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    Read the signs of Trump’s federal firings: AI is coming for private sector jobs too

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    The Trump administration recently announced that it would be laying off approximately 6,700 workers at the Internal Revenue Service, about 8% of the people employed by the agency. Tens of thousands of federal employees at other agencies are also losing their jobs.The timing could not be worse. We’re in the middle of the tax season with corporations and individuals facing filing deadlines in March and April. Millions of returns will need to be processed. Refunds will be due. Questions will need to be answered. But that’s not all.In just a few short months, Congress will be debating – and probably passing – new rules that will significantly change our tax laws. Republicans are pushing to either extend or make permanent many of the provisions of the 2017 Tax Cuts and Jobs Act, most of which expire at the end of this year. There are proposals to eliminate taxes on tips, social security income and overtime wages. The Democrats will be fighting some of these provisions, arguing their effect on future deficits. Regardless, there will be an enormous amount of change to rules, forms and guidance that will need to be made by the IRS.The remaining employees at the agency, already demoralized and now seriously short-staffed, will now be asked to handle this looming workload. Taxpayers and their accountants will need to be patient. I can already foresee my profession’s future frustration as they wait for guidance on a myriad of tax changes that will affect their clients. After barely recovering from all the disruptions caused by the pandemic, these layoffs are sure to set things back.But let’s not pretend this isn’t part of a wider trend.We all know the technology already exists to do much of the work that many IRS employees do now. My clients already use tech platforms to automate their accounts payment and payments. These systems – which leverage AI and optical character recognition – can very accurately (and affordably) scan, read and extract data from any document and ensure that the information is integrated into their accounting systems, where payments are automatically scheduled for review and disbursement. Considering that most of the tax returns filed are done in a similar fashion – and are mostly routine – it seems obvious that similar systems could be doing the same functions, which would probably eliminate a much greater percentage of workers who have already been chopped by the current administration.Look what technology is doing elsewhere. The financing platform Klarna announced last summer it was laying off about 2,000 workers – half of its workforce – as a result of its new AI customer service system that did their work instead. Morgan Stanley, JP Morgan Chase, UBS and other Wall Street firms are building AI-based systems that are eliminating the need for investment analysts, wealth managers and other human workers. Google, Ikea, Salesforce and a number of other firms are rapidly replacing their workers with AI systems. Mark Zuckerberg has publicly said that AI applications will be doing the work of mid-level engineers at Meta this year.About $80bn was allocated to the IRS under Joe Biden’s Inflation Reduction Act to “modernize” tax collection. Government being the government, I’m sure that progress has so far been slower than it should be. But if you’re working at the IRS, or any federal agency, do you not see the writing on the wall? And if you’re working in customer service, marketing, accounting or any of these jobs in the private sector do you also not see what’s happening?The firing of federal workers is a preview of what’s about to happen in the corporate world. CEOs at numerous companies have already demonstrated that technology can do the work of people and replace them. And they’re just getting started. The tech companies like to say that AI will “work alongside” humans or “increase employees’ productivity” but that’s nonsense. Like the federal workers, many in the private sector are about to be replaced too. More

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      From weather apps to taxes: the trickle-down effects of Trump’s federal worker firings

