Why Mitt hates Donald

[Over at Econlog, I have a follow-up to my recent Nick Rowe post.]

Mitt Romney famously divided America up between the “makers” and the “takers”, the latter group being those who pay no income tax:

“these are people who pay no income tax,” but they are people “who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them . . .

During 11 of the past 18 years, Trump has been a taker.

People are obsessing over the $70,000 spent on haircuts. The real issue is not the cost; it’s the lack of awareness that haircuts should be treated as consumption because they are consumption. Just as business lunches should not be tax deductible, haircuts to look good for business meetings should not be tax deductible. Bill Gates got rich without nice hair.

People need to understand that consumption is consumption. It is what it is. You may be consuming for pleasure, or consuming in the thought that it will make you more marketable in the future. But consuming food is consumption, whether it’s at a business meeting or at home. Consumption should be taxed.

I understand that from a certain perspective everything can be viewed as “investment”. If a factory worker doesn’t eat he starves, and thus is less productive. But society must make choices, and the most sensible choice is to treat all consumption as a taxable event. That includes business lunches and haircuts for The Donald.

PS. One reason to eliminate inheritance taxes is that as long as they exist then rich people will do things like pay their children millions in “consulting fees”. Unless you believe that Ivanka is a world-renowned expert on hotel development in Azerbaijan.

PPS. A few quick takeaways from the NYT story:

I had assumed that Trump was embarrassed to release his taxes because they would show a low level of charitable contributions. I was wrong. He took a $21.1 million charitable deduction for allowing a “conservation easement” on a lavish estate in Westchester County.

People used to ask me, “If Trump’s so dumb, how come he is rich?” Now we know. Trump got rich after 2005 by playing a billionaire on TV. The real reason he didn’t want his taxes made public is that they show he’s a lousy businessman; indeed most of his actual business ventures lose money. He got rich off The Apprentice, and uses the income to subsidize his money losing businesses. He had a few successful property deals, but nothing special given that he inherited a fortune from his dad in the 1970s, at a time when NYC property was dirt cheap. It’s been a near non-stop 45-year bull market in New York. He also makes money by cheating the Treasury out of the tax money he owes. And cheating students at Trump University. And cheating the taxpayer by using the presidency to put government workers into his hotels. And he encourages foreign despots to spend vast sums on his hotels in order to curry favor.

Trump is an almost textbook definition of “the swamp”.

PPPS. Now we know why Trump did not spend a few hundred million of his claimed “$10 billion” fortune on his 2016 campaign. He didn’t have the money.

PPPPS. I love it when a Trump aide confirms a story by attempting to deny it:

In response to a question about the audit, Mr. Garten, the Trump Organization lawyer, said facts cited by The Times were incorrect, without citing specifics. He did, however, write that it was “illogical” to say Mr. Trump had not paid taxes for those three years just because the money was later refunded.

That’s NOT what you say if the underlying story is false.

PPPPPS. I much prefer Biden to Trump, but just to be fair and balanced I should point out that this Yahoo article is kind of insane:

Under a scenario where Democratic presidential nominee Joe Biden wins the presidency and both the Senate and the House of Representatives are controlled by Democrats, 18.6 million jobs would be added by 2024, according to the analysis from Moody’s Analytics.

Under the opposite scenario where President Donald Trump wins a second term and Republicans control both chambers of Congress, 11.2 million jobs would be created.

Biden favors a $15/hour minimum wage.




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57 Responses to “Why Mitt hates Donald”

  1. Gravatar of Garrett Garrett
    28. September 2020 at 19:59

    From the Moody’s report:

    “Near-term economic growth is lifted by Biden’s aggressive government spending plans, which are deficit-financed in significant part. Stronger anticipated global trade
    and foreign immigration also contribute (see Table 2). His proposal calls for additional spending of $7.3 trillion over the next decade on a static basis on infrastructure, education, and the social safety net including everything from Social Security to housing and healthcare. The bulk of the spending is slated to happen during his term as president in an effort to generate more jobs to return the economy to full employment as quickly as possible (see Appendix: Biden’s Fiscal Policies in Detail).“

    So their thesis is that there will be more fiscal stimulus under Biden, therefore more jobs.

  2. Gravatar of Garrett Garrett
    28. September 2020 at 20:01

    Here’s what Moody’s says about the minimum wage:

    11 Biden has called for a $15 minimum wage, although he does not specify over what period of time it would be implemented. However, we assume that the federal minimum wage is raised incrementally over six years until it reaches $15 in 2027. This assumption is based from the Raise the Wage Act of 2019 passed last year by House Democrats.

  3. Gravatar of Gene Frenkle Gene Frenkle
    28. September 2020 at 22:04

    If Trump was an heir to a Cleveland real estate fortune he would own a successful used car lot…but instead he is member of the NYC real estate club which features a bunch of 70 something white guys that entered (or inherited into) the market at the right time.

