Ten Years Ago Donald Trump Promised to Eliminate the National Debt. It Has Doubled.

Ten years ago today, Donald Trump said he would pay off the national debt in the span of just eight years.

That did not happen. Instead, the gross national debt has doubled since that day—from about $19 trillion to over $39 trillion. Much of that additional borrowing has taken place during Trump's five-plus years in the White House.

The gap between Trump's outlandish promise and the brutal fiscal reality of the past decade is not just a political gotcha. It's also an apt illustration of how far and how fast the debt has spiraled. And it's a painful reminder of a missed opportunity that Americans will be facing for a long, long time. The bill for these 10 years of fiscal profligacy will be coming due long after Trump has finally departed from the political scene.

But it's a story that starts, as everything in politics seems to these days, with Trump.

Read the rest here.

Wealth Taxes & Flight... It's Complicated

This is a very good examination of a hot button topic.

The UK is a Warning to the Rest of the World

HT Blog reader Kurt.

I had never heard of this guy before but found the arguments presented to be cogent and well backed by sources and statistics. 

Wealth Tax Floated in California Has Billionaires Thinking of Leaving

Billionaires including Peter Thiel, the tech venture capitalist, and Larry Page, a co-founder of Google, are considering cutting or reducing their ties to California by the end of the year because of a proposed ballot measure that could tax the state’s wealthiest residents, according to five people familiar with their thinking.

Mr. Thiel, 58, who owns a home in the Hollywood Hills and operates a personal investment firm from Los Angeles, has explored opening an office for that firm, Thiel Capital, in another state and spending more time outside California, three of the people said.

Other billionaires who appear to be making moves to decrease their presence in California include Mr. Page, 52, a longtime resident of Palo Alto. He has discussed leaving the state by the end of the year, according to two people briefed on the talks. In mid-December, three limited liability companies associated with Mr. Page filed documents to incorporate in Florida, according to state records.

The moves are being driven by a potential California ballot measure from the health care union, Service Employees International Union-United Healthcare Workers West, the people said. The proposal calls for California residents worth more than $1 billion to be taxed the equivalent of 5 percent of their assets.

If the measure gains enough signatures to reach the state ballot in November and wins approval, it will retroactively apply to anyone who lived in California as of Jan. 1, 2026. Those with $20 billion in assets who resided in the state on that date would face a one-time tax of $1 billion and have five years to pay it, according to the terms of the measure.

Whether the proposal will reach California’s ballot is far from certain, but some billionaires may be unwilling to take the risk. For Mr. Page, whose net worth is estimated at $258 billion, the measure could result in a one-time tax of more than $12 billion. The tax bill for Mr. Thiel, whose net worth is around $27.5 billion, could be more than $1.2 billion.

Read the rest here.

With the rich ALREADY fleeing New York, who’d be left for Zohran Mamdani to tax?

Anyone who thinks Zohran Mamdani’s plans to tax the rich are remotely workable, beware: The city’s share of “the rich” is already shrinking.

So if Mamdani gets his way, there soon might be no one at all left to squeeze.

From 2010 to 2022, the Citizens Budget Committee reports, New York state’s share of taxpayers with more than $1 million in federal adjusted gross income shrunk by almost a third — from 12.7% to 8.7%.

The city’s share also fell, from 6.5% to 4.2%.

New York’s loss was other states’ gain, particularly Florida, Texas and even California.

Thanks to inflation, the gross number of million-plus earners in New York grew, but it less than doubled; it tripled in California and Texas and quadrupled in Florida.

New York’s losses come with a steep cost, the CBC warns: “Had New York State and City had the same share of millionaires in 2022 as they did in 2010, the State would have received $10.7 billion more” in personal-income-tax revenue, and “the City $2.5 billion more. More millionaires mean more PIT revenue.”

Read the rest here.

The Final Tally on Trump's Big Beautiful Bill

Congress’ nonpartisan scorekeeper released its final prediction Monday for how President Donald Trump’s signature legislative achievement will grow the national debt and affect U.S. households.

Over the next decade, the megabill Trump signed on July 4 would increase the federal deficit by $3.4 trillion and cause 10 million people to lose health insurance, the Congressional Budget Office forecasts. While the newly enacted legislation would save more than $1 trillion by cutting federal spending on health care — with the majority coming from Medicaid — CBO predicts that the package’s costs will far outweigh its savings.