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      You wake up to dark clouds outside, so you check the weather on your phone: a storm is coming.That weather app uses data from the National Weather Service, a part of the National Oceanic and Atmospheric Administration, a small organization which could see as much as 10% of its workforce cut this week.You grab food to make breakfast: eggs, meat, formula for your baby. The safety of your food is regulated and inspected by a host of federal employees, who flag and investigate when items shouldn’t be eaten.The former head of the Food and Drug Administration’s food division resigned this week because he thought firings and layoffs at the agency would hinder its work. “I didn’t want to spend the next six months of my career on activities that are fundamentally about dismantling an organization, as opposed to working on the stated agenda,” he told Stat News.You check your flight reservations for an upcoming trip to a national park. The safety of that flight is overseen by the Federal Aviation Administration, which experienced layoffs this month despite recent high-profile aviation accidents. The national park will probably see its staff gutted, leaving it more vulnerable to wildfires and without search and rescue capabilities. “I honestly can’t imagine how the parks will operate without my position,” a park ranger who was cut wrote on Instagram. “I mean, they just can’t. I am the only EMT at my park and the first responder for any emergency. This is flat-out reckless.”You keep an eye on the bird flu levels and a measles outbreak – the winter has been punishing for illnesses. The Centers for Disease Control and Prevention were hit with a first round of layoffs this week, which could affect outbreak response and reporting. The Epidemic Intelligence Service, a disease-detective training program, could be on the chopping block.Oh, and you’re working on your taxes – while thousands of Internal Revenue Service probationary employees are expected to be laid off during tax season.The government certainly has room for improvement – backlogs that should be cleared, investigations that should be more thorough, communication that should be sharper, actions that should be more transparent. But all of this work is done by the federal government and its millions of workers and contractors, whose daily jobs touch the lives of all Americans and many around the globe.In the first weeks of the Trump administration, the president and the billionaire Elon Musk, tasked with cutting government through the so-called “department of government efficiency” (Doge), have waged war against federal workers. Musk and his team have moved from agency to agency, indiscriminately firing probationary employees and those whose work they say doesn’t align with the administration’s priorities, including many who work on diversity initiatives or in international development.The result is a hobbled and terrified federal workforce that is just at the beginning of the expected cuts – and an American public that is starting to experience the repercussions.“We’re playing Russian roulette, and basically you’re putting a whole bunch of more bullets in the chambers,” said Max Stier, the CEO of the Partnership for Public Service, a non-profit that advocates for a strong civil service. “You can’t prevent all bad things from happening, but our federal government is, in a lot of ways, a manager of risk, and it does a pretty darn good job of managing that risk, even though it can be improved.”An email went out in January to millions of federal employees offering a deferred resignation, which the White House says about 75,000 people have accepted, although it’s unclear how many of the people who accepted are actually eligible.Joel Smith works at the Social Security Administration and is the president of the American Federation of Government Employees Local 3184, which covers more than 90 agency offices in parts of Arizona, New Mexico, Texas and Louisiana. He said the office of management and budget, which has coordinated the buyout program it’s calling a “fork in the road”, hasn’t communicated with the agencies about which employees accepted the buyout. Some employees didn’t show up the first day the program’s leave was supposed to begin, and the agency had to call them to figure out where they were, he said.“It’s just chaos on top of chaos, on top of terror, on top of employees that want to leave are being told they can’t leave. I’m trying to think of a good word for it. I don’t know if there is one, other than clusterfuck,” Smith said.Those that remain in their jobs worry about whether they’re next as they add to their workloads to cover for those who lost their jobs or quit. People eyeing next career moves will avoid civil service, previously seen as a stable career, to stay out of the current chaos.Many people take core functions of the federal government for granted, as it protects them from disasters or national security concerns, but might not otherwise affect them. But that could change after widespread firings. For example, layoffs in the Environmental Protection Agency mean that those remaining in their positions have less capacity to do their jobs.“That could come in the guise of someone not being able to respond to an environmental disaster,” said Nicole Cantello, president of the American Federation of Government Employees Local 704. “Or what about if there’s a facility illegally flaring air pollutants? We might not be as able to respond to something like that which could have health effects. There could be devastating effects to the American people.”If you or your loved ones use any direct services such as benefits programs, you could see the effects of a beleaguered federal workforce up close.Let’s say you’re helping your parents sign up for social security. The Social Security Administration is already understaffed, so losing any positions will make wait times longer for people who need to access benefits, Smith said.Smith’s father filed for retirement benefits in November to begin in February, but by February, his case hadn’t been processed – it was stuck in somebody’s backlog. A member of Congress had to intervene to bring attention to the delay, a frequent tactic to overcome stalled claims.“What people think they’re witnessing now and they’re complaining about now, in terms of delays, is going to be considered the good old days here in a year or two if this continues,” he said. “We already don’t have the people to do the work.”For federal workers and their families, the impact is heavy and immediate if they lose their livelihoods.“The way it’s working now is that the career civil servants are viewed as the villains,” said Rob Shriver, former acting director of the US office of personnel management who now works at Democracy Forward. “They’re viewed as people who are to be worked around and not worked with. They’re being deprived of the thing that’s most important to them, which is to contribute to the agency’s mission and bring their skills and expertise to the table to help inform decision makers.”Though many have focused on the disruption caused in Washington, federal workers live throughout the US and, in some cases, other parts of the world.“There’s a human aspect of it, which is these people are not just being fired, but they’re being fired in the worst way. No notice, no nothing. This is true across the board. There is zero humanity being demonstrated,” said Stier, of the Partnership for Public Service. “It is unbelievably costly to the individuals involved, and it’s costly to the system and to the American taxpayers. It’s going to cost the American taxpayer a ton of money. It is not going to save any money.”Send us a tipIf you have information you’d like to share securely with the Guardian about the impact of cuts to federal programs or the federal workforce, please use a non-work device to contact us via the Signal messaging app at (646) 886-8761. More

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      Trump advisers contemplating cuts to Medicaid and other welfare programs

