GOP Tax Bill Is The End Of All Economic Sanity In Washington - Forbes

[Horatio Parker]

It is incredible how little support this bill is receiving... yet it continues to move forward. All that remains is for the Tax Fndn to speak out against it, which I think unlikely.

Within six votes I read today.

a little cryptic here... care to elaborate?

That there are six Repug Senators on the record with reservations about the bill. Considered potential "no" votes.

 

[Jimmy Higgins]

It sounds like this may be a LOT simpler having fewer allowable deductions but a higher standard deduction. I really like the idea of simpler taxes.

That is something we should all be able to get on board with.

I agree that there is a place for simpler taxes. For example, the corporate income tax. Reduce the tax rate to 20% and eliminate all of the thousands of special deductions and tax breaks that some corporations enjoy. Put all corporations on the same competitive footing and allow the hard pressed CEOs to file the corporation's taxes on a postcard so the corporation can get back to concentrating on its core business.

Why haven't you heard this floated as a good idea? Obama proposed it years ago and the GOP didn't remotely consider it. (He proposed it at 25%, but with the primo negotiating chops of the GOP and the proven inability of the Obama administration to negotiate, i.e. trade, Iran, etc., the GOP could have negotiated it down to 15%)

The AMT still exists, therefore the tax code has not been simplified much at all.

 

[funinspace]

A few more thoughts on the tax bills wandering thru Repug Congressional circles...

Here is a Federal Reserve survey that doesn't seem to suggest companies will be doing lots of hiring due to this huge tax cut. The question: “If passed in its current form, what would be the likely impact of the Tax Cuts and Jobs Act on your capital investment and hiring plans?”
https://www.frbatlanta.org/research/inflationproject/bie/special-questions.aspx


Thoughts from the retired CEO from Brightcove, David Mendels:
https://www.linkedin.com/pulse/chie...ump-most-excited-group-out-big-david-mendels/

Why we should believe that this increase in profitability will lead to wage increases when we have already seen that increases in profitability over the last 10 years did not, but rather went to stock buybacks and dividend increases that benefitted the investors? As a CEO and member of the Board of Directors at a public company, I can tell you that if we had an increase in profitability we would have been delighted but it would not lead in and of itself to more hiring or an increase in wages. Again, we would hire more people if we saw growing demand for our products and services. We would raise salaries if that is what it took to hire and retain great people. But if we had a tax cut that led to higher profits absent those factors, we would “pocket it” for our investors.
<snip>
I hope more CEOs, executives and investors will speak out. The proposed tax plan might leave more $$ in our pockets and if you want to make that case I suppose it is your right, but trying to fool people that it is all about the middle class---that is just wrong. I believe that I (and the many other CEOs and top executives I know) have already done incredibly well in this economy and putting more dollars in our pockets right now is not a priority for our society.

RVonse, do you have significant income comes from investments? FWIW, I have a decent income stream from investments, beyond my W-2 income. So I will probably benefit from this Repug largess...that I don't support, as I don't need a tax cut.

 

[SimpleDon]

It sounds like this may be a LOT simpler having fewer allowable deductions but a higher standard deduction. I really like the idea of simpler taxes.

That is something we should all be able to get on board with.

If your tax preparation process takes you through the motions of checking all your deductions just to inform you in the end, you should take the standard deduction, that kind of sucks the simple right out of the process.
I reckon in the end it will be a matter of what gets eliminated and what remains but doesn’t exceed the standard deduction threshold. But folks will still be going through the motions.

I have noticed many of the talking heads on MSNBC harping on these deductions teachers and parents of college age students, etc will be loosing. Would be nice if they injected a degree of objectivity into the equation and spoke on the benefit of the standard deduction, or just avoid the topic all together and focus on the investor class.

After 2025 the doubled standard deduction goes away but none of the deductions taken away return, student loan interest, medical, etc. The house bill on the other hand creates a deduction for up to $10,000 of private school tuition. Why do you think that is?

 

[funinspace]

It sounds like this may be a LOT simpler having fewer allowable deductions but a higher standard deduction. I really like the idea of simpler taxes.

