Reform this week. In the business section, you lay out graphic. Megan we took a close look at the house plan. It is a serious attempt to implement major changes to the u. S. Tax structure. But also there is so much at stake politically. It is fascinating that a year after the election, we are now getting to what republicans universally say is the real thing that they have to get, tax reform. When anyone tries to get this done, there is a reason why it has failed in the past. The u. S. Tax code is so complex and there are so many vested industries and people and sectors and special Interest Groups that relied on parts of the tax code that in a normal, Intelligence System you would have not had in there. What is fascinating about the house tax plan is how much that it raises the deficit which has long been anathema for republicans. But also to make the numbers work, how much they look at smaller, limited parts of the code that will make a difference. Julia it is ok when you add those pieces together to make the money as long as you have the votes. When we look at the tensions of the Republican Party, that is what it comes down to. Megan it will be hard for two reasons. Number one, the rollout was what i would describe kindly as botched. It was so transparent as to how much the benefits of these proposals would flow to the wealthiest, and to the top 1 . I think there was a acknowledgment among the Republican Party that it did not do enough to help base voters and the core workingclass, or lower middleclass, uppermiddleclass voters. They have made attempts to correct that. The other thing is that in trying to correct that, they have alienated areas of the country that have higher pockets of uppermiddleclass earners. New jersey, new york. Higher state taxes. Who will be resistant to the changes and have little political reason to stay on what we would call the trump train. Even if tax reform is such a big republican core ideal,it will be fascinating to see the battle played out and going to the senate. If he really has the political will to move the party the way that he needs to move it. Carol the elections this week will have an impact. Megan massive impact. You see it all over described as this week as a democratic tsunami. Big wins in virginia, big wins in new jersey. Particularly in younger voters. They came out this week. What will be interesting how many republicans see this writing on the wall and say that saying trump will not take us over the line. Especially in purple states as we say. Informing their own little political ideology and away from the nativism impulses. New jersey showed that there are choices to be made. Julia let us remain taxmad on the front cover story. We look at the evolution of taxes in the united states. Justin explains his thinking behind it. Carol we asked justin to go back and say how did we even get here. I think when people read it they will be fascinated to see not only the different eras we have gone through, we are so focused to cut and we want the situation to be better. We forget the essential purpose of taxation, which is to pay for federal revenues. It is fascinating what justin said megan it is fascinating megan it is actually what justin shows far more eloquently than i could. We are at the same percentage of revenue raising as we were. Carol he talks about Alexander Hamilton and taft. We have more from justin. Justin it seems like definitely since the early 1980s it has become this constant obsession. Carol the 1980s, that is when president reagan did massive tax cuts. Justin he did massive tax cuts and indexed the tax brackets to inflation. Because before then, and inflation was in double digits in the 70s, people were being bumped into higher brackets all the time even though they were not wealthier. That was the big thing that drove the revolt. Carol you remind us that historically the idea of taxes is to raise revenue for the government. Justin it is sort of an obvious point and in theory is the idea of taxes. Carol but a forgotten point because tax reform has been a political football. I am sure there are elements before but starting in the 70s but definitely into the 80s and 90s there was much more serious analysis by economists but also political rhetoric about the Economic Impact of taxes. And part of that is just because taxes are like 17 , 18 of gdp, federal taxes. That is going to have a bigger Economic Impact. How you structure the taxes does matter more. Sometimes in the whole discussion about the current tax package, it seems like so much of it is going to do this for the economy, or it will mess up the Income Distribution in this way. There is some attention, but it is squeezed to the side, would it help raise more money to pay for government or not . Carol will it . Justin no. It will reduce revenue. I dont think theres any, even from people that are very much in favor of it, the way that it is structured now, it will increase the deficit and reduce revenue, even if it results in increased economic growth. Carol you remind us that we have been living in a modern tax policy era. Will it ever end . Because there was a point in our countrys history that we did not have taxes. Kind of a no tax era. Justin there was and it did not work well. Before the constitution, after independence, basically. From 17761789. The articles of confederation, the initial sort of constitution of the new nation had no provision for the federal government to raise taxes. They had to ask nicely. Carol good luck. Justin it is one of the reasons why people from all of the state said maybe we should put something together so we can actually raise money. That was a key element of the constitution and it made clear that congress could levy taxes. Julia making tax reform the cover image was the job of the design director. Lawmakers working on