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      Donald Trump’s economic advisers and congressional Republicans are discussing possible cuts to Medicaid, food stamps and other government welfare programmes to cover the costs of extending the president-elect’s multitrillion-dollar 2017 tax cut.The cuts could mean new work requirements and spending caps, according to the Washington Post, citing sources involved in the talks, including aides in Trump’s transition team.Extending the tax cuts – most of which are due to expire next year – could add $4tn to the national debt, which already stands at $36tn.But Republicans fear triggering a political backlash by slashing programmes that serve an estimated 70 million Americans to pay for a tax cut that disproportionately benefits the wealthy.The 2017 tax cuts were criticised for being skewed in favour of the rich, with households in the top 1% income bracket receiving a reduction of $60,000 in 2025, compared with less than $500 for those in the bottom 60%, according to the Center on Budget and Policy Priorities.Trump campaigned on extending the 2017 reduction while also vowing to abolish taxes on tips for restaurant workers.Republicans support the extension but worry that the loss of revenue could add to government borrowing – prompting them to search for savings in others areas.In addition to safety net programme cuts, some Republicans are considering re-purposing clean energy funds passed by Democrats.The GOP has warned that the costs of Medicaid – whose claimants can include low-income people, newborns, people who are blind or disabled, and those suffering from certain illnesses – has ballooned with the expansion of the Affordable Care Act, also known as Obamacare.Jodey Arrington, the chair of the House of Representatives’ budget committee, told reporters that a “responsible and reasonable work requirement” could save $100bn in Medicaid costs, while another $160bn could be cut by checking eligibility more than once a year.The Paragon Health Institute, a rightwing thinktank, published a study in the summer proposing other reductions that it said could save $500bn over a decade. It said rule changes to Medicaid recently enacted over the past year by the Biden administration could cost up to $135bn nationally and between $46.3bn and $82.3bn at state level over the next five years.Alterations to food stamps – officially known as the Supplemental Nutrition Assistance Program – could take the form of limiting which items recipients can purchase with benefits or broadening work requirements. The latter proposal was floated in the Heritage Foundation’s Project 2025 blueprint for radically overhauling US government.Qualifying criteria are tailored to assist the poorest households, with eligibility determined by income and household size. A single person with no dependents needs to be earning less than $1,354 a month to qualify. A household with two or more people but earning $1,800 per month would also be eligible.The projected cuts to welfare entitlement programmes come as the Republicans prepare to control the White House and both chambers of Congress following this month’s election.It also coincides with Trump’s choice of Elon Musk, the Tesla and Space X entrepreneur, to head a newly formed Department of Government Efficiency along with Vivek Ramaswamy, his former Republican primary opponent, with the brief of slashing waste from federal spending. Musk has spoken of making around $2tn in spending cuts.The US is currently running a budget deficit at around 6% of its gross domestic product. The national debt held by the public is currently worth around 97% of the national economy.The non-partisan Committee for a Responsible Federal Budget has argued that, without major spending reductions, the deficit would widen significantly in the next 10 years, while the US national debt could soar to 143% of the economy. More

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      No tax on tips fires up Nevada hospitality workers: ‘I want that!’

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      Kristine serves gamblers playing countertop video poker screens at the center bar of Las Vegas’s Ellis Island casino. She declines to share her last name for privacy reasons, but is not timid about her support for Donald Trump when asked about his campaign promise to end federal taxation on tips.“I want that!” Kristine says as she fulfills cocktail waitresses’ orders. “Our tip compliance is too high. They take so much from our paycheck.”Tip compliance – the tax process for expected earnings from tips – has become a political football in Nevada, with federal lawmakers from both parties piling in to co-sponsor bills or present their vision for how tax exemption for tips should work.The push for tax relief for a specific sector of wageworker may seem out of the blue if the idea wasn’t so brazenly opportunistic. According to state employment figures, one in four jobs in this crucial swing state are in leisure and hospitality, many if not most of which are tip-earning positions at bars, restaurants, casinos, spas and hotels in Las Vegas and Reno.The frenzy over the issue started in June, during a Trump rally in Las Vegas, where he surprised supporters, press and members of his own party, saying: “Hotel workers and people that get tips, you’re going to be very happy because when I get to office we are going to not charge taxes on tips.”It was a “wild-ass promise”, says Ted Pappageorge, treasurer for the Culinary Union Local 226, which represents 60,000 hospitality workers in