^ Senate Leader Mitch McConnell (l) and Orrin Hatch (r) : the Senate’s tax reform misses the entire point and cannot be supported

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So : can we support the bill, or not ? Do we endorse all of it or only some of it ? Or can we like any of it ? These questions I will try to answer in this, my first report on a proposal already generating a wave of criticism, as expected.

There are two separate tax reform bills on offer. First is the House’s version, which was adopted by a 227 to 205 vote (13 Republicans joined all 192 Democrats voting No). You can read the details of the House bill here : http://blog.acton.org/archives/98766-explainer-what-you-should-know-about-the-gop-tax-plan.html?gclid=EAIaIQobChMImcfAgMjX1wIVhrbACh26EgZ9EAAYASAAEgI9G_D_BwE

Please note that the final House bill reinstated the adoption tax credit not listed in the above, original version of the House proposal.

It’s not easy, at surface perusal, to fault the bill that the House finally adopted. The mortgage interest deduction is retained, as are deductions for state and local taxes and adoption. The one missing item that matters a lot is the deduction for interest on student debt, and I agree that this deduction should be retained and even expanded.

Beneath the surface, however, the House’s tax reform includes a number of changes that would significantly change the way households compute their taxable adjusted income. Here’s the major changes — a long list, but the tax coed is not short. Study these items carefully :

The highest tax bracket would remain at 39.6%: According to reports, the plan would propose a fourth marginal tax bracket on high-income earners. It will reportedly apply to married couples making more than $1 million a year.

• New individual tax brackets:
  • 12%: Applies to incomes up to $45,000 for an individual and $90,000 for a married couple.
  • 25%: Applies to incomes up to $200,000 for and individual and $260,000 for couples.
  • 35%: Applies to incomes up to $500,000 for an individual and $1 million for couples.
  • For single parents that are heads of households, the thresholds would be the midpoint between individuals and joint filers, expect for the highest bracket which would still kick in at $500,000.

 

• A change to the state and local tax deduction. One of the biggest hangups for Republicans in states like New York, New Jersey, and California has been the proposed elimination of the state and local tax (SALT) deduction. The benefit allows people to deduct those taxes from their federal bill. Brady said Tuesday the GOP reached a deal that would allow people to deduct state and local property taxes up to $10,000 but not income or sales taxes.

Corporate tax cut will be immediate and permanent. The cut to 20% from the current 35% will is designed to be permanent.

• Immediate expensing of business investments: Companies can deduct the cost of business investments from their tax bill in the year that they make them instead of spreading it out over multiple years.
• Elimination of the estate tax. The threshold for the tax, which applies only to estates with greater than $5.6 million in assets during 2018, would double to over $10 million. Then, the plan would phase out the tax after six years. The Senate GOP appears to be mulling preserving at least part of the tax.
• Repatriation tax rate. The repatriation rate will be a mandatory one time tax on overseas assets for US companies. Illiquid assets would be taxed at a 5% rate, spread out over a longer period than liquid assets like cash which would be taxed at a 12% rate.
• No repeal of Obamacare’s individual mandate. Despite Trump’s last-minute push to eliminate the penalty for not having insurance, such a provision was not included in the plan.
• No changes to 401(k) plans. Despite a back-and-forth between House tax writers and the White House that appeared to suggest some change to retirement-savings accounts would be included in the tax bill, there were no changes proposed in the first iteration.

 

Increase in the size of the child tax credit. A pet project of Ivanka Trump, the proposal is to increase the credit to $1,600 from $1,000. The bill would also add a credit of $300 for each non-child dependent or parent for five years, after which that provision would expire.

• Limiting home-mortgage-interest deduction. On new-home purchases, interest on loans up to $500,000 would be deductible. The current limit is $1 million.
• A larger standard deduction. To avoid raising taxes on those currently in the 10% tax bracket, the standard deduction for all taxes would increase to $12,000 for individuals (up from $6,350) and $24,000 for married couples (up from $12,700). These are slightly less than the doubled deductions expected — and, as Business Insider’s Josh Barro has written, the idea that this would save people money may be misleading since it eliminates other personal deductions and a secondary standard deduction.
• A 25% rate for pass-through businesses. Instead of getting taxed at an individual rate for business profits, people who own their own business would pay at the so-called pass-through rate. There will be some guardrails on what kinds of businesses can claim this rate, to avoid individuals abusing the lower tax.
• Elimination of most personal itemized deductions and many credits. The only deduction preserved explicitly in the plan is for charitable gifts and edited home-mortgage interest. Some of these include:
  • Elimination of the student-loan-interest deduction: The amount paid toward student loan interest can currently be deducted.

