Saturday, April 13, 2019

Wealthiest Do Most Tax Evasion

As Tax Day approaches it’s appropriate to think about how the wealthiest among us escape paying their fair share. We can argue over whether there ought to be brackets with higher rates than the current 37% on earnings over $600,000. What I doubt anyone will argue with is need to close the loopholes and tax dodges that high earners use to avoid paying even the current rates.

Propublica, the nonprofit newsroom based in New York, published an article recently discussing this very issue. They found that it is virtually impossible to enforce the tax code against millionaires due to the ability to create complex transactions and the army of attorneys and accountants they can muster to defend and obfuscate those transactions.

In 2016 the Internal Revenue Service determined a wealthy individual named Georg Schaeffler had engaged in abusive tax maneuvers. He stood accused of masking about $5 billion in income. The IRS wanted over $1.2 billion in back taxes and penalties. Schaeffler, is the billionaire heir of a family-owned German manufacturer.

A crack team of specialists formed in 2009 was assigned to the case and embarked on a contentious audit of Schaeffler in 2012. But after seven years of grinding bureaucratic combat in which they were outnumbered by Schaeffler's attorneys and accountants, the IRS abandoned its campaign. The agency informed Schaeffler’s lawyers it was willing to accept just tens of millions, according to a person familiar with the audit.

Shortly after the IRS formed its special team to go after tax cheats like Schaeffler Republicans in Congress began slashing the agency’s budget. The team didn’t receive the resources it was promised and needed in order to do battle with teams like those Schaeffler hired. Since then thousands of IRS employees have left the agency, especially those with expertise in complex audits, the kinds of specialists necessary to staff such an elite unit. The agency had planned to assign 242 examiners to the group by 2012, according to a report by the IRS’ inspector general. But by 2014, it had only 96 auditors. By last year, the number had fallen to 58.

Here’s why this is some important and why you and I have a right to be angry. Studies show that the wealthiest are more likely to avoid paying taxes. Those earning in the top 0.5 percent in income, or $500,000 to $19,000,000, account for fully a fifth of all the underreported income, according to a 2010 study by the IRS’ Andrew Johns and the University of Michigan’s Joel Slemrod. After adjusting for inflation, that’s more than $50 billion in unpaid taxes for 2017 out of a total of $1,587 billion. That’s an average of $62,500 in underreported income per member of the top 0.5 percent. Another way to look at it is they’re underreporting more than the average American worker earns in a year and they’re getting away with it.

While I’d like to say it’s all the Republicans’ fault I have to be honest and admit that there are plenty of Democrats taking campaign donations from those advocating for special tax loopholes that their clients can use to skip out on paying their fair share. We have a bi-partisan problem that is created and exploited by our campaign finance system. When wealthy people do most of the donating then it’s mostly wealthy people our elected officials listen to. Ultimately the only fix for this is public financing of campaigns. In the short term consider donating $5 or $10 to presidential candidates like Elizabeth Warren and Bernie Sanders who promise not to take money from political action committees.