  4. Gravatar of Gene Frenkle Gene Frenkle
    28. September 2020 at 22:12

    “were an heir” not “was an heir”. So LeFrak, Roth, Ross, Solow, Speyer, Charney, and Trump.

  5. Gravatar of Cartesian Theatrics Cartesian Theatrics
    29. September 2020 at 02:10

    On the Moody report, what happened to economists that they now talk seriously about “job creation”? Seems like less than a decade ago that was the kind of economic non-concept that they would quickly put aside.

    On the Trump stuff, seems like more strategically ineffective theater. It plays directly to Trump as positive agent for regime change. Yes, Trump a textbook definition of “the swamp”. He’s a self-avowed mockery of it, that’s sort of the point.

  6. Gravatar of Skeptical Skeptical
    29. September 2020 at 04:56

    I’m certainly not of the position that Trump is an astute or even marginally competent businessman.

    But honestly without the docs it’s impossible to tell how much of this is extremely aggressive depreciation on his property portfolio or even amortization on intangibles. Would be nice to see the differential in assets valued when begging for loans vs asset value when assessing for property taxes…..

    It’s amusing and lines up with my priors, but someone get us the damn cash flow statement already please

  7. Gravatar of Benjamin Cole Benjamin Cole
    29. September 2020 at 05:11

    I dunno.

    The NYT noted that real estate developers are entitled to certain deductions if property values decline, which they did after 2008-9. The NYT explicitly says Trump has not yet been accused of anything illegal.

    No doubt, Trump’s lawyers and accountants have aggressively pursued every tax loophole or benefit available. Would anyone pay more taxes than the legal minimum?

    Even Trump deserves an “innocent until proven guilty” benefit of the doubt.

    To date the US Tax Court (the ultimate arbiter, usually, of tax cases) has not ruled against Trump. BTW, there is an interesting dispute whether the Tax Court is an executive or judicial entity. The Supreme Court ruled is is judicial, which sent Scalia into a pique).

    Side note: If one ultimately pays up a contested tax bill as determined by the IRS, there is still no “innocent” or “guilty” charge.

    Trump’s golf courses may “lose money,” due to aggressive depreciation (an accounting legerdemain). They may make money on an operating basis. This is accounting 101.

    Decades ago I visited Trump’s Taj Mahal in Atlantic City and was amazed anyone would build such atrocities. This was ugly and cheap-looking even by Las Vegas standards of the time, which were low (this was 1990?). Also, Atlantic City looked like a sure flop of a dying city. Most of Trump’s architecture is dreadful from what I have seen, although his tower in Chicago is not bad.

  8. Gravatar of Philip George Philip George
    29. September 2020 at 05:16

    The facts were incorrect?

  9. Gravatar of Todd Ramsey Todd Ramsey
    29. September 2020 at 05:18

    “…cheating the Treasury out of tax money he owes…”

    I have seen nothing the Times has released so far has shown actual tax fraud. Is your statement an appropriate description for claiming credits and deductions allowed by the tax code?

    Have you ever taken a deduction for mortgage interest or property tax on your house, and if so, did you feel you were cheating the Treasury out of tax money you owe?

    Trump has many vile character flaws; no need to veer into TDS truth-stretching to discredit him.

  10. Gravatar of Michael Sandifer Michael Sandifer
    29. September 2020 at 05:24

    Todd Ramsey,

    Trump has been under investigation for a more than 72 million dollar refund that may have been illegal. Also, he apparently paid his daughter consulting fees and then wrote them off as business expenses.

    Did you even read the New York Times article? If not, why comment and waste everyone’s time?

  11. Gravatar of Michael Rulle Michael Rulle
    29. September 2020 at 05:55

    We know that the Times article is incomplete. Since they claim to have all his tax filings, why didn’t they show his income for each year? I have a hard time understanding why everyone seems so shocked about any of this. Trump’s casinos declared bankruptcy severl times–although he personally never declared bankruptcy. He convinced creditors his “brand” was worth more than they just taking over the properties.

    I know the numbers are teeny tiny in comparison, but how did Biden make $16 million in 2017-2018? Speeches and books. He is not different than most pols. That is how they get paid—that and being hired by Investment banks (like Kasich for example). It is as sleazy as whatever Trump has done—but you don’t care. Trump will make 10 times more than that when he leaves office—he may even approach the Clintons. But maybe not—who knows.

    Meanwhile, we have the direction of the country to worry about. Obviously you believe America will be better off if Biden wins. Right? In what sense will we better off?

  12. Gravatar of Thomas Hutcheson Thomas Hutcheson
    29. September 2020 at 06:03

    Moody Analytics presumably did not specify what monetary policy would be targeting in the two scenarios or look very deeply into how differences between policies such as trade, immigration, minimum wages, carbon taxation/CO2 reducing investments would affect the trade off between price stability and employment if NGDPL targeting were adopted.

