Net Neutrality

On Nov. 21, the Federal Communications Commission (FCC) announced a plan to dismantle Obama-era regulations that ensure equal access to the Internet. This opens the door for Internet service providers (ISPs) to control the content we see, give more weight to big players, and monetize the Internet in a new way. Decision on the plan is expected Dec. 14.

Background

In 2015, President Obama’s FCC put in place the strongest-ever regulations to protect “net neutrality” – an even playing field for all online companies and websites to have equal access to their customers. Recognizing the essential role of the Internet, the FCC chose to regulate broadband service as a utility (like the telephone), not a business.

The 2015 regulations prevented ISPs from stopping or slowing down the delivery of web-sites or from offering special high-speed services for an extra fee. The new plan permits that.

  • Telecom companies like AT&T and Verizon fought these regulations, saying the rules kept them from offering a wider selection of services, and that freedom from regulation helped the Internet thrive.
  • Verizon has asked the FCC to preempt or void any state laws that (like the 2015 policy) regulate network neutrality and broadband privacy.
  • Internet companies including Google, Netflix, and Amazon fought back in support of the 2015 rules, which they say kept the telecom companies from controlling Internet access.
  • Trump’s FCC chair, Ajit Pai, and other critics have accused the 2015 Obama rules of “micromanaging the Internet” and intends to roll back the regulations. He argues that the repeal plan is sufficient now in simply requiring ISPs to be “transparent” about their practices

Why This Matters

  • Instead of offering a government-backed guarantee of equal access, the Internet is likely to become a two-tier technology with a fast lane (big companies) and a slow lane (start-ups, small players such as Etsy and Pinterest, and everyone else).
  • The repeal plan for the first time permits ISPs to block content.
  • Consumers will most likely pay higher prices, reflecting the higher prices companies pay to ISPs for faster connections.

Effect on Internet Privacy

The 2015 rules prohibited an ISP from selling, sharing, or using our browsing history and app use unless we gave explicit affirmative permission. The new policy says ISPs do not need an affirmative opt-in consent. They must only offer us an opt-out, of which consumers rarely take advantage.

by Deborah Burns 12-6-17

DACA: Key Points

DACA’s Under Threat

What’s Happening?

The White House announced on Tuesday, Sept. 5, that President Trump has ordered an end to DACA (Deferred Action for Childhood Arrivals), the Obama-era program that protects from deportation more than 800,000 young undocumented immigrants who were brought to the United States as children.

  • In June 2017, Texas Attorney General Ken Paxton told US Attorney General Jeff Sessions that on behalf of 9 states (TX, AL, AR, ID, KS, NE, SC, TN, WV), he would sue the administration if it didn’t terminate the 2012 DACA program by September 5, 2017.
  • Paxton’s argument was that “the Executive Branch does not have the unilateral power to confer lawful presence and work authorization on unlawfully present aliens simply because the Executive chooses not to remove them.” (More here.)
  • To avoid a lawsuit, President Trump called on Congress to replace the policy with legislation before DACA is scheduled to expire 6 months later on March 5, 2018.
  • On Wed. evening, Sept. 13, Trump met with Rep. Nancy Pelosi (D-CA) and Sen. Chuck Schumer (D-NY) in the White House. According to the Democrats, they crafted a deal to save DACA and boost Mexican border security — without building a wall. Trump has zigzagged in reply. (New York Times coverage here and here.)

What DACA Does

DACA is designed to support undocumented immigrants who came to the U.S. before 2007 as children, but it is not a legal path to citizenship. Among the benefits and opportunities:

  • Employment Authorization Document (EAD) – work permit
  • Social security card
  • Driver’s license (except AZ and NE)
  • Credit score and credit card
  • Employment benefits and responsibilities such as health care and paying taxes
  • Utility bills in their name
  • Draft eligibility, if they are male between age 18 and 26 (DACA recipients cannot receive federal benefits or federal financial aid.)
  • Almost 800,000 DACA recipients participate in the program, having arrived in the US at an average age of six. A million more young people are eligible but have not signed up.
  • Any DACA recipient whose DACA status expires by next March 5 can renew for 2 years, but they must apply by October 5. Any new applications received before September 5 will be reviewed.
  • Once an individual’s DACA status expires, they can no longer work legally or have a driver’s license. They can also be deported, although officials say only individuals who have committed crimes will be deported.
  • Over the next two years the program will shrink as individuals’ DACA status expires. Under this scenario, by 2020 there will be no more DACA recipients.
  • Pending is a reevaluation of the “temporary protected status” conferred on immigrants from Sudan, South Sudan, Haiti, Honduras, and Nicaragua.

Background

  • The forerunner of DACA was the DREAM Act (Development, Relief and Education for Alien Minors), initially proposed in 2001. In the late 1990s and early 2000s border enforcement had intensified, which caused many undocumented immigrants to settle in the US with their families, rather than travel back and forth to bring money home.
  • Like their parents, the children of those families were not legal residents. The DREAM Act was devised to give children whose parents had brought them to the US a path to citizenship. It made extremely slow progress over the next 10 years.
  • Meanwhile, the US government was steadily increasing deportations – up to 400,000 a year by 2010, 25 percent more than in 2007.
  • When the DREAM legislation got stalled in Congress in 2012, President Obama created DACA, to be administered by the Department of Homeland Security (DHS), as a way for young undocumented immigrants to apply for protection from deportation themselves.
  • Other initiatives were underway, and in 2013, a broad immigration bill passed the Senate but not in the House.

Resistance to Trump’s Action

Further links:

FAQs

More FAQs

Homeland Security’s Perspective

Letter to the community from the Berkshire Immigrant Center

 

LGBTQ+ Community and the Trump Administration: Key Points

Overview

American society continues to make progress on LGBTQ+ issues, with the Supreme Court’s landmark decision on marriage equality being a major victory. However, members of the LGBTQ+ community still face significant discrimination. Research shows that approximately 20% of hate crime victims are targeted because of their sexual orientation or gender identity. Additionally, 21% of LGBTQ+ adults said that they faced workplace discrimination due to their identity. Finally, LGBTQ+ are more likely to have difficulty obtaining health care compared to other Americans.

Trump ran a campaign filled with many inconsistencies and flip-flops, and though at times Trump claimed he was an ally to the LGBTQ+ community,  he also took a number of anti-LGBTQ+ stances. Even before Trump took office, it became clear that he would not support the LGBTQ+ community. He selected Mike Pence as his running mate, a man with an alarming record of discrimination. Once he assumed office, Trump assembled a team of many adamant opponents of marriage equality and anti-LGBTQ+ politicians and figures.

  1. Anti LGBTQ+ Judge: Nominated John Bush for a federal judgeship, continuing a series of anti-LGBTQ+ appointments beginning with VP Mike Pence
  2. Trans Bathroom Rights: Removed Obama order allowing trans students in public schools to use the bathroom of their gender identity
  3. “Religious liberty” order: Signed “religious liberty” executive order, allowing religious organizations to engage in political activity and potentially opening the door to discrimination against people in the LGBTQ+ community
  4. Removal of Survey Questions: Removed questions about sexual orientation and gender identity from the National Survey of Older Americans Act Participants 
  5. AHCA: Proposed the American Health Care Act which disproportionately and negatively impacts people in the LGBTQ+ and individuals living with HIV
  6. LGBT Pride: Refused to acknowledge, recognize, or even mention June as LGBTQ+ Pride month
  7. Official Website: Removed all mentions of LGBT communities from the official White House website

Read More

Here’s how Trump has undermined LGBT rights (so far)

4 LGBT Issues to Focus on Now That We Have Marriage Equality

Digging Deeper

  1. Anti LGBTQ+ judges
    John Bush represents the most recent in a string of concerning nominations by the Trump administration. An incredibly conservative lawyer from Kentucky, Bush has consistently opposed marriage equality, likened the tragedy of slavery to abortion, and has been reported using derogatory language in a speech given at private clubs. Bush has been nominated to the U.S. Court of Appeals for the 6th Circuit, and a life-time appointment as a federal judge would give him a tremendous amount of power.

