House Republicans’ Tax Plan Proposal

The House Republicans unveiled a new tax plan today. At first glance, I thought the plan was decent. At second glance, I thought the tax structures proposed were not bad. But when I looked the third time, I felt that this tax plan, though looks good at a couple of places, is not the plan that is needed for the 21st century. 

While the reduction in the number of income brackets, capping mortgage interest rate deduction at $500,000, capping property tax deduction at $10,000, doubling the standard deduction, increase in the child tax credit - are all very welcome steps in the plan, the overall plan itself fails to put more money in the hands of lower and middle-income people. 

I have a fundamental disagreement in the concept behind which this plan seems to have been devised. This tax plan clearly is built around the principles of supply-side economics. While I have nothing against supply-side economics in particular, that is not where the problems of today’s slow growth in middle-income citizens lie. 

The problem, from the time of the Great Recession in 2008, has been clearly on the demand side. So to address a problem that has to do with low national (even global) aggregate demand, a tax plan based on the principle of demand-side economics should have been followed. 

Yes, demand has picked up a lot from the years immediately after the Great Recession. But the wage growth has been very meager. Why so? Economists are still breaking their heads on this, and there are very many factors for this, some local and some global, but in my opinion, there is undoubtedly a critical factor: pace of demand growth. 

The pace of demand growth has been moderate at best. That moderate pace has prevented companies from aggressive investments, especially on the labor side. Now couple this with companies coming out of over-production in the past years, along with a commodity bust period. Yes, the global labor pool has gone up, which is another critical factor in slow wage growth in advanced economies, but the best way to address that, slow pace of demand growth and wage growth sluggishness is by directly putting more cash in the hands of the poor and middle-income people. And that is best done by revamping the tax structure around the principles of demand-side economics rather than supply-side, which the current proposal seems to be based of. 

Now what do I mean by all this as it relates to the current proposal? Well, to begin with, I am not in favor of cutting the corporate tax rate to 20% from the current  35%. My friends have been very persuasive in trying to make me understand the positive effects of cutting the corporate tax rate. Among other things, they say that this would increase the “global competitiveness” of American companies, but I am not persuaded. I am yet to see any evidence of American companies not being globally competitive because they have a higher statutory corporate tax (keep in mind: the effective federal tax rate for corporations, after various deductions and loopholes, is not anywhere near 35%. It’s much less than that.) I would instead prefer to expand the earned-income-tax-credit option that would put cash directly in the hands of lower-income people. And whenever you put more cash in the pockets of poor and middle-income people, they tend to spend a big chunk of it, if not all, that goes directly into small, medium and large companies’ revenue buckets. Rather than a trickle-down, this will be a trickle-up economic model, which is what is needed in the 21st century’s globalized world. 

Other than that, I have mixed feelings about the estate tax, so let me put it aside from commenting for now. But I am not glad to see the deductions go away for medical expenses, people over 65, or people who retired on disability. That doesn’t make much sense to me. Also, I am surprised that the tax plan proposal doesn’t address the carried-interest loophole that hedge funds have been using to pay so little in taxes than an average middle-income worker - as a percentage on their respective incomes. The tax plan proposal also doesn’t seem to touch capital gains tax at all - which I think is a mistake, as capital gains tax needs to be reformed to better suit the 21st century investment practices. 

To conclude: at a glance, it looks some good, some bad, but at a closer look, overall, the principle behind the plan is flawed. A different road needs to be taken to reach the desired destination smoothly. 

Reference:

https://mobile.nytimes.com/2017/11/02/us/politics/tax-plan-republicans.html?action=click&module=Top%20Stories&pgtype=Homepage

India turns 70!

Today marks the 70th anniversary of independence for the people of the Republic of India from the British colonial rule.

After 70 long years, filled with famine, wars, drought, terrorism, communal riots, socialism, and forays into globalization, capitalism and budding nationalism, I take a look back at a time period from what was a major turning point in the history of humankind, where more than half a billion people on the Indian subcontinent breathed a combined sigh of relief and a sigh of fear - for the joy of independence they gained from the British empire was equally stitched with a fear of unknown - because for the first time ever in human history, peoples of all known human religions, castes, creed, color, hundreds of languages, cultures, customs, likes, dislikes, priorities, and frankly, unknown number of human feelings were stitched together as ONE nation called "India".