  13. Gravatar of Michael Rulle Michael Rulle
    29. September 2020 at 06:07

    regarding “haircuts” as consumption: I know this has been an issue in the news and entertainment industry for a long time. I believe the IRS has tended to permit deductions. I believe these occured when he was making 800mill on the apprentice. I do not know under what conditons the IRS permits or does not permit this to be deducted. As to what it “should be” I will not disagree with you. But acting like Trump did something unusual or immoral is disengenuous. Isn’t that what Congress is supposed to worry about?

    They do not—for obvious reasons. Not sure that is bad per se. Should we oulaw lobbyists? I don’t think so. Our world is complex—-and it is too easy for us to get ripped off—-and if it is not obvious that we are (you agree–we are a banana republic—I am coming around) getting manipulated by all—then we are not paying attention. I really do worry about us. I do not think humans have changed. But the influence of Govt has gotten bigger—-driven by private money. No solution. It can scare you if you think about it too much

  14. Gravatar of Christian List Christian List
    29. September 2020 at 08:13

    The pure facts in the NYT article are certainly not wrong, I’m not surprised that he pays zero income taxes, the wording is also up them.

    I just don’t like that really old-fashioned NYT way of thinking in terms of a controlled democracy approach, where they wait until a few weeks before the elections before they publish their old results because they hope the can influence the elections by waiting for the “right” moment.

    I think a lot of voters, especially Trump voters, are numb to this approach, like Cartesian says, it’s strategically ineffective theater.

    They would have to find something new, but actually new. I’m sure they have more, still waiting for the “right” moment, but now so close to the elections, the voters will always think that it is managed theater, and they think that for good reasons. Maybe it just doesn’t work like this anymore.

    I am looking forward to the TV duel with Chris Wallace. They say he’s tough, but that he’s tough on everybody. He doesn’t seem to be biased, and he doesn’t seem to think he has to favor the “good” side.

    As a journalist and moderator you should never ever take sides. Just think of the absurd duels Romney had to endure against Obama. And Romney didn’t even stand up for himself loudly, that is another reason why he lost, nobody wants someone who ducks aways like that as president.

  15. Gravatar of ssumner ssumner
    29. September 2020 at 08:22

    Garrett, I agree that that’s their assumption, but they are simply wrong. My hunch is there’d be slightly fewer jobs under Biden.

    Everyone, I agree that it’s hard to know exactly what went down. But the fact that Trump’s fighting tooth and nail to stop release of these documents, after promising to do so, suggests they are pretty embarrassing. And his aides defense of him is pathetic, suggesting the charges are basically true. Trump can release documents to show the NYT is lying, whenever he wants. And if the NYT is telling the truth then he almost certain underpaid his taxes, and will owe money when the audit is complete.

    Having said that, there’s a Trump outrage every week, so I don’t see this moving the needle very much. People simply don’t care what Trump does wrong, or what outrageous statements he makes.

    Michael, I happened to be outraged that business lunches are deductible but factory worker lunches are not. But that’s just the socialist in me I guess.

  16. Gravatar of Postkey Postkey
    29. September 2020 at 08:22

    “But the influence of Govt has gotten bigger—-driven by private money.”

    Quite right?

    “Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence. The results provide substantial support for theories of Economic-Elite Domination and for theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism. “
    https://www.cambridge.org/core/services/aop-cambridge-core/content/view/S1537592714001595

  17. Gravatar of Anonymous Anonymous
    29. September 2020 at 08:43

    NYT seems to want to have their cake and eat it too, arguing that he’s both a buffoon losing billions, and also cheating the IRS out of tax revenue with illegitimate dodges. It almost has to be one or the other, doesn’t it? People who don’t make any money don’t pay federal income taxes, no shock there.

    They do address the “depreciation” possibility in order to argue he’s actually losing money- but there’s no way to tell. They also say he pays 20% of revenues as consulting fees, so maybe he’s just paying all his money to his kids (being a nigh-80-year-oild) and booking the losses to offset his income.

    I don’t see a problem with deducting expensive haircuts if you are an actor or 50% of business lunches in general. It’s hard to draw a line that works well for everyone but I think in general men don’t spend $70k on haircuts if they don’t need to for an acting job, and many people don’t go out to eat at a restaurant if it’s not for business (some do). A deduction only reduces the cost to you by your marginal tax rate, it’s not like you’re getting free haircuts.

  18. Gravatar of Todd Ramsey Todd Ramsey
    29. September 2020 at 08:53

    @ Michael Sandifer: I did read the article. Probably, we have a different interpretation of the word “cheating”. IMO, cheating implies fraud, as opposed to aggressive interpretation of the tax code. Maybe I missed something; please point that out if I did. However, “under investigation” for something that “may have been illegal” is a long way from my standard for fraud.

    As for paying his daughter consulting fees, the word for that is “legal”.

    Trump may well have committed fraud. However, I did not see anything in the Times articles that meet what I consider that standard.

    Scott, “…suggests they are pretty embarrassing.”

    Absolutely agreed. But it’s possible, even likely, that the embarrassment is not that he is embarrassed of his tax deductions, but rather because he doesn’t want his actual (low) income disclosed, .

