Rand Paul vs. Tax Treaties

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“I’m calling on the Senate, in particular Sen. Rand Paul, who’s been a little quirky on this issue, to stop blocking the implementation of tax treaties that have been pending for years,”

Someone sounds a little upset. These are the words of President Obama, who was talking about tax treaties that he’s really wanted to be passed in the Senate. The reason why he wants these treaties put through? So he can stop “tax evasion”, a problem which he is looking to address.

Now, on the surface, this doesn’t look like it should be much of an issue. You need to understand that nothing in Washington is simple though. What these tax treaties would do is allow for law enforcement to basically act as if it were unbound by the 4th Amendment, and become almost NSA-like, since it would have the power to allow law enforcement to see what you’re doing, when you’re doing it, and what comes in and goes out. Yes, this can all be seen from bank activity. Scary, isn’t it?

So what about tax cheats? To be honest, these are the symptom of a much larger problem: a tax system not many know how to properly navigate, and many would like to just avoid all together, seeing as how there is no hope in trying to figure it out while keeping their costs low. And compliance? Haha, that’s a funny one.

2 of these treaties are with Switzerland and Luxembourg, two of the wealthiest nations on the planet, and since they see a lot of monetary traffic, the White House feels like it would be wise to have access to their records, so they can be used in tax investigations by the IRS if needed.

Going further into some research, I can across this gem over at Accounting Today:

Of the eight treaties, seven of them are bilateral agreements with various countries to facilitate cooperation to avoid double taxation and to lower compliance costs. Regrettably, these agreements also unnecessarily change the standard for providing personal financial information to law enforcement agencies from probable cause of criminal behavior, such as fraud—which Paul correctly regards as the only constitutionally permissible standard under the Fourth Amendment—to what amounts to wholesale bulk collection on the pattern of the NSA’s violations of email and phone privacy.

This is Paul’s only concern with these seven bilateral treaties. A simple amendment could conform them to constitutional standards and they could move forward expeditiously.

However, that reasonable solution is not acceptable to Secretary Jack Lew’s Treasury Department. That’s because the Department also insists on using the treaties as a Trojan Horse for one of the most dangerous and dysfunctional laws enacted under the presidency of Barack Obama: the Foreign Account Tax Compliance Act, or FATCA. 

FATCA, which few Americans have ever heard of, was passed by a Democrat-controlled Congress in 2010, supposedly as a weapon against “fatcat” offshore tax evasion. Disdaining the constitutional path of investigating individuals who are suspected of wrongdoing and securing a warrant for accessing their private records, FATCA takes the NSA approach: to require all non-U.S. banks to hand over information on U.S. private persons (not corporations, by the way) absent any requirement of reasonable suspicion, due process, or a court order. If banks fail to do so, they face crippling sanctions that essentially shut them out of the American market. FATCA has led many foreign banks to deny services to Americans rather than deal with the burdens and crushing compliance costs, thus impeding U.S. business and export opportunities and risking economic harm.

*bolding is my own*

Now you see why Obama wants these treaties passed in Congress, don’t you? There’s always another reason than just something like “tax evasion”. There’s always something more to it.

Rand Paul is right to be in opposition to these, and the thing is, is that these cannot pass while there is still opposition to them. Meaning, that as long as Rand keeps saying “I object”, then these cannot move on at all. They’ll just continue to sit around and collect dust.

My Thoughts On Bernie Sanders: Making the Wealthy, Wall Street, and Making Large Corporations Pay Their Fair Share

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I’m talking about Bernie Sanders again today, and in this post, I’ll be going over his “Making the Wealthy, Wall Street, and Large Corporations Pay Their Fair Share” section on his website. This is a really long section, but it looks like I’ve already covered portions of the stuff he mentions in this, so if that’s the case, I’ll link back to my commentary about them already done.

With that done, let’s dive in.

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Tax Plans: Jeb Bush vs Rand Paul

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Jeb Bush’s tax plan is really confusing. Why? Because it’s only tweaking the system as it stands now. I’ll try to simplify it the best I can.

Tax Rates: Jeb vs. Rand

Rand’s Plan: Flat, 14.5% across the entire spectrum

Jeb’s Plan: A Progressive tax system that has a top rate of 28%.

  • Singles making below $11,300 will pay 0% in taxes, along with couples making below $22,600.
  • Singles making between $11,301-$43,750 will pay 10%, along with married couples between $22,601-$87,500.
  • Singles making between $43,751-$97,750 will pay 25%, along with married couples making between $87,501-$163,800.
  • Singles making $97,501 and above will pay 28%, along with married couples making above $163,801.
  • Couples w/ Two Children: Making below $38,600 = 0% tax rate
  • Singles Making below $15,300 = 0% tax rate

Confused yet? Me too. So singles who end up in the lower part of the 10% bracket will possibly be able to pay 0%? But he just established that they won’t pay 0%? I’m confused here. This doesn’t make sense. If he wanted it to be like that (0% at $15,300), then why not just make that part of the first bracket?

