Author Topic: Republican Tax Plan  (Read 2132 times)

rightleft22

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Re: Republican Tax Plan
« Reply #100 on: November 30, 2017, 02:44:20 PM »
Dance Seriati Dance

Seriati

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Re: Republican Tax Plan
« Reply #101 on: November 30, 2017, 03:57:28 PM »
Lol, nothing like a substantive rejoinder to get the blood pumping, or I guess in this case the feet moving.

D.W.

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Re: Republican Tax Plan
« Reply #102 on: November 30, 2017, 04:11:41 PM »
It's a perception problem.  Wouldn't it be possible to write the tax code in such a way that allowed them to get deductions for raising wages? 

There is no public trust in trickle-down economics.  Citing it as a sure thing is ridiculous, even if economic theory makes a well reasoned case for it.

If the objective is to help out the middle class "average working American" there are more strait forward ways. 

Even if we get a best case scenario outcome on this, which seems fanciful to most, the optics on it are terrible.  If the PR on this bill was a movie trailer, I think everyone walking out of the theater would be wondering WTF they just watched.  Then we hope that 5-10 years later there will be a cult following of fans and everyone will forget the BS trailer used to lure some in for opening weekend numbers?  :)

Seriati

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Re: Republican Tax Plan
« Reply #103 on: November 30, 2017, 06:16:03 PM »
I don't view cutting the corporate tax rate as "trickle down" economics.  Corporations generally have to do something with the money they take in as profits, heck they actually spend a bunch of money that isn't profit as well.  The goal is to make a good use of that money to pay better wages, and honestly if you've worked for any company, you'd already know raises show up in "boom" years in much larger amounts and with much greater frequency.  When the company is doing well they really do pay more.  I'm not sure you're correct that there are more "straight forward ways" at least when it comes to getting raises to the middle class.  I'm not terrible inclined to support paying more taxes to provide more redistributed benefits either.

The point about optics really bothers me.  It seems like everything these days is decided based on the simplest surface understanding (ie optics).  People vote against their own interests everyday because of "optics."  What we ought to be doing is engaging in education, but I feel like half the time you can't out educate the rate of deliberate mis-education.  I mean here, one could dispute how much a corporate tax benefit benefits workers versus shareholders, but arguing that it doesn't benefit workers?  That's just bad science.

TheDrake

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Re: Republican Tax Plan
« Reply #104 on: November 30, 2017, 06:42:54 PM »
I think it is more interesting to ask "which workers might benefit" and where you're going to make up the shortfall (I don't believe all the missing corporate tax is going to be covered by growth).

Skilled workers benefit more than unskilled workers
Union workers benefit more than non-union
Possibly H1B workers benefit more than citizens (there aren't a bunch of out of work skilled people waiting for more investment.
Workers in an industry that produces exports benefit more

Other than exports, it is unclear to me how cutting corporate taxes would provide any more benefit than cutting personal income tax with respect to existing businesses. It is possible that new businesses may choose to locate in the US based on a tax advantage, but that's going to take a while before it really kicks in which is harder to measure. You'd cut tax, then two years later a business might grow enough to help move the needle. Larger companies looking to expand offices are going to take as long as Amazon to figure it out.

So if your goal is to benefit workers, why not chop out that $150B per year by cutting middle class taxes directly? After all, they'll have to spend that money on something - just like corporations, so that becomes revenue to corporations for the most part, right?

NobleHunter

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Re: Republican Tax Plan
« Reply #105 on: November 30, 2017, 06:46:54 PM »
You could also go after payroll taxes. Since we expect corporations to provide jobs, it makes no sense that we tax them by the number of jobs.

Wayward Son

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Re: Republican Tax Plan
« Reply #106 on: December 05, 2017, 12:55:33 PM »
Because of the sober and careful pace that the Senate went through to write their version of the tax bill, they accidently eliminated all corporate deductions. :)

Quote
Mitch McConnell never subjected his blueprint for restructuring the world’s largest economy to a single hearing. His caucus never invited experts to offer insight into the bill’s implications for housing, health care, higher education, outsourcing, or tax evasion. This haste had an upside for the Senate GOP: It allowed the party to pass deeply unpopular changes to the tax code before the public had time to learn about them.

But approaching major legislation like an Adderall-addled sophomore approaches an overdue term paper came with a minor drawback: It forced the party to pass a tax bill before they had time to read it.

