Taxes on The Huffington Post

Dave Johnson: Save Social Security: 10 Questions for the Deficit Commission

2009-12-22T14:40:51Z

It is possible that there is going to be a "deficit commission" to look for ways to reduce our country's budget deficits. I have some questions for them to ask to help get things started in the right direction:

1) President Reagan increased Social Security taxes, but used that money to cut the very top tax rates that only the wealthiest pay. Now that the money borrowed from Social Security is coming due, which income group is better positioned to pay it back, wealthy people or the elderly to whom this money is owed?

2) President Clinton left office with a huge budget surplus. Then, President Bush gave tax cuts to the wealthy, and his last budget had a $1.4 trillion deficit. How much of this change was because of those tax cuts for the rich?

3) How large was the country's yearly budget deficit and total debt in the "Eisenhower/Truman" decades when the top tax rate was 90%?

4) Today we have an "infrastructure deficit" - the amount needed to repair our country's roads, bridges, sewers, etc. - of somewhere upwards of $1.6 trillion. Was our infrastructure kept in good repair before the top tax rates were cut?

5) Concentration of wealth is long recognized as a threat to democracy, and now we are seeing a low-wage, everything-to-the-top economy with the greatest ever concentration of wealth going to a few at the top. Was the problem of wealth concentration increasing or decreasing before the top tax rates were cut?

6) When top rates were high people couldn't take home vast fortunes in a single year. When it took several years to make a fortune did corporations depend on long-term or short-term thinking? Did the executives of corporations care if the infrastructure and communities their companies depended on were in good shape? Did large corporations fleece customers and exploit employees for quarterly returns as they do now?

7) The military budget is the largest item in our country's budget. Was the military budget larger or smaller when we faced the cold war threat from the Soviet Empire?

8) Just how big is our military budget, if you add in veterans programs, nukes, intelligence and the military budget's share of accumulated debt interest? How large is it in relation to all of the rest of the countries in the world, combined?

9) Speaking of debt interest, how much debt interest do we pay on the debt that has added up since we cut tax rates at the top? Who gets all that interest?

10) Some will say that proposals to bring back the tax rates of the Eisenhower administration are "socialist." What was the name of the organization that accused President Eisenhower of being a Communist?

11) Does the following chart stimulate any ideas about how we might solve the debt problem?

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.

Best Books For Getting Rich

2009-12-21T14:53:12Z

The holidays are here, our economy is in a recession and your Christmas shopping needs a bailout.

While we can't dole out federal money to rescue your holiday budget, the Forbes Investor Team can help you find the perfect gift for the savvy investor on your list.

We polled our knowledgeable investor team for their best book suggestions that will make you look smart and keep your investor happy.

Estate Tax Laws Uncertain With Old Tax Set To Expire

2009-12-19T03:27:39Z

The possible expiration of the federal-estate tax has sent the normally staid world of estate planning into a frenzy of activity, as taxpayers try to cope with uncertainty.

Without the old estate tax in place, some new rules will come into play, potentially forcing families to dig up decades-old records or face big tax penalties.

Bill Gates, Sr.: Strengthening the Estate Tax to Strengthen the Country

2009-12-17T18:16:51Z

For eight years I have spoken to anyone who would listen about the importance of creating a strong estate tax, and there is no more critical time for action to be taken by Congress on this matter than now.

In a few days the Senate will break for their holiday recess and if they do not act the estate tax will disappear in 2010. The House of Representatives recently cast a 225-200 vote in favor of Rep. Earl Pomeroy's estate tax proposal, which makes 2009 estate tax law permanent, with a $3.5 million exemption ($7 million for married couples), and a 45% tax rate. If the Senate agrees, the result will still be a loss of $391 billion over 10 years, although that is better than no tax.

Letting the tax disappear entirely will be even more devastating and will cost upwards of a trillion dollars in lost revenue; revenue that supports vital public systems -- including transportation and energy infrastructure, education and healthcare -- that are the foundation of our broad-based prosperity and economic stability.

This is why I believe we must do more and strengthen this levy, which is our county's only tax on inherited wealth and applies to less than 1 percent of American families. The estate tax raises substantial revenue from those with the greatest capacity to pay.

If abolished or weakened, there are only three ways to make up the resulting shortfall: cut spending, raise taxes on the middle class, or pile it on to the national debt and leave it to our children and grandchildren who will inherit the consequences of the decisions we make now. This why I and thousands of other wealthy individuals have joined a campaign led by United for a Fair Economy to call on Congress to strengthen the estate tax.

A common, and misguided, criticism of the estate tax is that individuals who work hard and save their money should be entitled to pass on the fruits of that labor to their family. I am not against working hard, saving money, or taking care of your family.

However we must acknowledge that the person who accumulates wealth in this country was not able to do that independently. The simple fact of living in America, a country with stable markets and unparalleled opportunity fueled in part by government investment in technology and research (something my family has plenty of firsthand experience of), provide an irreplaceable foundation for success and have created a society which makes it possible for some men, women and their children to live an elegant life.

