the US after 1960, so few people younger than baby boomers know about him.

He began by writing songs that poked fun at vulnerable elements of culture, such as his first song, composed when he was 17 and an undergraduate at Harvard, which satirized college football fight songs. Those songs were fun to hear and sing along with: “Poisoning Pigeons in the Park” about a program in Boston to control pigeons with strychnine-infused corn kernels; “The Elements” listing all 102 elements known as of 1959; and “Be Prepared”, a salacious version of the Boy Scout creed. Lehrer earned his living as a university professor, and liked to make fun of academics, as in what I think is his greatest song, “Lobachevsky”, about the Russian mathematician Nikolai Ivanovich Lobachevsky, who supposedly taught him the secret of success – plagiarize.

In the early 1960s, Lehrer stopped performing, but continued to write songs that were much more political. His songs were performed by others on the satirical TV program “That Was The Week That Was” between 1963 and 1965. TW3 broke the broadcasting conventions about political neutrality, and paved the way for later political television, such as “Rowan and Martin’s Laugh-In”, which launched the careers of Goldie Hawn, Lily Tomlin, and other comics.

Lehrer poked fun at serious subjects, such as racism, fascism, pollution and nuclear war. Listening to him skewer racist hypocrites, imagine World War III, and exaggerate the effects of poisons in our air and water certainly contributed to the development of my political views. I wonder if he influenced the burst of anti-establishment protest in the later 1960s among the small segment of record-purchasers and TV viewers who heard his exuberant songs.

It’s comforting to think that listening to some satirical political songs could reduce the polarization in our current politics. But Lehrer himself did not have high hopes for the political effects of his songs. In an interview in 1995, he said about his work, “I don’t think that it would change anybody’s mind. I don’t think humor does that. I think it moves people a little, and softens them up for the hard pitch. By its very nature, as I say, you have to exaggerate, you can’t really make a strong point.” He stopped writing and performing when it was no longer easy to be funny about politics in the mid-1960s. He felt out of touch with the harsher protest politics of the Black Power movement and Vietnam War. He even made fun of political folk songs in “The Folk Song Army”: “If you feel dissatisfaction, Strum your frustrations away. Some people may prefer action, But give me a folk song any old day.”

Some of Lehrer’s subjects are no longer familiar. One of his funniest songs, “Vatican Rag” mocks the Second Vatican Council, the reforms of Catholic practice in the early 1960s: “So get down upon your knees, Fiddle with your rosaries, Bow your head with great respect, And genuflect, genuflect, genuflect!”

Politics today are angrier than in Tom Lehrer’s song-writing heyday, exemplified by our angry President, who seeks conflict wherever he can find it. It is harder to find political humor that doesn’t seem partisan. Johnny Carson has become Stephen Colbert, as each side watches its own form of news and laughs at its own jokes.

The guilty pleasures of Tom Lehrer’s often gross humor seem antiquated in today’s world, where presidential candidates compare the size of their penises and everybody drops F-bombs. His performances in tie and jacket as he plays musical theater piano are quaint. But his intellectual jabs at American culture, political or not, still retain their sharpness. On the liner notes of a 1997 re-release of some of this songs, Lehrer said of his musical career, “If, after hearing my songs, just one human being is inspired to say something nasty to a friend, or perhaps to strike a loved one, it will all have been worth the while.”

One thing remains the same – the inverted relationship between politics and humor. As Will Rogers once said: “Everything is changing. People are taking their comedians seriously and the politicians as a joke.”

Steve Hochstadt
Jacksonville IL
Published in the Jacksonville Journal-Courier, November 28, 2017

Tuesday, November 21, 2017

This Tax Cut Is Not For You

The news is all about tax cuts. For corporations, the news is good – both the Senate and House plans cut corporate taxes by nearly half. For real people, not such good news, unless you are rich. These plans are complicated and subject to change, but one thing is clear. This is not a middle-class tax cut.