Deductions: Jeb vs. Rand

Rand’s Plan: Only 2 Deductions remain (Mortgage Interest + Charitable Contributions)

Jeb’s Plan: Um… Eliminate a few?

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Here are all the deductions that Jeb keeps:

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Um Jeb, there are a lot more than just the Mortgage Interest & Charitable Contributions deduction. Anything else? Kinda left out any specifics on the rest.

Deductions for business? Um, that’s even more confusing. Here’s just GENERAL tax policy for Corporations, for example:

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Does this look simple to you? Can you find where they talk about deductions? Can you find what Jeb cut here? I can’t, but that’s okay. He said he’s going to close loopholes in deductions, and specifically, putting corporations on level playing field:

Because the proposal would adopt territorial taxation and full expensing, these special tax expenditures would no longer exist, rather all companies would have equal tax treatment.

By “level” of course, I mean broken into brackets by tax rates. True equality would be a flat rate applied across the board, as with Rand’s 14.5% rate for both business and corporate income, and no deductions at all. And, of course, leave it to Jeb to be vague. We still don’t know what other deductions he’d do away with for corporations.

Payroll Taxes:

Rand’s Plan: Eliminate the Payroll Tax

Jeb’s Plan: Jeb wants to provide relief to Seniors who have reached full retirement age, which he is proposing to raise. This isn’t to say that raising the age is necessarily bad, but it will not go over well with Seniors now.

The following is from Jeb’s plan:

Nearly all workers must contribute 6.2 percent of their income (up to specified levels) for the employee share of Social Security taxes. Currently, seniors who are eligible for Social Security must continue to pay payroll taxes so long as they remain in the work force. This proposal eliminates the employee portion of payroll taxes for workers who have reached the full retirement age.

So how exactly will the shortfall in contributions to SS work? Will employers now pay in that other half as well? I mean, that’s what I’m assuming here. It doesn’t say what the effect would be on people’s net income, or even gross income for that matter. We might assume that they both would go up, but unless we’re talking about lowering contributions here, and again, that’s not something I don’t fully oppose, I’m not sure this will end well.

The Internal Revenue Service:

Rand’s Plan: Eliminate

Jeb’s Plan: Under Jeb’s plan, we simply do not know. But being the middle of the road guy that he is, I believe it’s safe to say he’s just push to “reform” the IRS.

Corporate Welfare

Rand’s Plan: Eliminate

Jeb’s Plan: Jeb Bush is proposing that the Fed’s partner with online security firms to help increase security for corporations, the government, and the people in general from cyber attacks. His push would “create” a few million jobs in the process. However, we must remember to through out that already uneven playing field he’s proposed as a tax plan, and push for corporate welfare, which is undoubtedly what this is.

Now, besides corporate welfare, what is this? An attack on probably privacy rights. Do you remember the horrendous bills SOPA, PIPA, CISPA, and CISA? This has been the goal of those bills, and here he is in full support of it.

Summary:

Rand Paul’s plan is simple, and specific. You have one flat rate across the board. It cuts the fat that is corporate welfare out. It cuts out all the deductions except for the two mentioned earlier. It get’s rid of the IRS.

Jeb Bush’s plan is complex, hard to understand, and simply put, confusing. He keeps the Progressive model of taxation. He keeps corporate welfare, and will probably expand it. He keeps the IRS. He is the status quo that has plagued Washington DC since his Father’s years in office, and we simply cannot afford to have any more of that. At all.

New York Times Attacks Rand Paul’s Tax Plan

The New York Times Editorial Board released this opinion piece on July 10, 2015, attacking Rand Paul’s tax plan. I’ve already covered the key details in the plan, as listed and documented in my previous post. I was a bit concerned for a while when he first released it, largely because there weren’t any attacks really against it, or than those wanting a Fair Tax, and and those wanting a lower rate (mostly the libertarian camp).

Let’s dive into their arguments, and see if we can’t counter or debunk them, shall we?

 The Paul plan, like the flat-tax plans from previous campaigns, would fail to raise enough revenue to finance a modern government. Estimates by the conservative Tax Foundation found that it would reduce revenue to the Treasury by $1 trillion to $3 trillion over a decade. Citizens for Tax Justice, a more liberal advocacy group, estimates a 10-year loss of $15 trillion. Arguments about the proper role of government aside, a population and an economy that are growing in size and complexity cannot thrive with a shrinking government.

A supposed “modern” government, as the Times claims, must raise more than $3 trillion in revenues every year, and always be raising it’s budget, and increasing it’s tax receipts. Modern governments must spend billions in waste and abuse on programs. Modern governments must go to war and spend billions, if not trillions on them in the process. Indeed, this is what the Times is implying, even though we know that they have been long skeptical of these things. The Times imply’s that big government is the only solution, and that the warfare-welfare state is here to stay.

