High Wisconsin health care costs proving a big burden

There’s a new report out today from WalletHub, who is listing the “2018’s best & Worst States for Health Care.”

WalletHub worked with a number of health policy academics to determine how all 50 states and the District of Columbia fared when it came to health care services. Here’s what they came up with for Wisconsin.

Wisconsin ranking, WalletHub health care survey
Health Outcomes 9th
Health Care Access 13th
Health Care Costs 47th
Total Health Care Ranking 23rd

Source: WalletHub

47th out of 51 in costs! That seems like a big deal. How is that number determined?

Here’s what WalletHub says.

Cost – Total Points: 33.33
Cost of Medical Visit: Full Weight (~6.67 Points)
Cost of Dental Visit: Full Weight (~6.67 Points)
Average Monthly Insurance Premium: Full Weight (~6.67 Points)
Share of High Out-of-Pocket Medical Spending: Full Weight (~6.67 Points)
Note: This metric measures the percentage of the population aged 64 and younger with high out-of-pocket medical spending relative to their annual income.

Share of Adults with No Doctor Visits Due to Cost: Full Weight (~6.67 Points)

So it's basically 1/5 premiums, 2/5 the cost of the services rendered, and 2/5 out-of-pocket expenses and visits avoided due to costs.

Under these metrics, Wisconsin’s health care costs are by far the highest in the Midwest. In fact, 4 Midwest states are in the top 11 for lowest costs, and all Midwestern states outside of Wisconsin are in the top 20 for low costs. The high costs are the main reason why WalletHub ranks Wisconsin is 5th out of 7 Midwestern states for health care overall (only beating Illinois and Indiana. Minnesota is Number 1 in our region and 4th in the US).

It looks like Wisconsin has fallen from 21st to 23rd in these health care rankings vs where they were last year. What’s odd about it is that the state actually moved up in 2 of the 3 categories listed – Access (16th to 13th) and a notable increase in Outcomes (22nd to 9th).

But the cost element overrode those improvements, as Wisconsin fell from 25th to 47th for this year. It also was a main reason Ohio and Michigan passed Wisconsin in this survey (this is soothed a bit by Illinois falling behind us, due to the FIBs dropping from 29th to 31st in outcomes).

This is where I recall something that Citizen Action Wisconsin have harped over the 7 years that Scott Walker and the GOP Legislature have been in power in this state. The “regulators” of the insurance industry in Wisconsin have refused to step in and control how much insurance rates have gone up.

What Citizen Action said here in 2015 hasn’t really changed 3 years later.

As Citizen Action of Wisconsin has repeatedly pointed out, Governor Walker’s Office of the Commissioner of Insurance (OCI) has been exceptionally lax in its implementation of rate review. Since 2011, 46 Wisconsin insurance plans have increased their rates by more than 10%, yet OCI has not found a single rate increase excessive. This includes a 43% increase by Humana in 2013, a 37% increase by Unity Health Plan in 2014, and a 21% increase by WPS in 2014.

OCI has also failed to hold a single public hearing on a major insurance company rate increase. In 2012, the Walker Administration went as far as to request a waiver from the rate review provisions of the Affordable Care Act, which was denied.
States such as Minnesota have effectively used rate review to reduce the prices of health insurance plans.

“Thousands of Wisconsin consumers have seen excessive premium increases because of the Walker Administration’s refusal to police the health insurance industry,” said Robert Kraig, Executive Director of Citizen Action of Wisconsin. “It’s long over due for the Walker Administration to side with consumers across Wisconsin who need access to affordable health coverage that can never be taken away. A great first step would be to hold public hearings on the largest proposed premium increases.”

And why the Walker Administration didn't step up to stop those cost increases is obvious – It was a cynical attempt to claim that “Obamacare is failing” and turn Wisconsinites against the Democrats.



Note it took the combination of the Black man no longer being in the White House and the strong possibility of a Blue Wave in the midterms for Walker to try something to hold down what people may pay for health care. Even then, it’s in the form of a tax-funded bailout to insurance companies in the hope that they might play nice and keep a lid on premiums before the 2018 elections.

