Tax Fraud and the Trump Organization

I’ve been trying to find time to read the entirety of the Times investigation of the chicanery that Fred Trump and his children pursued to shield Fred’s estate from taxation.

It’s obviously a remarkable thing to see the nation’s leading paper put it out in black and white that the President of the United States is a potentially criminal tax cheat. I’m not sure it’s surprising, though.

This is in some ways a fitting cap to decades of financialization of urban housing–of turning the provision of space for dwelling and commerce into a financial transaction in which housing people and businesses is largely incidental–and of public policy that engineers results by embedding massive financial incentives in the tax code instead of directly allocating resources to necessary projects. The result is apartments unaffordable to anyone except their absent owners and storefronts vacant because collecting their rents is unprofitable.

Of course, breaking tax laws is not OK. Tax evasion means that governments at all scales lack the resources they need to solve problems. But observance of tax laws as designed often produces similar results.

Update: Here’s Amy Plitt noting how one aspect of the Trump family tax avoidance illuminates problems with rent control. Landlords are able to raise rents on stabilized apartments only if they can demonstrate making significant capital improvements to the property. Fred Trump was able to both raise rents and avoid gift taxes in transferring wealth to his children by making them partners of a corporation that sold boilers and other maintenance supplies to Fred Trump’s buildings, after buying them at rates negotiated by Fred Trump, and then selling  them to Fred Trump at a significant markup. All of this was enabled by an “honor system” approach to enforcing legal restrictions on landlords, which still plagues the city, as Plitt notes:

While the Trump family’s abuse of the MCI provision is egregious, it’s hardly unique, which is why tenant advocates have long argued that it must be reformed, or abolished altogether. “We see really dramatic rent increases through MCIs, and they’re full of fraud,” says Cea Weaver, the policy director of New York Communities for Change. Landlords are allowed to raise the rent by up to six percent per year, depending on the scope and extent of the repairs, which can lead to hikes of hundreds of dollars. “[It’s a] one-time cost for the landlord but a permanent increase for the tenants,” Weaver explains.

The system is also easy to abuse: Increases based on MCIs are overseen by the state’s Division of Housing and Community Renewal (DHCR), which Weaver says is “horribly underfunded” and doesn’t always thoroughly vet applications. And according to DHCR’s own fact sheet, the only proof that a landlord needs in order to get an MCI comes from the landlords and contractors themselves, which can easily be falsified.

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Home Rule Politics in New York

Sam Roberts’s recent New York Times article on the fractious relationship between New York City and the state government in Albany points to a host of issues I have studied, including how home rule doctrines have evolved through a series of tense political moments, shaping the character of municipal government.  What’s compelling about Roberts’s reporting is that he doesn’t fall back on abstract platitudes about local control or the best scale for government; Albany’s efforts to restrict the home rule powers of New York City were always about specific actions undertaken (or not) by municipal government, and the political and economic consequences of those actions. In the nineteenth century, Albany sought to control patronage politics in the city. Today, real estate developers fund coalitions in the state house to thwart rent controls and other restrictions on the market and hamstring the city’s power to tax its wealthiest residents to improve housing, transit, or public health.

 

Fulton County Sues Opioid Manufacturers

Charging that the distribution of opioid painkillers is delivering profits to the pharmaceutical industry and public health and criminal justice costs to local governments, Fulton County (GA) recently announced that it is suing a group of companies in the industry.

As federal aid to local governments has declined, and states have become stingier allocating limited block grant funds for social services, someone has to pay for the costs of overdose deaths, treatment, and jail. Under the principles established by the state settlements with tobacco companies, it should be those who profit. This is a fine example of the way that localities can use their power to push for equity (until, of course, state legislatures pass preemption laws to make such suits illegal).

GA 6 Special Election

So, Jon Ossoff came close to beating Karen Handel in the Georgia 6th district special election. I’m personally disappointed, surprised only that it was close, and not sure the result portends anything for the future.

As I’ve written (drawing from others’ commentary as well as my own historical work on the Atlanta suburbs), many affluent suburbs are Trump country. The 6th has become more ethnically diverse in recent years, but the effect of that diversity is mitigated by the fact that the district is drawn to elect Republicans. The 6th is a highly educated district, and Democratic optimists thought it would behave like the other 9 top-10 educated districts in supporting Democrats for Congress. It’s perhaps more like affluent but less educated districts than they were willing to recognize. Ultimately, as Molly Ball writes in The Atlantic, Republican voters in a structurally Republican district are going to vote Republican.

My personal take as a non-political scientist is that Ossoff’s efforts at minimizing ideology and idealizing pragmatism (to the point of being almost as unwilling as Karen Handel to refer by name to Donald Trump) are a bad strategy for Democrats in 2018. Even Matthew Yglesias is off the bipartisan civility train, though not as far off as Hamilton Nolan.

A Metropolitan Party?

Brookings Institution scholar Bruce Katz recently discussed the prospects and possibilities of a metropolitan political party. His argument in a nutshell is that the pragmatic orientation of local officials makes it more likely that they will resist the polarization of national partisan politics and implement solutions to pressing problems:

The United States desperately needs a new political force that resists the nationalization of partisan politics and, instead, infuses both establishment parties with the pragmatic, problem solving modus operandi of leaders at the local and metropolitan level.

This certainly sounds a lot better than what we’ve got now. But substantial caution is in order. Metro areas house about 8 in 10 Americans. So, while it makes sense to expect national politics to cater to the needs of those 8 rather than the 2 (who might lazily be inferred to live in Trump Country), it doesn’t make sense, given what we know about the contentious politics of metropolitan areas, to expect the 8 to agree on a comprehensive political agenda.