 

Elimination of the medical-expense deduction: Under current law, individuals who spend over 10% of their income on medical expenses are allowed to deduct part of those costs from their taxes. The proposed new bill would remove that deduction.

• Elimination of the moving deduction: This allows anyone who moved to a new home in the past year to deduct moving expenses.
• Elimination of alimony-payment deduction.
• Repeal of the alternative minimum tax (AMT). The tax, which forces people who qualify because of an outsized number of deductions, would be eliminated under the legislation. Incidentally, Trump’s own tax bill has been shown to be millions of dollars more because of the tax.
• Create a tax on large private university endowments. Private universities with assets of more than $100,000 per student will pay a 1.4% excise tax on their net investment income.
• Repeal the Johnson Amendment. The current rule prevents tax-exempt nonprofits from making explicit election endorsements.
• Eliminate the ability to deduct interest on bonds for sports stadiums from federal taxes. Currently, local governments issue bonds to pay for the construction of sports facilities, this would prevent people from deducting interest income form those bonds on their federal taxes.

 

The Johnson Amendment repeal is particularly distressing. Adopted in 1954, this legislation bar religious organizations from participating directly in political activity — a barrier well conforming to the precepts of the Constitution’s First Amendment. Right-wing religion interests already impact our public policy, greatly impeding the Constitutional right of women to control their own bodies and, in many cases, denying full civil rights to LGBT people. The last thing our policy makers should be doing is giving even greater political clout to anti-civil rights interests.

As you can see, elimination of several other current deductions will impact middle-class taxpayers quite negatively, and the increased standard deduction doesn’t come close to compensating. Other deductions and credits impact particular classes of taxpayer : ( 1 ) the deduction for school supplies bought by teachers is eliminated (2 ) the $ 600 increase in the child credit seems stingy. If we want to help working FAMILES, why not raise it by at least $ 1,400 ?

Unfortunately, on many counts, the Senate bill is even more unacceptable, especially as amended by committee Chairman Orrin  Hatch :

^ Governor Baker and Transportation Secretary Stephanie Pollack watch as new Orange Line cars get delivered

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Governor Baker’s office recently announced two significant improvements to our region’s transit services : first, new orange Line cars are starting to arrive for service — much needed to replace cars almost 40 years old and just about finished. Second, the MBTA’s Fiscal Control Board will be asked to approve a $ 720,000,000 installation of an al-electronic fare collection system that will, hopefully, eliminate fare jumping and make collection of fares just about fail safe.

You can read the Baker administration’s full report on “T” improvements here : https://blog.mass.gov/transportation/mbta/baker-polito-administration-mbta-welcome-345-new-buses-as-fmcb-marks-two-years-of-reform-progress/

These are good advances. Same can be said for the recently announced $ 1 billion savings won by Baker’s MBTA administrators for the cost of extending the Green Line. Nonetheless, fixing the “T” remains a challenge, because Boston’s population continues to grow, placing a non-stop burden on “T” service even as improved :

( 1 ) more people living in the City itself mean more “T” riders and more hours of operation. Today, the “T” shuts down between one ABM and five AM. That likely cannot continue. It’s already a large inconvenience.

( 2 ) extending the Green Line and adding more trains means more use of electric power. Yet Eversource’s planned new substations in the City have drawn significant opposition.

( 3 ) the need for added electric power will only grow, as the proposed electronic fare collection system is installed (if approved) and as further transit extensions — connecting Blue Line to Red, extending the Blue Line to Lynn, expanding the Silver Line to Chelsea and connecting it to the Blue Line — win budget allocation and go into service five to ten years from now.

( 4 ) electric power shortages will also increase as the Pilgrim nuclear power plant is shut down in 2019.

( 5 ) strong opposition to increasing our area’s natural gas supply via pipelines portends no relief from that power source either.

( 6 ) as more Boston newcomers opt not to own cars, ridership on the “T” will; increase even more than anticipated, imposing a burden on scarce electric power beyond the impacts I have listed above.

Transit service seems the transportation method that most people will use in the coming decades, more so than bicycles, perhaps as common as cars and trucks. If Boston in year 2030 contains 750,000 to 850,000 people — an increase of 100,000 to 200,000 from our 1970 population — both transit and the electric power that moves it will have to increase accordingly. Cars of the future will also use more electricity and less gas. Where is all of this added power supply to come from, if not from expanded Eversource substations and transmission lines ?

