Random Ramblings

A few random ramblings to take you into the holidays.

Omnibus Spending Bill 

The Congress looks like it is going to pass a $1.7 trillion spending bill just days before the House of Representatives is going to become Republican controlled.

I am at a loss as to why Senate Republican leader Mitch MeConnell would agree to this bill when the leverage and negotiating power of Republicans will go up substantially in a little over a week's time when they take control in the House.

Even more difficult to understand is McConnell's defense of the compromise legislation he has been hammering out with Democrats Schumer and Pelosi.

He claimed that it was important to support the bill because of increased defense spending and the additional support it provides to Ukraine in its war with Russia.

In fact, McConnell stated that most Republicans believed that arming Ukraine was the number one priority for the United States right now.

The bill increases the amount the United States has provided to Ukraine over the last year to more than $100 billion.

Seriously, Mitch?

More important than the economy, inflation, out of control government spending, immigration or collusion between the FBI and other government agencies to interfere in elections and curtail free speech?

Of course, McConnell is not alone. He got 17 other GOP Senators to support moving the legislation forward on the final vote. It now goes to the Democrat-controlled House where passage is assured. Democrats never break ranks on important votes.

Do you think the Democrats in the Senate would do anything similar if the roles were reversed?

Not a chance.

Trump's Tax Returns

The Democrats finally got their long-awaited wish and were able to disclose Donald Trump's tax returns,

The returns for 2015-2020 were released this week.

They showed Trump had adjusted gross income of -$53 million cumulatively for the six years.

He paid $1.8 million in taxes.

Source: https://www.nytimes.com/interactive/2022/12/21/us/politics/trump-tax-return-numbers.html?campaign_id=9&emc=edit_nn_20221222&instance_id=80837&nl=the-morning&regi_id=73336580&segment_id=120535&te=1&user_id=2e6cdf0ad8819ff86cda51e914c3d036

Most of the losses were associated with real estate and other businesses.

All of the years have been audited by the IRS or are currently under examination.

So Trump had negative income of over $50 million,  paid $1.8 million in taxes and the Democrats think he did not pay enough?

You lose millions of dollars, still pay a couple million in taxes and you should have paid more?

That is an interesting take since all of the deductions, credits etc. that he might have taken on those returns were put in the Internal Revenue Code by people in Washington that were not named Trump. Most were passed with a majority of Democrat votes since they were in control of Congress for most of the past 80 years.

They were put into the law to incentivize entrepreneurs like Trump to take risks in order to create jobs for workers.

Trump did not even take office until 2019.

Source: https://www.nytimes.com/interactive/2022/12/21/us/politics/trump-tax-return-numbers.html?campaign_id=9&emc=edit_nn_20221222&instance_id=80837&nl=the-morning&regi_id=73336580&segment_id=120535&te=1&user_id=2e6cdf0ad8819ff86cda51e914c3d036

Democrats are also complaining that the IRS did not begin auditing Trump's 2017 and later returns as required of all Presidents until after he left office. However, in my experience as a tax attorney dealing with the IRS over the years, it was the general rule that most large returns (especially those with carryover issues from prior years) would not be be audited until several years after the tax year had concluded. I see nothing unusual in what the IRS did in this case. It was standard practice.

The fact is that almost all taxpayers would rather have an audit take place as close to the tax year as possible. It is easier to collect records, etc. The IRS is almost always the one that delays audits.

Perhaps the new 87,000 IRS employees coming on board over the next few years will speed things up.

Covid 

A couple of weeks ago I posted data showing that New York and Florida were currently admitting seeing more daily hospital admissions for Covid this year than they did at the same time last year.

This is also true looking in the United States at large for those age 70+ at the current time.

This hospitalization rate was 12.2/100,000 on December 21, 2021. It is 13.6 now for this age group.

This is a group in which 93% are fully vaccinated and 67% are boosted.

It is at odds with everything we have been told.

A recent study from The Cleveland Clinic in which it followed all of its 50,000 employees to determine the effectiveness of the new Bivalent booster provides some interesting data that might explain what is going on.

It is without question that the age 70+ group is the most at risk from Covid and most likely to be hospitalized.

