By Dean Baker / CEPR.

Somehow, some way, someone paid $450 million, after buyer’s fees, for Leonardo da Vinci’s Salvator Mundi at Christie’s last Wednesday. Believed to be the last work by the artist in private hands, the painting’s price smashed all previous records. Since the price also seemed more on par with the education budget of a medium-sized country, Artsy asked a range of leaders from the arts, economics, bioethics, and development to tell us how they’d spend $450 million.

I have to decide whether I would use this money to try to end drug patents or copyrights. Since it is too early in the morning for such a weighty decision, I will put both on the table.

To do in drug patents, I would put up the money for nine orphan drugs trials. These cost around $50 million each, according to recent estimates from James Love, the director of Knowledge Ecology International. I would put all the trial results on the web so that other researchers and doctors would have the full benefit of this information (this would be subject to restrictions preserving the privacy of patients—economists know how to do this). This means they would know whether the drug is more effective for women than men, whether other conditions (e.g. arthritis or heart disease) had an impact on its effectiveness, etc. As it stands now, the drug companies only disclose information that helps them market their drug, so this should be a powerful precedent of how good science could be done.

I would then place the successful drugs in the public domain so that they could be sold as generics from the day they approved. This would mean that instead of selling for $300,000 for a year’s treatment, the next cancer breakthrough drug (most new cancer drugs have orphan designations) can sell for $300. This will help to demonstrate the incredible corruption of our patent system in financing drugs. We have needlessly created a problem of drug affordability that would not exist with a more rational method of financing research.

On the copyright side, the point would be to show that there can be alternatives to copyright monopolies to financing creative work. My dream is a tax credit where each person would have some amount (e.g. $100 a year) to support the creative worker(s) of their choice. They could also give this money to an intermediary that supports creative work (e.g. an organization that supports blues musicians or writing mystery novels). The credit is modeled after the charitable contribution tax deduction, except it’s a credit. To get the money, creative workers or organizations have to register, like 501(c)3 do, just saying what it is they do. In this case a condition for getting money through the system is that a creative worker is ineligible for copyright protection for their work for a period time (e.g. 3 years) after getting the money.

With my $450 million, I would propose to try this at the city level, giving out $45 million a year for 10 years. The idea is that a city would run this with the requirement that recipients would have to physically be present at least eight months a year to be eligible to get the credit from the city’s taxpayers. This should turn the city into an artistic mecca, since musicians, playwrights, and other creative workers would want to make extra money, and also win more tax credits, by doing their work in the city.

I would take bids from different cities seeing how much they were willing to put up and how appropriate they might be to serve as a model. (Think of the bidding to be Amazon’s headquarters.) The result should be a large amount of new creative work that is available at zero cost over the web and a thriving city that took the leap.

It’s not every day that I get to play with $450 million.

#RichPeopleNeedTaxCuts: The Republican Tax Plan

Truthout, November 20, 2017

When it comes to tax cuts, Congressional Republicans are determined to come through for their wealthy donors, and they don’t really care who gets hurt in the process. They want big tax cuts for corporations, rich people who can arrange to have their money come through a pass-through business, and the heirs of the super-wealthy. Everything else is just window dressing, or more accurately, window breaking.

Starting with the House bill, one measure, portrayed as closing a loophole, would end the medical care deduction. The medical care deduction only affects people who spend 10 percent of their income on medical bills.

The people in this situation are typically facing serious medical problems, like cancer or who have children with severe birth defects. The logic of giving the deduction is that if a middle-class family spends $40,000 on health care, they aren’t going to have the money to pay their taxes. Medical expenses are already the leading cause of bankruptcy in the country; the Republican tax plan should increase its lead.

Senate Republicans decided to leave the medical expense deduction in place, because they wanted to play their own game with people’s health. They propose removing the Obamacare mandate that requires people to buy insurance. According to the Congressional Budget Office (CBO), 13 million people will lose their health insurance within a decade.

Over time, the Republican plan will lead to the unraveling of the individual insurance market. As fewer healthy people sign up for insurance, the remaining pool will become ever less healthy. As a result, insurance in the individual market will become prohibitively expensive.

But this is just the start of the fun. Both the House and Senate bills propose raising the child tax credit from the current $1,000 to $1,650 per child. This is a good policy, except it’s not fully refundable. As a result, the people who need it most get little or nothing.

A single mother with two kids, earning $14,500 a year, can look forward to a whopping $75 a year from this tax credit. A couple with two kids earning $24,000 will get $200. By contrast, a couple with two kids earning $1 million will pocket $3,300 a year.

Then we have the Republican’s war on college education. Both bills eliminate the tax deductibility of interest on student loans. They also tax the tuition waivers that many grad students get as part of their payment as research or teaching assistants. The value of these waivers can easily be $20,000 or $30,000 a year.

Paying tax on this money will be a considerable burden on graduate students whose pay is often considerably less than the size of the tuition waiver. These are great policies if you think that too many low- and middle-income kids are going to college.

Then we have the elimination of the tax deduction for state and local income taxes. This is an effort to teach states like California and New York not to vote Democratic or spend money to help lower-income people.

There might be an argument for this pain if it served some important public purpose, but giving more money to the big winners in the economy for the last four decades doesn’t fit the bill. According to the Tax Policy Center, the richest one percent will get just under half of the tax cut over the next decade.

The Trump administration assures us that ordinary workers will still come out ahead because their corporate tax cuts will lead to a huge surge of investment. There is pretty much zero reason to believe this.

As Paul O’Neill, a former top executive at several major companies and Bush administration Treasury Secretary, said:

“As a businessman I never made an investment decision based on the tax code. If you give money away I will take it, but good business people don’t do things because of inducements.”

Perhaps the biggest irony in this story is that the economy is actually doing pretty well right now. Unemployment is at its lowest level since 2000, wages are increasing up and down the income ladder, and we may actually be seeing the beginning of a pickup in productivity growth.

It’s hard to see the rationale for the Republican tax cut plan in this picture, even if we accepted their story. But, as the saying goes, #RichPeopleNeedTaxCuts.

Dean Baker

Dean Baker is co-director of the Centre for Economic and Policy Research