    Scott, I’m your biggest fan. I consequently hold you to a high standard. I think you cheapen yourself when you stretch the truth to show Trump is an idiot. Your posts routinely do so without resorting to overstatement.

  19. Gravatar of Kevin A Kevin A
    29. September 2020 at 10:36

    2016, they want their huge news scoop back.

    Since then, trump has been accused of crimes, impeached and investigated. If anything, trump’s tax attorneys agrresive use of the MACRS table is turning the dial from 11 down to 3.

  20. Gravatar of sean sean
    29. September 2020 at 10:54

    If Trump paid Ivanka “consulting” fees; how is that bad? He gets a tax write-off but she would have to pay taxes I’m assuming at the individual income tax rate which would be a significant tax bill.

    I would be fine with Biden if the GOP narrowly holds the Senate and have control of the Supreme Court. Under that scenario I do not believe he would be able to implement many of the things on the left I’m afraid of.

  21. Gravatar of Benjamin Cole Benjamin Cole
    29. September 2020 at 11:46

    The Trump tax story underlines that income taxes have become a domestic and international shell game gong show.

    Probably, a migration away from income taxes to fuel, property, import and sales taxes is in order.

    Michael Pettis suggests taxing capital inflows.

  22. Gravatar of Thomas Hutcheson Thomas Hutcheson
    29. September 2020 at 12:52

    @ B Cole

    Progressively tax consumption. Are haircuts saving? I doubt it.

  23. Gravatar of Michael Sandifer Michael Sandifer
    29. September 2020 at 13:00

    Todd Ramsey,

    You might want to actually learn about tax laws so that your definition of “cheating” corresponds with legal reality. If Trump wants to shift money to Ivanka, he’s supposed to pay the gift tax. It isn’t legal to simply claim she’s offering services and make her responsible for the taxes. Do you really believe Ivanka had any valuable consulting services to offer her father?

  24. Gravatar of Postkey Postkey
    29. September 2020 at 13:24

    ‘BREAKING: DNI Confirms Clinton Cooked Up Russia Scandal’ And Obama Knew
    SEPTEMBER 29, 2020
    NATALIE WINTERS

    DIRECTOR OF NATIONAL INTELLIGENCE JOHN RATCLIFFE DECLASSIFIED INFORMATION RELATED TO THE FEDERAL BUREAU OF INVESTIGATION’S CROSSFIRE HURRICANE INVESTIGATION, REVEALING THAT CANDIDATE HILLARY CLINTON “APPROVED A CAMPAIGN PLAN TO STIR UP A SCANDAL AGAINST U.S. PRESIDENTIAL CANDIDATE DONALD TRUMP BY TYING HIM TO PUTIN AND THE RUSSIANS HACKING.” ‘
    https://thenationalpulse.com/breaking/russia-collusion-hoax/?utm_source=twitter&utm_medium=social&utm_campaign=ReviveOldPost

  25. Gravatar of Christian List Christian List
    29. September 2020 at 13:39

    You might want to actually learn about tax laws so that your definition of “cheating” corresponds with legal reality.

    Michael,

    In Germany there is something called tax ruling. The tax authorities confirm to the taxpayer whether his tax return is accepted. If one passes the test, then the matter is legal. It takes a few months, so 2016 and 2017 is long gone. This is necessary so that legal certainty exists. I suppose it is not much different in the US.

    Do you really believe Ivanka had any valuable consulting services to offer her father?

    We know that she’s one of the very view persons he actually listens to, so she is actually consulting. I doubt that the subjective quality of her consulting is relevant.

    I still don’t know what Hunter did in Ukraine though. Joe and the mainstream media said it had nothing to with the position of his father at all, so what then did he provide to an Ukrainian gas firm that’s worth $50,000 per month?

  26. Gravatar of Todd Ramsey Todd Ramsey
    29. September 2020 at 13:55

    @Michael Sandifer-

    Although I’m not thoroughly familiar with U.S. tax code, I easily found this sentence on an IRS page:

    “One of the advantages of operating your own business is hiring family members.”

    https://www.irs.gov/businesses/small-businesses-self-employed/family-help

  27. Gravatar of Doug M Doug M
    29. September 2020 at 14:15

    I am not at all surprized to see that a sophisitcated New York real estate investor books losses in more years than he books gains. That is the nature of real-estate investing.

    Tax law lets you depreciate the value of properties that are, in-fact, increasing in value. Then tax law allows you to endlessly borrow against these assets, monetising gains without realising these gains, simultaneously booking interest as an expense.

    If this is the world you live in, then you would come to beleive “only loosers pay taxes.”

    As for expensing hair-cuts. Yes, the tax code allows business owners to confate personal consumption expenses with busness expenses. And this is a big hole in the tax code and a subsidy for “the rich.”

    A code that taxes consumption appeals to me over a system that taxes income.