70 years on, and for all the miraculous achievements India has attained, I still see India as a country that has partially succeeded and terribly failed. 

70 years on, India, which was richer than China and South Korea on a per capita basis in the 1960s and 1970s is poorer than those countries today. 

70 years on, corruption is still rife, well alive and glorious in all aspects of Indian life.

70 years on, malnutrition and disease could be seen in every street corner. 

70 years on, India still struggles to find peace with the country with which it shares common history -- Pakistan.

70 years on, India still struggles to find peace in the border with its other gigantic neighbor -- China.

70 years on, Nepal, another neighbor hates India more today than ever in its history. 

70 years on, Sri Lanka, for all its atrocious racism that it has encouraged in its society, has never been so less fearful, or less concerned about India and its power.

70 years on, India, which was the light for poorer African nations in the global stage, is the dimmest ever today. 

70 years on, chronic illiteracy, broken infrastructure, gross inequality in access to opportunities fills the streets and hearts of Indians.

So is there is no hope? No, there is! For it is this country that prides itself in its millennia old slogan of वसुधैव कुटुम्बकम् (Sanskrit for: One world, one family). 

And it is this country where cultures clash to uphold a very universal human principle of யாதும் ஊரே யாவரும் கேளிர் (Tamil for: Every town in this world is my town; every citizen of this world is my relative). 

And it is in this land where a physically weak, but morally strong Gujarati, who asked Indians of all religions and cultures to die in non-violence and never kill in violence, even during the height of oppression, is hailed as the "Father of the nation".

And it is in this land, where not a single incidence of persecution of Jews was ever reported to have to taken place in its entire history. 

And it is in this land, where logic goes out of the window, leaving everyone scratching their heads to find a definition for "entrepreneurs". Are they people with skills and ideas? Or are they just otherwise called Indians? 

And it is in this land, of almost 80% Hindus, electing an Italian catholic woman for the top most office in the country, only for her to voluntarily give way for a Sikh man to assume the office. An office he was sworn in by a Muslim President.  

And it is in this land, where the very national flag holds the sacred colors of Hindus (saffron) and Muslims (green) living in peace together (white), while upholding the Buddhist principles of dharma (the wheel). 

And it is in this land, where when the tricolor flag is hoisted proudly across the nation today, more than half the Indian population, who don't understand a word of the national anthem, that was written by a Bengali, in Bengali, and translated peacefully into Hindi, will sing it with patriotic fervor and with a deep sense of belonging. Though almost half the population might not understand the meaning in the anthem, they do understand one thing deeply: that the spirit that they hold inside them transcends boundaries and holds humanity together. 

Philostratus, in his book Life of Apollonius of Tyana, written in 2nd century AD, recognized the experience of Apollonius in India, and he wrote Apollonius describing: 

"

In India I found a race of mortals living upon the Earth, but not adhering to it. Inhabiting cities, but not being fixed to them, possessing everything but possessed by nothing.

"

And that India, and that Indian spirit is still alive and well! And that gives me hope!  

Happy Independence Day to all Indian brothers and sisters :)

India's Supreme Court rulings

Recently, there have been a couple of rulings from India’s apex court that should trouble or atleast make every Indian citizen ponder on the effects of these rulings. Before I say anything, I must admit that I have tremendous respect for the Supreme Court of India, a court whose rulings in the past have inspired ethical judgments not just in India but outside its borders too. That being said, I am sad to say that some of their recent rulings have caused a concern as to whether they are going beyond their powers and jurisdiction and functioning with a parental touch rather than as the dispenser of justice and upholder of the constitution in a country of more than a billion individuals.