In hindsight, McConnell should have asked for an extension. While Republicans were manically outlining their plans to take from the poor to give to the Trumps, they also, accidentally, nullified all of their corporate donors’ favorite deductions.

This screwup — like most of the tax plan’s oddest features — was born of a math problem. Due to arcane Senate rules, the Trump tax cuts can only add $1.5 trillion to the deficit over the next decade. Last Thursday, the Senate tax bill already cost about that sum, and then McConnell started making expensive promises to his few holdouts....  This left the Senate Majority Leader searching under the tax code’s couch cushions for new sources of revenue.

Eventually, he came upon the corporate alternative minimum tax (AMT). At present, most corporations face a 35 percent (statutory) rate on their income. But by availing themselves of various tax credits and deductions, most companies can get their actual rates down far below that figure. To put a limit on just how far, the corporate AMT prevents companies from paying any less than 20 percent on their profits...

The GOP had originally intended to abolish the AMT. But on Friday, with the clock running out — and money running short — Senate Republicans put the AMT back into their bill. Unfortunately for McConnell, they forgot to lower the AMT after doing so.

This is a big problem. The Senate bill brings the normal corporate rate down to 20 percent — while leaving the alternative minimum rate at … 20 percent. The legislation would still allow corporations to claim a wide variety of tax credits and deductions — it just renders all them completely worthless. Companies can either take no deductions, and pay a 20 percent rate — or take lots of deductions … and pay a 20 percent rate.

With this blunder, Senate Republicans have achieved the unthinkable: They’ve written a giant corporate tax cut that many of their corporate donors do not like.

It actually increases the taxes of some of those corporations. :)

And this is just the first one.  Remember the bad wording in Obamacare that allowed states to opt-out of providing state-run sites to choose insurers?  This bill must be riddled with such errors, although the others will be less blatant and take longer to discover.

Great going, McConnell.  You guys sure know how to run a country. :D

Mynnion

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Re: Republican Tax Plan
« Reply #107 on: December 05, 2017, 02:46:40 PM »
Any thoughts on how the increase in the standard deduction will impact charitable giving?  I have been wondering what if any change in giving patterns will occur when much of the benefit of itemizing is removed.

yossarian22c

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Re: Republican Tax Plan
« Reply #108 on: December 05, 2017, 03:06:40 PM »
Any thoughts on how the increase in the standard deduction will impact charitable giving?  I have been wondering what if any change in giving patterns will occur when much of the benefit of itemizing is removed.

I've wondered this as well, killing/limiting any of the major deductions (mortgage interest or state/local/property taxes) basically nullifies the others as well with the larger standard deduction. It makes filing taxes a little simpler but really impacts a lot of economic decisions. It's worrisome how rushed this bill was and how little public debate there was on it. It will be interesting to see what emerges from the conference committee and if it can still pass both houses. It seems likely that whatever comes out will pass but this is a real dud politically (and I would argue economically) for a tax cut.

Seriati

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Re: Republican Tax Plan
« Reply #109 on: December 05, 2017, 03:31:00 PM »
It may impact some charitable donations, but it's not likely to make a huge difference.  The big charitable deduction people are wealthy enough that they will still be itemizing.  It doesn't take that much for the charitable deduction alone to exceed to exceed the standardized deduction.  It also still works for estate planning.

You're really talking about a fairly narrow range of people, who were getting fairly modest benefits (granted a couple thousand each really adds up), but it's not clear that most of them weren't donating because they supported the causes and the deductions were a secondary interest.  I mean, what are the most common?  Museum memberships?  Goodwill donations?  Friends charity efforts?  Pretty much all things that will continue.

It may impact churches, but I'm not sure that most of their donors are itemizing.

D.W.

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Re: Republican Tax Plan
« Reply #110 on: December 06, 2017, 11:21:51 AM »
Anyone up to speed on the corporate minimum tax?  It sounded like this may be ironed out when the two bills get reconciled.  Was this intentional?  Cut the tax rate but maintain the minimum (which is almost the same as the top now)?

Wayward Son

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Re: Republican Tax Plan
« Reply #111 on: December 07, 2017, 03:45:57 PM »
Here's a lovely bit of news I didn't find out until now.

