• Surprise! The Republican Tax Bill Mostly Helps the Very, Very Rich

    In the past, the work of the Joint Committee on Taxation has been pretty reliable. I don’t know for sure if that’s still the case, but for now I assume it is. With that caveat, here’s their estimate of who benefits the most from the Republican tax bill:

    Not bad for a Republican tax bill! Still, even though they were apparently trying to avoid the “tax cut for the rich” label, they couldn’t help themselves. The benefits rise steadily with income, and millionaires get twice the cut of even the very well off. According to one member of Congress, that’s exactly what they intended:

    “If you earn your income as a doctor, a lawyer, an architect, you’re not getting anything,” said Rep. Chris Collins (R., N.Y.). “But you’re not supposed to get anything—that’s how you earn your income. It wasn’t intended to lower the tax rate for a doctor, a lawyer or an architect. It was intended to lower the rate for manufacturing companies making widgets and employing other people.”

    ….The Tax Foundation, a conservative-leaning think tank, estimated Friday that the top 1% of households would see their after-tax incomes rise by 7.5% in 2018, compared with a 2.2% boost for the middle 20% of the population.

    Translation: if you’re extremely prosperous but you perform actual labor to earn your money, then you don’t get much. But if you’re flat out rich and just invest in other people’s businesses, then ka-ching! This tax bill is meant for you. That’s why “passive” investors in businesses always qualify for the new, low rate on pass-through income, while the folks actually running the businesses don’t.

    Of course, this bill is likely to change so much over the next month or two that this distribution chart will probably be out of date nearly as soon as I post it. Also, I’m curious to see if CBO arrives at the same score as JCT. I assume we’ll find out sometime next week.

  • The Peculiar Story of the Republican War on Alimony

    Nicolaus Czarnecki via ZUMA

    Bit by bit we’re getting analysis of some of the more peculiar parts of the Republican tax bill. For example, what’s up with eliminating the tax deduction for alimony payments? This one is so minuscule (about $1 billion per year) that you can’t even say it’s because Republicans were scrounging for nickels under the cushions to pay for their corporate tax cuts. In a $5 trillion tax bill, this is more like scrounging for cigarette butts: it’s just not worth it no matter how hard up you are. So what’s going on?

    First off, let’s explain what this is all about. Under current law, you write an alimony check and then both you and your spouse pay taxes on your respective net incomes. Under the Republican proposal, you pay taxes on your entire income and then write an alimony check from what remains. To see how this plays out, here’s an example using the new tax brackets in the Republican plan. Suppose you make $100,000 and a judge orders you to pay alimony of $40,000. Here’s the stylized arithmetic, not counting any kind of deductions or exemptions:

    • Current law: Your net income is $60,000 so you pay taxes of $9,150. Your spouse has income of $40,000 and pays taxes of $4,800. Total taxes paid = $13,950.
    • New Republican proposal: You pay taxes on $100,000 of your income and then send out the alimony check. Total taxes paid = $19,150.

    Why do Republicans want to change this? Stuart Levine looked into it. First off, he checked the GOP’s own explanation:

    The staff’s explanation (text page 61, pdf page 69) of the alimony provisions that I previously discussed is patently false: “[T]he intent of the proposal is to follow the rule of the Supreme Court’s holding in Gould v. Gould, [245 U.S. 151 (1917)] in which the Court held that such payments are not income to the recipient.” This explanation conveniently omits the fact that the result in the Gould case was changed by statute in 1942, over 75 years ago.

    So how about the analysis by the Republican members of the Joint Committee on Taxation? They label the current law as a “divorce subsidy”:

    The analysis goes on to assert that “The provision recognizes that the provision of spousal support as a consequence of a divorce or separation should have the same tax treatment as the provision of spousal support within the context of a married couple.” In other words, for 75 years there has been a recognition that a divorced couple has financial burdens that are greater than a married couple and the GOP is simply going to ignore those financial burdens.

