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 Richmans' Trade and Taxes Blog



The USA Should End Its Support for Climate Agreements
Raymond Richman, 5/20/2017

Thirty-one U.S. multi-nationals and domestic corporations bought a full-page ad in the Wall Street Journal May 12, 2017 addressed to President Trump expressing their “strong support for the United States remaining in the Paris Climate Agreement.” Signers included 3M, Cargill, Cummins, Coca Cola, General Electric, Goldman Sachs, Proctor & Gamble, Tesla, and Walt Disney.  What is interesting is how few of America’s leading manufacturers were represented. They do not speak for American industry. This is the “swamp” pretending to be “concerned about keeping the doors open for the global flow of American manufacturing goods at this critical time when our manufacturing sector is starting to grow from our competitive energy advantage.” Where is the evidence of that? Where were they while the U.S. chronic trade deficits decimated American manufactures and caused millions of American manufacturing workers to lose their jobs. Those were real costs. We are not even sure that the costs of global warming exceed its benefits, contrary to what the global warming fanatics have been scaring us with.

The architects of the Paris climate accord deliberately designed it to get the Congress of the U.S. to approve it by pretending it does not bind the U.S. to set emissions targets or to do anything. The authors were mindful of the Kyoto Protocol which was roundly rejected by the United States Congress because it set binding emissions targets for wealthy countries while letting most developing nations, including China, off the hook. But now, as forces within the Trump administration continue to debate whether to leave the Paris agreement, they face a far different calculus. The accord, agreed to in 2015, is alleged to be nonbinding, imposing no serious legal restraints on the United States or any other nation. If so, why have a treaty? Because it does bind the U.S. to make periodic reports of what action it has been taking to reduce CO2 emissions.

But the evidence is irrefutable that the U.S. has already spent billions on alternative energy, subsidies to producers of alternative evergy, subsidies to millionaire buyers of expensive electric autos, and subsidies to those who install insulation or heat panels without having any effect at all on global warming. Why continue to waste billion of taxpayer money? ...

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Rosenstein's huge favor to Trump
Howard Richman, 5/20/2017

by Raymond Richman and Howard Richman

[Note: This piece appeared in American Thinker blog this morning.] 

Rob Rosenstein, Trump’s new Deputy Attorney General, did the Trump agenda a huge favor on Wednesday when he appointed former FBI director Robert Mueller as Special Counsel to investigate the Trump-Russia connection.

His action has already taken the wind out of the Democratic media’s sales. They were running story after story in an attempt to keep the pretend-scandal on the front pages. Now, they must await the outcome of the investigation. Congressional investigations will also be put on hold, so as to avoid interfering with the special counselor’s investigation.

The press will be forced to cover Trump’s ground-breaking trip to the Middle East. They will be forced to report the new job-creating trade deal with Saudi Arabia and the new alliance that Trump is shepherding between Israel, Egypt, Jordan and the Gulf Arabs against Iran and ISIS. Trump will come home from the Middle East a hero.

Our prediction of a positive outcome runs counter to the opinion of knowledgeable Trump supporters Dick Morris and Pat Buchanan. Both predict a negative outcome based upon their past experiences with independent prosecutors. Some Trump underling could even find himself falsely convicted of perjury (as was Scooter Libby, by the last special prosecutor).

But the difference here is that the 72-year-old Mueller is close to retirement, so he does not need to take scalps to further his career. Furthermore, no crime has been committed (except by Trump opponents who leaked and published classified data).

So Trump will be exculpated, which would put an end to the Trump-Russia allegation. We predict that Mueller’s investigation will end within 6 months.

Then, turnabout will be fair play as Attorney General Sessions prosecutes the Obama Administration for real crimes, perhaps beginning with their improper use of IRS power and NSC data for political purposes.

 

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The Changing Balance of International Power
Jesse Richman, 5/18/2017

One of the key facts of the twentieth century is that the balance of international power is not the same as it was during most of the 20th century.  A key contrast is the relative power of the United States and China.  The graph shows the CINC (Composite Index of National Material Capabilities) for the United States and China.  Through nearly the entire 20th Century the United States was clearly the more capable party.  But over the last two decades, China has taken a clear lead.  In part this may be driven by an index that puts substantial weight on population -- that may bias China's power up.  But it also likely reflects a reality.  