Read more:

http://www.huffingtonpost.com/entry/trump-judicial-nominee-lgbt-abortion_us_5938179fe4b0c5a35c9ae02a?section=us_queer-voices

http://www.civilrights.org/advocacy/letters/2017/oppose-the-nomination-of-john.html?referrer=https://www.google.com/

  1. Trans Bathroom Rights
    Under Obama, the White House issued orders directing public schools to allow students to use the bathrooms that matched their gender identity. Now, the Trump administration is rescinding this order, allowing schools to force students to use bathrooms of the gender they were assigned at birth. This is primarily concerning for two reasons: this order could lead to more bullying and discrimination within schools, and it indicates the Trump administration’s indifference toward protecting the rights of more than 100,000 trans students in the United States.

Read more:

http://www.npr.org/sections/thetwo-way/2017/02/22/516664633/trump-administration-rescinds-obama-rule-on-transgender-students-bathroom-use

https://www.nytimes.com/2017/02/11/us/politics/trump-transgender-students-injunction.html

  1. “Religious liberty” order
    On May 4th, Trump signed a “Religious Liberty” executive order, granting vast exemptions to religious organizations. The order relaxes enforcement of the Johnson Amendment, which prohibits religious organizations from political activities. Though thankfully this order doesn’t include the earlier provision that could allow employers to discriminate against LGBTQ+ employees, members of the LGBT Equality Caucus along with many LGBTQ+ advocacy groups fear that this could open the door to additional discrimination.

Read more:

http://www.cnn.com/2017/05/04/politics/lgbt-religious-liberty-executive-order/index.html

http://www.nbcnews.com/news/us-news/trump-signs-religious-liberty-executive-order-allowing-broad-exemptions-n754786

  1. Removal of Survey Questions
    In 2014, the National Survey of Older Americans Act Participants (NSOAAP) was modified to include questions about sexual orientation and gender identity. This addition found that there are about 3 million LGBTQ+ over the age of 55 living in the United States. Suddenly, these questions have been removed from this survey. The NSOAAP is used to determine how to allocate federal funding to support the elderly. How can the government support LGBTQ+ elders if they are not even accounted for in the survey?

Read more:

http://www.nbcnews.com/feature/nbc-out/trump-administration-removes-lgbtq-questions-elderly-survey-n735741

https://www.americanprogress.org/issues/lgbt/news/2017/03/20/428623/trump-administration-rolling-back-data-collection-lgbt-older-adults/

  1. AHCA: Proposed the American Health Care Act, which disproportionately and negatively impacts LGBTQ+ people and people living with HIV 
  1. LGBT Pride: Refused to acknowledge, recognize, or mention June as LGBTQ+ pride month

Read more: Refusal to acknowledge

http://www.newsweek.com/trump-lgbt-pride-month-621206

  1. Official Website: Removed all mentions of LGBT from the official White House website

AHCA coverage: http://fenwayfocus.org/2017/03/the-american-health-care-act-would-harm-lgbt-people-people-living-with-hiv-and-black-and-latino-americans-according-to-fenway-institute-analysis/

News Sources

Marriage equality: https://www.nytimes.com/2015/06/27/us/supreme-court-same-sex-marriage.html?_r=0

Statistics: http://www.rollingstone.com/politics/news/4-lgbt-issues-to-focus-on-now-that-we-have-marriage-equality-20150629

Donald Trump “real friend”: http://www.cnn.com/2016/06/13/politics/donald-trump-lgbt-community/index.html

Flip Flops: http://www.nbcnews.com/storyline/president-trumps-first-100-days/here-are-new-policy-stances-donald-trump-has-taken-election-n684946

On LGBT rights: http://www.hrc.org/2016RepublicanFacts/donald-trump-opposes-nationwide-marriage-equality

Mike Pence: http://time.com/4406337/mike-pence-gay-rights-lgbt-religious-freedom/