Wisconsin used to be a leader when it came to offering health care at a reasonable price, and keeping its citizens covered. We have slipped badly in both categories in recent years, and now we resemble a middling, red state where citizens and businesses are having to pay a lot more than our neighbors do for the same services.

The only way this cycle of non-competitiveness changes is if we change the leaders in power. Know this.

Personal income and spending better, but owners still not giving to their employees

Wanted to give a few reflections on the US personal income and spending report for June, which came out last week. The topline numbers were solid for both areas, and was backed up by good GDP numbers for the 2nd Quarter of 2018.

Personal income increased $71.7 billion (0.4 percent) in June according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $65.3 billion (0.4 percent) and personal consumption expenditures (PCE) increased $57.1 billion (0.4 percent).

Real DPI increased 0.3 percent in June and Real PCE increased 0.3 percent. The PCE price index increased 0.1 percent. Excluding food and energy, the PCE price index increased 0.1 percent.

That matches up with the rebounds that we saw in 2nd Quarter growth in Friday’s GDP report. But much like we saw with the GDP report, the bigger story to me were the revisions to the income and spending figures that go back decades (!). The biggest changes were to more recent years, and like we saw in the GDP report, it showed that both the Obama years and Year 1 of Trump was slightly better than we already knew for incomes.

Personal income was revised up $107.4 billion, or 0.8 percent in 2013; $173.6 billion, or 1.2 percent in 2014; $166.6 billion, or 1.1 percent in 2015; $196.4 billion, or 1.2 percent in 2016; and $401.9 billion, or 2.4 percent in 2017….

The personal saving rate was revised up 1.4 percentage points to 6.4 percent in 2013, up 1.6 percentage points to 7.3 percent in 2014, up 1.5 percentage points to 7.6 percent in 2015, up 1.8 percentage points to 6.7 percent in 2016, and up 3.3 percentage points to 6.7 percent in 2017.

From 2012 to 2017, the average annual rate of growth of real disposable personal income was revised up 0.4 percentage point from 1.8 percent to 2.2 percent.

However, almost all of that upward revision in income came from “non-farm proprietors’ income” (aka CEO and other bosses’ pay), along with bumps up in 2014-15 for income from interest, and $130 billion in upward revisions for dividend income for 2016 and 2017. By comparison, wages, salaries and supplements actually ended up being slightly less than first reported from 2013-16, with only an upward revision in 2017 making that revision a net positive.

If you look at what the changes over the last 5 years look like as a result of these revisions, you'll see that the mid-2010s had a huge amount of growth in dividends, while both owners and wage-earners didn't gain by nearly as much. It's also worth noting that job growth was around 2% in this time, so the actual wage + salary increase in the US was more like 2% per person per year.



In the last 2 1/2 years, dividends haven't jumped as much (although there's been a notable increase since the GOP Tax Scam was passed at the end of 2017), but owners have been increasing their own incomes more than we've seen for wages, particularly in the last 24 months. Again, note that even with a tightening labor market, the growth in wages and salaries keeps increasing at the same tepid (non-inflation adjusted) rate.



Consumption was also slightly less than first reported, especially in 2016 and 2017, and I wouldn’t be surprised if those trends were related, along with the higher CEO and dividend pay being the choice made instead of paying wages and salaries.

As a result of the lower wages and the lower consumption, my earlier warnings about low savings rate in the US are now rendered irrelevant. Savings rates for 2013-2017 have now been revised up by amounts ranging from 1.4% in 2013 to 3.3% in 2017, and ended up above 6% for this entire time period, instead of down around 3%, as we had in the last reported data.



So these revisions to income, spending and saving means the economy was on better footing than we previously knew for both the Obama years, and for today under President Trump. But that gap between wages and CEO/shareholder income also was bigger than we first knew (especially in recent years), growing our inequality gap even more. It shows the absurdity of GOPs in Congress and at our State Capitol in Madison for continuing to pursue policies that give more to the people who already have more than enough, while limiting the purchasing power of the vast majority of the country.

Senate race- even righties admit that voters don't like GOP corruption.

I've seen this ad several times during Brewers telecasts recently.

