Biden’s Tax Proposals – USA Gov Policy

President Biden’s tax proposals, including allowing the Trump tax cuts to expire, will have a profound and damaging impact on an economy already reeling from the inflationary effects of both his energy policy and his extraordinary spending.

The U.S. Treasury summarizes Biden’s proposals:

Raise corporate income tax rate to 28%, Increase the corporate alternate minimum tax to 21%, Increase the excise tax rate on repurchase of corporate stock and close loopholes, Tax corporate distribution as dividends, Limit tax avoidance, Limit losses recognizes in liquidation transactions, Prevent basis shifting by related persons through partnerships, Conform definitions of “control” with corporate affilitiation test, Strengthen limitation on losses for noncorporate taxpayers, Expand limitation on deductibility of employee renumeration in excess of $1 million, Revise the global minimum tax regime, limit inversions, Adopt undertaxed profits rule.

Providing Washington with more revenue will neither balance the budget nor reduce the federal deficit, in the same manner that giving more booze to an alcohol will not end his addiction. Washington has accumulated more income than ever, but continues its deficit spending. The House Ways and Means Committee found that In fiscal year 2022, federal tax revenues reached a record-high of $4.9 trillion. Corporate tax revenues reached a record-high of $425 billion – $128 billion or 43 percent higher than when the Trump tax cuts were passed and $72 billion higher than CBO’s projections for 2022.

Individual tax revenues reached a record-high of $2.6 trillion – over $1 trillion or 66 percent higher than when the Trump tax cuts were passed and $642 billion higher than CBO’s projections for 2022.

On average, revenues increased $205 billion per year over CBO’s projections.

In the first two years after passage of the Trump tax cuts, GDP growth was a full percentage point higher than CBO’s pre-TCJA forecast.

According to the White House Office of Management and Budget, every additional one percent of sustained GDP growth will result in $600 billion in new revenues over 5 years and $2.8 trillion over 10 years.

Following passage of the Trump tax cuts…

Real median household income rose by $5,000 – a bigger increase in just two years than in the prior eight years combined.

Wages increased 4.9 percent, the fastest two-year growth in real wages in 20 years.

The poverty rate and unemployment rate reached their lowest levels in 50 years, with all-time lows in unemployment among African American and Hispanic workers, and those without a high-school degree.

The bottom 20 percent of earners saw their federal tax rate fall to its lowest level in 40 years.

Americans earning under $100,000 received an average tax cut of 16 percent.

The share of taxes paid by the top 1 percent of households increased while the tax burden paid by lower income earners decreased.

Allowing the Trump tax cuts to expires will mean higher taxes on working families and businesses, including…

A family of four earning $75,000 will owe an additional $1,500 in taxes.

A family of five with two earners making around $100,000 will owe an additional nearly $7,500 in taxes.

The Child Tax Credit will be slashed in half from $2,000 down to $1,000.

The guaranteed deduction that 90 percent of taxpayers use to simplify their tax filing will be slashed in half.

The 20 percent deduction that helps small businesses compete with larger corporations goes away leaving small businesses facing a 43.4 percent tax rate.

There have been no changes to CBO’s methodology to address other miscalculations…

For fiscal year 2023, CBO under projected the budget deficit by $1 trillion.

The green tax provisions in the Inflation Reduction Act (IRA) were originally estimated to cost $400 billion through FY 2031. This has since been revised up by two-thirds, to about $660 billion through FY 2031 or $790 billion through FY 2033.

