Pouring gasoline onto the fire, the Fed raised interest rates by a quarter of a percent yesterday. Meanwhile, Elizabeth Warren, Bernie and 10 other senators (all progressives and one conservative, Angus King) released a letter calling for the Fed to crack down on large regional banks with assets between $100 billion and $250 billion— like Silicon Valley Bank and Signature Bank, exactly the kind of banks that conservatives exempted from tough Dodd-Frank regulations. The letter, yesterday, to Michael Barr, the vice chair for supervision at the Fed noted that “The fall of both SVB and Signature, the near-crash of First Republic, and the struggles of other regional banks shed new light on the systemic important of banks with assets totaling between $100 billion and $250 billion… Irresponsible and excessive risk taking by SVB and Signature executives should serve as a clear reminder that banks cannot be left to supervise themselves. The Fed has a responsibility to ensure financial stability, and in order to fulfill that responsibility, it must ensure that all banks with potential systemic significance are subject to rigorous safety and soundness rules.”
Great that the dozen Democrats took the initiative to try to correct the mistake that conservatives have dug in on. But this is far from the only glaring issue facing the economic well-being of the country that Congress isn’t doing anything to fix. While Mike Pence runs around the country— losing the tiny but of credibility he ever had— calling for cuts to Social Security and Medicare. Raising the retirement age is working so well in France, so conservatives want to do it here as well. Austerity is always their answer-- as long as it doesn't include their wealthy donors. Full of shit as usual, Pence was calling for “reforms” to what conservatives call “entitlement programs,” trying to link it to the nation’s debt burden— never mentioning tax cuts for the very rich— “suggesting changes to Social Security and Medicare programs hurtling toward insolvency, particularly for younger generations, without naming specific recommendations.”
The opposite of Pence: working to solve real problems for real people— like cracking down on wealthy tax dodgers. Irina Ivanova reported that “With the U.S. having the dubious distinction of serving as one of the world's biggest tax havens, some senators are pushing the Treasury Department to crack down on what they describe as abusive tax-avoidance schemes commonly used by the wealthiest Americans… [O]nly 0.1% of Americans pay any sort of estate tax… While people who get a paycheck or receive tips must pay taxes on their income, and savers with ordinary bank accounts must pay tax on any interest their funds earn, some of the country's richest citizens can exploit special vehicles designed to shelter their assets from tax. Hundreds of billions of dollars are stored in these legal tax shelters, called trusts, investigative journalists have found. In a March 20 letter shared with CBS MoneyWatch, Senators Elizabeth Warren, Bernie Sanders, Chris Van Hollen and Sheldon Whitehouse are asking the Treasury to ‘limit this blatant abuse of our tax system by the ultra-wealthy.’”
“Billionaires and multi-millionaires use trusts to shift wealth to their heirs tax-free, dodging federal estate and gift taxes,” the lawmakers said. “And they are doing this in the open: their wealth managers are bragging about how their tax dodging tricks will be more effective in the current economy.”
Such tax-avoidance vehicles include Grantor-Retained Annuity Trusts (GRATs) and Intentionally Defective Grantor Trusts (IDGTs), while another loophole stems from a 1980s-era IRS decision that allows the person setting up the trust to transfer assets into and out of it essentially tax-free.
By using all three of these tactics, critics say, the ultra-wealthy can pass on vast assets to their heirs without paying estate taxes or exposing their children to a big tax bill.
"Tax planning via grantor trusts, including grantor retained annuity trusts ("GRATs"), is a kind of shell game, with a wealthy person and their wealth managers able to pass assets back and forth in ways that effectively pass wealth to heirs while minimizing tax liability," the senators said in the letter.
Take GRATs, which JPMorgan's wealth management unit describes as "an efficient way to transfer wealth with little or no gift tax liability." The person setting up the GRAT— a grantor— can put some assets into the trust and receive an annuity payment every year, based on the value of the assets. Typically, JPMorgan writes, GRATs are structured so that the annuity payments "zero out" the value of the trust's assets, letting the grantor pass their wealth on tax-free.
For decades, Congress has steadily reshaped the tax code in ways that help the richest Americans stash their wealth beyond the reach of the IRS, while reform efforts have failed. Yet the senators claim that Treasury officials don't have to wait for a law change to crack down on cheating, but can simply revoke previous decisions that worsened the current crisis.
More specifically, the senators want Treasury to block tax-avoidance tactics including:
Allowing wealthy people who set up trusts for heirs to pay gift taxes for those trusts without penalty— essentially increasing the size of the gift they're giving
Letting wealthy families understate the value of their assets by using "family limited partnerships," unfairly reducing their tax burden
Allowing grantors who set up grantor trusts to transfer assets into and out of the vehicles tax-free
Allowing beneficiaries of an IDGT to avoid paying taxes when assets placed into the trust, such as real estate or stock, rise in value
Addressing what they call such examples of "grantor trust abuse" could raise as much as $5 billion a year in taxes, the senators write, citing a Bloomberg report. And, while the amount of money lost to these wealth-hiding schemes is vast, the number of Americans sheltering their money this way is relatively small because the estate-tax exemption already excludes significant assets from taxation— up to $25.8 million for a married couple.
"The vast majority of Americans never receive an inheritance and of those who do, the vast majority do not owe any taxes. Only the wealthiest American families— those with over $25.84 million in wealth for a married couple— are asked to chip in a share via transfer taxes, and only on each dollar over that whopping $25.84 million exemption," the senators write.