This ad sounds like something Dems would run against Leah Vukmir – she’s a corrupt tool of the WisGOP establishment, who covered up for a lawbreaking GOP in the Legislature, and has constantly tried to go around the state’s open records law. Future ads could also add that Vukmir's staff chased and shoved a process server that was making Vukmir comply with court orders telling her to release records relating to an ALEC convention.

But it's not Dems running the ads, it's the right-wing oligarchs at Club for Growth Wisconsin. Along those lines I also got this mailer from the "Restoration PAC" the other day, which uses similar themes to prop up Vukmir's primary opponent.


The ad is a major tell. Even the Club for Growth and other right-wing oligarchs recognize that even GOP-leaning voters don’t like corruption and dishonesty, and that they actually do care about “Draining the Swamp.” But they also figure that those suckers don't like "liberals" enough (whatever that means) that they'll vote against Tammy Baldwin regardless of who the candidate is in November.

The oligarchs figure those suckers were taken in by a man claiming to be an “independent outsider” in Donald Trump, and that they can try the same routine with Kevin Nicholson, who has little track record of anything in his adult life, other than being a Marine in Iraq at some point (cue the flag! Stand up, you rubes!).

The problem is that the whole “Drain the Swamp” argument falls flat when you realize it’s coming from Club for Growth and Restoration PAC. And the main donor for both "organizations" is..... Illinois billionaire Dick Uihlein. Nicholson is the other side of the “Swamp”, a grifting empty suit who’s propped up with millions from Uihlein and the John Bolton SuperPAC.

And of course, no one is more Swampy than the self-dealing President and his equally crooked, favors-trading Cabinet. And there's little doubt that if Nicholson somehow won, he’d stand back and allow the Trumpist corruption to continue just like the rest of the GOP stooges in Congress. And Nicholson also supports a Tax Scam an overwhelming majority of Americans hate, but was passed because the Kochs and other rich donors kicked back their tax savings to GOP campaigns.

For the other side of the Senate race, I forward you to a great rundown this week by Isthmus’s Dylan Brogan about Tammy Baldwin’s campaign, and the state of the Senate race (mostly) from the Dems’ side.

Brogan’s article includes this analysis from Karin Johanson, who was Baldwin’s campaign manager when Tammy was elected to the Senate in 2012, who notes that attacks from the GOP and their dark money puppetmasters don’t match the reality people see.

“Kevin Nicholson says she’s an embarrassment. Leah Vukmir said a bunch of crazy stuff that’s totally untrue. Tammy would never say anything like that about anyone,” adds Johanson. “She goes about her business. She disagrees on policy and makes that clear. I think personality will stand her in good stead in this race.”

Right after the 2012 August primary, Baldwin launched a series of ads that highlighted Thompson’s career as a lobbyist after his tenure as governor. The catch lines on a few ads were “Tommy Thompson: he’s not for you, anymore.”

The ads came right after an exhausting primary that Thompson was not expecting and he was unable to counter Baldwin’s message. Johanson says the ads also rang true.

“After the primary, we went ahead in the polls. Much faster than we expected. But then we held it,” says Johanson. “They can try to make her into a caricature but it just doesn’t work. Her response is all the things she’s done for the state of Wisconsin. That’s what we did in 2012. I know that’s what she’s doing now.”

And that’s the difference between GOP primary world and the other 80% of us. “Does it ring true?", is a question that needs to be answered.

Because in GOPland, you can make empty slogans and claims and not have to back them up or answer for your actions. Leah Vukmir can call herself a “small-government conservative” while voting for corporate welfare like Foxconn and every ALEC bill that pre-empts a local government’s desire to set their own standards. Kevin Nicholson owes his political existence to his ability to suck up to an Illinois billionaire, and still tells GOP voters that he’s a “non-establishment” candidate that will help Donald Trump “Drain the Swamp”.

But outside of that Bubble, actions and reality still (somewhat) matter, and it likely explains why Baldwin continues to hold a sizable margin over whoever might emerge from the GOP Senate primary. And if Dems are smart this Fall, they’ll copy the “Drain the Swamp” themes Club for Growth and Dick You-Lyin' are trying to sell to casual and unaffiliated voters, and tell the voters the FACT that GOPs and their corporate puppetmasters in DC and in Madison are the self-dealing Swamp those voters despise.