  28. Gravatar of ssumner ssumner
    29. September 2020 at 18:31

    Anonymous, You said:

    “I don’t see a problem with deducting expensive haircuts if you are an actor or 50% of business lunches in general. It’s hard to draw a line that works well for everyone but I think in general men don’t spend $70k on haircuts if they don’t need to for an acting job, and many people don’t go out to eat at a restaurant if it’s not for business (some do). A deduction only reduces the cost to you by your marginal tax rate, it’s not like you’re getting free haircuts.”

    I find this sort of analysis to be depressing common. It’s wrong, and its wrong in a way that favors the rich. If we are going to err, let’s err on the side of the working class.

    Consumption is consumption, it makes no difference as to why a person consumes. In a sense we all consume to live, but that’s not the point. Exempting 50% of a business lunch makes our economy both less efficient and less equitable. Why would we want to do this?

    And this is also why we never should have had an income tax; it opens up all sorts of issues like business lunches. Just tax consumption.

    Todd, One doesn’t have to “stretch the truth” to show Trump’s an idiot, just look at his twitter feed.

    Sean, I don’t favor the gift tax, but it sure looks like an illegal end around for the gift tax. Trump can’t just give his daughter that money without a gift tax.

  29. Gravatar of Kevin A Kevin A
    29. September 2020 at 19:06

    “but it sure looks like an illegal end around for the gift tax”

    If she is charging consultant fees, she would have to report it as income, which would be taxed at her income tax rate. This might be advantageous or disadvantages depending on the circumstances, although the safe bet is that it’s advantageous.

    Structuring ones affairs to minimize tax payments is american as apple pie, ask anyone who receives cash tips.

    Although, not reporting cash income is illegal whereas structuring a transfer from person A to B to reduce taxes is crafty but legal.

    People need to keep in mind, a tax return is essentially Trump’s lawyers written statement to the government about his tax bill. Those specialists and lawyers aren’t going to include anything they don’t think they can successfully argue if that have to.

    As a result, there’s no real wow factor here other than it’s suspicious. But you can’t prove anything, just as the lawyers intended.

    Yawn, sounds like my Monday morning

  30. Gravatar of Michael Sandifer Michael Sandifer
    29. September 2020 at 19:22

    Todd Ramsey,

    Ivanka is listed as a consultant, not an employee, as I understand it.

  31. Gravatar of Michael Sandifer Michael Sandifer
    29. September 2020 at 19:24

    Scott,

    I agree with you about gift taxes, and that Trump seemingly potentially illegally dodged the gift tax

  32. Gravatar of Benjamin Cole Benjamin Cole
    29. September 2020 at 19:26

    Thomas Hutcheson:

    Taxing consumption may not always be wise.

    https://carnegieendowment.org/chinafinancialmarkets/75972

    Of course, radically downsizing the US government is another excellent idea, such as eliminating the USDA, the VA, the Education Department, the Labor Department, Commerce Department and HUD. Cut military outlays in half.

    Go back to a draft military.

  33. Gravatar of Mark Z Mark Z
    29. September 2020 at 19:49

    Benjamin,

    “Go back to a draft military.”
    Let’s not, not just for moral reasons. The draft isn’t a good idea economically either since it takes people out of the work force. An ‘economically optimal’ draft would allow one to pay someone else to take one’s place, so as to minimize the opportunity cost of conscription due to lost labor, but I believe such a system is ultimately equivalent to just taxing everyone and paying some people to join voluntarily. The rest of your recommendations sound nice to me, but I don’t think there’s a good economic argument for conscription.

  34. Gravatar of Kevin A Kevin A
    29. September 2020 at 19:51

    Bring back the draft?!?! Good luck with that.

    Honestly no one can steer this oil tanker. It’s better to just tip the whole thing over now and start over from scratch.

    Everything else is window dressing

  35. Gravatar of msgkings msgkings
    29. September 2020 at 20:02

    How ’bout that debate, eh? Boy I’m proud to have Trump as my president.

  36. Gravatar of dtoh dtoh
    29. September 2020 at 20:41

    Scott,
    Consumption? Really? All you are doing is expressing your personal preferences and biases. What about coffee in the office. What about the water cooler. What about air conditioning? Haircuts….what about for newscasters? What about a clock on your desk? What about $1000 clock? What about a $5 dollar clock? What about a desk and chair? Why not just sit on the floor. And speaking of floors, why allow carpeting in the office when linoleum will work fine? What about steel capped boots in the factory? What about Gucci loafers in the boardroom?

    That’s why we have the tax code so we don’t need to have a constant discussion about personal preferences and biases that have zero impact at a macro level. If you want to argue that any consumption (i.e. everything listed above) should not be tax deductible, that would at least be logical (albeit ridiculous.)

  37. Gravatar of dtoh dtoh
    29. September 2020 at 21:09

    If you think personal income taxes paid have any relationship to income for a business owner you’re an economic moron…. or at least a business and tax moron. You have no idea if the business entities are paying income tax. You don’t know if the businesses are held through trusts. You don’t know if personal assets are held in trust. And more fundamentally, if you’re building or expanding a business that requires significant up-front investment (e.g. real estate or a countless list of other businesses) you’re going to have ongoing losses until you dispose of the assets.