The NYT defines a “modern” government as being progressive, as this article will blatantly point out. There is no escaping this fact, and they will judge things along their own perspectives. Sure, many Americans hold this viewpoint. Many Americans do NOT hold this viewpoint, and in the past few years, we have been seeing more and more support for these programs crumble.

Government spending would reduce by about $3 Trillion. That’s what is called for. This would be made up in gains in the GDP, which was estimated to go up by 9.4% in 10 years (if passed and implemented). Government spending and control of the economy is harming production and reducing what GDP could be, and thus, we have effects that hurt people. Raise the minimum wage? Impose new regulations on an industry? Control prices on the commodities or goods? Impose controls on just about anything, and that harms the economy, and thus, harms regular working people, and not just the wealthy, like progressives like to think.

And as for the CTJ numbers they cite, you have to sort of read their analysis (they’re a liberal group). They say the following:

When the dust clears, this would leave the federal government with $1.2 trillion less in tax revenue in fiscal year 2016 if the plan were implemented immediately—a reduction of about one-third in total federal revenues. Over a decade, the plan would cost a stunning $15 trillion.

So, over 10 years, what this means is that the people, and not the government, will retain $15 trillion. Just because government doesn’t have the ability to spend that money, doesn’t mean it won’t be spent. And even if it isn’t, that doesn’t mean nothing happens with it. More than likely then, it’s in savings, and being used by banks in loans to businesses or people. This leaves people with money in their pocket, and this next quote is very important here.

Arguments about the proper role of government aside, a population and an economy that are growing in size and complexity cannot thrive with a shrinking government.

Um, yeah, it can. Take the sharing economy for instance. Right now, you have Uber, Lyft, and AirBnB fighting to live, with governments expanding their power by banning their services in their cities. You have a Presidential candidate named Hillary Clinton (D) being skeptical of these kinds of things, saying “This ‘on demand’ or so-called ‘gig economy’ is creating exciting opportunities and unleashing innovation, but it’s also raising hard questions about workplace protections and what a good job will look like in the future,”. Aside from realizing that Uber and Lyft weren’t meant to be full-time jobs, the sharing economy is coming under fire, and more government interventionism isn’t going to help it.

And why aren’t arguments about the proper role of government important? That’s probably the most important question of all. Ron Paul was right to bring that up and question that in the debates like he did. Governments aren’t supposed to be our nannies. They’re supposed to protect our rights that we already have. They cannot create them, but rather, take them and sell them back to use for a price (think marriage, for an example). When government is big enough to give you everything, as a lot of these progressives would love to have, they fail to recognize that it also holds the power to take it away if they wanted to do so, and that’s why I, like many others, don’t believe in these programs, and don’t see them as a proper role in government, and thus need to be cut.

The Paul plan also fails the basic test of progressivity. It promises a big tax cut for everyone, but analyses show it would be a big tax cut for high earners and businesses and basically a wash for everyone else.

I guess they forgot to link to that? I don’t know. I’ll keep looking for them. What’s interesting here is that the Times assumes that the rich are actually paying the high rates that are stated (somewhere) in the tax code for their brackets. After all the deductions and loopholes, which through the help of a tax attorney who knows the code, they can avoid paying exactly those high rates. The Paul Plan leaves only two deductions: for charitable contributions, and mortgages. The rest all disappear into the trash can (or the burn pile). So, the rich would actually pay more than they have been in the recent years, and yes, they’d pay more than those working at McDonald’s (actual dollar wise).

 Mr. Paul might be on to something if he were willing to acknowledge that his flat tax is essentially a value-added tax similar to those used in all market-oriented democracies except the United States.

The New York Times claims that this is a Value Added Tax, or VAT. I find problems with that simply in the very definition of the term itself. Here’s the definition from Investopedia:

A type of consumption tax that is placed on a product whenever value is added at a stage of production and at final sale. Value-added tax (VAT) is most often used in the European Union. The amount of value-added tax that the user pays is the cost of the product, less any of the costs of materials used in the product that have already been taxed.

We can see the problems with this already. The Fair & Flat Tax Plan is still taxing income, and much that I don’t like an income tax, we’re talking getting rid of many other taxes in the process, for which, I can settle with this for now. A consumption tax is completely different. The tax only is applied when a person or firm buys something. This is a Sales Tax, for example. These two tax very different things. One before you have your net income, and the other after you have your net income.

The Times does do good in pointing out the problems with a VAT, but the Paul plan simply is not a VAT.

Mr. Paul’s plan heads the wrong way on all those fronts, providing less progressivity and more cuts to spending and investment. It is bad policy, and it does nothing to foster a meaningful debate about the economy or taxes.