Nevada.He points out that during Trump’s four years in office and the four years since, the union’s heard “not a peep out of him” regarding overtaxed wage workers. Indeed, Trump’s signature legislative achievement as president was a tax cut that mainly benefited corporations, real estate developers, and billionaires and millionaires transferring wealth to their scions. “One of the problems is Trump lies, and he lies a lot,” Pappageorge said.But, Pappageorge added, Trump’s comments created an opening. “There’s actually a requirement now to have a discussion and an opportunity for us to wedge into the discussion, to make it real.”The union is now seeking tip compliance relief for their members while also advocating to raise the federal sub-minimum wage, which allows employers in some states to pay tipped earners as little as $2.13 per hour.Trump’s opponents have been listening. In Kamala Harris’s first Las Vegas rally as the presumptive Democratic nominee, she announced that she wouldas also pursue no taxes on tips, delighting rank-and-file Democrats who had become intrigued with the proposal, and irritating Trump supporters who wanted him to have the policy all to himself.“Why is she copying him?” says Kristine, the Ellis Island bartender. She voted for Trump in the last two election cycles and will again this fall. “I believe in women power, but I feel like we need a better president, like a strong personality, a tough one, to put [things] back to normal.”Wistful for the pre-pandemic economy, before food, fuel and housing prices shot up, Kristine says it would be nice if people could afford to enjoy themselves again: “Go on vacation again, because everything we make goes to bills, that’s it, and it’s not enough still. Everything is so expensive and you’re making the same money.”Southern Nevada’s vulnerability to economic slumps has led to two local sayings: the region is “the first to suffer, last to recover” because “when the economy gets sick, Las Vegas catches pneumonia.”The city was hit hard by pandemic-era travel restrictions. Since then, resorts have recovered strongly, reporting record profits from gaming each of the past three years. In resorts and casinos that are unionized (Ellis Island is not), the culinary union leveraged these historic profits to negotiate higher wages for their members.Still, many workers say their tip earnings have remained stagnant.Machines such as the Smarttender beverage-mixer and screen-based ordering systems have depressed tip earnings by dehumanizing the experience and distorting the scale of service, says Sheri Earl, 51, a cocktail waitress at Mandalay Bay. “It looks like a lot of the servers are bringing out so many drinks, but we’re not being tipped on all of those.View image in fullscreen“Also,” Earl adds, “people just aren’t tipping the way that they used to because they don’t have the money. I noticed when I’m serving, more people will give $1 for four drinks, whereas it used to be $1 per drink, so I’m serving more drinks, but bringing back less money.”A lifelong Democrat, Earl’s loyalty to the party had wavered in recent years, and her conversations in the employee break room suggest that many her colleagues will support Trump out of nostalgia for how they thrived before Covid.But Harris’s candidacy has reaffirmed her allegiance to the Democratic ticket, Earl says. “She’s very optimistic about changes that she wants to do as a female president, and a lot of the tax cuts for the working class helps.“Now, I don’t think there will ever be no taxes on tips,” Earl clarified. “I expect to pay it, but not at rates where it’s unrealistic, or I can’t support my family, or I can’t pay my bills at the end of the month.”Others were less inspired.“It’s a ‘so you vote for me’ promise,” says Samantha, a blackjack dealer at Ellis Island. “I don’t think Congress will let it happen. [The candidates] can say it, and they can hope that because they said it, you’re going to vote for them, but it isn’t going to happen.” Shrugging, she says she does not intend to vote. “Unfortunately, I don’t believe that my vote matters.”Democratic presidential candidates have enjoyed a winning streak in Nevada that goes back four cycles from Biden’s narrow 2020 win, to Hillary Clinton’s 2.4% margin over Trump, to Barack Obama’s victories in 2012 and 2008. Survey averages currently show Trump leading Harris by 2 to 3 percentage points.Before Biden dropped out, Trump led by 9 points in Nevada. Harris has rejuvenated Democratic enthusiasm and made strides to corral the unwieldly coalition that defeated Trump four years ago, but Nevada is proving to be a different beast. It’s one of the few swing states in which Trump continues to lead in most major polls. But her canny decision to jump on the no tax bandwagon may help.Badass Tax Guys, a tax preparation company in Henderson, Nevada, has hundreds of tip-earning clients, and many have mentioned to owner Robert Wagner that the proposal, while intriguing, seems too good to be true.“‘We see all the upside, and we love keeping our money, but what’s the catch potentially?’ is what I’m hearing right now,” he paraphrases while warning that it would be exploited if not written carefully to solely target those who need relief.“I would put a tip jar on my desk, you know what I mean?” Wagner quips. “I’ll charge lower fees and you can throw the difference in the tip jar. All of a sudden, my income is to going to go down quite a bit. I generally like the idea overall, but if you’re going to do that there needs to be a way to stop Wall Street from taking advantage of it.” More