If they do, they stand to win a whole lot of voters who were tricked into Trump in 2016, and they can also clean up downticket by linking it to the crookedness that has permeated all aspects of GOP-controlled state government in the 2010s. There's already a great visual for the Dems to use for that theme from now until November, should Vukmir slip through in the primary.

A race to the bottom between @LeahVukmir & @GovWalker could not be more fitting @wisgop @wisdems #wiunion #wiright @wispolitics https://t.co/ajGaA1oTmh

— Jeff Simpson (@JeffSimpson7) August 2, 2018

July jobs up, and wages still blah. Same as it ever was

Today was another jobs Friday, and I saw a lot of analysis along these lines.

The U.S. labor market was a mixed picture in July, but overall remains in good shape.

In July, the U.S. economy added 157,000 jobs while the unemployment rate fell to 3.9%.

Expectations were for the economy to add 193,000 jobs with the unemployment rate falling to 3.9%.

But if you go inside the actual jobs report, I don’t think the job growth figure was that bad, because the previous 2 months were revised up by a total of 59,000 jobs, which means we’re 216,000 jobs ahead of where we thought we were.

The unemployment drop was also for “the good reason” – more people finding work and outpacing the 105,000 additional people that entered the work force. The Employment-Population Ratio (people working as % of the population) reached its highest level since the start of 2009, at 60.5%.

Yahoo Finance indicates that a one-time oddity held down job growth, or else it would have been well past 157,000.

Friday’s report showed that the closure of Toys ‘R’ Us had an outsized impact on the employment picture in July as the economy lost 31,800 jobs from the sporting goods, hobby, book, and music stores sub-industry, which in total only employs around 600,000 people.

On the other side, a positive standout was the manufacturing sector, which gained 37,000 jobs in July, and has now added 307,000 in the last year. It continues a very good rebound in that sector that’s been going on for the last year and a half, and one of the biggest positives in our economy since the Trump took office.

By all indications, this sounds like an economy that is booming. So why doesn’t it feel that way for so many of us? Because as we’ve generally seen since the 2000s, wages continue to go nowhere, even with an allegedly tight labor market.

In July, average hourly earnings for all employees on private nonfarm payrolls rose by 7 cents to $27.05. Over the year, average hourly earnings have increased by 71 cents, or 2.7 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 3 cents to $22.65 in July.

That 2.7% is no different than it was 2 1/2 years ago.



What is different is that the rate of inflation has doubled over this time period, to the point that the 2.7% increase falls short of the current change in the Consumer Price Index, meaning that real wages are falling in the US.

The “more jobs, lousy wage growth” theme is especially true in manufacturing, where average hourly wages in manufacturing only went up by a penny in July, and declined in nondurable manufacturing industries such as food, paper and plastics. Average hourly manufacturing wages are only up 1.3% in the last 12 months, while prices have increased at twice that rate in the same time, and the work week is also down by 0.1 hours a week in manufacturing, meaning that weekly wages are up a paltry 1.1% for the last year.

Among other goods-producing sectors, mining and logging had a drop of 13 cents an hour in its average hourly wage in July, and is only up 1.0% percent in the last year. On the other hand, construction wages have risen nicely, up 12 cents an hour in July and up 3.2% in the last 12 months. But with signs of a slowdown in the home buying and building parts of the economy, I wonder when that starts to affect construction’s job and wage growth.

So July’s jobs number is really the same as we’ve been seeing in recent months. Good job numbers, especially in manufacturing. But also wage growth that isn’t even keeping up with inflation, and it continues our two-tier economy where the overall numbers look good, but a lot of people aren’t getting ahead.

Evers K-12 plan shows where Walker's stunts fall short

I know our media doesn't like to go over policy when discussing election campaigns, but I think we should take some time to talk about K-12 education. Not only because it is by far the largest expense of state tax dollars, but also because State School Superintendent and Democratic candidate for governor Tony Evers released his plan for public education for the next biennial budget this week, which will be integrated into the Department of Public Instruction's upcoming budget request.

One part of that plan includes a proposed $600 million that Evers wants to add in special education aid over the next 2 years. This is a portion of the DPI budget that has not been increased since Walker took office 7 1/2 years ago, which means the state barely covers 1/4 of designated special education costs today.

