Why the tax code favors the rich and powerful: Our pay-to-play two-party political system

Based on 2010 data -- it probably

has gotten worse for the bottom 40%

Context

There is an agreement between congress and the consumer tax preparation industry about simplifying taxes for consumers. The deal is this: Congress agrees to not pass laws simplifying taxes for consumers and in return the consumer tax preparation industry agreed to provide free tax prep services for filers with incomes below a certain level, $70,000 if memory serves. Of course, few consumers are aware of this free service. That is how the industry wants to keep it. To keep consumers in the dark and fed BS, the industry lobbies congress to not spend money advertising the existence of the free service. And finally, when some consumers do try to use the free service, the industry tries to trick them into making various payments. The whole thing is a scam to serve the tax prep industry, not consumers.  

That exemplifies how our two-party pay-to-play system fails to work for consumers doing their taxes, but works great for the industry. It keeps our taxes complicated and revenues flowing to them. It's a win-win for the industry, but a kick in the guts for us plankton, sardines and minnows. 

But us plankton, sardines and minnows is not what this post is about. There is another layer of pay-to-play tax sleaze for the big fish and whales. Feeding the big fish and whales is what this is about.

How Accounting Giants Craft Favorable Tax Rules From Inside Government

Feeding the big fish & whales

NYT: “Audrey Ellis went from PwC to the Treasury Department.

Two years later, she returned to her old firm, which promoted her to partner.”

The New York Times writes: 

Lawyers from top accounting firms do brief stints in the Treasury Department, with the expectation of big raises when they return.

For six years, Audrey Ellis and Adam Feuerstein worked together at PwC, the giant accounting firm, helping the world’s biggest companies avoid taxes.

In mid-2018, one of Mr. Feuerstein’s clients, an influential association of real estate companies, was trying to persuade government officials that its members should qualify for a new federal tax break. Mr. Feuerstein knew just the person to turn to for help. Ms. Ellis had recently joined the Treasury Department, and she was drafting the rules for this very deduction.

That summer, Ms. Ellis met with Mr. Feuerstein and his client’s lobbyists. The next week, the Treasury granted their wish — a decision potentially worth billions of dollars to PwC’s clients.

About a year later, Ms. Ellis returned to PwC, where she was immediately promoted to partner. She and Mr. Feuerstein now work together advising large companies on how to exploit wrinkles in the tax regulations that Ms. Ellis helped write.

Ms. Ellis’s case — detailed in public records and by people with direct knowledge of her work at the Treasury and at PwC — is no outlier.

The largest U.S. accounting firms have perfected a remarkably effective behind-the-scenes system to promote their interests in Washington. Their tax lawyers take senior jobs at the Treasury Department, where they write policies that are frequently favorable to their former corporate clients, often with the expectation that they will soon return to their old employers. The firms welcome them back with loftier titles and higher pay, according to public records reviewed by The New York Times and interviews with current and former government and industry officials.

The NYT goes on to point out that industry veterans working in government have had, an “enormous impact.” They (i) officially approve tax loopholes their former firms use, (ii) give tax breaks to former clients, and (iii) block efforts to rein in tax shelters. Talk about the deep state. There it is, working quietly, but fat and happy. 

The NYT mentions some examples. A former PwC partner in the Trump Treasury Department helped write regulations that allowed large multinational companies to avoid tens of billions of dollars in taxes. After doing his deep state duty for PwC, that partner went back his old job at PwC. Similarly, a senior executive at RSM, a major accounting firm, took a high level job at Treasury, and his office then expanded a tax break in ways that RSM wanted. After his deep state service he returned to work at RSM. See how that works? It is fun and easy. Well, at least for the big fish and whales. 

NYT interviews with some former industry executives viewed these practices as a major part of why tax policy is heavily skewed to favor the wealthy at the expense of most everyone else. NYT found that this is bipartisan. In the last four presidential administrations, there were at least 35 cases of people going from big accounting firms to (i) Treasury’s tax policy offices, (ii) Internal Revenue Service offices, or (iii) the Congressional Joint Committee on Taxation, followed by a return back to the same firm. The NYT writes: “In at least 16 of those cases, the officials were promoted to partner when they rejoined their old accounting firms. The firms often double the pay of employees upon their return from their government sojourns. Some partners end up earning more than $1 million a year.”