The bulk of the red ink from the package comes from the GOP’s permanent extension of Trump’s 2017 tax cuts. The analysis finds that the Senate Finance Committee, which has jurisdiction over tax policy, enacted policies that would decrease the incoming federal cash flow from taxes by a total of $4.5 trillion. That sum includes the cost of tax cuts Republicans added during Senate floor debate of the package.

Read the rest here.

The Dangerous Mythology of Central Banks (and out of control debt)

...Trump has purged the top echelons of the US military, the CIA, the NSA, the FBI, the justice department and every agency that stands in his way. It would be out of character if he spared the Fed.

His war of words against Powell is in full flight: “Low IQ ... a very stupid person, actually … terrible … a major loser … Mr too late ... a total and complete moron.”

Needless to say, Trump’s determination to get his hands on the machinery of interest rates and bond purchases is an admission that his “big, beautiful bill” is pushing the limits of US debt sustainability.

The Congressional Budget Office (CBO) says the draft will add $3.3 trillion (£2.4 trillion) to deficits by 2034, mostly from rolling over the Trump 1.0 tax cuts that were never affordable in the first place.

The US is in a runaway debt compound trap. The budget deficit is 6.7pc of GDP at full employment. The next recession will push it into double digits.

Interest costs were 1.6pc of GDP in 2018, during those halcyon days of free global money. They are 3.2pc this year and rising fast. “The federal budget has become highly sensitive to interest rate dynamics,” said James Knightley, from ING.

The US is also about to breach the Niall Ferguson rule: that great powers go into terminal decline once interest costs exceed military spending as a share of GDP.

Net public debt was 54pc of GDP at the turn of the century. It is now 121pc, rising by two points a year even in good times, and heading for 140pc in short order.

Read the rest here.

See also...

Republican Bill Puts Nation on New, More Perilous Fiscal Path

I promise you free this, that, and the other thing.

Just don't check my math.

Perks now, pain later

For all four years of Donald Trump’s presidency — and those years only — Americans would enjoy benefits like no taxes on tips or overtime, under the massive party-line legislation House Republicans are trying to pass this month.

Then it won’t be until 2029, when congressional GOP incumbents have already run for reelection and Trump is gone from the White House, that voters feel the sting from many of the “pay-fors.” That includes much of the Medicaid cuts estimated to strip health care coverage from more than 10 million people, plus the nixing of clean energy tax perks Democrats created during the Biden administration.

In each slice of the megabill House Republicans are working to tie up this week, policies would kick in immediately that curry favor with voters and add trillions of dollars to the federal deficit — before those costs are ultimately offset with unpopular policies that hit after the 2026 midterms and the 2028 presidential election.

Read the rest here.

Trump Launches Trade War with China, Mexico & Canada (JP Morgan Chase Stockpiles Gold)

President Donald Trump has signed tariffs on goods coming into the U.S. from Canada, Mexico and China, the White House said Saturday, raising the risk of a trade war with America’s closest trading partners and threatening to drive up prices on everything from cars to avocados.

It is unclear when the tariffs will take effect.

Canadian energy products would have a lower tariff rate of 10%.

Trump said he was imposing the tariffs because he claimed the countries were allowing fentanyl to come into the U.S. More than 107,000 people died from drug overdose in 2023, with nearly 70% of those deaths from opioids, including fentanyl. Trump also said the tariffs were in response to a trade deficit between the U.S. and the three countries because the U.S. imports more from them than it exports.

Economists across the political spectrum expect tariffs to increase what consumers pay for a range of goods, including vehicles, electronics, produce and lumber. Tariffs are paid by companies importing goods into the U.S., similar to a tax.

Read the rest here

Meanwhile, JP Morgan Chase is airlifting $4 billion in gold bullion to its New York vaults.

The Easy Part May be Over

There are (at least for now) limits to even Donald Trump's ability to govern by decree. In the not too distant future he is going to be facing the threat of default on the national debt while simultaneously pressing to extend his first term tax cuts. Here he may be facing two very powerful obstacles. The first is the greatly diminished, but not yet extinct, fiscal conservative wing of the GOP. There are still several dozen Republicans in Congress who have never once voted to increase the Federal debt limit. They are going to be a hard sell and with their razor thin majorities in both houses of Congress, Republicans may have to do some deal cutting with Democrats to get even a temporary spending bill and short term hike in the debt limit through. 