I'll go over the special ed topic at some other time, and instead I want to go over the other aspects of Evers' proposal, which Wispolitics went into detail on.

Evers as part of his “Fair Funding” plan [Tuesday] will propose indexing revenue limits to inflation. The limit caps how much schools can spend through a combination of state aid and property taxes.

Indexing the limit to inflation would almost always put it above the current revenue limit of a 0% increase per pupil. Those tight caps have pushed many districts into referenda just to keep operating as they currently are.

Obviously, this plan will be spun as “wanting higher property taxes” by WisGOPs. But Wisconsin school districts that had referenda asking to go over those caps had more than 3/4 of them approved over the last 2 years. In addition, the Marquette Law Poll from June showed that a majority of Wisconsinites are OK with their property taxes being raised for schools.

Which would you prefer, lowering property taxes or increasing spending on public schools? 59% say public schools, 35% say property taxes. #mulawpoll

— MULawPoll (@MULawPoll) June 20, 2018

Evers would also plan to bring back a level of state aids that we had grown used to in Wisconsin until the last 10 years.

His plan also will call for guaranteeing that the state fund two-thirds of each student’s education. The budget Gov. Scott Walker introduced in February called for funding 64.6 percent of public school costs after the state’s commitment dropped below 62 percent in 2012.

This would allocate more state money to the schools and lock it in for the future. But the obvious problem is the $1 billion structural deficit the state will be facing for the next budget due to the pre-election spending spree Walker and other Republicans went on to blow the small surplus of funds that we had.

How will we continue to come up with enough money to fulfill that “2/3 funding promise”? That’ll be a question sure to be asked, and the reason it'll be difficult to answer is due to the Republicans’ “Starve the Beast” agenda on public services.

Wispolitics notes a couple of other parts about the Superintendent’s proposed 2019-21 budget for DPI.

Evers also will call for:

*changes to the way pre-K students’ attendance is counted for the purpose of distributing state aid. Currently, state law requires that students enrolled in full-day programs be counted as one-half pupil, rather than one pupil. Under Evers’ plan, students in those full-time programs would be counted as one in calculating state aid.

*a state component to match the federal 21st Century Community Learning Center grant program. Under the current framework, the federal Department of Education provides grants to DPI for administering summer and after-school programs that often serve students from low-income families. President Trump last year moved to eliminate the program under his budget proposal. Under the state program, DPI would be able to fund CLCs the agency would otherwise have to deny if there’s a shortage of federal dollars, per a spokesman.

Both of those are interesting ideas, particularly the incentive for Wisconsin schools to have full-day pre-K, since having it would give districts more money under the state’s general aid and per-pupil aids.

The CLC proposal is a direct effect of Trump/DeVos education policies that devalue public education, and you can see how those regressive moves would kick the responsibility down to the states. It also illustrates tax cuts at the federal level being used as an excuse to get rid of certain programs (even if they work), and how tax cuts in by state legislators in Wisconsin will make it tougher for the state to deal with these programs that are handed off to them by Trump and DeVos.

Note that “education governor” Scott Walker isn’t promising anything past the one-time increases K-12 schools will see for this upcoming school year (and even that bump in funding isn’t enough to prevent some districts from cutting staff and services). Which tells you that our schools will be back on the chopping block if the voters of this state are stupid enough to return Walker and other voucher proponents into office.



It’s a cagey move by Evers to use his state budget submittal as a way to draw that contrast, and it’s a good marker for Tony to throw down to separate himself for both the primary and general elections. The polls and the referendum results show that Wisconsin voters want to see that commitment to K-12 public schools restored as well.

7 years after Act 10, it should be obvious that Scott Walker and his millions in dirty DeVos dollars don’t have anything to offer the majority of Wisconsinites that want to see their schools be adequately funded. Evers or any other Dem that might emerge from the August 14 primary would be wise to talk up their plans to restore the commitment to K-12 public education that Wisconsin used, and keep Gov Dropout off-balance.

More deficits = more US bonds = higher interest rates

Usually when the US gives information on its plans for bond sales, it’s pretty mundane stuff. But now that we’re in the aftermath of the GOP’s Tax Scam, it gives some interesting insight into where the US budget stands.