Then there’s the money factor. The State’s budget is already squeezed toward deficit status by the huge health care cost burden left to us by Washington’s refusal to continue subsidizing the State’s largest budget item — some 40 percent of our $ 40 billion total expenditure. How are we going to pay the approximately $ 5 billion to $ 6 billion of upgrades needed to bring the full “T” system up to “state of good repair” ? You might answer : the two-tier tax initiative to be voted at the 2018 election earmarks its revenue to transportation (and education). Perhaps; but the legislature has never carried out voters’ earmarks, and I am skeptical it will do so now.

As I see it, the FY 2019 state budget will need to add at least $ 2,000,000,000 to the usual “T” budget, and the same seems the case for FY 2020, 2021, and 2022 as well. Where will the money come from ? The legislature is not ready to raise voters’ tax burden, nor is the Governor likely to become a tax increaser.

There are two options; but I don’t foresee either of them coming to pass any time soon :

First, we could raise the minimum wage to $ 15/hour, thereby changing 500,000 minimum wage earners from EITC (earned income tax credit) recipients to actual tax payers. Or, we could allocate some of the two-tier tax initiative’s education earmark to transportation instead. Neither option seems likely, which means that the costs of improving “T” service for our expanded population won’t be met; which means that “T” service will not meet commuters’; coming needs. Which means the Boston economic boom bumps up against a bottleneck that can only be by-passed, not resolved, by increasing the amount of “T” operation done by private contractors with every incentive to skimp on quality and to pay their employees skimpy wages: which are the opposite of what we should be doing.

I will be most interested to find out what the legislature’s answer is to these riddles. Also the Governor’s.

—- Mike Freedberg / Here and Sp0here

 

^ opponents of the Eversource substation proposal feel that the site is much too close to inflammable fuel storage. Is this so ?

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About three years ago, Eversource, which provides electric power to East Boston and much of the metropolitan area, filed with state regulators a plan to site an electricity substation on land it owns at Eagle Square. The utility asserts an immediate need for increased and more reliable power supply.

I intend to opine on the upcoming decision, by the Public Utilities Commission, whether to approve the site or not; but first, you may read for yourself the Eversouce proposal, and the firm’s justifications, at two links :

https://www.eversource.com/Content/ema-c/about/major-projects-infrastructure/massachusetts-transmission-projects/mystic—east-eagle—chelsea-reliability-project

and

http://www.transmissionhub.com/articles/2016/05/eversource-files-initial-brief-with-massachusetts-siting-board-for-proposed-115-kv-project.html.

Not surprisingly, Eversource’s proposal sparked a ton of opposition. You can read the o9pposition’s arguments here :

Channel Fish Makes Last Push to Stop Eversource Substation

On November 30th, the Public Utilities Commission will hold a hearing at the State House, to determine if it should give final approval to Eversource’s proposal. The opposition intends to fill the hearing room with those who do not favor having an Eversource substation under any circumstances. As the above link reads, Channel Fish Company and its principal, Loulis Silvestro, continue to fight the Eversource proposal all the way, Channel beliveing that Eversource doesn’t give two hoots about the electric company or the neighborhood’ s diverse residents.

My personal opinion is that the Eversource proposal should be approved, unless ( 1 ) it can be shown that additional power supply is not urgently needed or ( 2 ) the overall power supply to East Boston falls far short of expected capacity demand. Here’s why I support the power addition :

That more power supply is needed is indisputable, East Boston’s population having added some 20,000 people since 2009. Right now these folks may in some cases be using unauthorized power, thus putting additional pressure on a system of energy distribution already close to bankruptcy. Unauthorized power is a danger to the entire system.

The substation’s proposed location is troublesome — but not unreasonable. The site at issue lies very close to a major ball field at which the  City’s Park league holds its games. That much is true. Channel Fish’s Silvestro alleges that the proposed pipe line lies much too close to his facility, putting his fish at risk. The area’s residents complain that above ground power lines out their children at risk of lethal electrocution. Lastly, they assert that the substation will stand dangerously close to inflammable fuel storage tanks, so why risk that ?

My view is that these objections can both be met and at no great cost. Regulations regarding the proximity of power lines to ball fields and schools can be drafted and should be. As for the neighbors’ objections, these tear at one’s heart but probably do not predict events. The potential for children wandering into a live transformer wire zone is real, but hardly impossible to prevent. Lastly, the claim of too great a proximity to major fuel storage tanks can be responded to. Those tanks are all attached to their station by electric wiring. It doesn’t seem likely that oil tanks already wired will become more dangerous because the substation that serves them if located nearby.

