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A big idea for populist tax reform: Really increase middle-class incomes

Now that the Trump administration is inching toward tax reform, the country needs a big bipartisan idea to ensure the changes enacted benefit the working middle class.

The Tax Policy Center’s best estimate as of August is that the administration’s concepts will on average save middle-class taxpayers $760 per year, compared to saving the upper fifth of taxpayers an average of $13,600 annually — an 18 fold difference! With middle-class real wages mostly flat or declining, there’s only one genuinely bipartisan tax-overhaul option for helping average Americans: Making the offering of broad-based profit sharing or employee share ownership a condition for businesses receiving corporate tax incentives.

Given that the richest 10 percent of citizens have almost 80 percent of capital wealth — such as stocks, bonds and real estate — and well over 90 percent of capital income — such as all capital gains, dividends, interest and profits from businesses — this market-based solution makes sense and could garner support from both political parties.

The country is now expected to spend more than a trillion dollars every decade on corporate tax expenditures. The proposed corporate tax reform will increase the tax benefits given to corporations beyond this largesse. Businesses expect to get lower taxes and the continuation of older tax benefits, such as accelerated depreciation. All that, however, will not change the income of the tens of millions of current employees of those businesses.

That’s why it’s necessary to encourage many types of equity- and profit-sharing that goes to normal workers.

Our current system of funneling wealth to the top is the result of decades of mostly unintended shrinkage of federal encouragement of broad-based profit sharing and employee share ownership.

The Carter administration created the 401(k) plan, which resulted in the ending of many generous profit sharing plans. The first Bush administration reversed tax incentives to encourage employee stock ownership plans in stock market companies, a program designed jointly by President Ronald Reagan and Sen. Russell Long in the last bipartisan collaboration on shares. The second Bush administration tried to reform executive pay after Enron by creating regulations for stock options. That resulted in changes to the accounting treatment on stock compensation but also unexpectedly incentivized companies with broad-based equity compensation plans to throw regular employees and managers out of their share plans.

These changes were never designed to expand the opportunity of the working middle class to participate in broad-base share plans. Our proposal is focused specifically on that.

What’s needed today, as our lawmakers tackle tax reform, is a requirement that certain tax benefits go only to companies that have some form of broad-based profit sharing or employee share ownership. Bipartisan groups in the House and Senate would figure out the details.

Congress and the administration could also instruct agencies to give some preference in federal contracts to companies with employee share ownership or profit-sharing.

Congress is at present considering about a half dozen employee ownership bills, all of which have components that could make the economy work better and more fairly. Our key message is that whatever it does, Congress should make any tax reductions for corporations conditional on sharing the benefits with workers. Ideally, the administration would also find this attractive.

Despite deep differences, many of America’s founders — Washington, Hamilton, Adams, Jefferson, Madison and Lincoln — spoke extensively about the ideal that broad-based property ownership was necessary for a democratic republic to sustain itself. In the nation’s first economic development policy, designed to rebuild the cod fishing fleet decimated by the British in the Revolutionary War, President George Washington conditioned tax incentives for new ships on the establishment of broad-based profit sharing plans with sailors.

Corporate tax reform that assures that middle class employees get a fair shake is the American way to go.

Hillary Clinton worries Dems with a book tour

The following editorial appeared in the Pittsburgh Post-Gazette on Tuesday:

Hillary Clinton ran a historic presidential campaign that was honorable, if flawed. The former New York senator was the first woman to top the presidential ticket of one of America’s two major political parties. The smart money was on Clinton, secretary of state in President Barack Obama’s first term, to be sworn into office as the 45hth president of the United States in January 2017.

But something unexpected happened. After consistently leading in the polls against the Republican nominee Donald Trump, Clinton lost. After the election’s bitter outcome, Clinton retreated to the woods of her suburban New York for daily walks to reflect on her loss. Her political ambitions were nil. She would not assume the role of leader of the Democratic Party in exile.

During her time away, Clinton worked on a book, out this week, titled “What Happened” — her perspective on the events that culminated in her loss to Trump despite his own scandal-plagued candidacy.

Democratic leaders have not been looking forward to Clinton’s return to center stage during what is expected to be a highly publicized book tour.

In the book, Clinton is less than flattering in her assessment of her primary election opponent, Sen. Bernie Sanders. She even complains about decisions her old boss, President Barack Obama, made that she says hamstrung her during the primary season.

But the lion’s share of the blame for her loss is laid at the feet of former FBI Director James Comey, whose investigation into her handling of emails on a private server fueled distrust she was never able to overcome.

She also blames sexism, the misogyny of Trump, the interference of Russian President Vladimir Putin and the conniving of WikiLeaks founder Julian Assange as major factors in her loss.

Clinton does take much of the blame for failing to put forth a message that resonated with voters, but she is adamant that Comey’s investigation was an anchor around her neck at a time when voters were deciding between two relatively unpopular candidates.

While the book is guaranteed to be a bestseller, it can’t help but put Democrats still scrambling to find their way after such a historic loss on the defensive. From their perspective, there’s something unseemly about refusing to accept one’s defeat gracefully and move on.

But everyone has different ways of processing something as traumatic as a presidential loss, especially when it was unexpected. Clinton may not be president, but she’s still an American entitled to her opinion whether it is convenient for Democrats or not. For their part, many in her party hate the book already, even though they haven’t read it.

It will be up to historians to determine whether “What Happened” is a valuable chronicle to understanding the craziest political season in memory or a warmed-over melange of half-baked excuses.

Immigrants will play a crucial role in hurricane recovery efforts

After Hurricane Katrina, grocery and big box stores all over the Gulf Coast found themselves having to create whole aisles devoted to Latino food. Mexican food trucks were everywhere in New Orleans. What caused this transformation of the food scene? Immigrants coming north to help rebuild after the storm.