For example, Katz suggests sensibly that this new party build its organization and constituency at the state level, where significant policy decisions affecting cities and metro areas are made. Specifically, Katz identifies state legislative preemption of municipal action, a serious problem for economic equity, development, and environmental protection. This would avoid the Democratic Party’s fixation on the Presidency and the Senate and cultivate a roster of political candidates for US House seats. But state houses are already metropolitical battlefields. School integration and funding equity? Taxation? Welfare policies? Economic development? In metropolitics, all of these policy areas have been hotly contested, and contested more importantly as zero-sum games.

This overlaps neatly with the tendency of white Americans to see racial advancement for nonwhites as coming at their expense, and it follows from recent arguments that Trumpism has a strong base in middle-class to affluent suburbs in America’s metro areas. Modern conservatism is not (or not only) the dying scream of rural America, it’s the tantrum of the affluent suburbanite. Metro areas contain multitudes, and they certainly contain the Tea Party.

So, when Katz writes

There is clearly a set of issues that sane metropolitan leaders across the red-blue divide can agree on: investing in modern regional transportation that connects people to jobs and goods to markets; boosting the economic competitiveness and innovation capacity of local industries; or policy reforms in housing, education and workforce programs.

I’m not entirely sure that’s true. Perhaps the work of identifying a positive agenda for equitable growth can tie metro areas together across racial and class divisions; New Regionalist scholars have long argued that equitable growth improves outcomes for rich and poor by removing drags on metropolitan economies like poverty, poor education, and collapsed property values. The hurdle has historically always been securing buy-in from the wealthy. And if the Metropolitan Party is to exercise power above the local level in the United States, it is going to have to be in places like New York where fusion arrangements are common or as a caucus within one (gee, which one?) of the dominant parties. Which might tie it to the partisan rigidity that Katz decries before it results in serious reform to the party. And more radical thinkers in the Right to the City tradition demand a grassroots politics far more inclusionary and redistributive than the technocratic development politics that Katz’s proposal suggests. But thinking about metro areas in terms of the representation and influence to which their populations are entitled may be the best way forward to govern for an equitable and democratic society.

FOLLOW-UP: Research on Racial Resentment and Approval of Social Policy

In my last post, I argued that understanding Tom Price’s likely actions as the Secretary of Health and Human Services requires understanding the fierce and racially fraught metropolitics of greater Atlanta, where tax and service politics of all sorts, but particularly those surrounding medical care for the region’s poor (who are much more likely than the whole population to be Black). The long and short of it is that the region’s wealthy homeowners (who are much more likely than the whole population to be white) have developed a consistent grievance politics around the premise that Fulton County’s social services under Black political leadership take from deserving white homeowners to give to the undeserving (implicitly Black) poor.

I’ve made this argument inductively from archival research on movements for suburban secession in Atlanta since the 1960s. With varying degrees of overtness, one core premise–that catastrophe would result from Black Atlantans exercising political control over whites’ property–has animated white homeowner politics in Atlanta. This of course simplifies the story, but I emphasize that core idea because it’s easy to get lost in arguments about quality of life, fiscal responsibility, or local control that circulate in the political discourse but are dependent on the core idea.

Interdisciplinarity is useful for historians because social scientists working deductively on questions of the role of racism in decision-making help to ground what may seem like more ephemeral or constructed narratives about historical actions. In this case, I’m highlighting research by political scientists Christopher Federico, Matthew Luttig, and Howard Lavine, featured on sociologist Lisa Wade’s blog The Society Pages

Are some Trump supporters’ political views motivated by race?

One way to find out is to see whether the typical Trump supporter is less likely to support policies when they are subtly influenced to think that they are helping black versus white people. This was the root of a study by political scientists Christopher Federico, Matthew Luttig, and Howard Lavine.

Prior to the election, they asked 746 white respondents to complete an internet survey. Each person was randomly assigned to see one of two pictures at the beginning of the survey: a white man standing next to a foreclosure sign or the exact same photograph featuring a black man. Respondents were also asked whether they supported Trump. (Non-white people were left out of the analysis because there were too few Trump supporters among them to run meaningful comparative statistics.)

The first graph shows that white Trump supporters were eight percentage points more likely to oppose mortgage relief if they had seen a “black cue” (the picture featuring a black man) than a “white cue.” The opposite was true for white Trump opponents.

This mirrors findings by Jason McDaniel and Sean McElwee posted on the Wester Political Science Association’s blog in March. McDaniel and McElwee conclude noting correlations between education and economic status and Trump support in a US county, that strongly held resentment against racial minorities by whites, defined in terms of a zero-sum or something-for-nothing understanding that gains for minorities come illegitimately at whites’ expense, was the stronger predictor:

While we accept that all of these factors help explain Trump support, we find that racism is the main driver of support for Trump. The model presented here accounts for all of these attitudes and still finds an incredibly strong relationship between racism and support for Trump. The centrality of racism to the Trump phenomenon should not be obscured.

This research is disturbing, but perhaps, in reference to the likelihood of drastic actions by Tom Price, hopeful. On one hand, the reality that the Republican Party has an ideological core of white nationalism or racial resentment evokes horrifying prospects. But, if the party is guided less by a rigid free market ideology and more by a perception that government largesse is simply going to the wrong people, that could mean that social safety net legislation like the Affordable Care Act, with its substantial constituency of white beneficiaries of Medicaid expansion in states like Ohio, Michigan, and Kentucky, could be very difficult to repeal. I’m not a policy wonk by training. I’ve been taught how to pick stuff apart after it’s happened, not to try to evaluate the process as it unfolds. But, it seems as though the difficulty of recrafting the ACA to exclude the “other” while legitimating and preserving benefits to whites may stop the new Congress from repealing it (Sarah Kliff explains).