a tax reform package. The magazine spent a lot of space talking about taxes this week. You had to make it to a cover image. What did you think about . Naturally, taxes are not the most visual thing. We decided to do something more typographic. The idea was to create something that represented the confusion and help you station of the tax system. We came up with the idea of taking these tax terms and overlaying them. Julia you can say, the confusion, perhaps, that was generated. Displayed by the black and the blue, and in the bold white writing is what we understand most. Why is the system such a mess . We wanted the headline to hit you first. Then you have this deeper, you are searching through trying to find what the different words are. Carol when i first saw the cover, i was completely confused. Like wait, what which is what the tax system is about. Lawmakers are trying to maybe clear up. We will have to see. Did you have a lot of ideas or not really . Most of them were typographic. We went through a bunch of options. It ended up towards this one. Julia it is punching. This color that we chose, appearing in charge for reagan charts for the reagan era. Carol an era where there was a lot of tax reform and changes. Next, the Hedge Fund Behind titan behind steve bannon may not be finished with politics. Julia allegations of Sexual Harassment. Carol this is bloomberg businessweek. Carol welcome back to bloomberg businessweek. Im carol massar. Julia and im julia chatterley. You can find us online at businessweek. Com. Carol and on the mobile app. In the politics section, billionaire Megadonor Robert Mercer is known for bankrolling the movement that elected donald trump. Julia he is positioning himself to be even more politically active. Robert mercer is the coexecutive officer of mercer Renaissance Technologies, perhaps the most profitable hedge fund in the history of the world. He is the financer behind this brand of kind of insurgent republican nationlist insurgency that propelled donald trump to the presidency last year. Carol he is involved with steve bannon and breitbart. He has been bannons atm for his projects. Hes tried to pursue to take over the Republican Party, push it in a populist, nationalist direction. Mercer basically bailed out Breitbart News when it was found floundering and turned it into what it was is today, a successful voice for this populist nationalist brand of conservatism. Julia what is going on here . Why is he resigning from Renaissance Technologies and at the same time selling Breitbart News . But he is selling it to somebody quite close to him. Explain this specifically. When he made this announcement last week on november 2 that he was stepping down from renaissance and he also kind of made these comments about his political views, even keep in mind, this is a person who has never discussed his political views at all. Julia the kind of does not need to, given who he is bankrolling. It set off a lot of speculation about whether hes stepping back from bannons projects in being this conservative megadonor that he has been. Carol is he . It is interesting. He made a lot of statements where among other things he denounces milo yiannopolis, this rightwing provocateur that he had given a lot of money to, and he distances himself from steve bannon. He says we talk about politics all the time but i make my own decisions. Almost like hes talking about his barber or cab driver. This is somebody who has been his close political advisor and he bankrolled banons entire suite of projects over the last few years. Julia with Breitbart News, are if you are suggesting that the politics of steve bannon and milo you does not agree with, it is not going very far. Breitbart news may be going somewhere but its not going too far. Explain what is going on to understand what is going on with his conservative values. Josh green and i, who cowrote the movies, talked to people around mercer and bannon, and this ise is that we not about stepping away from bannon or a change of direction. This might free him up a little more to do more. For instance, the sale of breitbart, he says he is selling it to his daughters. His daughter rebecca has always been the one that is the most handson in terms of breitbart. She is the one calling and story in story ideas and complaining about coverage. Carol and working closely with steve bannon. Thats right. Julia unions have championed themselves as advocates of safe workplaces. Carol reports suggest that the Labor Movement has work to do. Heres reporter josh adelson. Josh the Largest Labor federation in the u. S. Had its National Convention a few weeks ago. It happens every four years. It started in an unusual way. The Federation President read to all of the delegates from the recently strengthened code of conduct against Sexual Harassment and other kinds of misconduct. And actually presented for all of the delegates contact info for two people they could report Inappropriate Conduct two. He told me earlier that morning that there was a zerotolerance policy of the aflcio and he thought the federation was on the cutting edge and if not wanted to be on the cutting edge on these issues. Carol this is not just about reaction to what has been going on in terms of Harvey Weinstein and companies coming out about their policy. This is about stuff going on within the aflcio specifically . Josh there has been described a reckoning throughout the culture. As we know, post Harvey Weinstein about Sexual Harassment and misconduct. It is now in the u. S. Labor movement. What it was that led to some of these announcements, people can speculate about. The code of conduct of the aflcio goes back to march, to the executive Council Meeting that they had done. We now know that there have been serious allegations within the aflcio, even about conduct going