It is also the age group most likely to be fully vaccinated and have gotten the latest boosters.

The Cleveland Clinic study actually found that the more vaccines doses that an individual had the more likely they would be infected with Covid over the period of the study.

In fact, those who were not vaccinated were least likely to get Covid. Those who had received more than three doses were most likely to be infected. There was a direct correlation between the number of doses received and the rate of infection in those studied.

(Black line- 0 doses). (Orange line- 4 or more doses).

Source: https://www.medrxiv.org/content/10.1101/2022.12.17.22283625v1.full.pdf

This data suggests that there might be something to the theories of Geert Vanden Bossche who has argued that the vaccines may make someone may vulnerable to future infection.

Is this the reason we are seeing more age 70+ people in the hospital right now than last year?

We can only hope that we are seeing an earlier peak in cases than last year. If we were to follow last year's trajectory of hospital admissions we are in deep, deep trouble.

Another interesting fact I found in the study was that 59% of Cleveland Clinic employees reported that they had never been infected with Covid almost three years into the pandemic. This is despite working in a healthcare setting.

Could this be due to the vaccines? It might.

However, less than 10% of all employees reported that they had been infected before the vaccines rolled out widely in January, 2021. Three times as many reported being infected after the vaccines were in use. 27% of employees were infected with Omicron after the boosters had been deployed.

Could it be that the vaccines might not be everything Dr. Fauci says they are? That might be true as well.

In fact, the Cleveland Clinic contains this statement in its conclusion.

“We still have a lot to learn about protection from COVID-19 vaccination, and in addition to a vaccine’s effectiveness it is important to examine whether multiple vaccine doses given over time may not be having the beneficial effect that is generally assumed.”

Why Work? 

Many employers continue to struggle to find enough employees willing to work.

It is a problem that has building for years and is the result of several factors including declining numbers of those of working age due to retirements of Baby Boomers and fewer younger people entering the labor force.

The problem has been exacerbated over the years due to the safety net of benefits that are provided to those who are not working or who are on some form of welfare program.

Unemployment benefits are taxable income but most welfare benefits are not.

As a result, it takes higher and higher wages to induce people to work to compete with tax-free government benefits.

The system makes it more profitable to collect government benefits than work for a wage.

I wrote about this problem ten years ago in these pages in a blog post titled, "Why Work?"

One big factor in why the welfare recipient makes out so well is the tax-free nature of welfare benefits and the refundable tax credits that are built into the Internal Revenue Code.  Tax loopholes are not just for the rich any more.

Providing housing assistance, food stamps (EBT), welfare, Medicaid, child care assistance and Obamaphones in after-tax dollars provides a significant income advantage to the welfare recipient compared to a middle-class worker.

Consider a cell phone.  If a private sector worker and taxpayer wants a $50 monthly cell phone plan they need to earn about $65 to pay for the cell phone.  They need to pay income taxes (15%), FICA (7.65%) and state taxes before they have the money to spend on the cell phone.  People on welfare are just given the cell phone.

I am all for helping people who need a helping hand. However, this is clearly not a sustainable path. It also clearly shows that the incentives in the system are not properly aligned to get us the results we should be getting. 

Consider this fact about a single mother in Pennsylvania with two children.

The single mom is better off earning $29,000 with gross income from working combined with welfare assistance that provides $57,327 in net income and benefits than to earn gross income of $69,000 solely from working that nets out to income and benefits of $57,045.

In other words, earning more than $29,000 from work actually starts to reduce the single mom's household income. There is no incentive to earn more. It is more profitable to stay home and collect welfare.

 

I was reminded of this subject as I saw this New York Post opinion article last week.

The authors calculated the income and hourly wage equivalent in every state for a family with two unemployed adults and two children from unemployment and welfare benefits.

The numbers are mind boggling.

In several states a family of four can make the equivalent of six figures in household income by not working!

It was far worse than this when we had Covid supplemental unemployment benefits on top of these amounts.

Is it any wonder that millions of workers disappeared into thin air?

If we incentivize people not to work what result do we expect?

I believe we know the answer. 

Happy holidays to all!