I attended the University of Washington under the G.I. Bill, and then became a lawyer enjoying a successful career that allowed me to provide well for my family so that they in turn were able to create their own wealth. So I believe that those of us who have benefited so greatly from our country's investment in our lives should be asked to give a portion of our wealth back to invest in opportunities for the future.

Society has a just claim on our fortunes and that claim goes by the name estate tax.

Jonathan Kim: ReThink Interview: Phillippe Diaz (part 2) -- The End of Poverty? and Changing the System

2009-12-15T19:24:50Z

A few weeks ago, a friend of mine from Canada was in town on business and stayed with me for the weekend. As we looked through a Los Angeles guidebook, he told me he wanted to make sure we stopped at a Target. Apparently there are no Targets in Canada, and he wanted to buy some clothes there before he left.

I rarely shop at Target (and don't buy clothes when I do) and I was shocked at how low the prices were for clothes -- in many cases, lower than I remember them being as a kid when my mom would take me shopping there. How could Target be turning a profit?

I had recently seen the documentary The End of Poverty? (see part 1 of my interview with TEOP writer/director/cinematographer Philippe Diaz), and something that had been on my mind since then is the concept that the US and other countries in the northern hemisphere are rich because we are impoverishing hundreds of millions of people, mostly in the southern hemisphere.

So I started checking the tags of the clothes to find out where they were made. What I found was a list of countries where millions of people live in abject poverty: Cambodia, Mexico, Sri Lanka, China, Bangladesh, India, El Salvador, the Philippines, Nicaragua. Most didn't have information about where the raw materials came from, but I'm guessing that would provide yet another list of impoverished cotton-growing countries.

You don't have to charge much to make a profit when your products are made from stolen materials and assembled by people earning slave wages. And as people buying those products and benefiting from that "value", we are encouraging the continuation of that cruel system. With an economic philosophy in the northern hemisphere that requires more and more consumption and waste to fuel corporate growth for growth's sake, the amount of theft, slavery, suffering and environmental damage will only get worse. Unless we change the system, it will collapse under its own unsustainability -- or the victims of that system will revolt and smash it.

That's why Philippe Diaz made The End of Poverty? (click here to find out when/where it's showing near you). Below are more excerpts from my interview with him.

On why the discredited theory of "trickle-down" economics is alive and well and how the inequality it promotes inevitably leads to terrorism.

Diaz discusses the image of kids in Kibera, Kenya that became the poster for TEOP and why poverty affects children the most.

On how the people of the northern hemisphere must embrace a new system of "de-growth" to avoid a worldwide economic crisis and how the current crisis was not only predictable, but was predicted by many of the experts Diaz interviewed for the film.

On why so many of the solutions to end poverty suggested by the rich and powerful make no sense and were not included in TEOP.

How making The End of Poverty? showed Diaz how land, who owns it and how it is used is the key to what creates and can end poverty.

On how the tax burden has been shifted primarily to the poor through taxes on labor and consumption, and how increasing taxes on property and idle land would help rebalance the system.

Diaz explains why individual acts of conscience and kindness are important but will do little to end poverty unless we fundamentally change the system that causes it.

To see all the clips from my interview with Philippe Diaz, check out this YouTube playlist.

For more ReThink Reviews, the only (therefore best) political movie reviews online, visit ReThinkReviews.net.

Hale "Bonddad" Stewart: A Complete Rejection of the US's Binary Political Thinking

2009-12-15T17:14:09Z

Given my profession people assume I'm a Republican. After all, I work with business on a regular basis to lower their overall tax liability. However, I'm not a Republican for the following reasons. First, they have a clear anti-intellectual bent. Given the Republicans' complete denial of climate change and their embrace of the creationist movement, it's no wonder that a mere 6% of scientists consider themselves Republicans. And that goes to the larger point -- the Republican party has a clear anti-fact bias. Secondly, Republicans clearly want women to be nothing more than wombs with legs. Ever notice how Republican men love to talk about abortion but never seem to volunteer for a vasectomy? Finally, Republicans have embraced a talking/chattering class (Limbaugh, Beck, Hannity) that are nothing more than non-educated fear mongers. If these people are your spokesmen, you've got a series problem.

However, the last six months have demonstrated the Democrats are no better. What it really comes down to is the Democrats do not know how to lead. The latest example is the "compromise" legislation on health care that was created by the whiny baby Lieberman. Three months ago, Lieberman was all for a Medicate buy-in. Now he's not. Why? Because it gets him attention. His stance has nothing to do with ideology. However, notice how the Democrats -- who are in the clear majority -- can't seem to get anything done on this matter? The reason is simple: they can't lead. Reid, Pelosi and Obama have demonstrated they are unwilling to make the necessary decisions to get anything accomplished.

But at the heart of the matter is the central problem with US politics: binary thinking. Why are Republicans against health care reform? Because the Democrats are for it. Why are Democrats not interested in talking about entitlement reform? Because Republicans are for it. The list goes on forever. When a Republican says x, the Democrat will respond with the polar opposite. It's that simple. And that's the problem.

