The only sure thing is climate change and taxes

 

U.S. tax rates change over time. In 1913 the highest earners paid only 7 percent, but in 1918 they paid 77 percent to pay for the first world. During the early 1920s, top tax rates remained higher than today, but in 1925 the highest tax rate dropped to 25 percent. It stayed within a point of that rate until 1932 when it rose to 63 percent. The tax rate continued to climb during the Great Depression and beyond, reaching a high of 94 percent during the final two years of World War II. The rate dropped into the 80s after the war, but was generally around 91 percent between 1950 and 1963. The top rate then moved to 77 percent and began to fall after that, reaching a low of 35 percent in 2003. It remained at that rate until 2013 when it jumped to 39.6 percent. The Tax Cuts and Jobs Act of 2017 (TCJA) reduced the top rate to 37 percent.

Corporate tax rates fluctuate as well. From 1946 through 1949 corporate profits were taxed at a maximum rate of 53 percent. This rate applied to profits over $25,000 and under $50,ooo. The rate fell to 38 percent on profits over $50,000.

Between 1993 and 2017 the highest corporate tax rate was 39 percent on profits between $100,000 and $335,000. Above that amount, the rate dropped to 34 or 35 percent on profits below 15 million dollars. Between 15 and 18.33 million dollars profit the rate returned to 38 percent, before falling back to a top rate of 35 percent. Progressive tax rates increase as income grows, while regressive taxes take a larger bite of income from those with smaller incomes. This period’s tax rates are generally progressive, but don’t entirely follow a straight progressive increase.

The 2017 Tax Cuts and Jobs Act (TCJA) sets a flat tax of 21 percent on corporate profits. Flat taxes are usually considered to be regressive. Large corporations must love TCJA since it forces smaller ones to pay 21 percent instead of 15 percent on their first $50,000 in profits.

During its history, the United States has held debt at various times, but in 2001, it held a surplus. That didn’t last long. Today the national debt is an enormous three trillion dollars. Higher taxes can lower a nation’s debt. The rationale behind TCJA was that lower taxes would pay for themselves by growing the economy. Did it work? The economy did grow a bit, but not as much as predicted. Our nation’s high deficit grew instead of decreased as predicted. According to the Economic Policy Institute, TCJA “did not increase wages for working people, failed to spur business investments, decreased corporate tax revenues, and boosted stock buybacks in its wake.” No surprise here — taxes are paid on profits taken after employees are paid and R&D costs accounted for. There was never any logic to its boosters’ claim that TCJA would increase business investment and benefit workers. Who lobbied for this lie?  The usual suspects,  including among others, the Business Roundtable, the U.S. Chamber of Commerce, and the National Association of Manufacturers. These same organizations plan to lobby against the 3.5 trillion dollar economic plan.

If that economic plan isn’t implemented, there could be a long wait before climate change is meaningfully addressed. The poor also suffer when the wealthy don’t pay their fair share. During the mid-twentieth century when taxes were high the middle class was broader and more affluent than today. Taxing wealth to repair the climate would also benefit the bottom 90 percent of U.S. citizens. Speak loudly Citizen and shame the greedy into social responsibility.

Of mice and (greedy) men

 On the final day of August a Washington Post headline read, “Corporate America launches massive lobbying blitz to kill key parts of Democrats’ $3.5 trillion economic plan.”  A few days later, Paul Krugman, writing for the New York Times, asked, “Why does Mickey Mouse want to destroy civilization?” Krugman explains that the Walt Disney Company is a member of the U.S. Chamber of Commerce which intends to lobby against tax increases on corporate profits which would be used, in part, to pay for the proposed economic plan. Krugman is correct to assume that if climate change isn’t addressed immediately, years could pass before it finally is. By that time, it might be too late to address it significantly.

Members of the U.S. Chamber of Commerce may, or may not, believe in climate change, but they certainly believe that protecting profits from taxation is more important than doing their share to address it. Joining the Chamber in its defense of greed are the Business Roundtable, and PhRMA which doesn’t want the government meddling in drug pricing.

The National Association of Manufacturers is also involved in a lobbying effort. Its senior vice president, Aric Newhouse, said that if the economic plan passes, “manufacturing families will suffer, jobs will be lost.” He’s lying. Profits are taken after employees have been paid, not before. A tax on profits has no effect on labor costs. Who really will suffer? Stockholders, because they receive their dividends after all taxes have been paid. Only the wealthiest Americans have significant stock holdings — they can afford to pay higher taxes, but spend millions to avoid doing so. According to Statista, the top 10 percent of Americans hold 70 percent of the nations’ wealth. Many of the other 90 percent of Americans are but a paycheck removed from homelessness. After seeing this summer’s hurricanes and wildfires, it’s obvious that climate change is coming for us all. It won’t spare the wealthy, even if they believe their money will cushion its blows.

Similar lobbying tactics were used to pass the 2017 Tax Cut and Jobs Act (TCJA). The name itself is a lie. The act failed to create the jobs it promised. According to the Brookings Institute:

"Overall, the TCJA's advocates promised many supply-side benefits and promised they would materialize quickly. But at least for the first two years, the Act failed to deliver its promises on investment and growth, leaving the country instead with higher deficits and a less equal distribution of after-tax income." 