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      Extremist or mainstream: how do Tim Walz’s policies match up globally?

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      Within hours of Minnesota’s governor, Tim Walz, being chosen by Kamala Harris to be her Democratic presidential running mate, Donald Trump and team began attacking him as a “dangerously liberal extremist”.Trump surrogates seized on Walz’s record of expanding voting rights for former felons, combatting the climate crisis, and other measures as proof that Harris-Walz would be the “most radical ticket in American history”.If you step back from the melee, and look at his gubernatorial acts through a global lens, they appear anything but extreme. From the perspective of other industrialised nations, what Trump denounces as leftwing radicalism looks little more than basic public welfare provisions.Far from being militant and revolutionary, initiatives such as paid family leave, free college tuition and rudimentary gun controls – all championed by Walz in Minnesota – have long been regarded as middle-of-the-road and unremarkable in large swathes of the world. Through this frame, it is not Walz who is the outlier, but his Republican critics.Here are how some of Walz’s most impactful reforms compare with the rest of the world.Free school lunchesView image in fullscreenWalz’s record: “What a monster! Kids are eating and having full bellies so they can go learn.” That was Walz’s sardonic reply to CNN when he was asked about having introduced free breakfast and lunch for all Minnesota schoolkids. The 2023 measure puts Minnesota among just eight US states that offer school meals at no cost to all children, no matter their family’s income.Around the world: Several countries provide free lunches for their children nationwide. Sweden, Finland and the three Baltic nations all provide meals at no cost for all schoolchildren irrespective of income, and many more European countries provide targeted or subsidised meals. Even a developing country such as India ensures access to lunch for more than 100 million kids daily.“The idea of offering free meals to all students during the school day is hardly new – many countries already do so,” said Alexis Bylander at the Food Research and Action Center, a US anti-hunger organisation. “Numerous studies show the benefits, including improving student attendance, behaviour and academic success.”Combatting the climate crisisView image in fullscreenWalz’s record: In February 2023 Walz signed legislation committing Minnesota to having all its electricity produced by wind, solar and other clean energy sources by 2040 – an even more ambitious timeframe than adopted by California, America’s sustainable energy leader. The legislature also passed more than 40 climate initiatives, including expanding charging infrastructure for electric vehicles and introducing a new code for commercial buildings to cut energy use by 80% by 2036.Around the world: By global standards, Minnesota’s ambitions do not stand out. Some 27 countries have written into law target dates by which they will become net zero – that is, stop loading additional greenhouse gases into the atmosphere. In the developed world, Finland is leading the way, pledging to be net zero by 2035, and to begin absorbing more carbon dioxide than it produces by 2040. In December, almost 200 countries at the Cop28 climate summit in Dubai agreed to call on all countries to transition away from fossil fuels and for global renewable energy to be tripled by 2030.Child tax creditView image in fullscreenWalz’s record: Last year the governor signed into law a child tax credit program for low-income Minnesota families. The measure sought to fill the hole left by a federal scheme that expired in 2021 after Congress failed to extend it. The Minnesota plan is the most generous of its type in the US, offering $1,750 per child and reaching more than 400,000 children.Around the world: The Organisation for Economic Co-operation and Development (OECD), the forum of high-income democracies, reported in 2018 that 34 of the 35 countries with available information provided their people with some form of family benefit including tax credits. The OECD compared the value of family benefits for two-child families, measured as a percentage of average earnings, across 41 countries and found that the US came in at No 40, with only Turkey being less generous in its support.Basic gun controlsView image in fullscreenWalz’s record: The governor identifies as a proud gun-owner and hunter, and he accepted Harris’s invitation to be her running mate wearing a camo hat. That didn’t stop him in May 2023 enacting a slew of gun safety measures, including requiring all private sales of handguns and semi-automatic rifles to go through an FBI background check that looks for evidence of criminal or mental health risks. The changes also introduced a “red flag law” that allows relatives and other interested parties to intervene when someone is in danger of injuring themselves or others with guns.Around the world: International comparisons show that Americans own vastly more guns than civilians in other rich countries – 121 guns per 100 Americans, compared with five guns per 100 people in the United Kingdom. The number of gun killings per 100,000 people is also vastly higher: 4.12 in the US, 0.04 in the UK.Other countries also have much tougher gun controls that make those introduced by Walz look weak by comparison. Canada requires gun buyers to have a licence to possess or acquire a firearm and first time applicants have to wait a mandatory 28 days; it also imposes mandatory safety training and a ban on military-style rifles that does not exist in the US. The UK also bans some semi-automatic rifles and most handguns. Japan tightly restricts gun ownership, banning most guns other than air guns and a few other special categories and even then requiring owners to submit to annual inspections.Paid family and medical leaveWalz’s record: House File 2, enacted by the governor last year, gave Minnesotans access to up to 20 weeks in every year of partial wages to cover medical leave after a life-changing diagnosis, mental health leave, or time off to care for a new baby. “Paid family and medical leave is about investing in the people that made our state and economy strong in the first place,” Walz said as he signed the bill.Around the world: The US is the only OECD member country without a national law giving all workers access to paid leave for new mothers. Thirty-seven out 38 OECD countries offer national paid maternity leave – the only exception being the US. France, which holds the top spot, allows mothers and fathers to take paid leave until their child is three years old.The US is also one of only six countries with no form of national paid leave covering either family or medical leave in the case of a health concern.Voting rights for former felonsWalz’s record: The governor signed a bill that restores the vote to more than 50,000 Minnesotans who have been convicted of a felony. The Trump campaign denounced the measure as evidence of Walz’s “dangerously liberal agenda”, which is ironic, given that Trump himself, as a convicted felon, will only be able to vote for himself in November thanks to a similar reform in New York.Around the world: A report released by Human Rights Watch (HRW) in June concluded that the US was an “outlier nation in that it strips voting rights from millions of citizens solely on the basis of a criminal conviction”. In 2022, more than 4 million people in the US were disenfranchised on those grounds. By contrast, when HRW surveyed 136 countries around the world, it found that the majority never or rarely deny the vote because of a criminal record, while those with restrictions tend to be much less draconian in their approach than US states. More

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      ‘Huge tax breaks’: private equity prepares for a boon from Congress