In the hyper-partisan environment of Washington we have in essence a giant conflagration of wind-up dolls who say things on cue. Anytime a reporter goes to a Republican you know you're going to hear "low taxes ... government bad ... socialist " When a reporter asks a Democrat anything you're going to hear "Wall Street bad ... tax the rich." It's that simple. There is not a single ounce of creative thought that goes into anything that comes from Washington. I have not heard an intelligent, free-thinking statement from anyone in Congress for so long I am now convinced it is not possible in the current environment. And that is the real problem. Intelligent thought is no longer possible in the current political environment; both parties are so tied-in to their ideology that they can't see beyond themselves. And that is very concerning.

John Petro: City Council, Don't Throw Away Our Tax Dollars

2009-12-08T18:01:28Z

Taxpayers concerned about government waste should turn their attention to tomorrow's City Council vote on the proposed Kingsbridge Armory redevelopment. The developer of the project, Related Companies, will receive $18 million in direct city and state subsidies. Related will be able to skip out on paying sales taxes, the mortgage recording tax (which goes to funding the cash-poor MTA), and real estate taxes. Plus, the developer will get a discounted price for the purchase of the property and building and will inherit $30 million worth of improvements that the city completed with taxpayer dollars back in 2003.

All of this might be justified if the public could expect considerable benefits from the deal. Job creation is a public benefit, but if the jobs that are created pay a poverty-level wage, the public subsidies are wasted on perpetuating a cycle of poverty that will only cost taxpayers more money.

The City Council should not approve the Kingsbridge Armory project unless the developer guarantees that future retail workers will be paid a living wage. Without this guarantee, the public benefits from the Armory deal will not be great enough to justify the substantial public subsidy, especially at a time of budget crises in Albany and at City Hall.

By looking at wage data for retail workers, we can see that the retail jobs created at the Armory will not be enough for a family to survive without having to enroll in public assistance programs. Based on data from the New York State Department of Labor, the average wage for a worker in clothing and accessories stores in the Bronx is $17,313.

We also know that New York State spends at least $5.2 billion a year to support working families that must rely on public assistance to make ends meet. Using tax dollars to create poverty-level jobs is clearly not an efficient use of public funds. If we look at the effect poverty has on children, in terms of health outcomes and their success at school, the harmful effects of poverty-level jobs is multiplied.

Clearly, we can do better with our tax dollars. We must leverage our scare public resources to create real economic opportunity for working families. Anything less, and the taxpayer is getting the short end of the stick.

More Charities Seek Tax Break for Donors, Costing U.S. Billions

2009-12-05T21:53:29Z

Experts say nonprofits are skillfully exploiting the tax code's broad and elastic definition of what constitutes such a charity, making it difficult for the Internal Revenue Service, which must bless them, to say no. The agency approved 99 percent of the applications for public charity status last year, according to a new study by students at Stanford University -- or more than one every 10 to 15 minutes.

Edward Harrison: On the Sovereign Debt Crisis

2009-12-02T09:10:35Z

This post first appeared at my site Credit Writedowns

Given the spate of articles in the business press about this country or that country facing a potential debt crisis, I wanted to write a bit about sovereign debt crises.

In my view, economic stimulus has been warranted in order stabilize the financial system and prevent economic collapse. However, the price of that stimulus is unsustainably high increases in government debt -- in a world in which private sector debt is already critically high. I see the sovereign debt problem as critical, especially in Europe. The sooner we abandon a debt servicing cost mentality, the more likely we are to face up to this challenge.

The debt service mentality

During the boom and bubble which led up to the financial crisis, many in the financial community looked to debt service costs in the private sector as the only relevant metric to gauge whether debt levels were sustainable - both for individuals and in the aggregate. This was bubble mentality which I must take to task now now that we are seeing it crop up in discussions about public sector debts as well. If not, we will likely see some major sovereign bankruptcies in the not too distant future.

The debt service mentality goes a bit like this: Bob and Shirley are looking for a new house. They make $6,000 per month. So they can legitimately afford to pay $2,000 per month for their mortgage. With a 7% interest rate on a 30-year fixed mortgage, that means they can afford to borrow $300,000 - or just over four times income. So, if Bob and Shirley put 10% down on the purchase of a home, they can afford one that costs $330,000.

The problem is when this is the only constraint on borrowing. What happens to house affordability when Bob and Shirley's 30-year rate drops to 5%? Suddenly, they can 'afford' a $375,000 loan. What if they get a 4% rate? Now, they can afford $425,000 in debt - a loan more than 40% larger than at 7% and a massive 5.9 times income. Anyone who has a mortgage recognizes this math as integral to the home buying process.

The lower interest rates go, the more affordable any debt load becomes when debt servicing costs are the only constraint. As rates drop toward zero percent, theoretically Bob and Shirley could afford to buy any house no matter how expensive. But, of course, interest rates don't move in one direction. If rates were to move up significantly when Bob and Shirley wanted to move house, they would face a serious problem. In this sense, artificially low interest rates are toxic. And therefore pointing to debt servicing costs as the only metric of affordability and debt constraints is bubble finance plain and simple.