 Gentle reader, consider speaking or writing the idolaters whose Mammon worship blinds them to the catastrophes to come. Here’s some contact information to get you started:

National Association of Manufacturers
(800) 814-8468
(202) 637-3000
info@nam.org

U.S. Chamber of Commerce

(800) 638-6582

(202) 659-6000
membership@uschamber.com
federation@uschamber.com
smallbusiness@uschamber.com
press@uschamber.com

Sample message:

Your company is a member of the U. S Chamber of Commerce which plans to lobby against corporate tax increases slated to be used in fighting climate change. Money can wait, but the climate can't. Stop being so greedy and pay your fair share.

Caterpillar, Inc.

Citi
The Coca-Cola Company
General Electric
PepsiCo
Pfizer
Procter & Gamble
Target
Walt Disney Company 

Of Siren Servers and Radical Markets

Radical Markets: Uprooting Capitalism and Democracy for a Just Society
Eric A Posner and E. Glen Weyl
Nonfiction 337 pages
Princeton University Press, 2018

Who Owns the Future?
Jaron Lanier
Nonfiction 396 pages
Simon & Schuster, 2013

It is difficult to review what one doesn't fully understand. Which isn't to say that I was totally baffled by these two books from these  three authors. Their descriptions of socioeconomic problems made perfect sense to me. It was their solutions that baffled me.

"Radical Markets" looks at capitalism in a radical way, starting with the premise that property is monopoly. While their solutions are sometimes over-explained, they none-the-less failed to convince me. That may be due to my inadequate understanding of economics, or perhaps I've correctly intuited that something is missing in their solutions.

Regardless, the ideas are certainly worth reading. One in particular was splendid. It's called quadradic voting, and it works like this: let's say you have a number of vote credits and you can spend them across a number of issues. To vote once on an issue costs one vote credit, to vote twice costs four credits, and voting three times costs nine. If you really cared about an issue, you could vote four times, spending sixteen vote credits. The more you care, the more it costs you. This might be a good way to decide certain popular issues. We live in times where manipulating complex math is easy. There are all kinds of new solutions we could try.

The authors also discuss the idea of treating data as currency, giving credit for this idea to Jaron Lanier. The idea evolved as a solution to what Lanier calls "Siren Servers." I feel the same ambivalence toward Lanier's solutions as I do to those of the other authors. Lanier's label, "Siren Servers", refers to technology companies that make their money by mining other people's content or data. According to Lanier, people should be paid for the demographic data they provide to those who mine it for marketing products or gaining or suppressing potential votes. Sadly, in the United States a great deal of money is spent persuading voters to embrace policies that harm them while enriching those who already have too much. Paying people for their demographic data won't fix this problem. Limiting how much Political Action Committees can spend would do greater good.

I'm not sure Lanier's solution is workable, but I'm completely sure that Siren Servers are an engine of income inequality. Once software is written, only maintenance costs remain. Siren Servers don't require factories full of workers. Only a few, very well paid, employees are needed. Since there are only a handful of Siren Servers, there is little competition to limit price. Apple can charge an app maker 30 percent for a sale in its app store because no competitor charges less. It may not seem like much, but 30 percent of retail price is a strain for both the app maker and the app consumer. On the unregulated internet, price gouging is business as usual. In its earliest days the internet was used to share government and academic information. As the World Wide Web gained popularity, this information source was commodified. Going forward, the internet needs to be more like a library and less a device for monopolist rent collectors.

Explore Denver by Trail

Every city has its secrets and Denver is no exception. Among Denver’s secrets are its miles and miles of trails shared by cycling, walking, rollerblading, and riding urban adventurers. Of course, not every trail is suitable for every conveyance—horses aren’t permitted in some places and rollerblades will suffer on unpaved portions—but all in all, there’s plenty for everyone, especially those who travel on foot.

Suppose you’re attending a convention in the mile high city. Day’s business done, adventure calls. You leave the Colorado Convention Center, cross Speer Boulevard, descend a few stairs, and you’re there. You’re now on the Cherry Creek Trail. Should you head southeast, you’ll pass through some of Denver’s older and more affluent neighborhoods. If you go all the way to the end of the trail, you’ll have travelled about thirty-nine miles. But by then you’ll be in Franktown, not Denver.

Heading northwest instead, you’ll soon arrive at Confluence Park where Cherry Creek meets up with the South Platt River. Heading north along the Platt you can go as far as 104th Avenue before the trail develops discontinuous portions. Heading south, the trail system will take you as far as Chatfield State Park. Trying to go this distance on foot isn’t quite practical. But, a bicycle can take you there if you’re fit and have the time.

The Bear Creek Greenbelt is a personal favorite. It runs from the South Platt River Trail through several parks, including Bear Creek Lake Park, and ends in Morrison. Bear Creek hosts a variety of water fowl. I once saw a night heron while cycling that path. I’d never seen one before and wondered what a penguin was doing that far north. (Since writing this in 2008, I've also seen a Malayan Night Heron, though in Taipei, not Denver.)