Published in the Seguin Gazette - April 12, 2019

Saturday, April 6, 2019

Trump Attacks HealthCare He Promised to Protect

During the 2016 election Trump repeatedly claimed he would help people with pre-existing conditions yet his direction to Attorney General Barr to attack the constitutionality of the Affordable Care Act says differently. It is the Affordable Care Act, aka Obamacare, that protects people with pre-existing conditions from being charged outrageous and often unaffordable premiums.
Trump also campaigned promising, “I’m not going to cut Social Security like every other Republican and I’m not going to cut Medicare or Medicaid.” His proposed 2020 budget cuts all three.
This isn’t just about breaking campaign promises it’s about people’s lives, their physical well-being and their financial health. If Trump succeeds in overturning the Affordable Care Act in court and his proposed budget is passed there are a host of the negative consequences to the lives of most Americans.
Without the Affordable Care Act, most young adults 18-26 will lose the option to be covered under their parent’s insurance plan. Many young adults work part time while going to trade schools or college and aren’t eligible for employer sponsored health insurance and individual plans are notoriously expensive so overturning the Affordable Care Act via the courts will cause tens of thousands of young Americans like my daughter to lose their health insurance.
Do you know anyone with cancer or other expensive life threatening conditions? Should the courts overturn the Affordable Care Act insurance companies would once again be able to set annual and lifetime limits on the amount they’ll cover. Between two episodes of blood clots, one of which involved open heart surgery, a staph infection the nearly killed her and various other surgeries my wife would long ago have busted through the caps that many insurers were once allowed. In other words people like my wife would either die from lack of care or their family would go bankrupt or both.
The Affordable Care Act requires insurers to maintain at least an 80% medical loss ratio; that means at least 80% of premiums have to be spent on actual medical care. If an insurance company ends the year with less than that they have to refund you the difference. The first two years after the ACA first went into effect I got substantial refund checks. My insurer finally got the hang of not overcharging. Without the ACA you can bet medical loss ratios will fall and meaning premiums will go up just to so the insurance company can have higher profits.
Trump’s 2020 budget cutting Medicare and Medicaid would also impact many of us either directly or through our loved ones and friends. Medicare is already the most efficient provider of health insurance spending upwards of 95% of premiums on health care as opposed to the 80% allowed to private insurers. Cutting Medicare will mean cutting coverage or cutting physician reimbursement or both. Considering that Medicare already pays most physicians less than other insurers you can see it won’t end well.
Do you know someone in a nursing home? If so, chances are that Medicaid covers some or all of the cost since it covers 2 out of 3 nursing home residents. Trump’s 2020 budget cuts Medicaid, are you ready to care for you parent or grand-parent when they are kicked out of the nursing home?
Trump’s actions are just cruel and heartless. Let’s hope his enablers in the Senate at least see the electoral downside of this and stop him before it’s too late. If they don’t the 2020 election will be a blood bath at the polls.

Published in the Seguin Gazette April 5, 2019

Saturday, March 30, 2019

End of the Beginning for Trump Investigations

It’s not unusual for people to get upset when a District Attorney declines to prosecute someone that many, often including the prosecutor and police, believe is guilty. It’s frustrating and we often want to blame the system. That’s a mistake, we as a nation set a high bar for a guilty verdict and prosecutors don’t often want to waste their limited resources trying a case when they don’t believe they can prove guilt beyond a reasonable doubt. Declining to prosecute is not exoneration; it is an admission that they have been unable to find sufficient evidence to support a guilty verdict. Often that simply means the guilty party has done a good job hiding the evidence or that there is no fingerprint or DNA left at the scene of the crime that provides conclusive proof.

In the case of Trump or a member of his family or campaign leadership possibly conspiring the Russians to influence the 2016 election there’s plenty of suspicious activity but without someone on the inside confessing or providing documentation there is no way to know for sure and certainly no way to prove such a conspiracy in court.

On the topic of Obstruction of Justice Attorney General William Barr’s letter to congress specifically says: “The Special Counsel states that ‘while this report does not conclude that the President committed a crime, it also does not exonerate him.’" This is another case of suspicious activity but not enough concrete evidence to prove guilt. Remember Eliot Ness never proved Al Capone was a gangster or bootlegger or that he’d committed numerous murders. Ness’ teammate Frank Wilson of the Treasury Department proved tax evasion which is why Capone finally went to jail.

There are still half a dozen prosecutions and investigations going on in the US Attorney’s office in the Southern District of New York which specializes in financial crimes and where Donald Trump’s former fixer Michael Cohen is cooperating. Some of the investigations that may lead to prosecuting Donald Trump include a pair of campaign-finance violations for hush payments that Cohen says he made to two women at Trump's direction shortly before the 2016 election to keep them from talking about alleged affairs with the then-presidential candidate, as well as the financial irregularities of the Trump Organization and Trump's inaugural committee.