That is something we should all be able to get on board with.

If your tax preparation process takes you through the motions of checking all your deductions just to inform you in the end, you should take the standard deduction, that kind of sucks the simple right out of the process.
I reckon in the end it will be a matter of what gets eliminated and what remains but doesn’t exceed the standard deduction threshold. But folks will still be going through the motions.

I have noticed many of the talking heads on MSNBC harping on these deductions teachers and parents of college age students, etc will be loosing. Would be nice if they injected a degree of objectivity into the equation and spoke on the benefit of the standard deduction, or just avoid the topic all together and focus on the investor class.

After 2025 the doubled standard deduction goes away but none of the deductions taken away return, student loan interest, medical, etc. The house bill on the other hand creates a deduction for up to $10,000 of private school tuition. Why do you think that is?

That is so the Repugs can retain the fantasy that this will only put a $1,500,000,000,000 dent in the federal debt pile after 10 years. They had to drop something out of the tax cut pile to keep the BS numbers from being even worse...so screw the middle is the 'go to' answer.

 

[Horatio Parker]

The deficit is a bunch of shit.

The problem with this bill is it exacerbates income inequality. Taxes should be lower - for working people. A payroll tax holiday wwould stimulate growth, this bill won't.

 

[Jimmy Higgins]

The deficit is a bunch of shit.

After the last 8 years of 'Obama deficits' it isn't shit. We had to endure the stat mining about 'Obama's deficits'. And now, all of a sudden, the Republicans want to pass a "tax cut" bill that is more like a gift to people like Trump who pay accountants to wiggle in the gray area of tax law in order to minimize their tax liability by taking regulations out of context (but still legal), dropping their effective tax rates to very nominal ones, below that of what us actual working people pay.

8 years of whining about Democrat deficits, and we have to endure this debt adding tax cut for the "middle class".

 

[Horatio Parker]

The deficit is a bunch of shit.

After the last 8 years of 'Obama deficits' it isn't shit. We had to endure the stat mining about 'Obama's deficits'. And now, all of a sudden, the Republicans want to pass a "tax cut" bill that is more like a gift to people like Trump who pay accountants to wiggle in the gray area of tax law in order to minimize their tax liability by taking regulations out of context (but still legal), dropping their effective tax rates to very nominal ones, below that of what us actual working people pay.

8 years of whining about Democrat deficits, and we have to endure this debt adding tax cut for the "middle class".

By itself it's meaningless, now and during Obama. It's a residual exploited by neoliberals to justify austerity, a hangover from the days of commodity currencies.

You're utterly convinced that there's "not enough money". It's a brainwash, get over it. There's plenty of money, it just doesn't go to those who need it.

A tax cut is expansionary, it adds more money to the economy. But the more it's slanted to savers as opposed to spenders, the smaller the impact. Last time I looked, it most favors incomes over $5M.

 

[jonatha]

The AMT still exists, therefore the tax code has not been simplified much at all.

No it doesn't. (HR1, passed by the House, section 2001, "REPEAL OF ALTERNATIVE MINIMUM TAX.")

As near as I can tell the Senate hasn't actually introduced a bill yet.

 

[jonatha]

As far as "simplification" goes, here's a gem from just the description (not the legislative text) of the Senate bill:

The Chairman’s modification provides that in the case of a taxpayer who has qualified business income from a partnership, S corporation or sole proprietorship, the amount of the 17.4- percent deduction is generally limited to 50 percent of the taxpayer’s allocable or pro rata share of W-2 wages of the partnership or S corporation, or 50 percent of the W-2 wages of the sole proprietorship. W-2 wages of a partnership, S corporation, or sole proprietorship is the sum of wages subject to wage withholding, elective deferrals, and deferred compensation paid by the partnership, S corporation, or sole proprietorship during the calendar year ending during the taxable year. Under a special rule, the W-2 wage limit does not apply in the case of a taxpayer with taxable income not exceeding $500,000 for married individuals filing jointly or $250,000 for other individuals. The application of the W-2 wage limit is phased in for individuals with taxable income exceeding this $500,000 (or $250,000) amount over the next $100,000 of taxable income for married individuals filing jointly or $50,000 for other individuals. The modification further provides that the exception allowing the 17.4-percent deduction in the case of certain taxpayers with income from a specified service business applies to those whose taxable income does not exceed $500,000 for married individuals filing jointly or $250,000 for other individuals. The benefit of the deduction for service businesses is phased out over the next $100,000 of taxable income for married individuals filing jointly or $50,000 for other individuals.