You may have heard about the increase in the Standard Deduction for everyone.  Going from $6,350 for individual and $12,700 for families to $12,000 and $24,000, respectively.  I've been comforting myself, knowing that no matter what else, at least I'm at least getting that decrease in my taxes.

Not so fast...

They are also eliminating the Personal Exemption of $4,050 per person.  :o

So my small family loses $12,150 in exemptions while only getting $11,300 in an increase in the Standard Deduction.  I'll be paying $850 more in taxes.  >:(

A single person will be paying $1600 less in taxes (not $5,650 less as you'd expect).  A married couple will pay $3,200 less.  But give the couple one child and they only pay $150 less.  A second child means they pay $2,900 more each year (as long as the children are under 17 and gets the additional $1000 in the child tax credit*).  And they get hit with a $3,050 tax increase for each additional child.

The Mormons are going to love this.  ;D

The Los Angeles Times has a good break down on it.  (The article is a couple of months old, but Forbes seems to indicate the changes are still there.)

The bottom line, though, is if you thought the GOP tax cut was going to cut your taxes significantly, look again.  You may be surprised...

*As long as they are not poor, since the Child Tax Credit is limited to up to 15 percent of their income over $3000.
« Last Edit: December 07, 2017, 03:54:52 PM by Wayward Son »

TheDrake

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Re: Republican Tax Plan
« Reply #112 on: December 07, 2017, 04:06:06 PM »
I'm glad we're finally getting rid of the baby subsidy. It never made sense to me why we would create incentives to have a big family, unless it is to prop up social security...  Being facetious, I know this was about "poverty level" and roughly trying to make sure that there wasn't federal income tax on basic subsistence.

I don't see how a $4,050 deduction is turning into a $3,050 tax increase, wayward. It seems that this is an increase in taxable income, not tax. Tax itself would be at the highest rate for the individual filing.


Wayward Son

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Re: Republican Tax Plan
« Reply #113 on: December 07, 2017, 04:23:20 PM »
I am speaking about how much an individual or a family actually pays in taxes.  How that is termed, and how it comes about--as a "tax increase" or whatever--is not my point.  If there is a tax cut and you end up paying more in taxes, it ain't no tax cut to you. ;)

yossarian22c

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Re: Republican Tax Plan
« Reply #114 on: December 07, 2017, 05:02:42 PM »
I am speaking about how much an individual or a family actually pays in taxes.  How that is termed, and how it comes about--as a "tax increase" or whatever--is not my point.  If there is a tax cut and you end up paying more in taxes, it ain't no tax cut to you. ;)

There is a difference in taxable income and taxes paid.

Pete at Home

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Re: Republican Tax Plan
« Reply #115 on: December 08, 2017, 11:52:56 AM »
Ever since the election, I have been fighting the lies, the hyperbole, the sophistry being laid against Trump and the Republicans. I tried to make clear that I was not paying pro-republican so much as anti lies anti hyperbole and anti sophistry. When someone started shooting Congressman on a baseball field, I said that this was because of the awful things being said about Trump, the people were being brainwashed.

But here, Trump and the Republicans have done something everything as bad as all the lies and hyperbole about them has been for months. If someone were to go shooting at them on a field today, I would shrug and say that someone had accepted their declaration of war against the American people. I personally want nothing to do with sedition or violence. I'm looking into leaving the country. Not out of protest not out of lack of love for my country but simply because I want to survive without killing or being part of a killing machine. We're facing an era of violence where neither side is right, like the Spanish Civil War we're Stalin's pawns fought Hitler's pawns. The only way to win is not to play

Pete at Home

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Re: Republican Tax Plan
« Reply #116 on: December 08, 2017, 12:06:06 PM »
Eliminating the child tax benefit, eliminating tax breaks on student loan interest, and trying to cut off any immigration bonus for this with American families... This is the most anti-family regime in IS history

Seriati

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Re: Republican Tax Plan
« Reply #117 on: December 12, 2017, 10:53:53 AM »
Interesting follow-up on the international response to the tax bills:

https://www.wsj.com/articles/european-finance-chiefs-hit-out-at-u-s-tax-plans-1513000469

Fairly balanced as well.  Nut shell is that both Europe and China are panicking and preparing tax responses to prevent investment from flocking to the US.  Seems an odd response if you guys are correct and I'm completely wrong.

yossarian22c

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Re: Republican Tax Plan
« Reply #118 on: December 12, 2017, 11:47:57 AM »
Interesting follow-up on the international response to the tax bills:

https://www.wsj.com/articles/european-finance-chiefs-hit-out-at-u-s-tax-plans-1513000469

Fairly balanced as well.  Nut shell is that both Europe and China are panicking and preparing tax responses to prevent investment from flocking to the US.  Seems an odd response if you guys are correct and I'm completely wrong.