    How do you define “cheating?” Your personal preferences again, or does the tax code have something to do with it.

    How many tens of millions of business have family members working for them. I guess they’re all shams. And why would you give your children salaries that are taxable when there are myriad ways to pass money tax free through trusts and other devices created by (mostly Democratic) legislators. (BTW – any of you posters who think that the gift tax is a hindrance to transferring money to your children gets an extra moron star.)

    Also FYI – a consumption tax does not solve the business lunch issue. You still have the same issue.

    Finally, do you honestly believe that paying taxes is the only way of giving. I guess producing stuff doesn’t count?

    This is arguably the dumbest post that’s ever graced this blog.

  38. Gravatar of Benjamin Cole Benjamin Cole
    30. September 2020 at 01:09

    I realize this is not a forum for “the draft” but since my suggestion generated some comments, here goes:

    Forgotten today is why Nixon implemented the draft. After Vietnam, it was believed by DC globalists that US taxpayers and voters would not support foreign wars anymore, nor send their sons (it was sons in those days). Duh.

    So, the grotesque misnomer “all-volunteer,” or, more accurately “mercenary” military was created, and financed with borrowed money.

    This allows the US foreign-military-intelligence establishment to conduct perma-wars and occupations, and build an ever-larger bureaucracy, insulated from public opinion. The US military as a global guard service for multi-nationals. And a huge voting bloc.

    People blah-blah about a balanced budget, and never mention that DoD, VA, DHS, black budget and pro-rated payments on the national debt will consume $13 trillion in the next 10 years.

    The Founding Fathers loathed, detested and reviled standing armies and advised “avoiding foreign entanglements.” They held a citizen-military a necessary bulwark against over-reaching government.

    Indeed, founder George Mason did not sign the Declaration of Independence in part as it did not contain an explicit ban on a standing army.

    Mason wrote. “There is no declaration of any kind, for preserving the liberty of the press, or the trial by jury in civil causes; nor against the danger of standing armies in time of peace.”

    We won WWII with a citizen military, and then de-mobilized after WWII. That was the last time the US de-mobilized.

    Lastly, I do not think it is right to shoot or bomb people, as the pay and benefits are attractive.

    There is a good reason mercenaries are vilified in healthy discourse.

    The US is rotting at the foundations, for reasons moral, economic, political.

    Scott Sumner and John Cochrane are suggesting the country will burn down after the Nov. 3 election. I do not think so, but the very fact that intelligent people have such an outlook…

  39. Gravatar of David O’Rear David O'Rear
    30. September 2020 at 07:40

    As a life-long Democrat, I have to acknowledge that Mitt Romney is a very smart man who has tried to do the right thing in his political career, and with no strong evidence, I assume this is because of the examples set for him by his parents.

    That explains upwards of 95% of the many, many reason why he might not care for The Donald.

  40. Gravatar of Justin Justin
    30. September 2020 at 09:06

    Benjamin,

    While you’re right that the founding fathers didn’t care for standing armies, modern warfare doesn’t really allow for the raising of a citizen army after hostilities have broken out. In 1780, it could take several months for an army to be deployed across seas and it would consist of nothing other than a group of men with drums, muskets, horses and some cannon. Except perhaps the cannons, that stuff was already in the hands of citizens who were probably also as good with their muskets as the foreign military. Even in 1941, Hitler had essentially no ability to attack the American homeland after war was declared.

    Today, a military strike can be conducted same day anywhere in the world, whether via bomber aircraft, land-based ballistic missiles, electronic hacking or submarine-based missiles. It takes a significant amount of advanced military capital and trained soldiers to defend against such attacks. Modern fighters and ships can take years or even decades to go from the drawing board to production.

    Now we’ve lived in a world for a long time in which the US has really been the only country with this capability in any serious capacity, but that is changing as China has been developing its military forces. As it is becoming clearer and clearer that the world is no longer unipolar, various other countries will likely make similar investments. By 2050, India and China may have air and naval capabilities similar to what the US has today, but more advanced, and other countries may have smaller yet still potent expeditionary capabilities.

    Having nuclear weapons may help deter attacks on the homeland, but American interests don’t end at the border.

    I do agree that we could be smarter about what military capabilities to develop, maintain a smaller standing military, and find ways to achieve real deterrence capability for much less. I think the standing military should remain volunteer, with the draft used exclusively for temporary surges in manpower in the event of hostilities.

  41. Gravatar of ssumner ssumner
    30. September 2020 at 10:18

    dtoh, I understand that you think the lunches of factory workers should be taxable while the lunches of fat cat businessmen should be tax free, but I think it’s fair to say I have different values from you.

    I’ve personally deducted various business lunches, which is both a hassle (dealing with the receipts) and an inefficient practice, as consumption should be taxed. I favor a system that is better on both equity and efficiency grounds. If that’s stupid, so be it.