This provision, under the modification, sunsets on December 31, 2025​

This affects me but I have only a very vague idea how....

 

[laughing dog]

The deficit is a bunch of shit.

The problem with this bill is it exacerbates income inequality. Taxes should be lower - for working people. A payroll tax holiday wwould stimulate growth, this bill won't.

There is very little empirical evidence to support the idea that any tax cut has much effect on long-run growth. Tax cuts may spur spending in the short-run, but spending does not drive growth unless it is spent on capital goods or productivity enhancing technology in significant amounts.

 

[Jimmy Higgins]

The AMT still exists, therefore the tax code has not been simplified much at all.

No it doesn't. (HR1, passed by the House, section 2001, "REPEAL OF ALTERNATIVE MINIMUM TAX.")

As near as I can tell the Senate hasn't actually introduced a bill yet.

I'm sorry, I completely botched what I was trying to say... let me try again.

With the elimination of the AMT, the tax code can't possibly have been simplified much at all.

 

[LordKiran]

The deficit is a bunch of shit.

The problem with this bill is it exacerbates income inequality. Taxes should be lower - for working people. A payroll tax holiday wwould stimulate growth, this bill won't.

There is very little empirical evidence to support the idea that any tax cut has much effect on long-run growth. Tax cuts may spur spending in the short-run, but spending does not drive growth unless it is spent on capital goods or productivity enhancing technology in significant amounts.

Also the cut tax presumably has to come from somewhere, right? So are you really saving anything? There's no such thing as a free lunch or so the old wisdom goes.

 

[laughing dog]

The deficit is a bunch of shit.

The problem with this bill is it exacerbates income inequality. Taxes should be lower - for working people. A payroll tax holiday wwould stimulate growth, this bill won't.

There is very little empirical evidence to support the idea that any tax cut has much effect on long-run growth. Tax cuts may spur spending in the short-run, but spending does not drive growth unless it is spent on capital goods or productivity enhancing technology in significant amounts.

Also the cut tax presumably has to come from somewhere, right? So are you really saving anything? There's no such thing as a free lunch or so the old wisdom goes.

Conceptually, if the borrowed funds earn a sufficient return, the generated income will more than cover the repayment. Whether that is case with this tax cut and spending program is a different matter.

 

[jonatha]

The AMT still exists, therefore the tax code has not been simplified much at all.

No it doesn't. (HR1, passed by the House, section 2001, "REPEAL OF ALTERNATIVE MINIMUM TAX.")

As near as I can tell the Senate hasn't actually introduced a bill yet.

I'm sorry, I completely botched what I was trying to say... let me try again.

With the elimination of the AMT, the tax code can't possibly have been simplified much at all.

You find having to compute taxes twice using two different sets of rules simpler than doing it once?

 

[Jimmy Higgins]

No it doesn't. (HR1, passed by the House, section 2001, "REPEAL OF ALTERNATIVE MINIMUM TAX.")

As near as I can tell the Senate hasn't actually introduced a bill yet.

I'm sorry, I completely botched what I was trying to say... let me try again.

With the elimination of the AMT, the tax code can't possibly have been simplified much at all.

You find having to compute taxes twice using two different sets of rules simpler than doing it once?

Tax loopholes that lead to the AMT being necessary were never simple and this bill does not simplify it. The AMT is being removed so wealthy people can file uberly difficult tax returns to pay 2% effective rates on tens to hundreds of millions of dollars.

 

[Horatio Parker]

The deficit is a bunch of shit.

The problem with this bill is it exacerbates income inequality. Taxes should be lower - for working people. A payroll tax holiday wwould stimulate growth, this bill won't.