Less progressivity? From the same people who call for equality? Really? That aside, this actually helps, because the plan takes away those deductions the wealthy people have been using to pay a very low rate. The NYT would rather see them with a higher rate, but I guarantee that the deductions will not be taken away. The necessary cuts would actually be good, as this would allow private investment, by individuals and businesses, to take place, now that they have more capital of which to invest. This plan would allow families in trouble to breath a breath of fresh air, and begin to gain some stable ground.

To be fair, it’s a good policy to have a debate over taxation with. For the past so many years, all that’s been done is fiddle with the code. This is radically different. This is a game changer. This is what separates Paul from the crowd, and to say that this “does nothing to foster a meaningful debate about the economy or taxes” is truly off-point, and selfish. The Founders rebelled over taxation when it was in the single digits. Proclaiming that government can better invest money worked hard by other people is grossly inept and stupidly selfish and cronyist, if you ask me.

Can You Be For War With ISIS And Be For Lower Taxation?

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The wanting to go to war with ISIS seems to be growing in the Republican Party. According to a recent CNN-ORC poll, 60% of Republicans are in favor of sending ground troops back to Iraq to stop ISIS. 37% are opposed. With the repeal of the Death Tax passing through the House, we have to ask a question, and it’s a question that we CANNOT afford to just avoid: how will we pay for this war?

I’m not saying the Death Tax is something we should keep. I’m all for getting rid of it, but in reality, if you want to lower taxes, you have to cut spending, and if you want to go to war, well, that means you have to raise taxes. You cannot afford to repeal taxes and lose the revenues coming in unless you raise the rates elsewhere. It’s common sense logic.

Yet, the majority of Republicans will not think about this conundrum sadly. In their push for lower taxes, they’ll call for cuts in welfare to be able to pay for the war, should it come, to which, I hope. The tax rate cuts came under the last Bush Administration, but with a war going on, Bush only grew the deficit and the debt, and in the long run, it wasn’t a smart idea really to do it.

Take Bush’s war in Iraq. The second Iraq War was no cheap deal, and it too, involved a lot of fat that could’ve been trimmed, and a lot of inefficiencies. The total costs for the Iraq War have come to be around.. oh, nothing too bad, just $1.7 TRILLION (with a t). That wasn’t cheap. We won’t finish paying that off for a long time. That’s going to be around for decades at this point, with the current disfunction in Congress.

We cannot cut taxes and go to war at the same time. Only one of those two can happen. Neo-conservatives want to have it both ways, or at least, they campaign that way. Take Tom Cotton for example. The guy is the budding Neo-Con in the Senate, along with Rubio, who I’ll get to as well. Cotton has this petition on his website, urging people to sign it in support of lowering taxes. Cotton also wants the US to be on the offensive in the fight against ISIS. Cotton wants both of these things, but in the political reality of today, one cannot happen with the other. Only one can happen. You either go to war, and raise taxes, or you lower taxes, and don’t go to war.

My own Senator, Marco Rubio, wants to lower taxes. He put out a proposal with Senator Mike Lee (UT), who is a favorite of mine. Rubio’s plan would apparently cut taxes for 90% of the taxpayers. That sounds great. Problem? Rubio is a big Neo-Con, and that tax cut won’t help fund the war he really wants to fight with ISIS. Let it be said that Marco wants to go after ISIS.

These two gentlemen also encounter another problem: they don’t want to cut spending, even when they want to increase it. A few weeks ago, Rubio and Cotton were pushing for more that $190 BILLION in Department of Defense spending increases. They weren’t going to cut a dime. Rand Paul put out his plan to raise the same amount, but he thought smarter about this, and actually made around $110 BILLION in cuts in other areas. His amendment failed.

Rand has been, for the most part, against raising DOD spending. I can understand why he made this amendment, which if you read the last link, is critical of said amendment. The Rubio-Cotton Amendment passed, and his failed. The increases were going to come under the GOP. That isn’t that hard to see coming. Paul at least wanted something to offset the increases, and they shot his plan down.

So, to answer the question posed at the beginning in the title, no, you cannot be for lowering taxes and for going to war with ISIS. One has to be given up for the other to happen. If both are happening at the same time, then the people doing so are only making things worse for future taxpayers down the road who will end up having to pay for it.

Personally, I do not want to go to war with ISIS. I think going back into Iraq will only reopen the power vaccum we created when we first went in. We will only end up killing more innocent people, bringing home more soldiers in body bags, overloading our already messed up VA Hospitals, and for what? To get a terrorist group that’s taking a page from Osama Bin Laden’s playbook about drawing the US out onto their territory to bleed them dry? No, I won’t support that, and I don’t want anyone else to support it. At least, I see the GOP’s rising millenials moving in a more libertarian direction, and that includes being more cautious of war, which is what even the Founder’s would agree, is for the better.