on during that same executive Council Meeting at which they were approving this new code of conduct. Julia as you mentioned, it was his assistant, the chief budget officer, that was in the spotlight. Explain a bit about what happened. Josh perry stapleton, chief budget officer at the aflcio, we reported was accused of inappropriate behavior towards female administrative assistants in the office. We reported that the response of the aflcio to the allegations, which included pressuring a woman to have a sexual relationship with him and suggesting that he could protect her job if she did, the reaction to those allegations from the aflcio was a series of disciplinary measures including a twoweek suspension and making him pay for the cost of additional framing around these training around these issues but he did not lose his senior staff position. It was a no come that many of the former staff that i spoke to did not think was sufficient. The outcome changed when we reached out to the aflcio, telling them that we plan to write about this issue. A couple of days later, Terry Stapleton resigned from his job. Carol up next, President Trump hunts for trade deals in asia. Julia hoping for successful Winter Olympics fading fast. Carol this is bloomberg businessweek. Julia welcome back to bloomberg businessweek. Im julia chatterley. Carol and im carol massar. You can also listen to us on the radio on sirius xm, am 1330 in boston, and am 960 in the bay area. Julia and in london and in asia on the Bloomberg Radio plus app. In the politics section, President Trumps withdrawal from the Transpacific Partnership has put him in a difficult position when it comes to asian commerce. Carol he is seeing that firsthand with a trip to the region. Heres economics editor peter coy. Peter as one of his first acts in office, he pulled out of the Transpacific Partnership. That big 12 nation trade deal, countries along the pacific rim that was highquality in terms of components that the u. S. Looks for, which is restraints on the ability of state owned enterprises to subsidize, to get subsidies from the government, and so on. It had a lot of things that countries were reluctant to give and it had been won over intense negotiations, kind of trench warfare. And so when trump pulled out of it, a lot of people saw it as a backward step for the u. S. And i think now we are seeing that that turned out to be the case. Carol we have seen in history that it is better to be a part of these agreements. Think about a u. S. Multinational. It does business with multiple countries. If each country as a separate deal with domestic content rules or other things, that sort of splinters commerce. It is exactly the wrong way to go. What you want is a common set of rules across all of the markets that you play in. Carol where does that leave President Trump and his team in terms of negotiating trade . He already backed out of tpp. I mean, countries do not want to do Bilateral Agreements with him, and do they . I talked to a trade expert today who was saying that the u. S. Not right now. I talked to a trade expert today who was saying that the u. S. Is going to find slow going with the likes of japan and korea. They will say the status quo is not terrible. If we think that President Trump will make strong demands, we may be better off sticking with what we have. We will help trump save face by going through the motions of talking but we will not make any concessions. They may be just trying to out weight him. Carol in the economic section, south korea is preparing to host the olympics. Julia they might have trouble shaking off the threat of north korea. The corporate scandals in south korea. Carol here is our editor. It is a perfect storm of bad stuff. Actually, as we found out it is not just the threat from the north that may keep people away. At home, the threat from the north may keep people away. At home, people are demoralized with scandals, bigname companies. Carol you are talking about samsung . One prominent one. Carol the government . That is right. They do not have big champions in the games this year. In previous years they were strong in iceskating. So, that is also in depressing i think. Carol meanwhile, they are building, right . They are putting on the final touches. And expecting lots of money. They are going to be ready, unlike socchi, where reporters were on social media sending photos of missing Manhole Covers and dirty water and the door fell off in my hands. You know, that was all the stuff. When we checked in on the facility that is going to host the opening and closing ceremonies in midoctober, that was done. They were putting the finishing touches on that. The area is already a tourist area, mostly domestically. So, it has facilities. It is going to be a highspeed rail link from seoul, so people will be able to stay and take the train and for the day if they are going to see an event. So, there has not been as much spending required. Carol i am sitting at home and listening to this and thinking, wait a minute. How close is it going to be held . 60 miles. Carol are people buying tickets to events . Are they anticipating that people in the south korea or tourists will be coming in . They only sold 30 when we checked in other targets. Carol that sounds low. But i dont understand it is true that they have set it. Ticket sales accelerate as they get closer. You were saying that we have forgotten this is going to happen. They are saying, when the torch relay starts, that is when the world wakes up to the fact that especially the winter games are happening. That just wrapped up. They are saying that the last three months are crucial. But still, they acknowledge that they are running behind. The ironic thing is that they have sold more tickets to International Buyers, although proportionately, only 350,