 

Towering Babble

 

Back in 1946, George Orwell expressed his doubts about, Politics and the English Language in an essay with that title. If he was correct then that politics was corrupting  language, it's even more true now. Only today, it's not just politics. Social media and a tribalized electorate isolate Americans into conflicting subcultures.

Those who spout unreasoned political nonsense abuse both language and factuality. But one only needs to look toward academia to find serious language corruptors. Academicians abuse language by making it inaccessible to the more than two out of three Americans without college degrees. I suppose academicians coin new terms as a substitute for new ideas. It's a dangerous practice.

Take the term, critical race theory. What does it mean? The term invites attack. If instead, one promoted teaching the history of what really happened, who could object?

Another term I can do without is systemic racism. The word "systemic" bothers me. Without knowing which system, political, social, financial, or educational, is under discussion, it's impossible to address the problem. If I said instead that racism was culturally embedded, I'd be providing a better description of the problem. The seeds of racism are found in children's rhymes, folk tales, ethnic jokes, and locker room talk. Racism is embedded in American culture and that is where it must be sought. Only by understanding its cultural manifestations can we understand how it's embedded in different systems within our culture and its subcultures.

 

Big Donor Man

 

Dave asked me to write something, but I haven't had time. The children's grandparents are visiting and that means no days off for me. Granddad was playing a song by some old band called the Doors. I was thinking about the song and came up with my own lyrics about lobbyists and wealthy donors. It's not much. Perhaps the excerpt from my book explains it better.

WTF, yo...oh

C'mon, duh, duh, c'mon, duh
I am a, duh, I'm a big donor man
I'm a big donor man
The plebes don't know, but the rich folk understand

Hey, all you serfs that are tryin' to survive
I'm taking away the money that keeps you alive, duh
'Cause I'm a big dough man
The plebes don't know, but the rich folk understand
All reet, duh

You chumps go eat your lunch, crap on week-old bread
What we say at fund raisers make you wish you were dead, duh,
I'm a big donor man, wtf
The plebes don't know, but the rich folk understand

Well, I'm a big donor man
I'm a big dough man
Duh, sucka, I'm a big dough man
The plebes don't know, but the rich folk understand

Excerpt from Fix It. Voters don’t usually notice charitable donations that are subsidized by government, but these aren’t the only invisible ways in which elites can leverage government for their own advantage. Rent-seeking occurs when scarcity adds to the amount that can be charged for a product or service. Scarcity, however, can be artificially created by groups seeking to create regulations which favor themselves. There are four ways in which special interests can gain unfair market advantages, Brink Lindsey and Steven Teles write in, The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality.

Their examples of special interest rent-seeking come from finance, intellectual property, occupational licensing, and land use. Lack of competition, they argue, is one of the reasons behind income inequality. Enforcing antitrust laws would create more competition “But an absence of competition also comes from the affirmative use of government power, such as when incumbents are able to fend off challenges by constructing barriers to entry like licenses or intellectual property protection.”

While no one wants to see a doctor lacking sufficient credentials, over-strenuous requirements can keep qualified physicians out of the game:

Although graduation from a U.S. medical school is not required to obtain a medical license, completion of a U.S. residency program is … The U.S. residency requirement, combined with highly restrictive policies on high-skill immigration, makes AMA power over medical school accreditation a powerful lever to constrict supply. Meanwhile, by historical accident the vast bulk of funding for residency slots is provided by Medicare, and for cost saving reasons the number of slots has been frozen since 1997. In 2016, for example, 8,640 graduates of accredited medical schools who applied for residencies—or roughly a quarter of all applicants—failed to be given a match.

If a quarter of new doctors can’t find residencies, then shortages of doctors are bound to lead to higher healthcare costs. Should the AMA choose to loosen requirements enough to increase the supply of physicians, they would also be reducing the potential salaries of their members. Groups like the AMA lack incentives to increase membership and are likely to become even more restrictive in influencing licensing requirements. Unfortunately lawmakers receive most of their information from those most likely to engage in rent seeking. Such groups have both money and organization on their side while ordinary citizens lack both and are often unaware of potential rent seekers.

Silicon Valley is another source of rent seeking. Just recently one of Amazon’s patents expired. This was for their one-click purchasing method. While there’s nothing inherently inventive in a method that saves a mouse click, Amazon none-the-less gained an advantage over Barnes and Nobel with this dubious patent.

It’s easier now than in earlier years to obtain patents. “In 1982, the newly established Court of Appeals for the Federal Circuit (CAFC) was vested with exclusive appellate jurisdiction over patent cases. Since then, the CAFC has reshaped the law by lowering the standards for patentability and expanding the scope of patentable inventions to include software, business methods, and even parts of the human genome. As a result, the number of patents issued annually by the US Patent and Trademark Office has increased almost fivefold. …

For this reason an entire industry buys patents in order to sue those who infringe upon them. The potential liability that one might be sued for accidentally using another company’s patented method discourages innovators from developing new products. Loosely defined and over-enforced, patent laws are stifling start-ups, crushing competition, and preventing progress.