Here I am talking about bubble finance, not Ponzi finance. In the Ponzi finance schemes in the U.S., we saw fixed rates substituted with lower but unsustainable adjustable rates. Eventually affordability became passé as no-doc, zero-percent down, ninja loans became the norm. In the end, the Ponzi debt scheme collapsed in a heap - as it always must. That's what we saw in the blow-off stage of the bubble after Greenspan lowered rates early this decade. But, the debt servicing mentality is what preceded it.

Relative debt constraints

What is needed is a relative debt constraint like debt to income - or in the case of aggregate figures or sovereign debt figures, debt to GDP. For example, before the bubble in the U.K., one might have seen relative debt constraints like three times income. That meant one could borrow up to three times one's annual income - no ifs ands or buts. If you worked in the City and received a bonus, you might have convinced the bank to count half of it toward your income for loan purposes.

As prudence was thrown out, these constraints were relaxed. The Bradford and Bingleys of the world used lower interest rates to justify jacking these constraints up to 3.5 times or four times income. Eventually these constraints hit six times in the UK.

How do you compete against that as a bank? All of the business is going to Bradford and Bingley and you are getting stuffed. I guarantee you shareholders won't like that. As an executive, you better find the holy grail of prudent but profitable lending or follow Bradford and Bingley on the road to easy money. Otherwise, you will be out of a job.

Eventually, even the prudent relax their standards too - that's how risky behaviour drives out good when risk is rewarded. See my comments in "James Galbraith: How financial stability creates instability."

Operational and effective constraints

So all of the preceding caused Americans and Britons to run up massive amounts of debt. The same was true in places like Latvia, Spain and Ireland - and to a lesser extent in places like Australia. But I am referring here to the private sector. What about the public sector?

Here too there are limitations. For sovereigns with debt in their own fiat currency, there is not the operational constraint that you and I face. After all, they can go to the backyard and just pick some bills off their money tree - something we can't do unless we want to go to jail.

Remember, many countries like the U.S. or the U.K. can just print money to meet creditor demands. After all, the only financial obligation of government in a fiat currency system is the payment of more fiat money. This is a confidence game then. Creditors will only accept more fiat money from the debtor if they believe that the money represents good relative future value (i.e. when debt repayment occurs and where value is relative to other currencies or real assets at that time).

So while there is no operational constraint on government because of the electronic printing presses, there is an effective constraint in the form of debt and currency revulsion and price instability (large measures of deflation or inflation). On countries like Greece or Portugal in the Eurozone, the operational constraint is a lot more real than it is on the U.K. because of currency union. The same is true for countries with a currency peg or large foreign currency debts like Latvia, Hungary or Dubai.

Taxes

What is a sovereign government's income? It is the taxes we pay now and in the future. So this makes tax revenue central to the sustainability of sovereign debt.

How does the Beatles song go:

Let me tell you how it will be

There's one for you, nineteen for me

'Cause I'm the taxman, yeah, I'm the taxman

Should five per cent appear too small

Be thankful I don't take it all

'Cause I'm the taxman, yeah I'm the taxman

Basically, if the net present value of all of the future taxes fall short of the net present value of expected government expenditures, you have a problem. Again, this problem need not be a hard constraint since the government can issue debt in its own currency. Nevertheless, there is a limit to how much paper money people are willing to take if they worry about the future value of that paper.

That's what the worries of a sovereign debt crisis are all about. At some point, the central government's debt become so high that everyone knows they cannot possibly tax the population enough to cover their expenses and service the debt. There are few way outs then - even for sovereigns using their own currency. One can print money, jack up taxes or cut spending drastically. Printing money is inflationary and causes currency and debt revulsion (The inflationary impact depends on the marginal propensity to save in the private sector i.e. the demand for credit). Raising taxes is deflationary as it curbs aggregate demand. And jacking them up far too high invites tax evasion, eventually making money printing the only fallback. And cutting spending reduces aggregate demand, can reduce the future tax base, and risks a nasty debt deflationary spiral. Pick your medicine.

And when I say printing money, I mean 'monetizing the debt' by buying up debt with money printed out of thin air or simply printing money to pay creditors. The two are functionally equivalent in a zero interest rate environment (see my post "On debt monetization").

So, in the short run, we can talk about supply and demand of government debt thinking only about the near-term deficit, budget gaps, and demand for government bonds. We can ignore health care liabilities in the same way we can ignore them for a family's immediate debt problems because this is not actual debt we have to service. Longer-term, there are constraints like huge unfunded liabilities, making the situation that much more difficult.

Enter the debt service mentality

That's where the debt servicing mentality enters this picture again. The public sector can get away with deficit spending for much longer than you or I. But, eventually they too must yield.

Japan is the textbook case. With sovereign debt to GDP well over 150% and rising to well over 200% soon, it will need to cut spending, increase taxes or print money (or all three) to avoid default. The only reason it has avoided problems is the bid for Japanese Government Bonds (JGBs) and Yen due to a huge current account surplus. What happens when that surplus disappears? What happens if interest rates are normalized?

This is the exact same issue Bob and Dorothy faced. When interest rates are low, debt servicing costs are low as well. But, as soon as rates move higher, you have a big problem. Theoretically, of course, if one takes on debt and 'invests' it, receiving a higher rate of return, then one could pile up more and more debt. This is what is commonly known as a "Carry Trade' - and it is a hallmark of bubble finance underpinned by the debt servicing mentality.