The second obstacle is the bond market. Interest rates have been drifting up over the last few months, and the Federal Reserve is sending signals that it may not be in a hurry to cut rates. If bond investors start getting nervous about the US Government's ability to get its finances in order, they can make their displeasure known by demanding higher interest rates in order to lend the government money. Given the current level of debt, this could create serious problems fast. The US Government is currently borrowing more money just to pay the interest on the existing debt, than it  is spending on the entirety of the national defense budget annually. Back in the early1990s Bill Clinton's ambitious agenda got almost completely shut down by the so called "bond vigilantes," leading the famed Democratic political guru James Carville to opine that when he dies he wants to come back as the all powerful bond market. Clinton, with a lot of help from a frequently hostile Republican Congress (that actually was fiscally conservative) has gone down in history as the last president to balance the Federal budget. Privately he groused that he had been turned into an "Eisenhower Republican." But when he left office in 2001 we were running surpluses that were being used to pay down the principal on the debt, which in turn meant paying less interest and freeing up more money. Then came George Bush (43) and everything went to the hot stinky bad place. 

Meanwhile Trump is threatening to start trade wars with a not insignificant part of the rest of the world, including countries that we have historically had very close relations with. A tariff war would have immediate and serious consequences, almost certainly spiking inflation and damaging GDP. 

All of which brings to mind the old Chinese curse; "may you live in interesting times." 

Study: Half of states running business on debt

According to the study, 18 states are running very high levels of debt as measured by money owed per taxpayer to cover the state's fiscal obligations ($5,000+). Four of those states are running extremely high levels of debt at $20,000+ per taxpayer. 

Read the full report here (pdf).

Trump tax plans could exempt 93 million from income taxes

Former President Donald Trump’s tax reform ideas could offer total or partial income tax exemptions to roughly 93.2 million Americans, a meaningful chunk of the U.S. electorate, according to CNBC’s analysis of several estimates.

As part of his economic pitch to voters, Trump has floated a sweeping tax overhaul, including a slate of income tax breaks.

So far, the Republican presidential nominee has officially proposed eliminating income tax on tips and Social Security benefits, along with overtime pay. And last week, in an interview on the sports media site OutKick, Trump said he would consider tax exemptions for firefighters, police officers, military personnel and veterans.

These exemptions are part of Trump’s larger vision to transition away from the income tax system and replace it with the revenue he says would be generated by his hardline tariff proposals.

“In the old days when we were smart, when we were a smart country, in the 1890s and all, this is when the country was relatively the richest it ever was. It had all tariffs. It didn’t have an income tax,” Trump said at a sit-down with voters in New York on Friday for “Fox & Friends.” “Now we have income taxes, and we have people that are dying.”

Trump has pledged to impose a 20% universal tariff on all imports from all countries with a specific 60% rate for Chinese imports.

Tax experts reject the notion that tariff revenue could offset the losses incurred by eliminating income taxes.

“The math doesn’t work out,” Garrett Watson, a senior policy analyst at the nonpartisan Tax Foundation, told CNBC.

He said Trump’s tariffs would raise approximately $3.8 trillion over the next decade, far less than the roughly $33 trillion of estimated revenue generated by income taxes over the same period.

Given that tariffs are paid by U.S. importers and those costs have historically been passed on to consumers, Trump’s strategy appears to be based around a notion of replacing income tax revenue with a kind of invisible sales tax.

Tariffs, much like sales tax and other point-of-sale costs, tend to have the biggest impact on low-income consumers, for whom the amounts represent proportionately larger slices of their monthly budgets.

If implemented, Trump’s income tax exemptions could affect tens of millions of taxpayers.

Roughly 68 million Americans receive Social Security benefits each month, according to the Social Security Administration. And in 2023, about 4 million workers were in tipped jobs, according to an estimate from Yale University’s Budget Lab.

The U.S. Department of Veterans Affairs approximated in March 2023 that there were 18.6 million living veterans. There are 1.3 million active-duty military personnel, according to the Department of Defense. And there are 800,000 sworn law enforcement officers and roughly 500,000 paid firefighters.