It’s not a tax cut for teachers, whose $250 deduction for classroom supplies is eliminated.

It’s not a tax cut for middle-class and working-class families who work for colleges and universities, because the House bill classifies their children’s free tuition as income. They would get a tax increase of thousands of dollars on tuition costs of $10,000 to $40,000 a year.

It’s not a tax cut for middle-class families in states with high taxes, like New York, New Jersey and Illinois. The Senate bill eliminates deductions for property taxes and state income taxes; the House bill allows a deduction for up to $10,000 in property taxes. About 30% of all taxpayers claim these deductions, including half of middle-class taxpayers who make $50 - $100,000 a year.

It’s not a tax cut for families with high medical expenses. People who have to spend more than 10% of their income on health care could no longer deduct that amount, according to the House bill. About 9 million people, with average income of $55,000, take that deduction every year. People in nursing homes and families with disabled children often need that deduction to make ends meet.

This is not a middle-class tax cut. It will only lower some middle-class families’ taxes for a few years. But Republican leaders won’t say that. Two weeks ago, House Speaker Paul Ryan said: “according to the Joint Committee on Taxation – which is the official scorekeeper of these things – every single person, every rate payer, every bracket person gets a rate cut.” But he was doubly lying. First, while every category of taxpayers would see an average reduction of taxes, not everybody in each category gets a cut. If the House version becomes law, 10% of taxpayers in the middle income range would pay $1000 more in taxes next year and every year.

Second, the cuts for the middle class don’t last long. Senate Republicans made the tax cuts for individuals temporary, expiring in 2025, while the tax cut for corporations is permanent. Whatever benefit middle-class families gain disappears in a few years. That is clear from an exhaustive analysis by Ryan’s own scorekeeper, the Joint Committee on Taxation. By 2025, the Senate bill would increase taxes for Americans whose income is under $50,000 and collect about the same from those with incomes between $50,000 and $500,000. Only those making over $500,000 a year will still see a tax cut by then.

President Trump has broken the promises about taxes made by Candidate Trump. Candidate Trump said, “the hedge fund guys, they’re going to be paying up,” meaning they would no longer get a special low rate for their income. He repeated this many times, saying they are “getting away with murder.” Both the Senate and House bills leave that tax break intact. The most important promise Trump made was that the tax cut was for the middle class. Just two months ago, he said his tax plan was “not good for me, believe me” and “there’s very little benefit for people of wealth.” Don’t believe him. This month he urged a cut in the rate for the richest Americans and an end to the estate tax for inheritances over $11 million.

But you can believe that Trump is still trying to kill Obamacare. With his encouragement, Senate Republicans eliminated the Affordable Care Act’s requirement that everyone have health insurance. As we learned during the health care debate, this means insurance premiums will go up for millions of Americans, wiping out any tax cut they might get.

What would a real middle-class tax cut look like? Reduce taxes on Social Security benefits. If you receive other retirement benefits, then you’ll probably pay taxes on some or most of your Social Security income. Only if your total family income is less than $32,000 is your Social Security income free of tax. Millions of middle-class retirees would benefit if that threshold were raised. Pay for that by ending the tax boondoggle for hedge fund managers.

The Republican tax cut is not about economic policy and is certainly not for the middle class. It is political legislation about economic issues: cut corporate taxes to satisfy Republican donors and try again to kill Obamacare. Mainly it is a backwards reduction in the size of government. First create a giant deficit, much larger than the deficit that Republicans have been saying for years would bankrupt the country. Then later start screaming about deficits again and cut government spending to fit reduced revenues by slashing the programs that most Americans need to keep afloat – Social Security, Medicare, and Medicaid.

Only 25% of Americans approve of the Republican tax bills. The more Republicans know about the details, the less they approve. Trump, Ryan and company are trying to pass this giant bill so fast, that most people won’t realize what is happening to them.

Steve Hochstadt
Jacksonville IL
Published in the Jacksonville Journal-Courier, November 21, 2017