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      Some of largest and most profitable companies in the US are primed to save billions of dollars from a congressional tax deal that critics say gives “billions in tax credits to the biggest corporations while giving pennies to middle-class children and families”. And private equity funds could be among the deal’s biggest beneficiaries, a Guardian analysis suggests.The tax cuts passed the House of Representatives at the end of January as part of an agreement that pairs handouts for businesses with a moderate expansion of the child tax credit. The Senate could vote on the bill over the coming weeks, and the White House has indicated that Joe Biden would sign it into law.The deal, led by Democratic senator Ron Wyden and Republican congressman Jason Smith – the chairs of Congress’s tax-writing committees – would roll back a series of tax measures that were designed to partially offset the cost of the 2017 Trump tax cuts.Weakening these provisions would allow companies to claim bigger tax deductions for certain expenses, including buying new equipment, spending money on research and development, and paying interest on their debt, as the Guardian previously reported.Last year the American Investment Council (AIC), private equity’s main trade group, spent more than $3m lobbying the federal government, according to OpenSecrets – more than any single year since 2009. Including their subsidiaries, five of the country’s largest private equity funds – Blackstone Group, KKR & Company, Carlyle Group, Cerberus Capital Management and Apollo Global Management – together spent an additional $21m lobbying over the same period.“Increasing the interest deductions, which private equity firms have been the worst abusers of, is just another example of how the Wyden-Smith tax deal hands out billions in tax credits to the biggest corporations while giving pennies to middle-class children and families,” the Democratic congresswoman Rosa DeLauro, one of two dozen House Democrats who voted against the bill, told the Guardian.“While private equity is cheering on the huge tax breaks they will get if this deal passes the Senate, American families are living paycheck to paycheck and struggling with rising costs.”‘Debt can supercharge the returns of private equity’Tax policy experts told the Guardian that raising the cap on interest deductibility could provide an especially generous subsidy for private equity funds, which rely heavily on debt.“The model of the private equity industry is often to … buy public corporations, take them private and load them up with debt,” said Steve Wamhoff of the non-profit Institute on Taxation and Economic Policy. These heavy debt burdens help explain why companies bought by private equity funds are about 10 times more likely than other firms to go bankrupt.“The deductions that are allowed for interest expenses really make that a more viable business model,” Wamhoff said.Debt is cheaper when companies get a tax break for deducting the interest they pay on that debt, and “cheaper money, which has to be repaid by their takeover targets, is what makes private equity go,” said Carter Dougherty of Americans for Financial Reform (AFR), an advocacy coalition.“The magic of the private equity business model, and the way that it’s able to generate outsized returns, is its reliance on debt for the acquisition,” said Brendan Ballou, author of Plunder: Private Equity’s Plan to Pillage America.If you invest $20m in a business and get 10% returns, you only get $2m back,” Ballou explained. “But if, of that $20m, you actually only put up $2m yourself, you actually make 100% return. So debt, or leverage, allows you to get bigger returns than you normally would if you actually had to put up your own cash.”That’s how “debt can supercharge the returns of private equity”, Ballou said.Asked for comment, the AIC referred the Guardian to two letters previously signed by the group, one of which states that “debt financing plays an important role in supporting job-creating investments”.skip past newsletter promotionafter newsletter promotion“There’s already a strong bias in the tax code for debt, and this bill doubles down on that bias to boost private equity’s predatory practices, which will only drive more American companies into bankruptcy and decrease market competition,” said the Texas congressman Lloyd Doggett, one of three Democrats who voted against the bill in the House ways and means committee, in a statement.“There’s nothing fair about private equity companies lining their pockets while shifting the tax burden to American families already dealing with high costs.”‘A complete wasteful giveaway’The Trump tax law established new limitations on how much interest companies could deduct from their tax bills in a single year. That annual cap on interest deductions was tightened further in 2022.Higher interest rates have made debt more expensive, so private equity funds have found themselves having to invest more of their own money, rather than relying as extensively on borrowed money.That shift, in turn, has lowered potential returns, adding to the industry’s sense of urgency to loosen the cap on interest deductions, AFR’s Carter Dougherty said.Not only would the Wyden-Smith deal undo the tighter limit created by the Trump law, but it would do so retroactively, meaning corporations could amend their 2022 and 2023 tax returns to take advantage of the newly generous subsidies.Making these tax cuts retroactive “would be just a complete wasteful giveaway”, Chye-Ching Huang, the executive director of the Tax Law Center at the New York University School of Law, told the Senate finance committee last November. “You can’t change past investments or wages by giving away tax cuts.”Loosening the interest deduction threshold would cost $64bn over the next 10 years if it were made permanent, according to an estimate provided to members of the House ways and means committee by the US Congress’s non-partisan joint committee on taxation.While the Wyden-Smith deal only rolls back the provision through 2025, tax policy experts told the Guardian that corporations and their trade groups would probably work to extend it further.In a statement to the Guardian, a Wyden spokesperson said: “The provision dealing with business interest was a Republican priority in negotiations, and it’s clear that it would become law in a Republican Congress without any matching benefit for working families. With the support of finance committee Democrats, Senator Wyden set a standard for this divided Congress that any tax cuts for corporations must be matched with an investment in children and families that the Joint Committee on Taxation scores as equal, and that’s why the bill includes a child tax credit expansion that helps 16 million children from low-income families get ahead.”Smith’s office did not respond to a request for comment. More

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      Hunter Biden sues IRS for breaching his privacy rights over tax affairs