GT Update: June 14, 2017

Dear Greylock Together,
A briefer update this week—in part because the more things change, the more they remain the same. While POTUS’s “Nero Moment” and yesterday’s AG stonewalling continue the narrative of a “brand new surprise” each day, Congress keeps on doing what they’ve been doing since the election: trying desperately to unwind decades of American progress.
Take Trumpcare, which even the dude for whom it’s named now calls “mean” (perhaps because of revelations like this one). In short: hard right ideologues who want the tax cut for the wealthy are not letting anyone consider the option of working together to actually try and make health care better. How do we fight back? With determination for as long as it takes. GT member Ali Benjamin offers a powerful five-minute action we can each take today.
Take Our Second GT Survey
This survey includes bills about two dynamite issues: the economy and healthcare. How do we bolster a fragile recovery, fix a rigged system, and protect the victories of the past? With laws, and this is our first step.  We need your voice — do you support a $15 minimum wage, do you want a public option? You make the decisions… what will Greylock Together support? With hundreds of active members, we have a lot of power: help us decide how to use it! Our last survey shows the Greylock Together community is overwhelmingly supportive of nonpartisan redistricting to end gerrymandering, automatic voter registration, and ending the disenfranchisement of felons. Changing the system of voting from first-past-the-post also has majority support, but many people still have questions about that one.  So we’re getting good results and soon we’ll know what to back… and where our representatives stand! Take the new survey now.
Meet NY-19 at this Sunday’s Greylock Together Meeting
Dustin Reidy, a leader in the charge to unseat John Faso from New York’s 19th Congressional District (NY-19), will join us at our regular biweekly meeting: 3:00-4:30 p.m.Williamstown Youth Center,
Meet…Up! GT Social
Ali and Blair Benjamin are kindly opening up their homes to Greylock Together for an informal, restorative, social gathering on Monday, June 19thRSVP here.
Upcoming Events
Out In The Berkshires – A Conversation with the LGBTQ Community
June 22 @ 6:30 pm – 8:30 pm, Berkshire Athenaeum, One Wendell Avenue, Pittsfield, MA.
Book Group
Strangers in their Own Land by Arlie Russell Hochschild
June 22 @ 7:00 pm, Congregation Beth Israel, 53 Lois St., North Adams
Antique Appraisal Day, Raffle & Basket Auction
A fundraiser benefiting Berkshire Immigrant Center
June 24 @ 1:00 pm – 4:00 pm, South Congregational Church, 110 South Street , Pittsfield
And Support Our Immigrant Neighbors
June’s Immigrant Heritage Month. The attached flyer shows how you can support the Berkshire Immigrant Center’s best efforts.
Hope to see you Sunday!
Rob White

Five-Minute Action to Save Healthcare!

Did you get a chance to call your senators? If so, awesome (it’s kind of empowering, no?). This weekend, let’s pay it forward with our final 5-minute action of this week. Let’s all reach out to friends and/or family —particularly those in states with GOP senators who are most likely to be on the fence about the AHCA (list provided below) — and ask them, directly, to call their senators. 

The moment to do this is right nowTopher Spiro, from the Center for American Progress, has reported that for senators who are on the fence about the AHCA, this congressional recess is the test. If they get too much backlash in their home districts, they will tell Mitch McConnell that TrumpCare is dead.

So every one of these on-the-fence senators need to be met with more backlash than they can possibly imagine. We need everyone in this effort — both those who have been visiting/calling/protesting, and also those that haven’t yet started. This is entirely within reach; we need only three Republican senators to defect for the AHCA to fail.

The task, should you choose to accept it.

  1. Look through your contacts list, Facebook friends, twitter followers, address book. See if you can find at least one person (ideally more!) who lives in these states: 

Tennessee

West Virginia

Maine

Louisiana

Arkansas

Arizona

Colorado

South Carolina

Nevada

Alaska

Ohio

These are the states whose senators are on the fence. These senators must be completely unnerved by the end of next week. 

