Sunday, December 17, 2017

TAX BILL PUZZLE | Thatcher Policies in Reverse

Thatcher's policies added homeowners and reduced the number of renters
of public housing. (Chart by The Guardian.)
Of all the puzzles posed by the tax bill now before the Congress, the impact on homeownership is the hardest to fathom. 

The bill reverses one of the major thrusts of Margaret Thatcher's administration in Britain, to use greater homeownership through right-to-buy programs to expand the ranks of the Conservative Party. 

Thatcher became leader of the Conservative Party in Britain in 1975 and became Prime Minister in 1979. She therefore led a conservative-laissez faire revolution in the 1970s that in 1980 returned the White House to the GOP by electing Ronald Reagan President.

Thatcher presided over large-scale selling off of Council Housing to the people who lived in the the rented homes. Her goal was to make them into homeowners who would care about their property... and vote Conservative in future elections.

The tax bill before the Congress removes incentives for homeownership and tilts the playing field toward renters. An astonishing reversal of a Thatcher program that has been widely viewed as brilliant.

Wednesday, December 13, 2017

TAX BILL | Latest on House-Senate Conference

The following is from Dana Chasin in Washington, reposted by permission. (I am in Washington this week as well.) This is his Update 235 on Washington legislation.
This afternoon at the White House, President Trump made one last pitch for the Tax Cuts and Jobs Act.  

Up on the Hill, conferees met to continue trying resolve differences between the House and Senate bills.  

Even as the process is well underway, the conferees know that Americans have picked up on the fact that their promised tax cuts are turning out to be rebates that dwindle over ten years through a series of sunsets. 
When will the initial tax cuts sunset?  Who then gets the tax hikes that follow?  How much does the middle class get in relief, averaged annually over the life of the law?  How many middle class taxpayers are looking a tax hike?
Rebate and Switch
This afternoon, Republican tax negotiators from the House and Senate met to hash out differences in the GOP effort at sweeping reformation of the nation’s tax code.  Unsurprisingly, the meeting was conducted behind closed doors. Republicans point to an ambitious timetable for keeping negotiations out of the public eye, but just as important is the tax bill’s overwhelming unpopularity.
Republicans made grand promises in their sales pitch to the middle class. Americans were told the average middle class family of four earning $59,000 per year would see a tax cut of $1,182 -- more than $11,000 over ten years. Even today, President Trump repeated the claim that corporate rate reductions will generate $4,000 in new annual income per household. Simply put, the public is not buying it. As negotiations have worn on and details of the bill have emerged, public support for the bill has plummeted.
The bill would send trillions of dollars to the country’s largest corporations and wealthiest income earners. As of now, the nation’s top income earners would see their individual tax rate fall from 39.6 percent to 37 percent. Corporate taxes are slashed more severely, falling from 35 to 21 percent. Those in the middle and working classes would see their taxes increase. 
As a result, the Republican tax plan is now less popular than the tax hikes passed under Presidents Clinton and H.W. Bush. That the GOP has managed to make tax cuts less popular than tax hikes is signal.  The majority of Americans sees this Republican chicanery as a massive reverse transfer payment financed on the back of the middle class and generations to follow. 
What the Middle Class Actually Gets: Sunsets
Republicans included a number of short-term provisions in order to improve their bill’s distributional optics, but most of these concessions are written in disappearing ink.  While GOP lawmakers were sure to make corporate handouts permanent, many of the individual rate cuts and tax credits disappear by 2025. 
The increased medical expense deduction disappears after 2018. The expanded Child Tax Credit, which Sens. Rubio and Lee loudly pushed for, expires after 2024.  One of President Trump’s favorite provisions, the doubling of the standard deduction, also expires after 2024.
Bottom line: the average family will receive nowhere close to $11,820 in tax relief over the decade ($1,182 times ten).  What starts out as a $1,182 cut in year one transforms into a tax hike as deductions expire and individual rates reset.  By 2027, the wealthiest one percent of Americans will receive an average tax cut in excess of $27,000. That year, the bottom 60 percent of wage earners will face an average tax hike of $160.
In the end, an estimated 87 million families -- almost 40 percent of taxpayers -- will see their tax liability increase.  Per the Institute on Taxation and Economic Policy, 19 states would pay more overall in taxes. In 14 states, over 1 million taxpayers will face a tax hike.  
Indirect Hikes and Paygo Pain
To make matters worse, millions of Americans will see rising costs indirectly due to provisions in the tax bill unrelated to tax rates:
  • The individual mandate penalty repeal alone is expected to increase premiums by 10 percent. This provision would also increase healthcare costs for the 13 million Americans who will lose health coverage as a result of mandate repeal.
  • A new Chained-CPI measurement of inflation that would push filers into higher brackets more quickly.
And still worse; the deficit increase of $1.4 trillion has already initiated talks in GOP circles of automatic cuts to critical social programs -- including $25 billion in Medicare cuts in 2018 alone.  At first Republican leaders promised their cut bill would not trigger Paygo cuts, but they have recently changed their tune.  Sen. Rubio, Ways and Means Chairman Kevin Brady, and Speaker Paul Ryan have all linked tax cuts with welfare reform in recent weeks. 
Where provisions that help the middle class (the child tax credit, the doubled standard deduction, the rate cuts) are made temporary, provisions that hurt the middle class are made permanent.
Source: Tax Policy Center
Permanence for Corporations
The sunsetting of individual rate cuts and other middle class credits and deductions pave the way for permanent business tax cuts. The long-term winners are corporations were the long-term losers are the bottom 60 percent.  Wealthy Republican donors will appreciate the long-term 21 percent corporate rate, while middle and low-income Americans will see a little to no difference in disposable income and maybe substantial cuts to the government programs they count on.  
Next Steps 
Look for the Conference Committee to conclude its work blending the House and Senate versions of the bill by Friday.  The bill will then move to the Senate first for passage most likely on Monday in order to ensure compliance with Byrd Rule budgetary restrictions. The House is scheduled to take up the legislation the day after it passes the Senate. The GOP’s ultimate goal is to have the final bill on President Trump’s desk as early as December 20.