The NYT comments on current politics: “President Biden and congressional Democrats are now seeking to overhaul parts of the tax code that overwhelmingly benefit the richest Americans.”

One can easily see why big fish and whales love Republicans with its deep state operating in obscurity, but hate at least some Democrats. Whether Democrats actually will increase taxes on the rich remains to be seen. My guess, there is about a 35% chance that will happen before the 2022 elections. Industry lobbyists backed by campaign contributions are quietly swarming all over congress to make sure that all proposed tax hikes are blocked as quietly and industry fingerprint-free and politician accountability free as possible. At least some Democrats are susceptible to this kind of pay-to-play pressure (free speech persuasion). It takes only one Democrat in the Senate to side with the big fish and whales for the idea of tax increases on the rich to die and fade away.

Questions: Is there such a thing as a deep state where industry executives work in government for a while to write and/or approve tax breaks their employers want and then return to the private sector to be rewarded with some of the added value their tax breaks protected or created? What is the approximate chance the Dems will actually be able to pas tax hikes on the big fish and whales before the 2022 elections? Which party do the big fish and whales prefer on tax policy, the Dems, the Repubs, or are they seen as about the same? 

Brett Kavanaugh: A vengeful Christian nationalist Supreme Court judge

An opinion piece the Washington Post published summarizes the reasons why the Brett Kavanaugh confirmation was so divisive and bitter. This is a nice reminder of how corrupt and partisan sham the process was. The FBI never investigated most of the allegations against Kavanaugh on the orders of Corrupt Donnie, our toxic ex-president. The WaPo writes about the Republican white wash in an article entitled, The Senate knew about Kavanaugh’s partisan history. It confirmed him anyway.:

Occasionally, his votes or some news story will renew the bitter sense among many Americans that he got away with a lie in denying Christine Blasey Ford’s and Debbie Ramirez’s allegations of sexual misconduct, as well as a third such accusation, from his Yale years, that Senate Republicans all but bottled up.

Earlier this summer, reports said the Justice Department had confirmed that, in 2018, the FBI received more than 4,500 tips against Kavanaugh and sent “relevant” ones to the Trump White House, where they disappeared. This month, Kavanaugh joined the 5-to-4 ruling allowing a Texas antiabortion bounty-hunting law to take effect, though it plainly violates court precedents upholding a constitutional right to abortion. To many, that provided further evidence — along with his previous support for a Louisiana antiabortion law — that he’d bamboozled Sen. Susan Collins (R-Maine), who provided the linchpin vote for his confirmation after he assured her that he respected those precedents as “settled law.”

The hearing record signaled that Kavanaugh was a Republican with an ax to grind long before his televised tirade in 2018 dismissing the misconduct allegations as a Democratic “political hit” — payback for Donald Trump’s election and Kavanaugh’s role in Ken Starr’s Javert-like pursuit of the Clintons.

He warned us then: “What goes around comes around.”

Even before Kavanaugh arrived to solidify their ranks, the Supreme Court’s conservatives generally took the Republican Party’s side in political cases. They allowed unlimited corporate spending on elections and ended federal “preclearance” of voting changes in states with histories of discrimination. With Kavanaugh’s decisive assist in 2019, they ruled 5-to-4 that federal courts were powerless to block partisan gerrymandering. Throughout 2020, he and other conservative justices generally stuck together — and with Republicans — in opposing state rules making it easier and safer to vote amid the pandemic; Trump openly complained that such changes would doom Republicans by increasing Democrats’ turnout. In one case, Kavanaugh echoed Trump’s criticism of counting mail-in ballots that arrived after Election Day.

The WaPo article goes on to assert that of the six Republican Christian nationalists (CN) justices on the Supreme Court, only four (Clarence Thomas, Samuel Alito, Neil Gorsuch and Amy Coney Barrett) are conservative ideologues. That is nonsense. All six are radical CN ideologues, not conservative ideologues. These people are far beyond simple conservatism. CN majorities have overturned some precedents to get radical outcomes regardless of the consequences.