What if the investments don't succeed? What if they end up as malinvestments? Then you have wasted money and are now in a deeper hole than you were before. I think there is room to maneuver for the U.S. in terms of deficits to prevent a nasty double-dip recession, especially in regards to job creation. But a lot of what we have seen in terms of stimulus has been more dubious in nature; some will be malinvestment. Going forward, we should expect the same. And there has been absolutely no effort to reduce overcapacity in autos, banking, housing or elsewhere in the bailout nation. This is why relative debt metrics like debt to GDP are actually a good thing. They act as a hard constraint on deficit spending that otherwise does not exist.

Keeping this issue in mind, the following on Bruce Krasting's blog is interesting:

On ABC's "This Week" show there were some interesting thoughts from Paul Krugman.

He remarked:

"The cost of the deficit is only 1.2% real rate of interest at the Federal level."

This is economic speak. What Mr. Krugman was saying is that the Government can borrow long term at 3.2% and inflation is 2% so the real cost of debt is only 1.2%.

In response, George Will made the point:

"In ten years the interest cost of servicing the debt will go to $700 billion per year!"

Mr. Krugman responded:

In ten years GDP will be $20 trillion, debt service would still be 3.5%. "That doesn't sound too bad".

Mr. Krugman believes in the ultimate carry trade. His view is that growth will come from affordable (cheap) debt capital. He thinks that the US can go to 100% Debt/GDP without upsetting the applecart. I think he is dead wrong.

We are at the point where the laws of big numbers start to come into play. For Mr. Krugman' view to work out we would have to successfully sell an additional $900 billion of debt each year for the next decade. I think that is an impossible task. But what is truly impossible is that that amount of debt can be sold without an increase in the 1.2% after inflation cost of the debt that Mr. Krugman is relying upon. You can just fool so many bondholders for so long before they look elsewhere.

The cost of servicing our debt will likely double. The increase will be a combination of a general rise in interest rates and in increase in the "spread" that the US will have to pay. If debt expense was a modest 6% it would put the cost at $1.2 trillion. I don't think we will get to that level. We will blow up first.

The Carry Trade is fraught with risk.

IRS files $79,000 Tax Lien Against Schwarzenegger

2009-11-27T14:30:55Z

The Internal Revenue Service has filed a federal tax lien against Gov. Arnold Schwarzenegger for nearly $80,000, public records show.

The lien was filed May 11 at the Los Angeles County recorder's office for $79,064, according to a record in an electronic database that includes lien filings. The record does not indicate what property the lien was placed on, but it lists the debtor as Arnold Schwarzenegger with the governor's home address in Brentwood.

Krugman: Financial Transactions Should Be Taxed

2009-11-27T09:47:16Z

Should we use taxes to deter financial speculation? Yes, say top British officials, who oversee the City of London, one of the world's two great banking centers. Other European governments agree -- and they're right.

Unfortunately, United States officials -- especially Timothy Geithner, the Treasury secretary -- are dead set against the proposal. Let's hope they reconsider: a financial transactions tax is an idea whose time has come.

Carl Levin: New War Tax For Rich May Be Needed To Fund Afghan War

2009-11-21T13:42:33Z

Higher-income Americans should be taxed to pay for more troops sent to Afghanistan and NATO should provide half of the new soldiers, said Carl Levin, chairman of the Senate Armed Services Committee.

An "additional income tax to the upper brackets, folks earning more than $200,000 or $250,000" a year, could fund more troops, Levin, a Michigan Democrat, said in an interview for Bloomberg Television's "Political Capital With Al Hunt," airing this weekend.

Bloomberg: Layoffs Likely But Windfall Will Save Police, Firemen Jobs

2009-11-18T12:31:14Z

Mayor Bloomberg's administration quietly reported an unexpected tax windfall of $683 million this year - of which $145 million will exempt cops, firefighters and correction officers from earlier budget cuts.

Offshore Bank Accounts Revealed To IRS By 14,700 Taxpayers

2009-11-17T15:39:58Z

MIAMI (AP)-- More than 14,700 U.S. taxpayers came forward to disclose billions in offshore bank accounts in 70 countries under a voluntary Internal Revenue Service program allowing most to avoid criminal prosecution as long as they pay what they owe, IRS officials said Tuesday.

A flood of people came forward in the last days before the amnesty program expired Oct. 15, IRS Commissioner Doug Shulman said. The final total far surpasses the number who disclose offshore accounts in a typical year -- about 100 -- and comes amid a broad U.S. crackdown on international tax evasion at Swiss bank UBS AG and other institutions.

"To put it simply, this is a historic milestone for the nation's hardworking taxpayers," Shulman said in a conference call from Washington.

The total in taxes, interest and penalties collected from those in the voluntary disclosure program will be in the "billions of dollars," Shulman said. The disclosures involved accounts on every continent but Antarctica.