Meanwhile, Politico reported that progressives have upped the demand for a minimum wage to $20, more in line with an actual living wage. In New York State, conservatives, led by the shit governor, are fighting against it. “New York isn’t an outlier in the wage debate,” wrote Nick Niedzwiadek. “A decade after the so-called Fight for $15 campaign took root and won minimum wage hikes in some of the biggest states, liberal lawmakers and progressive activists are now aiming higher: $20 per hour or more.”
California, Washington state and the District of Columbia have already edged beyond the $15 threshold, as of January. And activists are launching lobbying campaigns in more statehouses, hoping to push the minimum wage as high as $22 per hour in coming years. Others are pushing to index state minimum wages to inflation.
After inflation rocketed upward last year in a way not seen in decades and upended policy calculations made only a few years prior, those pushing for higher minimum wages see a rare opening to gain ground on progressive policy making.
“Fifteen dollars now is worth a lot less than I think advocates thought it would be when a lot of these bills were proposed and enacted,” Dave Cooper of the Economic Policy Institute said in an interview.
In New York, Hochul has argued her plan’s guardrails on future minimum wage increases help make them predictable for employers, smoothing out yearly bumps while ensuring workers get raises when their wages fall behind the buying power of the dollar.
A spokesperson for Hochul said the governor’s changes would make the state “more affordable, more livable and safer, and she looks forward to working with the legislature on a final budget that meets the needs of all New Yorkers.”
Among states without such caps, Washington state’s minimum wage for 2023 jumped $1.25, to $15.74, after it calculated a nearly 8.7 percent adjustment over the prior year, and Colorado’s surged by a similar percentage.
Ramos sponsors an alternative proposal that, by 2026, would raise New York’s minimum wage to $21.25 downstate and $20 elsewhere, before tagging on a less-rigid means of indexing future increases.
Democrats in the state Senate and Assembly are amenable to inflation-related adjustments, but both have signaled that it should be accompanied by a discrete increase that kicks in first.
The federal minimum wage has been plateaued at $7.25 since 2009 despite attempts from Democrats in Congress to ratchet it up, leading to a patchwork of state laws. Before they lost their majority in the midterms, House Democrats twice passed legislation to phase in a $15-per-hour federal wage standard that got hung up in the Senate.
“When this legislation was originally proposed, we would be well on our way to the $15 minimum wage,” said William Spriggs, chief economist for the AFL-CIO and a Howard University professor. “I think all of us are reevaluating what we think that number should be.”
There are now 30 states and four territories with wage floors higher than the federal minimum of $7.25, with the majority clocking in above $10 per hour.
For instance, lawmakers in Massachusetts cut a deal in 2018 to gradually step up its minimum wage to $15-per-hour by this year. Already, members of the coalition that led the effort, Raise Up Massachusetts, are gaming out a new target.
“The baseline a decade ago is not a living wage for those in Massachusetts in any way,” Marlishia Aho, a spokesperson for one of the unions in the coalition said. “It’s so important that we have a minimum wage that is keeping up with inflation and the cost of living.”
Labor unions and groups that fight poverty are typically among the strongest backers of higher minimum wages, and employer groups are often the ones lobbying against significant pay increases.
In addition to raising the standard minimum wage, many of these same organizations have pushed to end the even-lower base pay for tipped workers as well as the subminimum wage for certain types of workers, such as people with disabilities.
Built-in inflation mechanisms have become a popular feature of recent minimum wage updates, in part to prevent extended stretches of stagnation, as on the federal level.
“Indexing is definitely a really good policy to make sure that workers’ paychecks are not as impacted by what we’re going through right now,” in terms of inflation, the National Employment Law Project’s Yannet Lathrop said.
However, indexing remains far from universally accepted, even among Democrats.
First-year Maryland Gov. Wes Moore, a Democrat, championed an economic agenda that, among other things, called for accelerating a $15 minimum wage not set to take effect until 2025 and linking future increases to inflation. The Democratic-led legislature is on the verge of signing off on speeding things up, but the state Senate omitted the inflation component— likely killing it for the year— over concerns it would take power away from lawmakers and let wages rise on autopilot.
Likewise, a New Mexico bill to tether the state’s $12 an hour minimum wage to inflation stalled in committee after a pair of Democrats joined Republicans to vote against the measure.
State Rep. Miguel P. García, a Democrat who sponsored NM HB 28, said he felt that it was a missed opportunity to ensure workers get raises without hiking businesses’ labor costs at irregular intervals.
“That has dramatic impacts on businesses, especially smaller businesses,” he said in an interview. “At the same time Covid kind of created this paradigm shift where we cannot take our lower paid workforce for granted.”
While minimum wage increases regularly hit snags in statehouses across the country, advocates have found success at the ballot box when they have gotten to ask the question directly— including in conservative states.
In November, Nebraska voters approved an initiative to raise its minimum wage from $9 to $15 by 2026 and tie it to the consumer price index from then on by a 59 to 41 percent margin. That proposal even included a $1.50 hike that went into effect just weeks after results were tallied.
Voters in states like Arkansas and Florida have also approved minimum wage boosts by wide margins in recent years.
Just the threat of a ballot question has proven useful to advocates in some states. Aho, of 1199 SEIU in Massachusetts, said that the 2018 deal brokered by the state’s Republican governor at the time, Charlie Baker, and the Democrat-controlled legislature came about in an effort to head off a trio of ballot questions— one of which included the state’s minimum wage.
“We’ve seen this to be a bipartisan issue; everyone wants to be able to take care of themselves and their family,” Aho said.