 USChinaCINC.png

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Cutting the Corporate Income Tax Will Not Create Jobs, Jobs, Jobs
Raymond Richman, 5/14/2017

The corporate income tax cut being considered by the Congress will accomplish none of the goals claimed for it. It will not stimulate the economy and create jobs, it will not do anything to balance trade, it will cause the federal budget deficit to grow, it will worsen the already unequal distribution of income. The President seems to have bought the ideas of some economists called supply-siders who assert  that the economic growth stimulated by the tax cut will more than offset the initial  loss of revenue. Most economists disagree asserting that if growth occurs, it will because of other forces. Most economists agree that the corporate tax lacks interpersonal equity, has negative economic effects, and worsens the distribution of income. These negative characteristics can be avoided by eliminating the corporate income tax and taxing corporate earnings as the personal income of the shareholders, just as partnership earnings are currently treated.

One of the criticisms economists make of the corporate income tax is that shareholders of modest incomes pay the same rate of tax as those in the highest personal income tax bracket pay. In fact, those in the top personal income tax bracket are favored because corporate earnings are now taxed at a top rate of 35% compared with 39.6%, the top rate of personal income tax. Corporate stock is highly concentrated in the hands of the wealthy. Thus the corporate income tax makes it easier for the wealthy to become more wealthy than if they paid the personal income tax rate on corporate earnings, while those of middle income find it more difficult to provide enough for their retirement. The pension funds owned by middle income families are invested mostly in corporations whose incomes are taxed at 35% by the corporate income tax when they as individuals may be in the 20 percent personal income bracket. How much faster their retirement funds would grow if their share of corporate earnings were taxed at the rate of 20% instead of 35%/, as they would be if corporate earnings were taxed as personal income.

Corporations would pay the Treasury the top rate of personal income tax on its earnings and shareholders would be credited with the tax paid by the corporations on their behalf. The most wealthy taxpayers would pay more than the 35% to corporate rate, 39.6%. Less wealthy taxpayers, say those in the 20% personal income tax bracket would get a tax credit for the excess tax paid to use as a credit against their other taxable income. To illustrate how this would work, in 2016 Amazon Corporation had 474 million shares of stock outstanding and had net earnings before tax of $3,892 million or $3.25 per share. Suppose all the earnings were taxed at 39.6%, Amazon would pay $1,541 billion to the federal government as withholding of personal income tax or 3.25 per share. If a shareholder owned 100 shares, he would report income from Amazon of $821 and receive a tax credit of $325, while those in the 20% personal income tax bracket would pay $164 and apply the excess paid as a tax credit against his other income. The result is a substantial increase in progressivity. ...

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Why Conservatives should Support Raising the Gas Tax
Howard Richman, 5/11/2017

By Jesse Richman, Howard Richman ­­and Raymond Richman

[This piece was also published in the American Thinker on May 8.]

On May 1, President Trump mentioned that he might be willing to support raising the gasoline and diesel tax to pay for infrastructure improvements. Bloomberg News reports:

“It’s something that I would certainly consider,” Trump said Monday in an interview with Bloomberg News in the Oval Office, describing the idea as supported by truckers “if we earmarked money toward the highways.”

However, the next day Grover Norquist, President of Americans for Tax Reform, tried to quash Trump’s openness on this issue. He told Fox Business that the current rate of taxation would be sufficient if certain other changes were enacted.

In contrast, to this “conservative” defender of taxpayers, the lobbyists for those who would pay the tax actually favor raising its rate, so long as the revenue really goes toward improving the roads. For example, in 2015 the American Automobile Association and the American Trucking Association joined the U.S. Chamber of Commerce in a letter to lawmakers which stated:

Americans are frustrated with our nation’s crumbling infrastructure, including increasingly congested highways and deficient roads and bridges. Thirty-two percent of major roads are in poor or mediocre condition. This neglect costs the average driver $324 each year in additional vehicle repairs and operating costs.

In this case, the taxpayers are right, and this “conservative” defender of taxpayers is wrong. User taxes are an appropriate and efficient way to pay for highway spending. They fall directly on those who benefit from such spending. Each purchase of fuel to run an automotive vehicle helps pay for the roads on which that vehicle will drive.

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    Wikipedia:

  • [An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]

    Journal of Economic Literature:

  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

    Atlantic Economic Journal:

  • In Trading Away Our Future   Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]