The article concludes tomorrow

Illustration: Pixabay

Quick Analysis

Long Term Effects of Putin’s Ukraine War

“The war in Ukraine is leading both Moscow and Kyiv to engage in increased cyberattacks that are destructive to both infrastructure and civilian lives from meddling with energy networks to manipulating people into committing violent acts,” according to Luke Rodeheffer of the Jamestown Foundation. Both sides are engaging in activities that will leave their mark on the world for years to come as the war has increasingly blurred the lines of official state actions and those of non-state cyber actors. Criminal hacking groups and official intelligence organizations are developing working relationships that offer attractive opportunities to collaborate with good pay. As the kinetic war drifts into the cyberspace domain, some members of government agencies are moonlighting as hackers and coordinating their activities over the Internet. Early on in the war Mykhailo Fedorov, Ukraine’s Minister of Digital Transformation, announced that the country needed a volunteer Information Technology (IT) Army capable of coordinating activities against Russian targets using Telegram. Today that IT Army distributes free hacking tools to its volunteers for conducting cyberattacks on the Russian infrastructure and companies. Using tens of thousands of network devices, Ukraine’s volunteers have had success in performing distributed-denial-of-service attacks. “Ukraine has conducted a large-scale call center fraud operation targeting Russia, particularly older and more gullible Russian citizens, which is forcing the Russian state to increase surveillance on communication networks,” says Rodeheffer. In late June the IT Army overwhelmed Russian target Internet infrastructure with “connection requests” that ultimately led to interruptions in Mir, Russia’s national payment card system, according to Lizzie Simpson writing for Habr. She quotes a Forbes interlocutor in the Russian information security industry as saying: “The attack is 100%, and this is the work of the IT army of Ukraine.” Confirmed attacks such as the Mir incident are changing the character of warfare and are challenging for international security networks to control. The intensity and breadth of the attacks continues to increase on both sides of the conflict, however, it started long before the invasion. As early as 2010, there are indications Russia engaged in destructive cyberattacks against Ukraine. One of the most egregious strikes occurred in the winter of 2015 against the country’s power grid. Years before the invasion of Ukraine, Russia used hacks to shut down the computer infrastructure of TV channels in the country, according to an expert involved in the investigation of one of the episodes. Russia carried it out in a “multi-stage secret infection of information networks,” says Vsevolod Nekrasov of Epravda. Russia often employs these weapons against Ukraine in its current war effort against the civilian infrastructure. Using malware capable of permanently erasing data, Russia is seen as the likely sponsor of last December’s attack on Kyivstar, Ukraine’s largest telecommunications company. It resulted in extensive interruptions in telephone and Internet services that disabled the country for weeks. Kyivstar called it “catastrophic” at the time. In April, a response by a Ukrainian security services linked group called “Ukrainian Blackjack,” responded in kind by targeting a Russian data center utilized by several Large Russian companies and defense-related conglomerates. NV.ua reports that the group destroyed 300 terabytes (TB) of data. A DVD-R holds 4.7 GB. One would need 63,830 DVD’s to hold 300 TB of data! Ukraine has also targeted public figures in Russia linked to the war including high-ranking Duma members and policymakers focusing on the Middle East and Central Asia. Two of those, Alexander Babakov and Semyon Bagdasarov were close confidants of Putin. Their emails exposed sensitive detailed plans on how Russia planned to work with Iran to avoid sanctions. Simultaneously with the increase in cyberattacks, is a corresponding rise in cybercrime aimed at the Russian citizenry. Many of these incidents were in the form of fraud calls tricking Russians into transferring money out of the country or revealing personal information, according to RIA Novosti. “The scale of Ukrainian cybercrime has provided Moscow with additional justification to bolster its internal communications surveillance systems, under the auspices of detecting fraudulent phone calls,” says Rodeheffer. Radio Svoboda is reporting that it is also being used as an excuse to rush the integration of the occupied regions of Ukraine into Russia’s telecommunications systems and SORM, the communications surveillance system. What is most problematic is that the criminal elements involved may make it difficult to dismantle this “underground” after the war ends, says Rodeheffer. What is tolerated during a war, including the need for questionable characters with technical expertise, may lead to a new type of 21-century warfare that extends beyond the current geography of the Russia-Ukraine conflict. It could end up as a battle for the survival of both Western military and civilian infrastructures.