Taken together, these reforms could leave about 93.2 million people off the hook for at least a portion, if not all, of their income taxes.

That accounts for about 38% of the 244 million Americans eligible to vote in 2024.

Read the rest here.

Trump's economic plan in summary: Eliminate income tax for most people, levy a 20%+ tariff (sales tax) on all imports which will start a trade war with pretty much the entire word and replace about 10% of the lost tax revenue in the best case scenario, precipitating an explosion in inflation and the national debt.

On which note, gold is currently trading at ~$2,745.00/oz. 

The Debt Delusion: Why Modern Monetary Theory Is a Luxury Belief

While Fed Chair Jerome Powell made the rounds on Capitol Hill this week, discussions about the Federal Reserve’s expectations for inflation have once again come to the forefront. Unsustainable government spending is raising inflationary pressures with potentially devastating consequences for the US economy. In this context, the belief that debt doesn’t matter, especially championed by proponents of Modern Monetary Theory (MMT), appears more detached from reality than ever.

This notion, prevalent on the political left, claims that a government that issues its own currency can never run out of money in the same way a household or business might. Advocates argue that such a government can always print more money to pay off its debts, thereby sidestepping any constraints imposed by traditional fiscal discipline. While this might sound appealing, it’s a classic example of what sociologists call a “luxury belief”—an idea that is primarily held by those insulated from its real-world consequences.

“We are a sovereign currency, we can print all the money we want”—former House Budget Committee Chair John Yarmuth (D‑KY) at a congressional hearing.

Luxury beliefs, as sociologist Rob Henderson describes, are ideas that confer status on the rich while often burdening the less fortunate. The concept has traditionally been associated with cultural and social norms, but it applies equally well to economic theories like MMT. Proponents of this “magic money” theory, often shielded by their own economic stability, pay too little heed to how elegant theories on paper can lead to catastrophic outcomes in the real world.

A key argument against MMT’s false promise is that printing money for the sake of financing government spending leads to inflation. When a government prints money to cover excessive spending, it increases the money supply without a corresponding increase in goods and services. This creates an imbalance between available resources and the money available to purchase them, with the result being inflation—an increase in the price level that erodes the purchasing power of money. For the wealthy, this might mean adjustments to their investment portfolios or higher prices on certain items. For the poor and working class, however, inflation can be devastating.

Read the rest here.

Is Germany’s church tax ‘miracle’ over?

Each year, the journalist Peter Winnemöller noted, hundreds of thousands of people formally left the Catholic Church in Germany. But year after year, church tax income continued to grow.

But what Winnemöller facetiously called the “Kirchensteuerwunder” — the church tax miracle — may be over.

The German bishops’ conference announced July 8 that church tax revenue was 6.51 billion euros (around $7 billion) in 2023.

That’s a lot, of course, but it marked a 5% drop on the year before, when church tax income was a record 6.84 billion euros (roughly $7.4 billion).

What exactly is the church tax? How is the so-called miracle even possible? And is it truly coming to an end?

For many Catholics outside of Germany, the idea of a church tax is bizarre. But within Germany, it’s a largely unquestioned feature of Catholic life.

It’s telling that while Germany’s controversial “synodal way” produced 150 pages of resolutions calling for radical changes to Catholic teachings and practices, it did not offer a single proposal for reform of the Kirchensteuer. 

A cynic might say that’s because the tax helps to keep afloat the lay Central Committee of German Catholics (ZdK), which co-sponsored the synodal way alongside Germany’s bishops.

Perhaps, but it might simply be that few can imagine an alternative to a system that is rooted in the medieval practice of tithing but took on its present form in 1919.

In Germany today, religious communities that are corporations under public law have a right to levy taxes on their members. 

Every person in Germany — including foreigners — who says they are Catholic on an official registration form must pay an 8-9% surcharge on top of their income tax liability, depending on the state in which they live. 

This sum is collected directly from employees’ paychecks on the Church’s behalf by the state authorities, which claim roughly 3% of the total revenue.

The only way for baptized Catholics to opt out of the system is to declare formally that they are leaving the Church, after which they are told they may no longer receive the sacraments, hold Church posts, or serve as baptismal or confirmation sponsors.

Read the rest here.

HT: Dr. Tighe

Note: To the best of my knowledge, Orthodox Christians are not subject to the church tax in Germany. 