    Roughly speaking, the Republican view is that if you’re married you pay taxes on your income and then you and your spouse get to spend it. So why shouldn’t it be the same for divorced couples? The question, I guess, is whether you view alimony as (a) splitting a pot of money into two income streams or (b) basically a gift from one person to another after a divorce. The former seems obviously more correct, which is why current law treats it that way.

    So what’s the Republican beef? The only thing I can come up with is that evangelicals think that current law encourages divorce, which they disapprove of. Maybe more people will stay married if they realize they’re going to have to support two separate households on the same amount of money as before.

    I dunno. Anyone else have a better idea?

  • Why Didn’t Donald Trump Renominate Janet Yellen as Fed Chair?

    Yin Bogu/Xinhua via ZUMA

    Dan Drezner is trying to figure out why President Trump didn’t do the easy thing and renominate Janet Yellen for a second term as Fed chairman:

    As Trump decisions go, choosing Powell is far from his worst one. But it’s frustrating when there exists an obvious, superior choice on the menu and the president of the United States abstains from that option. In Trump’s eye, Yellen does not look like a central banker from central casting. Readers can proffer their own theories for why Trump perceived Yellen in this way. The important thing is that this decision reflects poorly on Trump, not Yellen.

    I don’t get it. This one is easy: Trump was never going to renominate Yellen. It’s not because she’s a woman. It’s not because she’s a liberal. It’s not because she has a PhD. It’s not because she sports an elfin hairstyle. And it’s not because Trump wanted someone who looked better in group photos.

    It’s because she was originally appointed by Barack Obama, and Trump seems to be driven almost entirely by two intertwined appetites: Maintaining his appeal to whites and overturning everything Obama ever had a hand in. Janet Yellen is one of those things. That’s it. End of story.

  • Here’s the Joint Fundraising Agreement Between Hillary Clinton and the DNC

    Following up on yesterday’s post about Hillary Clinton’s joint fundraising agreement with the Democratic National Committee, here is the memo itself:

    So the bottom line is this: The DNC was broke, and Clinton agreed to raise enough money to fund its data, technology, analytics, research, and communications functions. In return, the Clinton campaign got a veto power over hires in these areas, as well as the power of review over “strategic” and “general election related” decisions and communications in these areas. Both sides agreed that “all activities” performed under the agreement would be focused solely on the general election, not the primaries.

    I’m still dithering over whether this was appropriate. Partly it depends on whether the DNC offered Bernie Sanders a similar deal, but apparently things never progressed enough for us to find out. ABC News has the Sanders JFA here, but it’s obviously just boilerplate. Sanders didn’t guarantee any funding to the DNC and the DNC therefore didn’t offer him any particular say in its hiring and decisionmaking. There’s no telling what kind of JFA they would have had if Sanders had decided to take it seriously.

    In any case, this was the deal. Comment away.

    UPDATE: Either Donna Brazile—who took over the DNC during the general election—is a nutbag or else the Clinton campaign genuinely treated her like shit. I have no idea which it is. But hoo boy, she sure does have a massive grudge against Hillary and everyone associated with her.

  • USA! USA! We’re (Almost) #1 in Machines That Go Ping

    I was fiddling around looking for something unrelated, and happened to run across this chart from the latest OECD “Health at a Glance” report. We’re #1 in health spending, of course, and we pay inflated prices for just about everything. But what’s equally interesting is what we spend all that money on. More doctors? Nope. More nurses? Not really. More hospital beds? Nah.

    So what do we spend our money on? Technology, baby! Who cares about having plenty of doctors as long as we have lots of machines that go ping? The Japanese may be serious technophiles too, but at least they also have plenty of hospital beds and reasonable spending levels.

  • No Movies For You!

    Every year the LA Times publishes a special section about all the end-of-year movie releases. This year someone is missing:

    The annual Holiday Movie Sneaks section published by the Los Angeles Times typically includes features on movies from all major studios, reflecting the diversity of films Hollywood offers during the holidays, one of the busiest box-office periods of the year. This year, Walt Disney Co. studios declined to offer The Times advance screenings, citing what it called unfair coverage of its business ties with Anaheim. The Times will continue to review and cover Disney movies and programs when they are available to the public.