  1. Call these loved ones. Or write to them. Don’t just communicate to a broad audience in a general Facebook post. Write to at least one person specifically. Use their name. Use their senator’s name. Here are the names and contact numbers for the target senators. 

Ask them to contact their senator/s. Tell them you’re worried about health care, and that because they’re a resident of (NAME STATE), they are in a better position to influence health care than almost anyone in America. Say, “will you please pick up the phone, or go to a protest?” Tell them you’ll walk them through it if they’re nervous. Some suggested phrasing is below.

Tell them your own story about making a first phone call. Tell them that you were nervous, that your voice shook, that you stumbled over your words, and that’s okay. It is so much more important that they call then how they sound when they call.

Tell them you’ll check back in with them. And that as long as they pick up and dial, and say manage the words: “do not repeal obamacare, or do not repeal the ACA,” you will cheer like heck for them.

Please provide the senators’ contact number in your email. Give them everything they might possibly need. 

Not sure what to say? Here’s a possible model:

Hi, _________. 

I hope you’re well! I don’t know if you’re aware, but like many people, I’ve become much more politically involved since November. I’ve been calling my own senators and representatives about a variety of issues — one of which is health care. I believe — and all the data suggest — that the AHCA (TrumpCare) would be a disaster for the nation’s health — far, far worse than Obamacare, which I’m committed to help improve. 

Here’s why I’m writing to you: the GOP needs 50 senate votes to pass the AHCA…which means we can block this by convincing just three moderate Republican senators not to vote for it. Your senator, Susan Collins, is very much on the fence…and word is that she’s spending this congressional break trying to figure out where her constituents stand. This means you (yes you specifically!) are in an extraordinary position to influence the health of this nation. Can I ask you to pick up the phone and call Senator Collins? 

I don’t know if you’ve ever made a call to your senator before…I will offer that I was super-nervous the first time I did it. What I learned is that (a) the first phone call is always the hardest, (b) it doesn’t matter what you sound like when you call…it only matters that you call, and (c) it actually feels really, really good when you’re done. 

You don’t need to know any specific policy points. As long as you say that you’re opposed to repealing Obamacare (the ACA), or that you’re opposed to the AHCA, you’ll have done what you needed to. If you stumble over your words (as I did), or if your voice is shaky (as mine was), that’s actually great — it’s a sign that you’re an ordinary citizen. 

If you’re nervous, I’m happy to help coach you through the phone call. Please know that I wouldn’t ask if I didn’t believe that both the issue and the moment were critically important. I spent my whole life not talking about politics…but this moment, right now, matters too much to for me to stay quiet.

Susan Collins’s # is 202-224-2523. Phone calls are much more effective than emails, FYI. Sometimes it takes a few tries to get through.  If you want a sample script, there’s one here: https://www.indivisibleguide.com/resource/demand-member-congress-oppose-trumpcare/

Let me know if you have any questions…and let me know when you call: I will cheer like heck for you!

Why ask friends and family? 

Many, many people hesitate to make that first phone call. They want to call. They intend to. Maybe they’re sitting there right now, feeling like they should, but…something’s holding them back. While that “something” might be different for every one of them, all of them are much more likely to take the leap if they’re directly asked by someone they know. 

But isn’t it rude to pressure loved ones about politics?

Don’t think of it as pressure. Think about it as encouragement. If any part of them wishes they can do something, then they’re going to feel empowered when they make that first call. They’re going to feel good.

I say this with experience. Back in January, I wrote to my mother-in-law — a southern woman who is deeply uncomfortable discussing politics. I knew she didn’t like Trump and that she was worried about the country. But I also knew that 70+ years of not talking politics meant she probably wouldn’t pick up the phone on her own.

I didn’t feel comfortable asking. But I asked anyway. She did call, and then she wrote me to say, “I’m afraid I’m not very good at this, but I did it!” She was relieved, and proud…and it was a beginning. Now, she’s calling regularly (woohoo!).

But it’s so uncomfortable to talk about politics.