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      Hunter Biden sued the US Internal Revenue Service on Monday, alleging the agency violated his privacy rights as it investigated his tax affairs.The business career of the US president’s son is at the centre of Republican attempts to impeach Joe Biden over unsubstantiated allegations of corruption.Hunter Biden faces criminal charges regarding his tax affairs and a purchase of a gun. In his lawsuit against the IRS, filed in US district court in Washington DC, he said “whistleblower” agents disclosed information that should have remained private.“IRS agents have targeted and sought to embarrass Mr Biden via public statements to the media in which they and their representatives disclosed confidential information about a private citizen’s tax matters,” the suit said.It also described an “assault on Mr Biden’s rights involv[ing] the public disclosure of his confidential tax information during more than 20 nationally televised and non-congressionally sanctioned interviews and numerous public statements”.The suit added: “No government agency or government agent has free rein to violate his rights simply because of who [Hunter Biden] is.”Biden is seeking $1,000 in damages “for each and every unauthorised disclosure of his tax return information”, as well as costs and attorney fees.In testimony before Congress, an IRS supervisory special agent, Greg Shapley, and a second agent, Joe Ziegler, claimed a pattern of “slow-walking investigative steps” into Hunter Biden. They alleged the prosecutor overseeing the investigation, the Delaware US attorney, David Weiss, did not have full authority to bring charges in other jurisdictions. Weiss and the US justice department have denied that.On Monday, Shapley’s lawyer called Hunter Biden’s lawsuit a “frivolous smear” that sought to “intimidate any current and future whistleblowers”, adding that Shapley did not release confidential tax information except through legal whistleblower disclosures.“Once Congress released that testimony, like every American citizen, he has a right to discuss that public information,” a statement said.Ziegler’s lawyer said he would “continue to speak out” about what he considers “special treatment” for Hunter Biden.The Republican-controlled House oversight committee called Shapley and Ziegler “good people who did everything right to obtain whistleblower protection with the best interest of our country in mind”.The IRS declined to comment, citing the pending litigation.Last week, Hunter Biden was indicted on charges relating to a gun purchase initially covered, with tax charges, by a plea deal which fell apart earlier this year. Biden is now reportedly set to face new tax charges from Weiss, who is now working as a special counsel, with a high degree of independence from justice department leadership.Also on Monday, in a letter to Jason Smith, the Republican chair of the House ways and means committee, reported by the Washington Post, the Biden lawyer Abbe Lowell said accountants now believed Biden was in fact owed a refund, for “overpayments of tax”.The Republican impeachment effort is doomed to fail, given Democratic control of the Senate – and given the paucity of evidence unearthed. Nonetheless, the White House is fiercely pushing back.On Monday, the White House impeachment war room pointed reporters to a Washington Post column by Ken Buck of Colorado, a conservative impeachment skeptic; a “comical Freudian slip” by Mike McCaul of Texas, the House foreign affairs chair who told Fox News “we don’t have the evidence now but we may find it later”; a New York Times report that said Republicans’ own witnesses “have undercut or pushed back against some of their major claims”; and a link between James Comer of Kentucky, the House oversight chair, and a promoter of the QAnon conspiracy theory.But the Post also pointed to the strength of the Republican drive to link the president with his son in the public eye, when it profiled Garrett Ziegler, a 27-year-old Trump White House staffer turned “scorched-earth activist trying to take down Hunter Biden”.Ziegler, the Post said, “is at the vanguard of a sprawling network of Biden antagonists, from rightwing media organisations to congressional leaders to [pro-Trump, Make America Great Again] activists, that is focused intensely on the president’s son.“They see Hunter Biden’s activities as his father’s biggest political vulnerability, a conclusion reflected in the House GOP’s recent decision to launch an impeachment inquiry.”The Associated Press contributed reporting More

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      $80bn for the IRS? Fund the US taxman, but not like this | Gene Marks

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      Ask any accountant and we’ll tell you that the Internal Revenue Service is woefully underfunded. Our clients complain about the long delays for refunds, the interminable waits for getting answers and the frustrations waiting for guidance on issues that affect their businesses.But it’s not just accountants that are clamoring for more IRS funding. Most taxpayers I know will admit that the IRS needs a serious upgrade. So why the big brouhaha over the $80bn approved last year to hire more auditors and upgrade the agency’s pathetically outdated systems? The answer lies not in why it’s so badly needed. It’s in how badly it was sold to the American public.We all pay for things we don’t like. We need to have insurance but we don’t like the premiums. We don’t really want to give a wedding gift to that fifth cousin or tip the waiter even though the service wasn’t that great. And of course, we pay taxes – and no one likes that either.The same goes for the IRS. We know that everyone should be paying their fair share and we get that there has to be a government agency to oversee this. Making sure the IRS has adequate funding is a no-brainer. And yet here we are arguing over its need. For this, I blame President Biden and the Democrats.The bipartisan Tax Foundation found that the costs to collect $100 (in 2021 dollars) has decreased 41% since 1991 and that during this same period, the amount collected per taxpayer has increased 45% and that the agency did this despite its much lower staff. These are impressive accomplishments when you consider that most of the agency’s systems are decades old.Even so, Republicans and the media pounced on the $80bn allocated under the Inflation Reduction Act to be used for hiring more auditors and technology upgrades which could potentially save more than $1tn per year. And during recent talks to raise the US borrowing limit, Republicans somehow managed to claw a quarter of that amount back with plans to pursue more.Most people in both parties understand the necessity to fund an agency whose sole objective is to ensure that everyone pays their fair share of taxes. But you can’t really blame Republicans for crying foul. This is what politicians do when there’s a slam-dunk issue like this. Big government: bad. Small guy taxpayer: good.But there was a better way for the Democrats to achieve this funding, which, according to the Cato Institute, will increase the IRS’s budget from $5.2bn to $19.5bn by 2033 – about $1.4bn per year, which is just one-half of one percentage point of our country’s overall spending.Why not bury some of this amount in the overall treasury department’s annual budget of $3.24tn? Over a 10-year period that funding could have been absorbed by the numerous subdivisions of the agency and then re-allocated back to the IRS in that bureaucratic way that bureaucrats do where no one really knows where or how the money was spent.Or how about trying what any business owner would do when appropriating money to a project: assign quantifiable metrics and holds its recipients accountable? Make it such that the spending could be paused or even pulled unless these numerical goals are achieved each year. That way the Republicans could insist they’re holding their opponents’ feet to the fire, while the Democrats still get to spend the money.Or you could take a pure tech angle and take people out of the equation. Remove and prohibit the “hiring” of new auditors and instead mandate that the funds only be used for technology. Better yet, AI technology because that’s what’s hot! Emphasize that the IRS is going to be the federal government’s leader in tech, reducing its headcount and increasing its output and responsiveness by leveraging the latest AI tools as it upgrades its systems. Of course, some may be scared by the prospect of out-of-control robots but it’s obvious to most of us who regularly deal with the IRS that – probably more than any other agency – most of what it does can be automated.But no. Instead, Biden and the Democrats allowed an inordinate amount of attention to be drawn directly to the $80bn for the evil IRS, which in turn invited a tidal wave of backlash. This didn’t have to happen. With a little bit of thought, some maneuvering, finessing and manipulation, that money – which is sorely needed – could have been spent under the radar and much of this controversy could have been avoided. More