Eversource must be able to meet all objections and likely can do so. Electricity has always been dangerous to create and transmit. Eversource has decades of experience confronting the dangers of electric power transmission and storage. Of course we cannot allow Eversource to build an unsafe power facility, nor a leaky one; my sense of it is that of all the risks involved in the planned substation,  electricity’s danger is something that Eversource is most well prepared to minimize.

Such is the positive case for approving the Eagle Square substation. The case for disapproving will surely be testified to at the November 30th hearing, complete with evidence and assessments. We will be eager to hear the opposition’s best case.

However : if the entire community needs this power increase, as Eversource asserts it does, why should a few be allowed to inconvenience the many ? Power is essential to everything in modern life. A home can’t run without it, you can’t recharge your smart phone, you can’t refrigerate, you can’t heat your residence. Businesses can’t operate either. It’ll have to be shown me quite conclusively, that Eversource is mistaken about upcoming power needs, before I will oppose the substation entirely — although the safety concerns raised by neighbors and by Channel Fish certainly do merit diligent mitigation.

So, is there in East Boston a grave need for more power locally ? Perhaps the November 30th hearing will answer some of these crucial questions.

—- Mike Freedberg / Here and Sphere

 

 

 

^ Paul Prevey (l) lost his bid to defeat Mayor Kim Driscoll (r), 4194 to her 7982.

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Last Tuesday the city of Salem’s voters delivered the most definitive electoral verdict, one that forever makes Salem a different city than it had been. More than 12,000 voters cast a ballot — well more than half of all registered — and Mayor Kim Driscoll defeated her challenger, Paul Prevey, by almost two to one, winning every one of Salem’s 1r4 voting precincts.

You can read all of the actual numbers here : http://salem.wickedlocal.com/news/20171108/by-numbers-salem-2017-election-results

Though Driscoll carried every Salem neighborhood, the dynamics of her campaign spoke a different story, one reflected in the location of her largest precinct victories :  she is Downtown Salem’s Mayor, and it is the residents of downtown — most of them newcomers typo the city — who now control its politics, its economy, its social settings.

It is Downtowners who have created Salem’s new voice — the city where there is “no place for hate,” a city open for business in which the symbol of unity is a gorgeously tall drag queen, Gigi Gill, who calls herself — with much justification — “Duchess Gigi. Official Queen of Salem.”

It is these same Downtowners — many of them owners of small businesses and technology start ups — who, supported by Mayor Driscoll, have established the city’s openness to all LGBTQ people, very much in line with the takeover of “pride” events and marches by business progressives — in one city after another.

That story is the same in Salem as in so many American cities : downtown has become the beehive of activity economic, social, industrial, and political. Rents rise, house prices rise, condominiums abound, single people fill bistros with eager and well heeled young faces. They set the tone, mark the tempo, make the music of today’s Salem.

As for long-time residents, living chiefly in neighborhoods away from Downtown, the results of this election made absolutely clear that they have two choices : get with the expansionist program, and move to the techno beat, or be defeated opposing it.

It was also the city’s business community that made significant a proposal offered by City Councillor David Eppley, to declare Salem a Sanctuary City — a movement that has taken hold in many booming American cities, by which the city asserts it will offer no help at all to Federal immigration officers trolling for undocumented residents to arrest. Businesses know well that undocumented residents are potential customers just like everyone else. In keeping with their desire to attract LGBTQ customers, these businesses want undocumented residents to know that their patronage is requested and respected. Thus the Sanctuary ordinance.

No sooner had the ordinance been approved by the City Council, by a seven to four vote at a hearing attended by hundreds of contentious activists, than opponents mounted a successful drive to place a referendum of the ordinance on the election ballot. The heated controversy over the sanctioning of “law breakers” (as an opponent called undocumenteds) stoked the large election day turnout throughout the city. Support for the Sanctuary matter was strongest, however, in Downtown Salem neighborhoods. Long-time Salemites dominate the three outlying precincts that voted “no.”

Sanctuary received 1700 more votes than the “No,” and that vote, plus its location, corroborated the current state of Salem politics : Downtown dominates, its dominance spearheaded by Mayor Driscoll and financed by its businesses and customers. The rest of the city takes on the attributes of a suburb, going about its very different affairs at a much slower and less noisy pace, in streets with outdoor swimming pools and lawns, trees and spacious homes on cul de sacs.

This is a common story in American cities today. I doubt there is any going back, for any of them, to the cities they were barely 30 years ago, with dead or dying downtowns and families moving to the suburbs as fast as they could leave; nor is Salem likely soon to revert to the silent, undynamic burg that was, a Salem as finished and gone as any version in its long and often scandalous history.

—- Mike Freedberg / Here and Sphere