Monday, December 4, 2017

TAX BILL | Sen. Heinrich Calls the Tax Bill "Immoral"

Senator Martin Heinrich (D-N.M.)
After the passage of the Senate Republican tax bill on Saturday, December 2, U.S. Senator Martin Heinrich (D-N.M.), Ranking Senate Member of the Joint Economic Committee, issued the following statement:
Today, Senate Republicans passed their tax bill that harms working families, will blow a huge hole in the deficit, and I fear will lead to drastic cuts to vital programs in the years ahead. 
Yet again, our children and our communities will end up paying the price for irresponsible and immoral Republican tax giveaways. 
Under the Senate bill, nearly 28 million working families will face a tax increase by 2027. 
This bill spends money we don’t have on tax breaks the rich don’t need. 
The legislation adds $1.4 trillion to the national debt, an average of $140 billion each year in increased deficits, further damaging our long-term fiscal situation. Blowing a hole in the deficit to give tax breaks to the wealthy and special interests is the standard Republican playbook. 
Meaningful tax reform is a big, complicated, and complex undertaking. It doesn’t happen behind closed doors, and doesn’t happen with one party calling all the shots. 
We could craft a better bill that would lower taxes in a way that doesn’t add to the deficit. I urge my colleagues—let’s work together to find real solutions to health care, to tax reform, and to all of our nation’s challenges.
For more information, contact Latoya Veal at or 202-224-0379.

Saturday, December 2, 2017

TAX BILL | Details, details

The Tax Bill has passed the Senate. 

Now the House Republican leadership will seek to take up this bill as passed, to avoid a long conference over the differences between the Senate and House bills.

But will GOP Members of Congress accept all the changes that the Senate made to get to 50 votes? Will the House pass it by the looming December 8 debt-ceiling deadline?