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      It’s OK to be Angry about Capitalism review: Bernie Sanders, by the book

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      ReviewIt’s OK to be Angry about Capitalism review: Bernie Sanders, by the bookThe Vermont senator and former presidential candidate offers a clarion call against the American oligarchsThe Vermont senator Bernie Sanders has a predictably unsparing view of the effects of “unfettered capitalism”: it “destroys anything that gets in its way in the pursuit of profits. It destroys the environment. It destroys our democracy. It discards human beings without a second thought. It will never provide workers with the fulfillment that Americans have a right to expect from their careers. [And it is] propelled by uncontrollable greed and contempt for human decency.”Has Bernie Sanders really helped Joe Biden move further left?Read moreThe two-time presidential candidate makes his case with the usual horrifying numbers about the acceleration of inequality in America: 90% of our wealth is owned by one-tenth of 1% of the population; the wealth of 725 US billionaires increased 70% during the pandemic to more than $5tn; BlackRock, Vanguard and State Street now control assets of $20tn and are major shareholders in 96% of S&P 500 companies.Sanders recites these statistics with religious fervor, and poses fundamental questions for our time: “Do we believe in the Golden Rule? [or] do we accept … that gold rules – and that lying, cheating, and stealing are OK if you’re powerful enough to get away with it?”Bernie believes (and I strongly agree) that it’s long past the time when we should be paying at least as much attention to American oligarchs as we do to those surrounding Vladimir Putin. Our homegrown plutocrats “own” our democracy.“They spend tens of billions … on campaign contributions … to buy politicians who will do their bidding. They spend billions more on lobbying firms to influence governmental decisions” at every level. And “to a significant degree”, the oligarchs “own” the media. That is why our prominent pundits “rarely raise issues that will undermine the privileged positions of their employers” and “there is little public discussion about the power of corporate America and how oligarchs wield that power to benefit their interests at the expense of working families”.We were reminded this week of how this system works. Joe Biden released a budget with perfectly modest proposals for tax increases, like a 25% minimum tax on the wealthiest Americans and a seven-percentage-point raise in the corporate tax rate to 28%, which would still leave it seven points lower than it was before Donald Trump gutted it with his gigantic tax giveaways.Instantly, experts owned and operated by the billionaires started spewing their familiar bilge, like these moving words from the Cato Institute: “Higher tax rates on the wages of a narrow segment of the United States’ most productive executives and business leaders will have strong disincentives against their continued work and other negative behavioral effects that translate into a less dynamic, slower growing economy.“Higher taxes on investment income target the financial rewards to successful entrepreneurs who undertake risks and persevere through failure to build high return businesses that provide welfare enhancing goods and services to people around the world.”Sanders quotes one of the most prescient Americans of the mid-20th century, from 1944: “As our industrial economy expanded [our] political rights proved inadequate to assure us equality in the pursuit of happiness. We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence.”The name of that dangerous revolutionary: Franklin Delano Roosevelt.Several decades before that, Theodore Roosevelt similarly bemoaned the “absence of effective state, and, especially, national, restraint upon unfair money-getting” which “has tended to create a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power”.There is something extremely refreshing about an author who assumes it should be obvious that billionaires should not be allowed to exist – and has perfectly reasonable proposals about how they should be eliminated. At the height of the pandemic, Sanders proposed the Make Billionaires Pay Act, which would have imposed a 60% tax on all the wealth gained by 467 billionaires between 18 March 2020 and January 2021.“But why stop at one year?” he now asks. After all, the 1950s were economic boom times in America – and under a Republican president, Dwight Eisenhower, “the top tax rate for the wealthiest Americans was around 92%. America thrived. Unions were strong. Working-class Americans could afford to support themselves and buy homes on a single income.” And the richest 20% controlled a measly (by current standards) 42.8% of the wealth.Bernie Sanders: ‘Oligarchs run Russia. But guess what? They run the US as well’Read moreSanders’ 99.5 Percent Act would only touch the top 0.5% of Americans. “But the families of billionaires in America, who have a combined net worth of over $5tn, would owe up to $3tn in estate taxes.” He would accomplish this with a 45% tax rate on estates worth $3.5m and a 65% rate on those worth more than $1bn.There is much more here, including a convincing case for Medicare for All and an excoriation of a for-profit healthcare system which spends twice as much per citizen as France or Germany and still manages to leaves tens of millions of Americans un- or underinsured, all while nourishing an obscene pharmaceuticals business in which profits jumped by 90% in 2021.I first toured the castles of the Loire Valley as a teenager in the company of the family of my uncle, Jerry Kaiser, a 60s radical and a very early opponent of the war in Vietnam. As we absorbed the opulence of one chateau after another, Jerry had only one question: “What took them so long to have a revolution?”The noble purpose of Bernie Sander’s powerful new book is to get millions of Americans to ask that question of themselves – right now.
      It’s OK to Be Angry About Capitalism is published in the US by Crown
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