For example, we found out today that the US Treasury is going to increase the amount of bonds it’s going to sell in order to pay for the Trump/GOP Tax Scam.

In its quarterly refunding announcement on Wednesday, the Treasury boosted the auction sizes of coupon-bearing and floating-rate debt [to $78 billion] from $73 billion the previous quarter. It was the third consecutive quarterly increase, as President Donald Trump’s fiscal policies widen the nation’s budget deficit.

The Treasury will sell $34 billion in three-year notes on Aug. 7, compared with $33 billion it sold last month and $31 billion in May. The government increased to $26 billion the sale of 10-year notes to be auctioned on Aug. 8, from $25 billion last quarter, and the 30-year bonds to be sold on Aug. 9 to $18 billion from $17 billion in May, Treasury said. The sales will raise new cash of $39.8 billion….

The Treasury also said in the statement it plans to boost auction sizes of all other maturities over the coming quarter. Treasury will boost the size of its two-, three- and five-year notes by $1 billion per month over the quarter, while increasing the floating two-year auction by $1 billion in August. The department will raise the size of its seven-, 10- and 30-year notes by $1 billion in August, holding auction sizes at that level through October. The changes will result in an additional $30 billion of new issuance.

As the bond teeter-totter reminds us, the surplus of those notes and bonds will likely require increased interest rates to sell that debt, in order for the Treasury to have the dollars they need to pay their (deficit-funded) bills.



Partly with that in mind, the yield on the benchmark 10-year Treasury note hit 3% today for the first time in 7 weeks. And it didn’t seem too affected by today’s Federal Reserve decision to hold off on any short-term interest rate hikes until their next meeting in September.

In the meantime, we will see all of this new US debt go on the open market, and that isn’t going to be a one-time thing. As Bloomberg noted, the ballooning budget deficits that Trump and the GOP have voted for are going to require more and more notes and bonds to flood the market in the coming months.

The Treasury’s borrowing needs in the second half of the year will be the most since the financial crisis a decade ago, with the Treasury expecting to issue $769 billion in net marketable debt, the department said Monday. That compares with $1.1 trillion in July-December 2008, when America was in the midst of its worst recession in generations.

Tax cuts, higher government spending and an aging population are expected to push the federal budget shortfall to $804 billion in the current fiscal year, with the deficit exceeding $1 trillion in 2020, according to the Congressional Budget Office. The deficit totaled $607 billion in the first nine months of the 2018 fiscal year that ends Sept. 30, compared with $523 billion from the same period a year earlier.

Even before these extra bonds hit the market and are bid on, we may be starting to see some effects on the US economy from the higher interest rates that are already in place. (Today) we saw more evidence that the US housing market may be declining from the mini-boom we’ve seen in recent years.

Total mortgage application volume slipped 2.5 percent from the previous week and 12 percent from a year ago, according to the Mortgage Bankers Association's seasonally adjusted report.

While homebuyers are less sensitive to weekly rate moves, mortgage applications to buy a home fell for the third straight week to the lowest level in a month. Application volume for homebuyers was down 3 percent for the week and just 1 percent higher than a year ago. Home sales have been weakening for months as high prices hit affordability and low inventory limits choices.

"Application activity remained slow, which is in line with weak trends in other housing indicators such as home sales and housing starts," said Joel Kan, MBA vice president of economic and industry forecasting.

Mortgage applications to refinance a home loan, which are highly sensitive to interest rate moves, fell 2 percent for the week and were nearly 29 percent lower than a year ago, when rates were nearly three-quarters of a percentage point lower.

This is where I remind you that new residential home construction has detracted from US GDP in 4 of the last 5 quarters. That lack of construction may have some responsibility in driving up prices in recent years, but now the higher prices along with the higher interest rates seem to be driving down demand (although your market may vary). When do prices fall with that drop in demand?

The recent upward revisions to the US savings rate keep me from thinking a crash or recession is imminent. But as I‘ve mentioned before, the combination of higher interest rates with a strong dollar makes me think the current direction of businesses and consumers isn't going to sustain in the near future. When that adjustment in economic habits hits, it could put an end to the growth in manufacturing and similar sectors that we’ve been seeing.