Based on Michael Cohen’s public testimony before congress we already know that Trump overstated the value of various assets in order to get a loan, that’s bank fraud – a felony. He also understated the value of assets when reporting his taxable income, that’s tax evasion – another felony. In fact those two crimes are some of what Paul Manafort and his partner Rick Gates pleaded guilty to have gone to prison for.

It’s been reported that there are as many other investigations ongoing into Trump, the Trump Organization and the Trump campaign in other venues as there are in the Southern District of New York. Then there are the various House committees looking into Trump’s taxes and various other activities, so Mueller handing in his final report isn’t the end, it’s just the end of the beginning.

Published in the Seguin Gazette - March 29. 2019

Saturday, March 16, 2019

Elections Matter - For the People Act

I often hear the phrase "elections matter" when suggesting that a judicial appointment or new law has been either especially good or bad. Last week that phrase took on an additional meaning when Maryland congressman, John Sarbanes introduced H.R. 1, the For the People Act which is designed to clean up corruption in Washington, make it easier to vote, and give the American people more power in our democracy. The bill was written because elections matter - and elections matter because without the 2018 election resulting in the Democratic Party majority in the House this bill wouldn't have seen a chance for passage. All 236 Democrats have co-sponsored the bill but not a single Republican cares enough about the right of the people to free and fair elections or open and honest representation.
H.R. 1 makes critical reforms across three key areas: voting rights, campaign finance, and ethics and accountability.
On voting rights H.R. 1 expands access to the ballot box by attacking cumbersome registration systems, limited voting hours and many other barriers. The bill requires automatic voter registration in every state, ensures that individuals who have completed felony sentences have their full rights restored, expands voting by mail and early voting and otherwise modernizes the U.S. voting system.
 H.R. 1 fights back against attacks on voting rights like eliminating polling sites in minority communities and gerrymandering by committing Congress to build the record necessary to restore the Voting Rights Act, prohibiting voter roll purges like those seen recently in Texas as well as Ohio, Georgia and elsewhere and ensuring that discriminatory voter ID laws do not prevent Americans citizens from exercising their rights. The bill also ends partisan gerrymandering to prevent politicians from picking their voters. The bill enhances federal support for voting system security, particularly paper ballots - which our county commissioners had the foresight to address with our new voting machines.
On campaign finance, H.R. 1 addresses super PACs and dark money in politics by requiring any organization involved in political activity to disclose its large donors. Since the Citizens United decision nearly a decade ago wealthy donors and special interests have been able to hide their spending in networks of “social welfare” organizations that aren't required to report where the money came from.
H.R. 1 levels the political playing field for everyday Americans by creating a multiple matching system for small donations thus restoring the right of the American people to exercise their will in a world where the wealthy currently have overwhelming influence. The bill will break the stranglehold special interests have on Congress so that the American people are served once again.
H.R. 1 tightens rules on super PACs and restructures the Federal Election Commission to break the gridlock and enhance its enforcement mechanisms and repeals regulations that prevent government agencies from requiring commonsense disclosure of political spending.
The bill also addresses the revolving door between government and lobbyists and boardrooms which is where much of the shenanigans originate. H.R. 1 also closes registration loopholes for lobbyists and foreign agents, and ensures watchdogs have sufficient resources to enforce the law.
In all H.R. 1 is great start on restoring government power to the people, sadly while it is sure to pass the House, Mitch McConnell has already boasted it won’t ever even be voted on in the Senate claiming it’s a power grab. Well if that’s true it’s a grab by the people and Mitch and his Republican enablers like John Cornyn should watch their step.
In 2020 elections will matter once again.