New York City (what's wrong)

This is a really good video explaining what's wrong with New York from somebody who is obviously not hard right in their politics.

IRS: Wealthy Americans are evading $150 billion in taxes annually

The nation’s millionaires and billionaires are evading more than $150 billion a year in taxes, adding to growing government deficits and creating a “lack of fairness” in the tax system, according to the head of the Internal Revenue Service.

The IRS, with billion of dollars in new funding from Congress, has launched a sweeping crackdown on wealthy taxpayers, partnerships and large companies. In an exclusive interview with CNBC, IRS Commissioner Danny Werfel said the agency has launched several programs targeting taxpayers with the most complex returns to root out tax evasion and make sure every taxpayer contributes their fair share.

“When I look at what we call our tax gap, which is the amount of money owed versus what is paid for, millionaires and billionaires that either don’t file or [are] under reporting their income are $150 billion of our tax gap,” Werfel said. “There is plenty of work to be done.”

Werfel said that a lack of funding at the IRS for years starved the agency of staff, technology and resources needed to fund audits — especially of the most complicated and sophisticated returns, which require more resources. Audits of taxpayers making more than $1 million a year fell by more than 80% over the last decade, while the number of taxpayers with income of $1 million jumped 50%, according to IRS statistics.

Read the rest here.

Tax evasion has become something of a national pastime in the US. With the IRS having been starved of funding for decades, the chances of getting caught are extremely low. 

Who is rich?

The Guardian thinks anyone who makes over £60,000 (around $76,000) is wealthy and should be taxed accordingly. In the United States, that is considered middle class. In some parts of the country, it is on the low end of middle class. 

Are billionaires turning charity into a tax dodge?

Americans sent half a trillion dollars to charity last year—a substantial chunk of money to pay for worthy causes left unaddressed by the government and corporations.

But a huge portion of that money isn’t going to food pantries or scientific research or even churches. Instead, the ultrawealthy, including many billionaires who have pledged to give away their technology or stock-market-fueled fortunes, are funneling their wealth through opaque financial instruments, where it can sit for years tax free without touching an actual charity, according to a new report from the progressive think tank Institute for Policy Studies.

“There's a fair amount of charitable dollars that are not being deployed, where the donors have already gotten a tax break,” Chuck Collins, director of the Program on Inequality at IPS, told Fortune.

More than one-quarter of charitable giving in the U.S. last year went to donor-advised funds, or DAFs, according to the National Philanthropic Trust. DAFs are vehicles that give the donor an immediate tax deduction, but allow money to sit potentially for decades without being used for actual charitable work.

DAFs are the fastest-growing type of charitable investment, according to Fidelity. Among the ultrawealthy, they are the most popular, and many of the headline-grabbing billionaire donations in recent years have gone to DAFs.

In 2021, Bill Gates donated $15 billion; Elon Musk gave $5.7 billion, Jack Dorsey gave $700 million, and Mark Zuckerberg $700 million—but rather than individual charities, those donations all went to the donors’ DAFs or family foundations, IPS notes. Last year, more than two-thirds of the billionaires who signed the Giving Pledge, a nonbinding promise to give away the bulk of their wealth to charity in their lifetimes, gave either to donor-advised funds or their family foundations.

Proponents of DAFs say that their structure encourages giving: The tax deduction encourages wealthy patrons to dedicate money for charity even before they’ve decided which cause to support. “Donors may have good reasons to postpone grants,” a Stanford Law School article says.. In one hypothetical, a tech founder who “sells a startup for millions of dollars” may want to donate her takings but is too busy to immediately decide how to direct the funds; a DAF is a good choice for this person, the law article notes.

However, while DAFs could in theory grow the charitable pie, in practice, they too often allow the donor the illusion of charity while letting them keep control of their funds, critics say.

Read the rest here.

Non-Profits Are Seeking IRS Classification As "Churches"

From Religion Clause: 

Both Baptist News Global and ProPublica have recently published lengthy investigative articles on the growing number of non-profit entities that have sought classification by the IRS as a "church" or "association of churches" or an "integrated auxiliary of a church." this exempts them from filing the annual Form 990 required of other non-profits. Form 990 disclose income, expenditures and compensation of officers, directors and key employees.