There is very little empirical evidence to support the idea that any tax cut has much effect on long-run growth. Tax cuts may spur spending in the short-run, but spending does not drive growth unless it is spent on capital goods or productivity enhancing technology in significant amounts.

Isn't there a shortage of aggregate demand? Isn't there excess capacity? Doesn't consumer spending drive two thirds of the economy? Aren't consumers highly leveraged? If we can't raise their wages, we can let them keep more.

If a demand side cut only leads to short term growth, I'll take it.

 

[Jimmy Higgins]

The deficit is a bunch of shit.

The problem with this bill is it exacerbates income inequality. Taxes should be lower - for working people. A payroll tax holiday wwould stimulate growth, this bill won't.

There is very little empirical evidence to support the idea that any tax cut has much effect on long-run growth. Tax cuts may spur spending in the short-run, but spending does not drive growth unless it is spent on capital goods or productivity enhancing technology in significant amounts.

Isn't there a shortage of aggregate demand? Isn't there excess capacity? Doesn't consumer spending drive two thirds of the economy? Aren't consumers highly leveraged? If we can't raise their wages, we can let them keep more.

If a demand side cut only leads to short term growth, I'll take it.

What growth? We keep hearing about growth, but haven't seen it. Obama cut taxes in '09 in an attempt to get a bit more money into the economy to stop a Depression from forming. That was crucial. The Reagan and W tax cuts were not followed by growth, but recessions.

 

[funinspace]

There is very little empirical evidence to support the idea that any tax cut has much effect on long-run growth. Tax cuts may spur spending in the short-run, but spending does not drive growth unless it is spent on capital goods or productivity enhancing technology in significant amounts.

Isn't there a shortage of aggregate demand? Isn't there excess capacity? Doesn't consumer spending drive two thirds of the economy? Aren't consumers highly leveraged? If we can't raise their wages, we can let them keep more.

If a demand side cut only leads to short term growth, I'll take it.

What growth? We keep hearing about growth, but haven't seen it. Obama cut taxes in '09 in an attempt to get a bit more money into the economy to stop a Depression from forming. That was crucial.

Well, at least the tax cuts did come while the economy was still in the dumpster, but I'd say that the FR did more of the heavy lifting...

The Reagan and W tax cuts were not followed by growth, but recessions.

The Reagan tax cuts of 1981, were signed in August 1981. The recession was July 1981 – Nov 1982. I don't really see how one hangs the recession on the tax cut there...never mind that the recession was very much driven by the actions of Volker's FR IMPOV. The Shrub tax cuts have a similar timing problem: Tax cuts signed June 2001; recession was Mar 2001– Nov 2001. Not that I am arguing cause and affect with the Reagan tax cuts, but the below generally looks looks like pretty darn good GDP growth numbers by the time one could realistically expect the tax cuts to have an impact on the numbers:

Year GDP growth
80 -0.2%
81 2.6%
82 -1.9%
83 4.6%
84 7.3%
85 4.2%
86 3.5%
87 3.5%
88 4.2%

Refs:
https://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States
https://www.thebalance.com/us-gdp-by-year-3305543

 

[Horatio Parker]

There is very little empirical evidence to support the idea that any tax cut has much effect on long-run growth. Tax cuts may spur spending in the short-run, but spending does not drive growth unless it is spent on capital goods or productivity enhancing technology in significant amounts.

Isn't there a shortage of aggregate demand? Isn't there excess capacity? Doesn't consumer spending drive two thirds of the economy? Aren't consumers highly leveraged? If we can't raise their wages, we can let them keep more.

If a demand side cut only leads to short term growth, I'll take it.

What growth? We keep hearing about growth, but haven't seen it. Obama cut taxes in '09 in an attempt to get a bit more money into the economy to stop a Depression from forming. That was crucial. The Reagan and W tax cuts were not followed by growth, but recessions.

"Leads to" not "has happened". The proposed cuts aren't aimed at working people. IIRC pretty much all tax relief from Reagan on has been supply side.

The only payroll tax relief was from Obama, and it was partial and temporary. Probably helped his reelection.