Here are some of the issues facing the House, as outlined in an early-morning email from Dana Chasin, who has been following the proceedings in Washington, and used here by permission:
  • The Senate grants owners of pass-throughs a deduction rather than a maximum rate, zeroes out the individual mandate penalty, and retains a panoply of deductions eliminated in the House bill.
  • The bill is unpopular. This is possibly the least-popular tax package that the Senate has ever passed. A Quinnipiac poll reports only 25 percent of voters approve of it. Representatives will all be facing their constituents in 2018, and many are concerned about how the tax bill will be perceived by voters.
  • The December 8 expiration of the debt ceiling and the Alabama special Senate election create deadlines. If the bill is not passed by the House by the 8th, hostility to the bill's impact on the debt and on the GOP's electoral future could overwhelm it.
Some Republican Senators threatened to break ranks over these issues:
  • Fiscal (Debt) Impact. Senators Corker and Flake threatened to revolt over the tax plan's debt impact. The standoff came after the Senate parliamentarian shot down Corker’s proposal to insert a “trigger” that would automatically increase taxes in the event the bill did not produce enough growth to cover its deficit impact. Earlier in the day, the Joint Committee on Taxation (JCT) reported that H.R. 1 would add $1 trillion to the debt, even after accounting of dynamic growth effects. The standoff sent leadership scrambling to find ways to raise revenue, but not enough for Corker, who voted against the bill (the sole Republican defection).
  • Small Business Treatment. Republican leadership earlier in the week was confronted by  Senators Johnson and Daines, who threatened to withhold their support unless more generous concessions were given to pass-through businesses. Both Senators have indicated their support after the bill was changed to increase the deduction for passthroughs from 17.4 percent to 23 percent. A 23 percent deduction translates into a maximum rate of 29.6 percent, based on the 38.5 percent top rate in the Senate bill. Republicans plan on paying for their generosity by increasing the size of the one-time excise tax on the repatriation of foreign corporate earnings.
  • Property Tax Deductibility. Senator Collins, one of the last Republican holdouts, signaled support after announcing that leadership had accepted her amendment to allow individuals to deduct up to $10,000 in state and local property taxes, the same treatment as the tax bill that the House passed last month. Winning Collins’ swing vote came at a steep price. Eliminating state and local deductions is a key revenue raiser for the Byrd Rule-constrained Senate bill. Early indications are that Republicans have opted for keeping a modified version the Alternative Minimum Tax (AMT) in order to pay for Collins’ amendments.
  • ACA Individual Mandate Repeal. Senator Paul raised eyebrows last month when he announced that the Senate bill would zero out the Affordable Care Act’s individual mandate. The provision was needed to buy Paul’s vote and raise perhaps $300 billion in revenue. It was a risky compromise.  Senators Collins, Murkowski, and Moran have all expressed concern about the bill’s treatment of Obamacare. Collins indicated her support of the bill after getting promises on health insurance premiums, Murkowski signed on after an addition of ANWR oil drilling, and Moran never seriously dissented. McConnell's bargaining appears to have paid off. 
While Senators sparred over pass-through deductions and budget holes, few addressed the tax burden that will weigh heavily on the middle class following passage of this bill. The Joint Committee on Taxation’s “dynamic analysis” estimates only a 0.8 percent increase in GDP and just $408 billion generated from economic growth over the next ten years, while other reports provide even lower estimates.

Reps. Ryan and Brady promised to save the average family of four earning $59,000 a year an estimated $1,182. But this works only for the first year of the plan. After that, the cuts decline and the Family Flexibility Credit is phased out and chained CPI (which indexes spending and taxes, slowing adjustment for inflation) reduces future benefits from what they would have been. These families face tax increases in 2024, paying approximately $450 more by 2027. Furthermore, these hikes are expected to affect families earning less than $30,000 in 2019 and less than $40,000 in 2021.

Senator McCaskill noted amendments from lobbyists bundled together as the Manager’s Amendment and geared to expanding pass-through and corporate deductions to various stakeholders. The chances of legislation that favors the middle class receiving such consideration appear bleak.

That this unpopular tax bill could pass the Senate so quickly is astonishing. However, Americans won’t be filing under the new tax system, if it passes, until April 2019 and most Americans won’t suffer a tax increase until after the 2020 election.

NEW YORK CITY | Best Workplaces, by Type of Business

Happy Workers.
Crain's New York has issued another annual ranking of the "Best Places to Work". It may be found here:

I have sorted the companies by type of business. This shows clearly how much the list is weighted toward advertising, finance, law, marketing, real estate, technology – and their tech-age specialties. I have slightly changed some of the descriptions of the type of business to group together similar companies.