Published in the Seguin Gazette - March 15, 2019

Saturday, March 9, 2019

ACA Not Good Enough for All Americans

Too many Americans still can’t afford health insurance even after passage of the Affordable Care Act and four million have lost their subsidies on the through Exchanges over the last four years. A recently released study by the Kaiser Family Foundation shows that particularly older and rural folks find it hard to afford individual insurance whether on the Affordable Care Act Exchange markets or not.
Part of the problem is that Exchange subsidies cut off federal assistance for premiums at incomes at 400 percent of the poverty line, or nearly $49,000 for an individual and just over $100,000 for a family of four. Rather than phasing out by reducing the subsidy gradually the subsidy just disappears, lending the phenomenon the name "subsidy cliff." The Kaiser study uses this example: "On average across the U.S., a 40-year-old making $45,000 would pay $227 a month (6% of their income) for a subsidized bronze exchange plan, whereas the same person making $50,000 would pay $340 a month (8% of their income) for the same plan without a subsidy."
And if you’re older it goes from bad to worse: "a 27-year-old making $50,000 would pay 7% of their income in premiums for the average lowest-cost plan nationally, whereas a 60-year-old making the same income would pay 17% of their income in premiums. Even at an income of $70,000 (577% of the poverty level), a 60-year-old would have to pay 12% of income for a low-cost plan on average."
Rural areas get hit even harder since health insurance there is even more expensive. The Kaiser study provides this example of a 60-year-old in almost any county in Nebraska, earning $50,000 and paying between 30 percent and 50 percent of their income in premiums. And that's for the least expensive, ACA-compliant plans.
There are several ways to deal with the problem. One way is to eliminate the subsidy cliff by adjusting the subsidy so that the premium paid by the insured is never more that 6% of their income. That’s an expensive solution. A better way would be to expand Medicare to cover people 50 and older. Even better is the Medicare For All Act of 2019 introduced last week by Representatives Debbie Dingell, Pramila Jayapal, and co-sponsored by over 100 other members of Congress.
Our current healthcare system in the United States is ineffective, inefficient and outrageously expensive. Around 70 million Americans are uninsured or cannot afford the costs of their co-pays and deductibles. The quality of our healthcare is worse than other industrialized countries with lower life expectancy in the U.S. than other nations, and a much higher infant mortality. The U.S. spends more money per capita on healthcare than any other industrialized nation in part because we waste hundreds of billions of dollars every year on unnecessary administrative costs like insurance CEO salaries in the millions of dollars, while healthcare industry executives measure success in profits, instead of patient care.
When the Franklin Roosevelt administration created Social Security conservatives fought it but the lives of millions of older Americans were improved immediately and seniors have continued to benefit from it 80 years later. When Medicare was passed under the leadership of Lyndon Johnson conservatives fought it, Ronald Reagan even made speeches calling it socialism, but again millions of older Americans lives were improved and seniors today recognize their lives would be much worse without it. Conservatives are fighting Medicare for All but it will improve the lives of tens of millions of Americans and save us and our country billions of dollars at the same time.

Published in the Seguin Gazette - March 8, 2019

Saturday, March 2, 2019

Climate Change Topics in the News

Global climate change is back in the news due to new science, political maneuvering, corporate denialism for profit, and technological progress. Unfortunately most of the news is bad and yet there is still some hope for our children and grand-children. It remains to be seen whether our latest generation of voters will show up at the polls and call on legislators demanding action or will the efforts of fossil fuel company political donations win the day thus sending the environment into an unrecoverable tailspin all to earn a short term profit.

New research the Intergovernmental Panel on Climate Change (IPCC) shows that based on the latest available science the world has about 11 years left to drastically reduce greenhouse gas emissions like CO2 and methane in order to keep global warming to a livable 2 degrees Celsius or 3.5 degrees Fahrenheit. Other research released even more recently shows that cloud cover is reduced in a warming world and acts as a feedback mechanism that increases the amount of solar energy reaching the planet causing further heating. This is similar in effect to warming air causing the northern hemisphere’s permafrost to melt thereby releasing methane stored in the soil which then causes further planetary warming.