Kavanaugh, along with Chief Justice Roberts tend to be more deceptive about their political agendas. Roberts’s incrementalism appears to be an attempt to show the court is nonpartisan while moving inexorably into deep radicalism. WaPo asserts that Kavanaugh’s caution appears to be that of a former partisan, who wants to minimize blowback against his FRP (facsist Republican Party). Those two probably do not want to see jarring headlines like “COURT OVERTURNS ROE!” They can get to their fascist ends in small-appearing and thus less-obvious increments. The recent shadow docket decision to allow a clearly unconstitutional Texas anti-abortion law to stand is an example of this incrementalism. 

The WaPo article argues that the Republican “six-pack’s” record “makes a mockery of recent protestations from Barrett and Democratic appointee Stephen Breyer that the justices really are apolitical.” Barrett’s assertion of being non-political came at a recent purely political event with Senate Minority Leader Mitch McConnell. McConnell’s role in ramming Barrett onto the bench was about as blatantly partisan and political as it can get. She is the product of politics and her political acceptability was necessary for her to be nominated in the first place.  

The article points out that Kavanaugh was in both the conservative legal movement and in FRP politics. After law school, he spent nearly four years with Ken Starr investigating Bill and Hillary Clinton, which started off looking at financial matters. Finding nothing there, it metastasized in a search for something else. The FRP witch hunt led to Monica Lewinsky and Clinton’s impeachment. In private practice, Kavanaugh joined in politically charged legal disputes, including Bush v. Gore. His partisan legal politics got him jobs in George W. Bush’s White House as a counsel and then staff secretary and then a nomination him for the D.C. appeals court. the WaPo comments: “Midway through his 12-year tenure, a Washington Post columnist wrote that Kavanaugh was ‘nothing more than a partisan shock trooper in a black robe.’” That sounds about right. A vengeful partisan shock trooper.

Questions: Is it fair to criticize Kananaugh and the other FRP justices on the Supreme Court as radicals that have moved beyond conservatism? Or, (i) has the Overton Window[1] moved so far to the right that CN radicalism is now the standard for conservatism, or (ii) the FRP CNs are just standard, old-fashioned conservatives, but the Overton Window has moved so far to the left that some people see the judges as radical right CNs? Or, has the FRP and CN movement passed from what used to be called radical to what used to be unthinkable (see image below)?

Footnote: 

1. Wikipedia on the Overton Window (OT):

The Overton window is the range of policies politically acceptable to the mainstream population at a given time. It is also known as the window of discourse. ....  an idea's political viability depends mainly on whether it falls within this range, rather than on politicians' individual preferences. According to Overton, the window frames the range of policies that a politician can recommend without appearing too extreme to gain or keep public office given the climate of public opinion at that time.

The point of the FRP’s and CN’s divisive, crude radical right rhetoric and norm-busting behavior is to push the OT to the far right, making far right radicalism appear to be normal and mainstream. For the radical right, this reflects the knowledge that most Americans fundamentally oppose what the FRP and CN movement want to do to government and society. They have no choice but to create illusions and to sow reason-killing division and polarization, and reason-killing emotions such as distrust, intolerance, fear, anger and bigotry.

Radical conservatives want to push the window to the right,

radical liberals want to push it to the left --

maybe the window can be stretched in both directions

at the same time with echo chambers siloing the rhetoric and ideas 

off from each other

A reminder that Christian nationalist ideology opposes secular education

MSNBC reports that as part of her testing for higher level power in the FRP (fascist Republican Party), maybe a run for president in 2024, radical right Republican South Dakota Gov. Kristi Noem is trying to raise her national visibility and score points with the Republican base. Noem is trying to advance her career by taking a deep dive into radical fundamentalist Christian nationalist (CN) dogma and rhetoric.

She spoke in Iowa last July and told conservatives that she doesn't recognize the United States anymore. “When I grew up, people were proud to have a job. They weren’t confused on the difference between boys and girls. We prayed in schools – which by the way, in South Dakota, I’m putting prayer back in our schools.”