Taxpayers flocked to the amnesty program after the U.S. reached an agreement in August with the Swiss government and UBS to obtain names of 4,450 U.S. taxpayers believed to be hiding assets in secret bank accounts. Earlier this year, UBS paid a $780 million penalty under a deferred prosecution agreement filed in a Florida federal court that included disclosure of an additional 150 names.

Seven of those people have been charged criminally, with at least two getting sentenced to prison time.

Shulman said the combination of the UBS disclosures and the amnesty program have fundamentally changed the offshore tax landscape, particularly in Switzerland where bank secrecy was the tradition for centuries.

"It shows we are serious about piercing the veil of bank secrecy," he said. "The whole game has changed."

Also Tuesday, the IRS and Swiss unveiled the criteria being used to determine which American UBS accounts will be disclosed under the August agreement.

Accounts being targeted include those that contained 1 million or more Swiss francs at any time between 2001 and 2008; instances in which there was clear fraudulent actions, such as false documents; and accounts that earned an average of 100,000 francs a year for at least three years.

The equivalent amounts in U.S. dollars vary widely depending on the year, as the dollar lost over a third of its value against the Swiss franc during that period. One million francs was worth about $600,000 in 2001, compared with about $900,000 seven years later.

U.S. Sen. Carl Levin, who chairs Senate Permanent Subcommittee on Investigations, called the criteria "disappointing" because it means some of Switzerland's bank secrecy will remain intact.

"It complicates and muddies what should have been a straightforward agreement by UBS and the Swiss government to disclose Swiss accounts hidden from the United States by U.S. account holders," said Levin, D-Mich.

The Swiss have until the end of August to hand over the names. Swiss officials said the first 400 names will be chosen by the end of this week, with another 100 expected to be ready by the end of the month. Those taxpayers who are picked for disclosure can appeal to Switzerland's top administrative court.

The Debt Economy - How The Tax Code Encourages Debt : The New Yorker

2009-11-17T10:29:12Z

. Debt didn't get dangerously out of scale because the system was broken. It got out of scale, in part, because the system worked.

The government doesn't make people go into debt, of course. It just nudges them in that direction.

Tobacco Companies Using Loophole To Avoid Hundreds Of Millions In Taxes

2009-11-17T06:55:27Z

WASHINGTON — When President Barack Obama signed a law expanding children's health insurance this spring, he slapped tobacco companies with huge tax increases to pay for it.

It didn't take long for the companies to find a multimillion-dollar loophole.

Glitch Could Force 15 MILLION People To Repay Obama's Stimulus Tax Credit

2009-11-16T12:11:11Z

WASHINGTON – More than 15 million taxpayers may owe the government $250 or more because of how the IRS last spring set up President Barack Obama's tax break that was designed to help consumers spend the U.S. economy out of recession.

Individuals with more than one job and married couples in which both spouses work may have to repay the government $400, either through a smaller tax refund or a larger tax bill, according to a report released Monday by the Treasury Department's inspector general for tax administration. Social Security recipients who also earn taxable wages may have to repay $250.

Medicare Paid $47 Billion In Suspect Claims, According To HHS

2009-11-15T00:20:56Z

WASHINGTON — The government paid more than $47 billion in questionable Medicare claims including medical treatment showing little relation to a patient's condition, wasting taxpayer dollars at a rate nearly three times the previous year.

Excerpts of a new federal report, obtained by The Associated Press, show a dramatic increase in improper payments in the $440 billion Medicare program that has been cited by government auditors as a high risk for fraud and waste for 20 years.

Mike Lux: The Danger of Backsliding

2009-11-13T10:48:39Z

One of the most fundamental truisms of politics and policy is that old saying about democracy requiring eternal vigilance. In a political system like ours dominated by big money and the lobbyists that money hires, that is especially true, even in years when Democrats control both houses of Congress and the White House.

Beyond the raw power and connections of big business lobbyists, two of the biggest reasons we still have to worry about this even with Democrats in control are that (a) a lot of these things are done behind the scenes, out of the public spotlight, while other big issues are being intensely debated; and (b) the free market ideology that has come to dominate even in a lot of Democratic circles.

Three huge examples of major backsliding on economic issues have come to light over the last couple of weeks brought on by this combination of lobbyist influence, free market economic theory, and the ability to quietly push for things in the dead of night while health care is taking most of the media's -- and the progressive movement -- attention. Any of these issues would be easy to win on if the media covered them and/or the progressive movement focused their fire on them, but with health care taking up so much bandwidth, it's harder to fight these things.