    As for the gift tax, we both think it’s stupid. But there are IRS regs to prevent people from evading the gift tax through sham payments of “consulting fees”.

    You said:

    “Finally, do you honestly believe that paying taxes is the only way of giving. I guess producing stuff doesn’t count?”

    Obviously I never said or even implied that, you are becoming delusional.

    Ben, You said:

    “Scott Sumner and John Cochrane are suggesting the country will burn down after the Nov. 3 election.”

    All your idiotic lies just make you look like a fool. Is that how you want people to remember you?

  42. Gravatar of Michael Sandifer Michael Sandifer
    30. September 2020 at 11:38

    Here’s a bit of good news for the sane and those of good will:

    https://www.realclearpolitics.com/elections/betting_odds/2020_president/

    Biden got a 10 point boost in prediction markets following the “debate” last night.

  43. Gravatar of dtoh dtoh
    30. September 2020 at 13:19

    “Obviously I never said or even implied that,”

    Of course you did….

    “…..During 11 of the past 18 years, Trump has been a taker.”

    a judgment based on whether or not he paid personal income taxes.

  44. Gravatar of dtoh dtoh
    30. September 2020 at 14:56

    Scott,

    You said:

    “I understand that you think the lunches of factory workers should be taxable while the lunches of fat cat businessmen should be tax free, but I think it’s fair to say I have different values from you.”

    Obviously I never said or even implied that (especially since it’s the exact opposite of what I think.)

    If you are going to have a corporate tax (which I don’t favor), I think business expenses should be deductible. I also think businesses are pretty good at judging on their own what to spend money on (but I also think there needs to be some minimal regulation or guidance on reasonableness.)

    And BTW – lunches for factory workers are non-taxable to the employee and 50% deductible by the employer (just like lunches for “fat cats”.)

  45. Gravatar of Benjamin Cole Benjamin Cole
    30. September 2020 at 15:40

    Scott Sumner:

    From the recent John Cochrane post “The storm”, about the post Nov. 3 scenario if the election outcome is not clear:

    “There will be widespread protest, violence and looting. Right and leftwing “militias” will face off. We are not fighting about abstractions like “social justice.” This a good old fashioned fight about political power.

    What do you do if you are president with cities burning? You send in the troops.”

    https://johnhcochrane.blogspot.com/2020/09/storm-coming.html#more

    Cities burning? OK, maybe knocked down to the ground.

    You pretty much assented to his view in your blog.

  46. Gravatar of Benjamin Cole Benjamin Cole
    30. September 2020 at 16:25

    Justin:

    Thank you for your intelligent response to my views on the draft.

    You say, “Having nuclear weapons may help deter attacks on the homeland, but American interests don’t end at the border.”

    But who determines these interests? Not me. Not anyone I know.

    As an ordinary citizen, I feel an obligation to somehow promote the cause of freedom and democracy around the world, though I recognize the US is 330 million people, and the global population 7.8 billion. Discretion is the better part of valor.

    The DC-globalist establishment does not share my views. My government has determined that good relations with the Beijing’s Chinese Communist Party, and thus with manifest wretched human oppression, is more important than good relations with Free Taiwan. (The Trump Administration is a fleeting aberration.)

    Why? My government serves multinationals who do business with the CCP (or business anywhere in the world). Call it policy as made by Apple-Disney-NBA-Walmart.

    I sadly concur that the CCP may soon emerge as a global threat to human freedom everywhere.

    Even more sadly, the CCP has many well-financed mouthpieces in the US. A tricky situation in all regards.

  47. Gravatar of Postkey Postkey
    30. September 2020 at 23:36

    “As an ordinary citizen, I feel an obligation to somehow promote the cause of freedom and democracy around the world, . . . ”

    What about first promoting ‘the cause of freedom and democracy’ in the U.S.?

    “Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence. The results provide substantial support for theories of Economic-Elite Domination and for theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism. “
    https://www.cambridge.org/core/services/aop-cambridge-core/content/view/S1537592714001595

  48. Gravatar of ssumner ssumner
    1. October 2020 at 09:03

    dtoh, I thought it was obvious that I was describing Mitt’s view on “takers”. Read the post again.

    dtoh, You are wrong about lunches. When a factory worker buys lunch at McDonalds it’s not tax deductible. When a businessman buys lunch at a fancy French restaurant it is tax deductible.

    My lunches are tax deductible when I’m in DC.

    Ben, You said:

    “You pretty much assented to his view in your blog.”

    More lying. I defy you to find any place where I ever suggested there would be violence after the election. I said:

    “his depiction of American political dysfunction is even more nightmarish than anything I’ve written.”

  49. Gravatar of dtoh dtoh
    1. October 2020 at 13:04

    Scott,
    If the employee is not eating with a business associate AND not discussing business it’s not deductible. If they are eating with a business associate and discussing business it’s 50% deductible. It has nothing to do with where they eat or what their position is in the company.