I don’t think anyone here has argued that the tax cuts aren’t good for businesses and the wealthy. The argument I have been making is that the tax cuts do not benefit the average person (particularly those in blue states). Taxing tuition wavers and eliminating the tax deduction for medical expenses seriously hurts a lot of low income people.

TheDrake

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Re: Republican Tax Plan
« Reply #119 on: December 12, 2017, 04:29:26 PM »
Fairly balanced as well.  Nut shell is that both Europe and China are panicking and preparing tax responses to prevent investment from flocking to the US.  Seems an odd response if you guys are correct and I'm completely wrong.

As Yossarian said, GDP and dividends can go up sharply without making a dent in a particular person's hourly wage. Additionally, I made the point a couple of eons ago in this thread that attractive export economics are a big result of reducing corporate tax. That says very little about how different subgroups will fare, or the specific claim that it will "raise wages".

D.W.

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Re: Republican Tax Plan
« Reply #120 on: December 12, 2017, 05:09:42 PM »
I read something about this plan driving up the value of the dollar, which in turn hurts exports.  Is this just a minor "won't be as good as you hope" nay-saying?  Or is their any merit to this line of thinking? 

On the wages front, our market is already as competitive and qualified as ever, yet wage growth hasn't reflected this.  As unemployment numbers go down, you would think compensations should go up.  But maybe this is going to be the silver bullet.  Maybe this town trickle down economics will save the day...    ::)

I'm not against making us more attractive from a global perspective, but the sham salesmanship BS on this bill is annoying. 

Wayward Son

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Re: Republican Tax Plan
« Reply #121 on: Today at 12:33:36 PM »
FiveThirtyEight had an interesting article on the effectiveness of the GOP tax plan to stimulate the economy.

Quote
Gary Cohn, director of the National Economic Council and one of the “Big Six” Republicans behind President Trump’s tax rewrite, was on stage at The Wall Street Journal’s annual gathering of business executives in Washington last month defending the plan...

The host from the Journal asked the audience for a show of hands: Who would use the tax windfall to invest more in their companies?...

[T]he response from the impromptu focus group at the Journal event was muted; only a smattering of the assembly’s members indicated they would use the proceeds from a tax cut in a way that would produce a stimulative effect.

“Why aren’t the other hands up?” Cohn asked.

Here’s one answer: Cohn and others in the Trump administration might have oversold the potential benefits of their tax plan. One big reason that the legislation won’t supercharge the economy is that the tax cut isn’t as big as it looks on paper.

The articles goes on to explain:

Quote
[T]hanks to a bevy of deductions, few American corporations actually pay 39 or even 35 percent. Estimates vary, but Kent Smetters, the Wharton School professor who runs the Penn Wharton Budget Model, said in an interview that he reckons the average effective rate that U.S. corporations pay is around 22 percent...

The average rate paid by money-making, publicly traded companies at the start of the year was about 26 percent, according to calculations by Aswath Damodaran, a finance professor at New York University’s Stern business school. Most of the rates ranged from about 7 percent for software companies to just under 39 percent for the retail sector.

Therefore, the change in the statutory rate is a crude way to estimate how companies would respond to the proposed tax law: Some industries would see a sizable windfall, others a small gain, and some companies would see no gains at all.

Another complicating factor is that companies that pay the corporate rate account for only about half of total business income. The rest is generated by “pass-through companies,” which tend to be smaller businesses where the owner or owners are taxed at personal rates...

The five biggest banks would have saved more than $11 billion in 2016 if they paid an effective tax rate of 20 percent, which was the rate originally proposed in the bills passed by the House and Senate. That was significantly more than any other group of publicly traded companies would have saved, according to an analysis by S&P Global Market Intelligence.