The first ruling, in hearing a petition filed by an individual, by a single judge in the apex court, mandating cinema theatre owners all across the country to play the national anthem before the movie starts and mandating the movie-goers to stand when the national anthem is played with the theatre doors closed (unlocked) is frankly a ridiculous ruling. The ruling, among others, read – “Be it stated, the time has come, the citizens of the country realize that they live in a nation and are duty bound to show respect to the national anthem,”. Now, frankly, this is a mockery of intelligence and spirit of the citizens of the country. As far as I know, there is no law that mandates this, nor is there a violation of any fundamental right enshrined in the constitution when a theatre doesn’t play the national anthem. For me, personally, this issue goes beyond that – the idea that the apex court of the country thought that it was necessary to instill patriotism, through whatever means it may be, on its citizens, is an issue of serious concern to me. Because anytime we talk about “patriotism”, it borders on “nationalism”. And to me, nationalism is the enemy of humanity. We have seen repeatedly in history that whenever the concept of nationalism is trumped up, it leads to a violation of individual rights – which is what I believe is happening here too. By ordering when to play the national anthem and how its citizens should respond to it, the Supreme Court of India has strayed too far away from its powers and authority, and frankly, has behaved in a dictatorial way.

The other ruling that had come out just this week, by a panel of seven judges in the apex court, with four of them ruling, on the basis of the secular nature of the Indian constitution, to ban all political parties and persons seeking to occupy a public office from using religion, race, caste and language to seek votes during election campaigns, is an issue that I invite all Indian citizens to ponder carefully. On the surface, this ruling must look like something we all should welcome. After all, we dream for a secular society where religious, caste and linguistic based lines are erased and people unite as humans who care for each other and live an ethical life. But sadly, that is still a dream, and the reality is far different. And hence, unfortunately, in this case, I might have to side with the other three judges in the panel who voted against this ruling by citing that this ruling would violate the free speech right enshrined in the constitution. And I agree with them. Many social progresses in the country have come by mobilizing people on these grounds. Yes, I do feel awkward to say this because I am well aware of the fact that many social backwardness have also resulted in the country by mobilizing people on these grounds, but that’s not to say that we could take away a tool that can be used and has been used to make social progress and correct historic injustices in the country.

If such a ruling existed in the 1950s and 1960s, then the people of the state of Tamil Nadu might have not been able to understand the negative implications of the attempt to impose the Hindi language on them by the central government during that time. Politicians and political parties mobilized people on linguistic basis to stop the domestic colonial attempts of giving unwarranted extra-importance to Hindi in a state that has spoken Tamil for millennia. Or take this case - The man who is credited to writing the secular Indian constitution, Dr. Ambedkar, had raised genuine issues during his time surrounding the plight of Dalits, the lowest-caste society or the “untouchables”, a caste group to which he himself belonged. If he contested today for election by mobilizing people of his caste on some of the injustices that still seem to occur to Dalits, would he disbarred from contesting or would his election be disqualified by the Supreme Court of India? And today, in Tamil Nadu and many other parts of the country, there are genuine social issues and problems faced by the “Brahmin” or the upper-caste society members. So would it be wrong for someone from that society to contest for office and speak publicly about those problems or promise to correct them if he/she is elected to the office?  Would the Supreme Court void his/her election for speaking the truth?

Whether we like it or not, India is a country that is rooted in diversity – diversity in religion, race, caste, language etc. And what unites all these people is the ability and the inherent culture to speak freely, debate freely, and in the process evolve into a continuously tolerant and accepting society by embracing all these differences and diversity. Curtailing that free speech, however good that intention may be, will not give us anything other than piled up anger and frustration. Allowing to speak freely, though at times may annoy and even harm us, will ultimately be more beneficial to all individuals living in the society. And lastly, the Supreme Court can leave this matter to the intelligence of the people of this country rather than taking it in their own hands, because it is in that country, where religion-based and caste-based parties are repeatedly defeated in elections. One just has to look at the last election, both at the state and at the national level, in the state of Tamil Nadu, where even in constituencies where their religion or caste were the majority, the parties and politicians who campaigned on them, were handsomely defeated. They won less than 2% of the votes in some instances and less than 10% of the seats in total. What more evidence do you need, honorable judges of the Supreme Court? Let the free-speaking and free-thinking people take up this matter. Leave it to them!