    The story about Disney’s relationship with the city of Anaheim—which, believe me, is hardly a secret in Southern California—is here. With no offense meant to its author, it’s a fairly routine piece of conflict reporting, pitting people who are pro-Disney, because they bring in tons of money to the city, versus activists who think Anaheim should take a tougher line in negotiations with the Mouse. It’s hardly Woodward and Bernstein material.

    But in the era of Trump, apparently the answer to every single grievance is to be an asshole—not that Disney has ever needed any help in that area. So there will be no advance screenings for the Times. What a bunch of infants.

  • What’s Really Going On With the Republican Tax Bill?

    What’s up with the Republican tax bill, anyway? The Senate voted to approve a maximum increase in the deficit of $1.5 trillion over ten years, which is why it took so long to cook up the legislation. When you’re planning to give away a few trillion dollars in pass-through taxes to small businesses like, um, The Trump Organization, it’s hard to find offsets that will get your deficit down to a mere $1.5 trillion. But apparently they did.

    But here’s the thing: thanks to the usual reconciliation rules, they still have to reach a deficit number of $0 in the long-term. One way to do that is to have the bill expire after ten years, but that’s not what it does. Another way is to declare that your bill will supercharge the economy so much that it will pay for itself down the road. That means they need CBO to score the bill something like this:

    This is unlikely in the extreme. CBO just isn’t going to end up with something like this. So the only way the bill works is if Republicans override CBO and have the Finance Committee chair invent his own numbers and then everyone just votes to accept them. But I’m guessing that there are at least three Republicans who won’t go along with a charade this blatantly and obviously fraudulent. And if the Senate GOP leadership can’t get 50 Republican votes, they can’t pass the bill.

    So what the hell is going on? They must have something in mind, but what?

  • Donald Trump Is Unhappy That He Can’t Use the Courts to Persecute His Enemies

    Donald Trump does not like the civilian justice system:

    “What we have right now is a joke and it’s a laughingstock.”

    Trump also does not like the military justice system:

    And he’s also unhappy with his own Justice Department:

    Yesterday he wrapped this all up and explained to WMAL host Larry O’Connor just how unhappy he is:

    “The saddest thing is that because I’m the President of the United States, I am not supposed to be involved with the Justice Department,” Trump said. “I am not supposed to be involved with the FBI.”

    …. “I look at what’s happening with the Justice Department. Well, why aren’t they going after Hillary Clinton with her emails and with her, the dossier?” Trump said…. “I’m very unhappy with it that the Justice Department isn’t going,” Trump said. “I am not supposed to be doing the kind of things that I would love to be doing. And I am very frustrated by it.”

    He really does think the entire federal government should be directly under his personal control. I can’t wait for his next interview, where he goes after the IRS for not auditing people he doesn’t like.

  • Donna Brazile and the Latest Great Hillary Scandal

    Tom Williams/Congressional Quarterly/Newscom via ZUMA

    I’ve gotten lots of requests to comment on Donna Brazile’s “sensational,” “shocking,” “blockbuster” book excerpt in Politico yesterday. The reason I haven’t, to be honest, is that the more I dive into it the less sure I am what really happened. So let’s start with a short summary of what went down:

    • After 2012, President Obama basically left the Democratic National Committee broke.
    • Debbie Wasserman-Schultz, the DNC chair, did little to address this. Also, pretty much everyone agrees she was a crappy chair for a variety of other reasons.
    • In mid-2015, Hillary Clinton set up a “joint fundraising agreement” with the DNC.
    • The gist of the JFA was that Clinton would raise tons of money by asking rich donors for roughly $350,000 each in both 2015 and 2016. This is way above normal contribution limits, but it was legal because it bundled together donations to Clinton, the DNC, and 33 state parties. Clinton’s campaign would then split up the money and send it to the appropriate places.
    • However, the money for the state parties was mostly routed immediately back to the DNC for things like building voter lists. That was the deal the states accepted when they signed onto the JFA. Depending on your outlook, this is either slightly shady or just a smart way for state parties to help finance things that will help them in the long run.
    • Although states didn’t get much actual cash from the JFA during primary season, they did get it during the general election. So states did pretty well in the end.
    • Bernie Sanders was also offered the opportunity to set up a JFA, but he decided to go the small-dollar route instead.