And it turns out that the banks are an excellent example of why there’s so much skepticism about the Republican tax plan. American corporations have been piling up profits in recent years, yet labor’s share of corporate income has been on a steady decline. There is academic support for the view that reducing corporate taxes could trigger job and wage growth. But in the real world, it seems unlikely that banks would use their tax cut to go on a hiring spree, as they have reduced their headcounts over the past decade. They might instead choose to take those billions and do more lending. Or they might give most of it back to their investors.

Bank of America chief executive officer Brian Moynihan, for one, noted in his letter to shareholders this year that the company had raised its minimum wage to $15 an hour. But his priority clearly was to use profits to repurchase the shares the company issued when it needed money to survive the financial crisis. “We need to continue to reduce the number of shares outstanding,” Moynihan said. “This is essential if we want our stock price to exceed the record highs we have achieved...”

Advocates such as Cohn say individuals will benefit when corporations come back to the United States once the corporate tax rate is more in line with that of the rest of the developed world. “I would like to get the tax rate as low as possible so that businesses want to create jobs here,” he told the Financial Times in August. But even the tax cuts in the GOP bill may do little to help achieve that, as the companies that left are probably already paying rates of around 20 percent.

According to an analysis by the Congressional Budget Office using for data for 2012, the median of the average corporate rate paid in 17 big economies was 20.4 percent.

There is one other factor that hasn't gotten enough attention:  inflation.  With this sudden influx of money into the American economic system, prices may increase greatly, especially if companies decide to invest their windfall in real property rather than in innovation and salaries.

What really worries me right now is how many companies will repurchase stock to raise their "stock price to exceed the record highs we have achieved."  This could create a stock price bubble, which it feels like we are having right now.  (What is the current stock price/company value ration?)

Crunch

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Re: Republican Tax Plan
« Reply #122 on: Today at 01:50:03 PM »
There is one other factor that hasn't gotten enough attention:  inflation.  With this sudden influx of money into the American economic system, prices may increase greatly, especially if companies decide to invest their windfall in real property rather than in innovation and salaries.

If the vast cash injections of QE1 and QE2 didn't cause inflation, I'm hardly concerned about a corporate tax cut causing it.

What really worries me right now is how many companies will repurchase stock to raise their "stock price to exceed the record highs we have achieved."  This could create a stock price bubble, which it feels like we are having right now.  (What is the current stock price/company value ration?)

This has been happening since QE1 and QE2, that's what a lot of companies did with the money. That's why, while the Obama economy was flat, stock prices continued to go up after the initial shock. None of these companies will want to buy so fast they make the stock unaffordable for their buyback. They'll slowly buy back over a period of years. But, if you think it's a bubble about to burst, you can time it and short stocks and get rich. Kind of a win for you either way they go if you want to take advantage of it - I'm sure those that are in a position to do so, will. Assuming this scenario comes to pass. The beauty of the market is it's self correcting as long as the government doesn't artificially manipulate it.

Wayward Son

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Re: Republican Tax Plan
« Reply #123 on: Today at 02:04:22 PM »
There is one other factor that hasn't gotten enough attention:  inflation.  With this sudden influx of money into the American economic system, prices may increase greatly, especially if companies decide to invest their windfall in real property rather than in innovation and salaries.

If the vast cash injections of QE1 and QE2 didn't cause inflation, I'm hardly concerned about a corporate tax cut causing it.

As I understand it, QE1 and QE2 occurred during the recession, which is a different environment than today.

Quote
What really worries me right now is how many companies will repurchase stock to raise their "stock price to exceed the record highs we have achieved."  This could create a stock price bubble, which it feels like we are having right now.  (What is the current stock price/company value ration?)

This has been happening since QE1 and QE2, that's what a lot of companies did with the money. That's why, while the Obama economy was flat, stock prices continued to go up after the initial shock. None of these companies will want to buy so fast they make the stock unaffordable for their buyback. They'll slowly buy back over a period of years. But, if you think it's a bubble about to burst, you can time it and short stocks and get rich. Kind of a win for you either way they go if you want to take advantage of it - I'm sure those that are in a position to do so, will. Assuming this scenario comes to pass. The beauty of the market is it's self correcting as long as the government doesn't artificially manipulate it.

Yes, and those who can afford to short stocks are doubtlessly counting on it.

But what about all those workers who have their 401Ks invested in stocks?  They probably will be the ones who will suffer the loses.

Which doubtlessly is what some people are counting on. ;)