On the political side Trump has announced an ad-hoc panel to study whether or not global climate change is a national security risk, something which the Defense Department has already determined to be a big concern. Trump had appointed a prominent climate change denier named William Happer to head the panel and the reason it is ad-hoc is that disclosure and transparency laws are looser so they can avoid public scrutiny of their work. While on the side of the people young political star Alexandria Ocasio-Cortez and the Sunrise Movement are working on building support for the Green New Deal which is intended to address the timetable set out by the IPCC by reducing carbon emissions drastically with a multi-pronged approach of increased generation of renewable energy and decreased usage of energy via efficiency.

Corporate political donations from fossil fuel companies continue to drive many political leaders to deny the science that global climate change is mostly drive by the actions of man, in particular CO2 and methane emissions along with deforestation. Sadly this isn’t even a partisan issue though there are more deniers on the Republican side, too many Democrats are complicit as well. Just the other day California senator Dianne Feinstein told a group of young people she wouldn’t support the Green New Deal because she knows better. Exxon Mobil, the world’s largest fossil fuel company, is currently battling in the courts with some of its own shareholders to prevent them from even proposing to the shareholder’s meeting a set of goals to meet to reduce the company’s exposure to risks from global climate change.

New developments in battery technology continue to reduce the price of batteries and now utilities are beginning to buy them in large quantities for use in storing power to meet peak demand. In order to meet the sudden and relatively brief demand power companies have to startup additional generators. That means building entire facilities for use just a small fraction of the day so that energy is really expensive. If they can store electricity generated during off peak times they can save big bucks making solar power and storage a practical solution.

The Green New Deal aims to push all this technology forward quickly in order to save our planet for our children and grandchildren. You, your family and your friends can make that happen by calling your legislators.

Published in the Seguin Gazette - March 1, 2019

Saturday, February 23, 2019

Wall Street or Main Street

Recently two freshmen senators, Rick Scott of Florida and Mike Braun of Indiana, introduced a bill to end congressional pensions. Many Americans probably cheered but think about that. The two authors of the bill are millionaires many times over, they could live in the lap of luxury for the rest of their lives on the income from their investments alone. Now it’s true that millionaires make up a disproportionately large fraction of Congress at 38% as compared to 9% of the general public but this bill just makes it that much harder for non-millionaires to put in the effort to serve their country.

Truly working class people like the recently elected Alexandria Ocasio-Cortez often struggle to make ends meet given that they must cover the expenses of a home in their respective states and one in Washington, D.C. A member of Congress is paid $174,000 per year and that seems like a lot, it’s more than twice my salary anyway. Now consider what it costs just to rent an apartment in the Washington, D.C. area, one bedroom and one bath in 746 square feet goes for $2,990. That’s half the size of my house and nearly three times the mortgage payment.

Oh and the pension isn’t all that generous either, you get nothing unless you serve at least five years and don’t get a full pension, which can be no more than 80% of your last year’s salary, until you turn 62. The average annual pension as of 2016 was just over $41,000 for those in the current system which started in 2003. Millionaires like Rick Scott, worth about $255 million, won’t notice whether they get a congressional pension or not but the people we need in Congress most, people like you and me, would be much less willing to serve with no chance to even earn pension benefits.

If we really want to make our representatives more beholden to the people who elect them then bills like the STOCK Act which made it illegal to use inside information about upcoming legislation when investing can help. Sens. Sherrod Brown (D-OH) and Jeff Merkley (D-OR) have introduced a bill that would ban members of Congress and senior staff from buying or selling individual stocks while in office. Members would also be barred from serving on any corporate boards.

Merkley and Brown cite two recent trading scandals, one involving a Republican congressman from New York and another involving former representative and one-time Trump administration Health and Human Services Secretary Tom Price, for inspiring the bill. You might remember that Price bought stock, then authored bill benefiting company which earned him a bundle. Rick Scott, perhaps also inspired by Tom Price, is moving in the opposite direction, he’s removing his investments from a blind trust and holding them directly, this will allow him to know how legislation he’s voting on can affect his finances.

It really comes down to whether you want the halls of Congress to look more like Wall Street or Main Street.

Published in the Seguin Gazette - February 22, 2019