The three issues are:

Weakening investor protections. In 2002, after the corporate corruption scandals of Enron, and so many other companies had dominated the headlines for months, the Bush administration was forced to accept the Sarbanes-Oxley bill, a modest but important clean-up of accounting rules providing some basic protections for investors in publicly traded companies. Ever since we got Sarbanes-Oxley passed into law, corporate America has been trying to repeal or erode it, and investor/consumer/corporate responsibility advocates have managed to hold them off even in the dark years of Republican control of everything (both houses of Congress and the White House, 2003-2007). Now it looks like the business lobbyists and their friends in Congress and the White House are coming dangerously close to eroding these protections by exempting "small" businesses from a requirement that mandates audits of internal controls. The problem is the rather outrageous definition of "small" in this proposal: any business with a market capitalization of $75 million or under. That's a pretty big business to be exempting from audits.
Weakening offshore tax crackdowns. As David Sirota points out here, another rare progressive victory over Bush and congressional Republicans in 2002 was banning federal contracts from going to companies that engage in the practice of buying a P.O. Box in Bermuda and filing their taxes from there to avoid paying U.S. taxes. Rosa DeLauro brilliantly maneuvered a vote on this provision on the House floor, and too many Republicans were afraid to vote against it, so Bush and his corporate allies were forced into accepting something they hated.
Now, apparently at the behest of the Obama administration, this provision is close to being repealed. So much for being deficit hawks.
The third problem provision (also written about by David Sirota, and talked about here in a great segment by Rachel Maddow) involves big corporate interests lobbying against language in a customs bill that would ban the import of products made with slave labor, or forced child labor. Seriously: businesses are opposing anything that would keep them from selling products made by little kids forced to work in factories, and by slaves. This is like something out of the 1800s. But the free trade uber alles cheerleaders believe that any restrictions on trade, for any reasons whatsoever, is bad news, so we will have to watch this like a hawk to keep it from getting through. We outlawed slavery in this country in 1865, and child labor forty years after that, but we will let other countries who do it sell their products here with no penalty? Sounds like some serious backsliding to me.

The first two items I mentioned were quite possibly the only two positive policy changes that happened in economic issues in the six years that Bush and the Republicans controlled Congress. There might have been others, but honestly I can't think of any. That the Obama administration is now apparently involved in trying to roll them back is a shame and an outrage, and a reflection that the free market religion that dominates the Republican Party is also way too strong on the Democratic Party as well.

Even as we are closing out the health care debate, progressives need to keep our eye on these lower profile issues, and work with progressive Democrats in Congress to stop this terrible backsliding.

White House Looking To Cut Deficit With Extra TARP Cash

2009-11-12T03:07:02Z

The Obama administration, under pressure to show it is serious about tackling the budget deficit, is seizing on an unusual target to showcase fiscal responsibility: the $700 billion financial rescue.

Huff TV: HuffPost Editor Roy Sekoff Discusses The Sarah Palin Coin Controversy On The Joy Behar Show

2009-11-12T02:00:14Z

HuffPost Editor Roy Sekoff appeared on The Joy Behar Show Wednesday night to talk about religion in politics and the controversy surrounding Sarah Palin's "In God We Trust" coin conspiracy. Joining Roy, was Libertarian and magician Penn Jillette.

Behar started off the discussion by playing a clip from Fox News, debunking claims by former Republican vice presidential candidate Sarah Palin implying that President Barack Obama was trying to secularize the nation's currency by moving the term "In God We Trust" from the faces of American coins and onto the edge of coins. The decision to move the term was made by a Republican-controlled Congress and was approved by Former President George W. Bush.

Roy argues that Palin has never let the facts get in the way of a good raging paranoia. He points out that the "scary thing" is that Palin admitted to her source for the claims: a friend. The former governor of Alaska never bothered to research her friend's claims.

Behar goes on to ask Roy and Jillette about the Stupak Amendment to the House health care bill, the Catholic Church's influence on health care legislation, gay marriage, and the Mormon Church's support for an anti-discrimination statue that would protect gays and lesbians in Salt Lake City, Utah.

Asked if the Mormon Church and other institutions were being fair to gays, Roy said no:

They're obsessing about marriage and they're obsessing about abortion. But not much talk about poverty. Not much talk about the poor. And if you took out all the mentions of poverty and the poor from the bible, very thin book."

Watch:

David Sirota: Obama Helping Lobbyists Weaken Offshore Tax Crackdown Dems Passed in 2002 Over GOP Opposition

2009-11-11T11:26:30Z

One of the few - and I sincerely stress the word few - concrete legislative successes progressives notched in the Republican Congress under President George W. Bush came on the evening of July 26th, 2002, when they humiliated the House into passing a bill sponsored by Rep. Rosa DeLauro (D-CT) banning federal contracts from going to companies that engage in tax "inversions." These are the schemes whereby a corporation that is based in the United States buy a P.O. box in Bermuda and use it to legally avoid paying American taxes.

The bill, reported Congressional Quarterly at the time, "was expected to fail [but] when the 15-minute voting clock ran out, DeLauro's amendment was five votes ahead." Ultimately, industry-owned Republican legislators who had tried to vote down the measure realized they weren't going to be able to stop it, and "after a nod from Republican leadership, more than 100 Republicans recast their votes to give DeLauro an avalanche victory." Having witnessed this firsthand on the floor of the House, I can tell you it was indeed a sight to see.

And yet in the now-Democratic Congress seven years later, with deficits exploding and the government clearly needing to strengthen any and all incentives for corporations to pay their taxes, I was more than disheartened to read this story in the Hill newspaper this week:

Multinational corporations are fighting to preserve language in a spending bill that would weaken a ban on federal contracts.