    Meals when traveling even if eaten alone are also 50% deductible. So no you can’t deduct the cost of your lunch in DC. You can only deduct half the cost.

    I did re-read your post. What you said and what Romney said are clearly delineated, and you said Trump was a taker based solely on the fact or whether or not he paid taxes.

  50. Gravatar of Benjamin Cole Benjamin Cole
    1. October 2020 at 17:03

    Scott—ok, you do not explicitly say America will burn down after the election.

    Anyway, Trump told the Proud Boys to “stand down,” so you are safe for the time being.

    I do see a scenario with a lot of turmoil under certain conditions. Remember, the GOP sent bully boys into Florida in 2000 to upset vote-counting. The bully boy action worked, the votes were not counted, and then the Supreme Court handed the election to Bush.

    There will be a lot more time this go-round for bully boys to halt vote counts. Possibly even burnt down facilities where ballots are kept, etc. Highlight every incident of vote fraud.

    Throw the election into the Supreme Court, which is pretty much a kangaroo legal facility, and there you have the recipe for some real turmoil…

  51. Gravatar of ssumner ssumner
    2. October 2020 at 14:09

    dtoh, Business lunches should not be even 50% deductible, regardless of whether business is discussed. There’s no justification for this tax loophole.

    And you obviously didn’t read me correctly as I don’t regard people who don’t pay taxes as takers. Trump is a taker but that’s because he is a tax cheat.

    Ben, First you wrongly accuse me of predicting violence, and then you predict violence. Okaaay . . .

  52. Gravatar of dtoh dtoh
    3. October 2020 at 13:41

    Scott,

    Why business lunches? Why not other consumption. Again, this is just an expression of your personal bias. There’s no logical basis for the distinction. And from an employer’s perspective, if I can get an employee to work for free during their lunch break or in the evening. That’s seems like a pretty good way to spend money.

  53. Gravatar of dtoh dtoh
    3. October 2020 at 13:42

    Scott,
    Why is Trump a tax cheat? Do you have any actual basis for making this statement.

  54. Gravatar of ssumner ssumner
    4. October 2020 at 08:00

    dtoh, Trump can easily prove me wrong by releasing his tax forms and showing the NYT article is wrong. If he does not do so, I’ll assume the charges in the NYT are true. Trump promised to release the taxes. That was a lie. Then he said he couldn’t release them because they were under audit. That was a lie. I’ll take the NYT article over Trump’s claims any day. Again, he’s free to do what he promised and prove me wrong. If so, I’ll admit I was wrong.

    And I never said other consumption should be tax free. I mentioned business lunches as a particular egregious example, as they are so easy to tax. Free water from an office water cooler is not worth taxing—too much of a hassle. Business lunches are actually easier to tax than to not tax. It requires paperwork to make them deductible. That’s just insane. Not just stupid, totally insane. Why would we want to do something so crazy?

  55. Gravatar of dtoh dtoh
    4. October 2020 at 13:07

    Scott,
    Where in the NYT article did it claim that Trump was cheating on his taxes?

    So do you believe that the cost of business travel should be non-deductible? Same for office space and office furnishings? What about fees for participation in conferences? All non-deductible (or treated as taxable income to the employee?)

    What about capital and raw materials. Are they deductible?

    If you have a corporate tax regime based on income/earnings, and you (or the government) arbitrarily decide that some expenses are deductible and some are not, please explain how this does NOT cause a misallocation of resources?

  56. Gravatar of ssumner ssumner
    5. October 2020 at 14:47

    dtoh, They claimed in multiple places that he probably underpaid his taxes. Did you read the entire article? If the accusations are wrong, save time by telling me what in the article is incorrect?

    You asked:

    “If you have a corporate tax regime based on income/earnings, and you (or the government) arbitrarily decide that some expenses are deductible and some are not, please explain how this does NOT cause a misallocation of resources?”

    Well if the government does not try to do this then they will collect zero revenue, as people will find deductions for everything. That new house I bought on Lake Tahoe? We had a business meeting there so it should be deductible. The car I use to drive to work? Deductible. That new suit I bought from Brooks Brothers? I wouldn’t need it if I worked in a factory.

    Unless a tax system tries to distinguish between consumption and investment you either tax everything (which neither of us want) or you tax nothing.

  57. Gravatar of dtoh dtoh
    6. October 2020 at 14:09

    Scott,

    Nowhere in the article does it claim that he “probably” underpaid his taxes. Your characterization of the article is not accurate so I would again ask if there is any actual basis for your saying that Trump is tax cheat? And BTW, demanding that someone prove something is not false is a poor form of argument.

    The argument you’re making about expenses is not about consumption and investment. (If it were, then presumably you would be OK buying company cars for employees.) It’s about expenses that potentially provide a personal benefit to the employee as well as a benefit to the company. And to be more specific, it’s about certain expenses toward which you have a personal bias. It seems to me that you’re just promoting a modern form of sumptuary laws.

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