Put that together with the prospect of even higher tariffs being put on to Chinese imports, and this economy seems like it’s going to have to choose between inflation and an interest-rate influenced slowdown pretty soon.

Trump, GOP Congress trying to give away even more to Wall Street gamblers and super-rich

In what is becoming par for the course, the GOPs in Congress are considering yet another terrible idea to make their Tax Scam help the rich even more. That story has emerged after a New York Times report this week which indicated Trump Administration officials agree with some GOP members of Congress, and back a plan that would cut capital gains taxes in yet another way.

At issue is a priority of conservatives to reduce the amount that people pay in capital gains taxes by indexing capital gains to inflation. Republicans see this action as a way to build off the tax-cut law that Trump signed last year, and say it would boost the economy by increasing incentives for taxpayers to make new investments.

Under current law, people pay capital gains taxes on the difference between the amount for which they purchased an investment and the amount they sold it for. But conservatives instead want people to pay capital gains taxes only on the difference between the cost of purchasing the investment plus inflation and the amount for which the investment was sold.

Legislation to index capital gains to inflation has been introduced by Rep. Devin Nunes (R-Calif.) and Sen. Ted Cruz (R-Texas). There has been some interest in including the tax cut in a second package of tax cuts that the House plans to vote on this fall. However, it was not included in a "Tax Cuts 2.0" outline House Ways and Means Committee Chairman Kevin Brady (R-Texas) released last week.

This is outrageously regressive Donald Trump’s own alma mater at Penn Wharton said earlier this year that this backdoor $10 billion-a-year tax cut would give almost all of its benefits to the super-rich.

Share of tax cut from indexing capital gains cost to inflation
Top 1% of earners- 86%
Top 5% of earners- 95%
Other 95% of Americans- 5%

Let me also remind you that capital gains already gives a large tax cut to the rich under our current tax system. As this handy chart from Putnam Investments explains, the top marginal rate for capital gains is at 23.8%, well below the (newly-reduced) top marginal tax rate of 37%. So on top of that tax break, the Trump Administration and some GOP members of Congress now want to have less of those gains be taxed.

This would give a double benefit to stockholders and others who gamble on trade assets….and leave the rest of us to pay the difference with taxes on actual work. And we also get to deal with the higher interest rates and lowered social investments that will result from the increased deficits.


Permanent avatar of the GOP Tax Scam

In addition to the absurdity of the proposed regressive tax cut, Treasury Secretary Steve Mnuchin took it to another level earlier this week by claiming that if Congress can’t push this through in their next Tax Scam, the Trump Administration might just do it themselves.

“Consider that with, obviously, other parts of Tax 2.0,” Mnuchin told the [Wall Street] Journal. “If we’re not able to complete Tax 2.0, then we’ll go back to the drawing board and decide whether we want to consider this on a nonlegislative basis.”…

Conservatives argue that Treasury has the authority to index capital gains due to a 2002 Supreme Court ruling in a telecommunications case that found that the term "cost" was ambiguous. But Democrats disagree that Treasury has the authority to index capital gains by executive action, arguing that the Supreme Court ruling had nothing to do with the tax code and noting that 1992 opinions from Treasury and the Department of Justice found that Treasury did not have the power to take the action.

I’m not a lawyer, but I know damn well that you can’t change the definition of a “cost” that changes how much tax revenue comes in without a change in the law. Just….no. (And indeed, the Trump Administration was backing down on that "do it alone" plan by last night, once it became public).

Now, the Trump Admin can choose to change how they enforce the law and how often they audit people for violating the law, like how Trump’s IRS recently decided to allow political “social welfare groups” to hide the names of their donors. But there’s no change in the taxes those organizations do/do not have to pay, and they still have to file their regular tax return with the same numbers in them.

And why didn’t the Republican Congress forecfully tell the Trump Administration, “changing tax law is our duty, it’s right here in Article I, Section 8 of the Constitution that you swore to uphold. Don’t even try to change this on your own.” In addition to supporting such a regressive tax scam, the GOP Congress’s failure to assert its authority in this and numerous other areas of governance is more than enough reason to boot them out in 14 weeks.

In the great words of a Democratic Senator from the past, “WHEN DOES THE GREED STOP?”