At the conservative outlet Real America’s Voice, Noem argued that Americans should look at government actions to insure that they “line up with the word of God [to] see if they're Biblical.” That the United States is a democracy, and not a theocracy, does not faze Noem. The CN Supreme Court now sees prayer as protected free speech. In that same interview, Noem went further. Right Wing Watch posted this excerpt:

“We’ve seen our society, our culture, degrade as we've removed God out of our lives.... When I was growing up, we spent every Sunday, every night, every Wednesday night in church. Our church family was a part of our life. We read the Bible every day, as a family, together.... I don’t know if families do that as much anymore, and those Biblical values are learned in the family, and they're learned in church.... We in South Dakota have decided to take action to really stand for Biblical principles.... I have legislation I’ll be proposing this year that will allow us to pray in schools again.”

Apparently, the governor is indifferent or hostile to a separation of church and state. Noem wants to apply “Biblical principles” to help “re-center” children in schools.

As discussed here before, it is core CN ideology is to get rid of all secular public education and replace it with a religious fundamentalist “education” based on CN dogma. CNs are dead serious about getting and using power to impose their radical fundamentalist vision of America on government and society, whether people want it or not.

Questions: Is it clear what Biblical principles Noem wants to teach American children, e.g., do not lie or do not steal? Can those values by taught by families in the home, even families that are not religious (Noem referred to religious learning in the home and at church, not in public schools)?

American debt default is on the horizon

The Washington Post writes:

Democrats have set up a similar type of strategy that, if successful, will force Republicans to accept their fair share of the national debt that now tops $28 trillion. If this strategy fails, the federal government could run out of funding authority and enter another congressionally forced shutdown — the fourth in less than a decade — and create a debt crisis that could rattle global financial markets.

McConnell has declared that Senate Republicans will not vote to increase the Treasury’s authority to continue borrowing, which is the same as voting to allow a default. As he has done before, McConnell has essentially created a new rule out of whole cloth to justify his actions.

“Let me make it perfectly clear. The country must never default. The debt ceiling will need to be raised. But who does that depends on who the American people elect,” McConnell told Punchbowl News on Tuesday, acknowledging he will vote for a policy outcome he says he doesn’t want to occur.

The WaPo article points out that since Dems control the White House and Congress, McConnell is arguing that Dems alone are responsible for the government’s creditworthiness and preventing a potential economic calamity. There never has been any rule or political norm like that. In the past the when debt ceiling was increased, it usually was bipartisan and done under regular Senate order that requires at least 60 votes to end debate on the legislation.

As usual, McConnell and other congressional Republicans conveniently ignore the fact that the purely Republican 2017 tax cut for rich people and corporations adds nearly $1 trillion in federal debt each year. There was no Republican concern for federal debt. McConnell's move is pure partisan politics. The GOP is willing to blow everything up to block domestic spending. The GOP is willing to go deep into federal debt for military and rich people and corporation spending, but on spending for the rest of us.

In the past, both parties played politics with the debt limit, each blaming the other, but neither was willing to actually allow a default. These days, the GOP arrears to be willing to default to get what they really want, Democrats out of power. Once back in power, they will be OK with debt increases as long as it isn't for domestic spending. 

In 2019, McConnell vote to suspend the debt limit for two years, arguing that failure to do so would "be a disaster and, quote, put our full faith and credit at risk." That is still true.  

Rich people, corporations and the military get service and money. Most of the rest of us get screwed. 

Maybe Democrats can back down by dropping both infrastructure bills, but that alone won't be enough. There is still accumulating debt from current spending. It may be the case that congressional Republicans will not back down and that would force us into a default, but right now that feels unlikely. Attitudes since the 2020 election have hardened and further polarized, not gotten better. 

It will be exciting to see how this stink bomb plays out. If it ends with serious default, the pain most Americans will feel starting within a few weeks after a default will be serious to catastrophic, especially in these times of the Republican COVID pandemic ripping through the economy. Then the political finger-pointing will commence. We have until late October, maybe a bit longer before the default happens.

Questions: 

1. Since the American people voted Dems into power in 2020, is the onus on the Dems to back down to avoid default as McConnell now argues, or on the fascists to back down and with until they get back in power?

2. Who is most at fault here, (i) the Dems, (ii) the fascists, (iii) the American people, or (iv) voters, or is the blame spread about equally among all those groups?