You bet it is. But the folks out there who are rooting for Trumpism— all those who support white nationalism, who want to ban all members of an entire religion from entering the country, who are discrediting legitimate journalism as fake news, and who are shouting “lock her up” like we’re living in Salem 1692— aren’t uncomfortable. Nor are they being quiet. This means the alternative to talking with our loved about politics is having them hear the Trumpists in one ear…and a vacuum in the other.

And if you think it will help them relax, you can always send them these humorous tips for calling your elected official, from the New Yorker.

Want to take it one step further? Help them find a resistance event near them: https://twitter.com/TopherSpiro/status/868080004290183168

Ali Benjamin

New Attack on Obamacare: Key Points

by Chip Joffe-Halpern 4-23-17

The White House is pressuring House GOP leaders for another showdown vote on repealing Obamacare soon, possibly this week (April 24).

From what we know so far, the latest proposal would include allowing states to apply for “limited waivers” that would undermine Obamacare’s protections for pre-existing conditions. Under these waivers, states could opt out of Obamacare standards setting minimum benefits that health plans must offer and a requirement — called community rating — forbidding insurers from charging different prices to people based on health status.

An outline of his proposal said states could seek to relax “essential benefits” that Obamacare requires insurance plans to cover, such as emergency room trips, maternity and newborn care, and mental health services.  States also could request waivers to Obamacare’s ban on insurers charging sick customers higher premiums than healthy customers. But states would have to establish “high-risk pools” using government funds to help pay for insurance for people with costly medical conditions.

Historically, high-risk pool coverage are prohibitively expensive and there is little evidence to suggest that the existence of such pools made coverage less costly for others in the individual insurance market. People with preexisting conditions may have “access” to coverage, but most will not be able to afford it and those who can will face limited benefits and extremely high deductibles and out-of-pocket payments.

Action – calling Congressman Richard Neal:: (413) 442-0946
Senator Ed Markey: 413-785-4610
Senator Elizabeth Warren: 413) 788-2690

Script: Hi, my name is [NAME] and I’m a constituent from [CITY, ZIP].

I’m calling to object to any future bills aimed at repealing and replacing the Affordable Care Act, especially bills that allow waivers for pre-existing conditions, coverage of essential health benefits, and the implementation of high risk pools.  It’s been made clear that the majority of Americans want Congress to focus on making the current law work instead.  Thank you for your hard work answering the phones.

Republican Tax Plans: Key Points

KEY POINTS ON REPUBLICAN TAX PLANS, drawing on our session with Bill Gentry, Professor of Economics at Williams and expert on tax policy.                                                                    Jim Mahon 4/21/17

Background:  Tax economists think about three things when evaluating policy, while most of the rest of us think about one of these more than the other two. 

  1. What we all think about is equity between rich and poor, the way a tax system takes account of people’s (or firms’) ability to pay.  Tax policy people call this “vertical equity.” 
  2. What the rest of us  think about less is fairness between people or firms that make similar incomes but in different ways, or who use it in different ways.  Ideally, these people should face the same tax liability.  Policy wonks call this “horizontal equity.” 
  3. The other thing that mostly concerns tax economists is what they call “distortions,” which are economic decisions that people or firms make because of the tax code—beneficial projects that do not get done, or less beneficial things that do get done, because of the tax code (the general term for foregone economic activity is “deadweight loss”).   We non-economists sometimes think about this when these distortions affect economic growth, as with the related dimension of simplicity vs. complexity, most people (naturally) favoring a simple tax system that is relatively easy to deal with.
  • Under a Destination Based Cash Flow Tax (DBCFT), what is being called “Border Adjustability” in news reports, the government taxes cash flow rather than corporate income (profits). This implies that capital spending gets expensed (deducted from the taxable base) right away, rather than depreciated over time; and there is no deduction for interest paid, because in this view, interest is a cost of doing business.
  • In terms of reducing the distortions of the (corporate) tax code, Bill Gentry said that the idea of the DBCFT has a lot to recommend it. It is especially valuable during times of inflation, or when depreciation schedules are too slow for the capital goods (say, computers) a firm uses.
  • However, the bill favored by House Ways and Means Chair Kevin Brady, and Speaker Ryan, does not follow this idea consistently. One version of it preserves interest expensing, for example (something Trump is also likely to want), and does not allow firms to expense purchases of land.  It also wants to cut the rate applied to pass-through entities (such as limited partnerships), creating another loophole that firms would predictably exploit (a.k.a., a distortion in how firms organize activity).