The provision, inserted in the Senate version of the bill at the request of the Obama administration, would weaken a ban on federal contracts for inverted companies...

Before the ban began in 2002, four of the 100 largest federal contractors were inverted, according to a Government Accountability Office (GAO) report.

In 2001, those four companies received $2.7 billion in federal contracts, but they have unable to win the contracts since the ban was put into place.

The Obama administration is justifying its push on the grounds that the ban may - at some point in the undetermined future - conflict with our trade agreements. It's a charge North Dakota Sen. Byron Dorgan (D) rightly calls "absurd."

What this is all about is corporate lobbying against provisions that both use taxpayer money to reward domestic companies that pay their fair share of taxes and disincentivize companies from trying to rip off the public through offshore "inversions." And it's one of the first examples we've seen of the Obama administration and the Democratic Congress potentially doing something even worse than the Bush administration and the Republican Congress.

Here we have a commonsense progressive tax measure that Democrats managed to pass and then expand under Bush and the GOP, and here we are less than a year into an era of full Democratic control of Washington watching Democrats aiming to weaken that tax measure. When you look at this move and remember that candidate Barack Obama himself promised to strengthen - not weaken - laws cracking down on offshore tax rip-off schemes, you wonder why we even waged that tough progressive fight back in 2002.

You wonder, in short, whether you are getting sold down the river.

US Treasury's Gold Valued: US Gold Reserves Total $288 Billion, But Not Really

2009-11-08T18:07:15Z

Buried in the Treasury's International Reserve Position report is an intriguing bit of math. The document details the total amount, by weight, of the Treasury's gold reserves, plus a dollar value for said metal. But some fast division reveals something interesting: The Treasury marks the value of its gold at $42 an ounce, the price settled on in 1973...

Joel Judd: Fair Taxes/Fair Share

2009-11-05T17:23:13Z

Fundamentally, taxes must be fair.

No one should be paying less than their fair share. Even if you have lots of money for lobbyists and political consultants you ought to pay your fair share. I have written about this before, and am doing so again for the simple reason that we have to face up to fiscal reality. In Colorado we have a system of tax exemptions and credits that allow corporations and other businesses to minimize their tax liability. For example, we exempt:

Railroad locomotive parts

Aircraft parts

Vending machine food

Bullion

Printing material

Newspapers

Direct mail advertising material

Uranium and steel manufacturing material.

Manufacturing clean rooms

Dairy equipment

Farm equipment

Farm equipment parts

Pesticides

Bull semen

Straw

We cannot give away tax dollars for tax credits for large corporations without proof that they work.

November 12 at 9:00 a.m. at a joint meeting of the House Finance Committee, which I chair, and the Senate Finance Committee will see if we can reduce state service cuts by eliminating some of these hand outs.* My goal is to learn firsthand if various tax credits work. These credits allow large corporations to avoid paying hundreds of millions of dollars in taxes. The lobbyists and political consultants they spend hundreds of thousands of dollars on all say that these tax credits create jobs and promote our state's economy. It's time to back up those claims. Not by hiring lobbyists but by coming forward with positive proof that for hundreds of millions of dollars in lost tax income the State of Colorado is getting jobs in return.

When we are shutting down programs for the developmentally disabled in Grand Junction, we need to be very careful about giving away tax dollars to big corporations.

When we are looking at closing colleges we need to be sure that tax credits are actually creating jobs.

When the governor is proposing cuts to programs for the mentally ill that work extremely well then we must make certain that the tax breaks we give away are working.

No one can accuse me with a straight face of not being pro-business. I have worked to bring in new jobs and proudly supported Governor Ritter's new energy economy initiatives.

But I am also pro-common sense. I'm not going to support kicking a developmentally disabled person out of a program that works, closing a college or forcing a woman suffering behavioral illness to fend for herself without compelling evidence that the tax credits that are siphoning so many tax dollars work.

Please send me your thoughts on this topic. Please attend the hearing on November 12. Please let your legislators know how you feel.

*Subject to approval by the Executive Committee of the Legislative Council

Amitai Etzioni: The Deficit Trap

2009-11-04T17:25:41Z

The Obama Administration is planning to start cutting the deficit soon for economic and political reasons. To now even merely discuss tax raises, expenditure cuts, and increases in interest rates that are entailed will slow the recovery. We know what must be done; it does not require long preparations. And there is no sign that the feared inflation that deficits are said to cause is anywhere in sight. True, once inflation settles in, it is difficult to eliminate -- but it starts slowly. There is plenty of time.

Note that both Carter and Clinton fought to balance the budget and cut or capped social programs -- only to allow the Republican administrations that followed to provide huge tax cuts to those better-off.

As to politics -- whatever Obama does, the GOP will complain that the deficit is too high and make political hay out of the tax raises and benefit cuts. As to the voters -- while they tell pollsters they fear deficits, they hate increased taxes and benefit cuts many times more.

Last but not least, how much deficit is bad for the economy is far from clear.

In short, for now, worry about those without jobs, not those who are crying about deficits.

Amitai Etzioni is a University Professor at the George Washington University. To contact him, write icps@gwu.edu. www.gwu.edu/~ccps/securityfirst