    So far, there’s nothing new here. It was all reported long ago and litigated during the campaign. Whatever you thought about it back then, feel free to continue thinking. But then Brazile added one more thing:

    • In return for raising lots of money, Clinton’s JFA gave her substantial authority over hiring and administration of the DNC.

    Here’s how Brazile describes it:

    The agreement—signed by Amy Dacey, the former CEO of the DNC, and Robby Mook with a copy to Marc Elias—specified that in exchange for raising money and investing in the DNC, Hillary would control the party’s finances, strategy, and all the money raised. Her campaign had the right of refusal of who would be the party communications director, and it would make final decisions on all the other staff. The DNC also was required to consult with the campaign about all other staffing, budgeting, data, analytics, and mailings.

    ….The funding arrangement with [the Clinton campaign] and the victory fund agreement was not illegal, but it sure looked unethical. If the fight had been fair, one campaign would not have control of the party before the voters had decided which one they wanted to lead. This was not a criminal act, but as I saw it, it compromised the party’s integrity.

    So how do you view this? On the one hand, in 2015 everyone assumed that Hillary Clinton was the obvious nominee since she had no serious opposition.¹ So, since Clinton would have control of the DNC before long anyway, what difference did it make? And anyway, if Clinton was going to raise huge sums for the DNC, it’s hardly surprising that she’d want some control over the organization, especially if she had little faith in Debbie Wasserman-Schultz.

    On the other hand—well, the other hand is obvious. During the primaries, one of the candidates had significant control over the party apparatus. That often happens de facto, but it’s not supposed to happen de jure.

    But now let’s add one more thing. Here is Brazile again on what she found aside from the JFA:

    I had tried to search out any other evidence of internal corruption that would show that the DNC was rigging the system to throw the primary to Hillary, but I could not find any in party affairs or among the staff. I had gone department by department, investigating individual conduct for evidence of skewed decisions, and I was happy to see that I had found none.

    And this:

    So Brazile herself, though she obviously disapproves of the JFA, says the primaries weren’t rigged and there was no internal corruption at the DNC that favored Clinton. In something that suprises me not at all, it appears that even though Clinton had substantial authority and could have rigged things, she instead used this authority to raise lots of money; make sure the DNC hired competent people; and try to get the party apparatus working again.

    In the end, then, this strikes me as almost classic Hillary: she did nothing wrong, but practically went out of her way to make it look like she was doing something slippery. I have never seen another human being do this so frequently. But, in fact, it looks like she really didn’t do anything seriously unscrupulous here, and nearly everyone agrees that, in the end, the primaries weren’t rigged in any serious way.²

    So the more interesting thing about all this is: why did Brazile write this? Her prose is so melodramatic that you’d think she had discovered Hillary was a child molester. Finding the JFA “broke my heart,” she says. She called Bernie Sanders to tell him about all this, but first “I lit a candle in my living room and put on some gospel music. I wanted to center myself for what I knew would be an emotional phone call.” (In fact, it turned out not to be an emotional call. Apparently Bernie didn’t care much.)

    In the end, I’m more curious about this than I am about the facts of the case, which turn out to be fairly pedestrian. Obviously Brazile wrote about this the way she did for a reason, but what is it?

    ¹This was long before the Bernie phenomenon, back when he was considered mostly a Ron Paul-esque vanity candidate.

    ²The primary evidence in favor of rigging was the short debate schedule. But there’s nothing new about this, so again, whatever you thought about that before, feel free to keep thinking.