[Here’s a decent explanation of the Ryan/ Brady plan, in cartoon form.]

  • Also, the move from an income-based corporation tax to a DBCFT would be expensive in the short term. Already-agreed tax treatment allowing interest and capital depreciation expensing would probably have to be honored while under the new rules, new capital outlays would be expensed 100 percent in their first year.  Especially if this were combined with a drop in the statutory rate from its current 35 percent to, say, 15 percent, we would have a big revenue hole in the first few years.  Given the PAYGO rules that impose a 10-year “budget window,” there would have to be a way to pay for this.  The idea now being discussed—a tax holiday, a low rate of 10 percent applied to repatriated profits (like the >$200 billion cash hoard Apple has in Ireland)—is, in Bill’s opinion, a bad one.
  • The “destination based” part of the DBCFT is also tricky. It is in the bill because the USA is now pretty much the only developed country using a worldwide, rather than territorial, base to calculate corporate tax obligations.
  • The US choice was based on a very defensible idea of fairness: if a foreign jurisdiction levies a 20 percent tax on the income of an American corporation’s operations in that country, the corporation should have to pay an additional 15 percent (to bring it up to the US rate of 35%) when those profits are returned to the firm.
  • BUT this puts US firms at a competitive disadvantage relative to a foreign company in that jurisdiction, if that company’s home country uses a territorial base, because the US firm ends up paying more. The US firm will have an incentive not to repatriate profits from that jurisdiction, retaining cash there perhaps in order to invest in that country instead of the USA.
  • Territorial taxation does make transfer pricing—the practice of setting intra-firm prices so that taxable profits are shifted to low-tax jurisdictions–a bigger problem.
  • Now, destination basing is like territorial basing except that it computes tax obligations from where a good is consumed rather than where income is earned.  Like a value-added tax (VAT), this method would have tax fall upon imported goods and services but not exports.  Unlike the VAT, businesses would be able to deduct expenses related to labor and rent, so that the taxable base now looks more like profit than value added.
  • Combining destination with cash-flow basing, you get a system that has the potential to be simpler, to encourage profit repatriation while putting US companies on even footing with competitors in foreign markets, and (depending on what happens to exchange rates), have a neutral to positive effect on the trade balance.
  • However, the politics of this ideal reform look difficult: Lots of interests are organizing against it.  It would also require tax accountants and attorneys to change the way they do their jobs.  The Senate, in particular, is likely to be hostile territory.  Orrin Hatch, Chair of Senate Finance Committee, is said to be mildly opposed, and several other important R Senators (e.g., Grassley) are more opposed.
  • When all is said and done, we are more likely to get a standard-issue Republican tax bill. My guess (Jim M.):  a corporate rate cut from 35 to 20-25; a personal top marginal rate cut from 39.6 to 35, maybe 30; an elimination of the estate tax; and some attention-getting sweetener for the “middle class” (R’s define this a households struggling on $250K- $1M).  There will be pressure on the CBO to use aggressive “dynamic scoring,” projections of the net impact that imply a big boost to economic growth.  If these don’t do the trick, expect a tax holiday for repatriated profits.
  • Going back to the three criteria noted above. The most tax-policy-wonkish Dems and Repubs could agree on minimizing distortions and horizontal equity, but they part company on vertical equity.  As the reform package evolves, unless the process is truly bipartisan (which R leaders say they welcome but will probably not follow in practice), this difference means that Dems and resistance groups would be right to distrust legislators whose philosophical guide is Ayn Rand.

[And here’s a recent take on the politics.]

 

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