These sectors pay well. They are also sectors that would interact frequently with Crain's. Many of the categories are traditional strongholds of New York City. Others wouldn't have existed 20 years ago, even ten years ago...

The growth in software as a driving force for jobs, identified in the 1999 New York City Comptroller's report on software and IT, is still with us.

Rank Type of Business Name of Company
71 Accounting WithumSmith&Brown
92 Accounting Anchin
61 Advertising Noble People
83 Advertising – Native TripleLift
8 Advertising – Native, software Sharethrough
19 Advertising analytics for travel brands Intent Media
43 Advertising software The Trade Desk
88 Advertising technology YellowHammer Media Group
93 Advertising technology Index Exchange
94 Advertising technology PulsePoint
52 Advertising/public relations/marketing Capacity Interactive
56 Advertising/public relations/marketing Teads
2 Application integration Button
33 Asset management Star Mountain Capital
86 Asset management GPB Capital Holdings
28 Business consulting – tech West Monroe Partners
60 Business consulting – tech hiring Vettery
66 Business consulting and software CoEnterprise
17 Cloud computing Salesforce
75 Co-ed sports leagues ZogSports
14 Community of online programmers Stack Overflow
57 Construction Gilbane Building Co.
58 Construction Rusk Renovations
36 Construction management T.G. Nickel & Associates
44 Construction management Clune Construction Co.
59 Content marketing Conductor
72 Contract furniture Meadows Office Interiors
39 Database software MongoDB
30 Digital – advertising Good Apple Digital
77 Digital – advertising Ready Set Rocket
63 Digital – advertising, predictive AdTheorent
45 Digital – interactive content Arkadium
4 Digital – marketing Path Interactive
6 Digital – marketing Elite SEM
7 Digital media solutions Digital Remedy
76 Digital payment services Payoneer
80 Digital promotions RevTrax
68 E-commerce – direct-to-consumer Spring
47 E-commerce for health products,
64 E-commerce fraud-prevention Riskified
98 Engineering and architecture RAND Engineering & Architecture
96 Event marketing software Splash
41 Event ticket marketplace SeatGeek
18 Events FIRST
22 Financial – ETFs WisdomTree
89 Financial – news, education Investopedia
49 Financial – services Fortis Lux Financial
73 Financial – small-business loans Fundera
99 Financial – stock exchange IEX
48 Financial – tech Liquidnet Holdings
91 Financial – trading algorithms Pragma Securities
12 Global campaigns
32 Health care marketing Evoke Health
34 Health care software CipherHealth
29 Human-resources outsourcing Insperity
65 Information technology Myriad Supply
90 Insurance – life Theodore Pappas & Associates
38 Insurance – nonprofits Lamb Financial Group
53 Law Adam Leitman Bailey P.C.
10 Legal services Sheppard Mullin
24 Legal services Cooley
46 Legal services Michelman & Robinson
62 Legal services Alston & Bird
81 Legal services Frankfurt Kurnit Klein & Selz
85 Legal services Reed Smith
20 Location intelligence services PlaceIQ
40 Manufacturer – socks Bombas
79 Market research BuzzBack
84 Marketing Firstborn
9 Marketing analysis software Unified
23 Marketing analytics Dynamic Yield
67 Marketing analytics Fluent
3 Marketing for influencers Cogent Entertainment Marketing
16 Marketing-data software mParticle
69 Media services Horizon Media
97 Media-monitoring software Meltwater
74 Mobile application developer Dom & Tom
50 Mobile gaming Dots
42 On-demand massages Zeel
25 Public relations Allison & Partners
100 Public relations CooperKatz & Co.
82 Real estate brokerage GFI Realty Services
31 Real estate info – Commercial CompStak
87 Real estate marketplace StreetEasy
1 Real estate services – Commercial Transwestern
15 Recruiting software Greenhouse Software
35 consulting Silverline
95 Social-media monitoring Brandwatch
13 Software management BetterCloud
26 Software-development consulting Stride
51 Technology SiteCompli
54 Technology Rocketrip
55 Technology CB Insights
5 Telecommunications MASS Communications
37 Video marketing platform Innovid
11 Video-creation software Animoto
27 Video-on-demand services Hulu
70 Website-building software Squarespace
21 Window contracting Adler Windows
78 Worldwide auctions LiveAuctioneers