With the announcement that the Trump administration will end the Deferred Action for Childhood Arrivals, or DACA, program, it is all the more important to understand why immigration matters at times like these. As areas of Texas, Louisiana and Florida face a long and historically expensive recovery from Harvey and Irma, they need to learn all they can from Katrina. One of those lessons was the importance of immigrant labor in the rebuilding process.

During these times, immigration will relieve pressure on the market for lower-skilled labor. As the demand for clean-up and construction labor grows, workers have to come from somewhere. There are some willing native-born Americans, but from past experience it’s clear that there aren’t enough Americans who both need the work and are willing to do it for the current wage.

The increased demand for labor will push up wages, and higher wages will attract workers to Texas and Florida. If we continue to close the door to immigrants, those workers will have to come from elsewhere in the United States, reducing the number of workers and raising labor costs along the Gulf Coast or in other areas.

One way to gain that additional labor without labor costs rising as high would be to open the door to more immigrants. Higher local wages in the immediate aftermath of the storm will make it worthwhile for workers to come from Mexico and the Caribbean. That influx of labor will push wages back down, closer to where they were before.

High wages are certainly a good thing for workers already in those industries, but not for people looking to rebuild. The victims of Harvey and Irma need to rebuild cheaply while the rest of the country avoids suffering the ripple effect of rising wages.

Post-hurricane wages for unskilled labor will offer immigrants much more lucrative work than they could get at home, making it worth the risk and inconvenience of coming to the United States. Those wages would also enable them to send remittances back home, improving the lives of their families.

Immigrants’ wages would also help rebuild flooded communities by becoming a source of demand for local and national businesses as they reopen.

Putting down the welcome mat for immigrants in the aftermath of Harvey and Irma is good for the same reasons immigration has always been good. It provides more lucrative work, enabling them to live a better life with their loved ones. It also gives them the resources and connections to begin to build lives as productive and engaged citizens.

After Katrina, many immigrants who helped rebuild settled along the Gulf Coast, and are today still providing value with their work, paying taxes and creating communities in their neighborhoods.

Increased immigration also creates much-needed slack in the post-hurricanes labor market. The more new entrants to the labor force we can get through immigration, the smaller the increase in labor costs elsewhere in the U.S. economy will be.

The anti-immigrant message sent by ending DACA will make it harder to attract such labor than it was after Katrina. This will make recovery more difficult and expensive than it needs to be, revictimizing those affected by the recent hurricanes and harming others around the country who will also face higher labor costs.

Rebuilding will require a great deal of new labor. Getting it through immigration is a win-win for both Americans and the immigrants. It shouldn’t take the catastrophic flooding of America’s fourth-largest city or much of Florida to remind a nation of immigrants why welcoming workers from the rest of the world, especially as we recover from major natural disasters, is good for everyone involved.

Journal Times editorial: Finally, Unified board gets the message

If one thing has been made clear by Gov. Scott Walker and the Republican majority in the state Legislature since January 2011, it’s that they do not hesitate to use the power of the state government to prevent local government bodies from taking or continuing actions they don’t like.

We’re wondering why it took the Racine Unified School District board until Monday night to figure that out.

Act 10, the law which eliminated nearly all collective-bargaining rights for members of public-employee unions, was passed by the state Senate and Assembly and signed into law by Walker on March 11, 2011. It was Walker’s 68th day in office.

In the summer of 2015, when the abrupt resignation of Lisa Parham from the School Board was followed by a 4-4 deadlock — and walkouts by board members Dennis Wiser and Julie McKenna to prevent a vote on Parham’s replacement — Walker and the Legislature didn’t wait long to intervene and resolve the issue: We witnessed the fast-tracking of legislation in Madison enabling a school board president — at that time in Unified, it was Pastor Melvin Hargrove — to appoint someone to fill a vacant seat on the board.

The appointment bill passed both houses, Walker signed it into law on Oct. 23, it took effect on Oct. 25 and on Oct. 26, Hargrove appointed businessman John Koetz, a Mount Pleasant resident, to the board. Koetz was sworn in that same day.

Not long after that, Walker and the Legislature mandated that the School Board seats be determined by geographic districts rather than at-large voting, putting all nine seats up for election in April 2016.

Despite the mounting evidence, and with clear signals this summer from the Legislature that it expected Unified to make its employee handbook Act 10-compliant, in August the School Board deferred action on removing the language reminiscent of collective bargaining from the handbook.

Finally, on Monday night, with provisions in the proposed state budget calling for state takeover of failing Unified schools and the empowerment of its suburbs to explore secession from the district, the School Board voted 7-2 to approve a revised handbook, one the Board believes is compliant with Act 10. (Wiser voted in favor of the revised handbook, McKenna against. Hargove and Koetz are no longer on the board.)

“I believe that our action will be the first step in showing that we want the governance of this district, the ability to make the changes to improve student achievement, (to remain) here,” School Board President Robert Wittke said Monday night. “My appetite for risk with this district is zero. I want to take no risk whatsoever with all 19,500 kids that we have.”

Mr. Wittke has read the lay of the land correctly. We’re glad a solid majority of the board agrees with him.

We believe that Gov. Walker, state legislators, the RUSD board and the members of the Racine Education Association teachers’ union all want to see public education in Racine improve. But there are serious differences of opinion as to how to make that happen, and the power to impose their way of doing things lies in Madison.

You don’t have to like the swiftness with which Madison Republicans make changes to Racine Unified. But by now, to think they won’t do what they say they’ll do is just foolish.