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Republicans Release Tax Plan

 
 
 
Jimmy Higgins said:
Don2 (Don1 Revised) said:
These are major changes. So I am probably going to have to hire an accountant.
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What are the major changes, I mean other than to the deductions us proles could actually take advantage of?

Based on what I've read, the mortgage interest / property tax / state tax issues could make this a non-starter as 35 Republicans could be voting to raise taxes on their constituents.
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At this point I doubt the Republicans can get anything substantial through the Senate. There's nothing that will get the vote of both the extremists and the ones who aren't running for re-election.
 
Jimmy Higgins said:
Here is an interesting article on the bill.
article said:
Then there is the GOP’s big addition to the tax code, which would add new complexity: a new, 25 percent rate for so-called “pass through” companies, which include everything from small businesses to hedge funds. Republicans argue that the rate will promote investment and increase economic growth, but it will also encourage high-income individuals to reclassify their income so they can take advantage of the 25 percent rate. Republicans crafted a complicated set of rules to block such tax avoidance, which will create new headaches for the 95 percent of businesses organized as pass throughs. “There will be complex rules in the code and then complex regulations and then complex struggles to enforce it,” said David Kamin, a tax expert at New York University who was an economic adviser to Barack Obama.

The same problem exists with the GOP plan to change how businesses’ overseas earnings are taxed. Under the current tax code, those earnings are not taxed until they are brought back into the U.S., leading to trillions of dollars of income kept offshore. Republicans want to move to a system where only domestic earnings are taxed. But this would create a huge incentive for businesses to shift their income so it appears as foreign income, requiring policymakers to create new rules to prevent such tax avoidance. “That will be a full employment act for international tax lawyers in the U.S.," said tax lawyer Libin Zhang.
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That's for all practical purposes eliminating corporate taxes on big business.

While I would like to see all business income taxes eliminated (in reality they're just passed through to the consumer and are thus regressive) this is not how to do it!
 
I just caught a bit of a town meeting run by Pelosi with public input. Lots of crap buried in this tax plan. US corporations pay taxes on businesses in the US. But not on taxes on operations outside the US! This will mean it pays to send jobs off shore. Just insanely stupid. This was presented by an ex-Nabisco worker whose job was just sent to Mexico.
 
Cheerful Charlie said:
I just caught a bit of a town meeting run by Pelosi with public input. Lots of crap buried in this tax plan. US corporations pay taxes on businesses in the US. But not on taxes on operations outside the US! This will mean it pays to send jobs off shore. Just insanely stupid. This was presented by an ex-Nabisco worker whose job was just sent to Mexico.
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They don't need to send jobs offshore to take advantage of the tax break. Just play games with costs and legally get to pay $0 in taxes.
 
Loren Pechtel said:
Cheerful Charlie said:
I just caught a bit of a town meeting run by Pelosi with public input. Lots of crap buried in this tax plan. US corporations pay taxes on businesses in the US. But not on taxes on operations outside the US! This will mean it pays to send jobs off shore. Just insanely stupid. This was presented by an ex-Nabisco worker whose job was just sent to Mexico.
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They don't need to send jobs offshore to take advantage of the tax break. Just play games with costs and legally get to pay $0 in taxes.
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You are correct that it is easy for corporations to fiddle with costs to offshore profits. But it isn't legal to do it.

Which raises another point, shifting domestic income offshore to avoid taxes is illegal. Allowing those corporations now to bring those illegally offshored profits back at a reduced tax rate is allowing those corporations to profit from an illegal act. This is something I am sure that the Republicans don't allow in their proposed bill, but I haven't read anything about how they plan to avoid it.
 
The idea that cutting taxes on corporations will increase wages in the US is dependent on capital inflows into the US from overseas and increases in the marginal productivity of labor.

The marginal product of labor is the change in output divided by the change in labor required. The marginal productivity of labor is the change in output gained by the addition of a unit of labor. The theory behind the promises is that the increase in wages comes from the increasing productivity of the labor due to infusion of capital from lowering the corporate profits tax.

The idea that at least part of this additional capital would come from overseas is based on the added attractiveness of investing in US corporations. This is based on the belief that an investment in the stock market is an investment in the company whose stock is bought and that somehow investing in the company by buying their stock provides the company with money that the company can use to improve productivity or to build new production facilities. But this is not true. Except for the very rare IPOs or the even rarer SEOs the money that you use to buy stock goes to the person who owned the stock before you bought it. It doesn't provide any money to the company.

Indeed the American stock market is attractive to foreigners, it is estimated that 35% of the money in the US stock markets comes from foreigners. But this fact presents a problem for the rosy predictions of conservatives about the advantages of the tax cuts. It means that 35% of the tax cuts for corporations is going to foreigners. This is 700 billion dollars over ten years going to foreigners. This is a rush of capital that is currently being spent in the US that is going to be leaving the country.
 
SimpleDon said:
Loren Pechtel said:
They don't need to send jobs offshore to take advantage of the tax break. Just play games with costs and legally get to pay $0 in taxes.
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You are correct that it is easy for corporations to fiddle with costs to offshore profits. But it isn't legal to do it.

Which raises another point, shifting domestic income offshore to avoid taxes is illegal. Allowing those corporations now to bring those illegally offshored profits back at a reduced tax rate is allowing those corporations to profit from an illegal act. This is something I am sure that the Republicans don't allow in their proposed bill, but I haven't read anything about how they plan to avoid it.
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While it's illegal there is no meaningful enforcement even now. There would be none at all under the Republicans. The big corporate tax rate would be 0%.
 
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