Tag Archives: economics

Wrong Response

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As usual. And as usual, the wrongness of the response is due to mischaracterizing the problem.

The Treasury Department on Thursday released 603 pages of proposed rules for the corporate alternative minimum tax, or CAMT, reaching a milestone in this exceptionally complex endeavor for regulators and corporate tax executives. The proposal comes more than two years after Congress passed the law creating the tax and more than 20 months after it took effect.

The rationalization is offered by the Biden-Harris’ Deputy Treasury Secretary Wally Adeyemo:

This is about tax fairness. The ability to use accountants and lawyers to reduce tax bills down to zero gives billion-dollar corporations a competitive advantage over smaller businesses.

They don’t understand what’s fair. Here’s what’s fair: make the problem irrelevant by simplifying the corporate tax code, rather than complexifying it, by reducing the corporate tax rate to that paid by those ill-treated small businesses. Even fairer, and not just for businesses, would be to reduce the corporate tax rate to zero for all businesses. That way, large corporations, with their accountants and lawyers, won’t have any “unfair” advantage over smaller businesses.

And there’d be no need to write 603 pages of regulation to implement a simple-sounding and wrong-headed tax rule. Which would reduce the need for all those Treasury bureaucrats whose jobs center on writing arcane, excessively complex regulations.

Here’s a Thought

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The article opens with this subheadline and lede:

There might be better ways to help low-income families than vastly expanding the child tax credit
The child tax credit is one of the few government entitlements that both political parties want to make more generous.

The problem with the child tax credit, though, is that rewards folks for not working—the credit is fully refundable, meaning that families get the full handout credit even if their income is lower than the credit.

My thought is this: switch to a low, flat income tax rate regardless of the source of income. That will leave more money in the hands of all American citizens—more than just the credit’s value—it’ll leave that money in our hands throughout the year, instead of our having to struggle through all twelve of the months of the current year, plus tax time, in order to get the money back in the following year (only a fraction of the credit is handed out in installments).

And it’ll encourage getting more work, or at the least reduce the government’s handout-induced discouragement of work, by leaving that erstwhile tax money in the hands of folks who work and pay taxes. Further, that erstwhile tax money already is coordinated [sic] with income; there’s no need to play games with indexing.

The problem with that, though, is strictly political. The move directly challenges the Progressive-Democratic Party’s addiction to constantly raising taxes. The move also would greatly reduce Party’s ability to curry favor and buy votes with credits and circuses’ handouts.

She Contradicts Herself

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Progressive-Democrat Vice President and Party Presidential candidate Kamala Harris does this with some regularity. Here’s her latest self-contradiction:

If you earn a million dollars a year or more, the tax rate on your long-term capital gains will be 28% under my plan, because we know when the government encourages investment, it leads to broad based economic growth[.]

Capital gains are the stuff of investment, both its goal and the source of funds for further investment as well as for initial investment in different directions.

Thus: Harris would “encourage” investment by taking investment funds away from investors via her higher taxes.

That’s some investment encouragement.

A Couple of Questions

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Former President and Republican Presidential candidate Donald Trump says he wants to “once again turn America into the manufacturing superpower of the world,” and that a couple of the ways he’d achieve that would be to reduce the corporate tax rate to 15% for those companies that make their products in the US and by applying tariffs on foreign-made goods.

One question concerns how strictly he’d apply that tax break criterion—or how strictly Congress would allow him to. Would making their products in the US include or exclude companies who assemble their products in the US, but do so from components or subassemblies that are imported? If implemented in some form, would the exclusion include components or subassemblies that are made in USMCA members Mexico and Canada?

The subassembly bit especially would impact the several car companies that assemble their vehicles in the US, but these are far from the only companies that do that. Which brings up another question: what about those international companies headquartered in other nations but that assemble/manufacture in US factories products for sale in the US. Would the 15% tax apply to the US component of those businesses? To the whole foreign-domiciled company?

How would the tariffs apply to the components imported for final product assembly? How would the tariffs apply to those foreign-headquartered companies that bring in components for final assembly in the US and sale in the US?

Answers need not block either of the two proposals, but they do need to be worked out.

The Professors Have a Thought

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Charles Silver, Civil Procedure Professor at University of Texas Austin’s School of Law, and David Hyman, Professor of Health Law & Policy at Georgetown Law, have an idea on how to improve Medicare, and it doesn’t even include cutting Medicare or raising taxes. Here’s their straightforward solution:

Rather than pay providers, Congress should give Medicare money directly to enrollees, as it does with Social Security. The government should deposit each enrollee’s subsidy into a health savings account, letting seniors decide what they need and how much they are willing to pay. By reducing the government’s role, this reform would eliminate most forms of healthcare fraud, waste, and abuse immediately, saving hundreds of billions of dollars.
The reform would also significantly improve healthcare. When patients pay for it directly—as they do for cosmetic surgery, Lasik, over-the-counter medications, and other elective procedures not covered by insurance—things work well.

Such a move likely would increase the number and range of doctors available to seniors, also. Large numbers of doctors, for a variety of reasons, currently won’t take patients who are on Medicare. Among those reasons are Medicare’s reimbursements to doctors being so low that many doctors lose money on Medicare patients, and Medicare’s slow rate of payments. With patients paying their doctors directly, albeit with Medicare dollars, those doctors would be paid promptly and wouldn’t have to worry about taking a loss on the appointment.

Letting people be responsible for their own decisions. What a concept.

The professors’ thought is a very good one.