Tag Archives: taxes

SALT Debates

Posted on by
Reply

Recall the SALT—State and Local Taxes—deduction, capped at $10,000 under the Trump income tax reform of a few years ago. Keep in mind the current debate among Progressive-Democrats about whether to raise the cap to $80,000, or higher, or eliminate the cap altogether. Set aside the debate centering on how much lifting the cap would aid essentially exclusively the Evil Rich vs most of those Evil Rich are heavy donors to various Progressive-Democrat politicians.

Consider instead that

some of America’s top earners—including private-equity managers and law firm partners—are already legally circumventing the cap on much of their income.
That is because state governments and the Trump administration blessed a cap workaround for owners of closely held businesses that is proliferating around the country.

That workaround is quite byzantine, too.

Here’s how it works. Normally, so-called pass-through businesses such as partnerships and S corporations don’t pay taxes themselves. Instead, they pass earnings through to their owners, who report income on individual tax returns. That subjects them to state individual income taxes—and the federal limit on deducting more than $10,000, created in the 2017 tax law.
Details vary by state, but the workaround flips that concept. The states impose taxes—often optional—on pass-through entities that are roughly equal to their owners’ state income taxes. Those taxes then get deducted before income flows to the business owners.
The laws then use tax credits or other mechanisms to absolve owners of their individual income-tax liabilities from business income. Thus, they satisfy state income-tax obligations without generating individual state income-tax deductions subject to the federal cap.

The SALT cap was well intended, if set too high at $10k. However, both the SALT and these convoluted workarounds illustrate the foolishness of using our tax code for social engineering and other political purposes instead of simply to raise revenue to cover the few Constitutionally mandated spending purposes.

One low, flat rate tax on income from all sources would simplify things immensely, with no negative impact on revenues for the government. And it would reduce the cost of compliance, with an associated reduction, however small, in end prices to consumers.

Partisanship

Posted on by
Reply

Gerald Seib had a piece on this in the context of gerrymandering. Along the way, he had these as examples of partisanship:

Yet when the bill [the $1.2 trillion “infrastructure” bill] came to a final vote, six of the state’s [Michigan’s] seven Republicans voted against it. Nor was the phenomenon limited to Republicans. Democratic Representative Rashida Tlaib also voted against it, in part because Congress wasn’t also passing a giant social-spending and climate-change package that she and other progressive Democrats have been demanding.

Seib expressed surprise/dismay at those votes, along with the fact that 13 Republicans who did vote for it came in for some opprobrium. Seib apparently missed the part where bill has little to do with actual infrastructure and much to do with “social justice” questions, “green-ness” (just not enough to suit Tlaib). It was a bill worthy of voting against.

Seib also missed here: lawmakers try to perform their most basic tasks: prevent a government shutdown by passing a spending bill, and prevent a national debt crisis by raising the debt ceiling.

Were Congressmen truly concerned about their districts and then our nation ahead of other considerations, they’d produce a Spending Reduction bill, not a spending bill; they’d lower tax rates, which actually increases revenues to Government; and they’d pass a debt ceiling raise large enough only to cover already committed spending, and then only on condition the prior two items also are passed.

More Disingenuosity of the Left

Posted on by
Reply

Buried in the Progressive-Democrats’ reconciliation bill that they’re so desperate to hurry up and get passed before anyone can peruse it is this payoff to unions:

The bill the House passed would allow union members to deduct up to $250 of dues from their tax bills. The deduction is “above the line,” meaning filers can exclude the cost of dues from their gross income. In other words, union dues would get the same treatment now reserved for things like insurance premiums and retirement contributions.

The Progressive-Democrat Senator from Pennsylvania, Bob Casey, claims it’s no payoff at all; it’s because

Unions are the backbone of the middle class. This legislation would put money back in the pockets of working families.

Never mind that union membership in the entire private sector is only a bit over 6%, not close to any sort of middle class backbone.

What the Progressive-Democrat carefully ignores, too, is that absent the vast increase in taxes included in the reconciliation bill, there’d be no need to put money back in the pockets of working families because that money wouldn’t be leaving those pockets in the first place.

The WSJ has the right of it:

The true goal of the tax break is to fill union coffers by making dues less of a deterrent to joining. The incentive would be particularly strong in 23 states without right-to-work laws, where workers pay partial union fees whether or not they’re members.

(Keep in mind, too, that the Progressive-Democrats also are pushing legislation that would eliminate right-to-work laws in those 23 States and nation-wide.)

Bread and circuses. Vote buying.

Disingenuosity of a Progressive-Democrat

Posted on by
Reply

Recall that last spring’s reconciliation bill included an expanded child tax credit, which payments were automatic monthly payments that went to families without income as well as to those with income.

Progressive-Democrats, in the current reconciliation bill, want to make those credits permanent, and still automatic. Progressive-Democrats also want to start paying out a universal basic income to all Americans. But, House Majority Leader Steny Hoyer (D, MD) is denying that the child tax credit is a step toward a universal basic income.

As constructed, though, this “credit,” paid automatically regardless of “need,” is itself income, and given the breadth of Americans who receive it, it’s virtually universal all by itself.

And, of course, it’s income.

What is Hoyer’s limiting principle that proves this child tax credit is not a step on the road to a fully universal basic income? What hard principle prevents him from changing his mind on this, or that prevents any of his colleagues from changing this “credit,” later?

Hoyer has none. He’s simply being disingenuous when he claims the nearly universal child tax credit isn’t a step—a huge step, nearly spanning the gap, I say—toward a universal basic income.

Zeroing In

Posted on by
Reply

That’s what the Biden-Harris administration claims is all it wants to do with its “new and improved” personal bank account monitoring scheme.

…banks, credit unions, and other financial institutions would be required to report annually on accounts with deposits and withdrawals worth more than $10,000….

Here’s Biden-Harris’ Treasury Secretary, Janet Yellen:

Today’s new proposal reflects the administration’s strong belief that we should zero in on those at the top of the income scale who don’t pay the taxes they owe, while protecting American workers by setting the bank account threshold at $10,000 and providing an exemption for wage earners like teachers and firefighters

Because some American workers are more equal than others of us, and so more deserving of protection from this government spying.

On top of that is the Biden-Harris/Yellen disingenuousness and that of their Progressive-Democratic Party syndicate that this is solely about tracking down those Evil Rich Tax Dodgers. Even at $10,000, though, those Evil Ones would need hundreds, if not thousands, of bank accounts to get down to sizes even approaching that $10k threshold. No, this move remains centered on the prurient interest those peopling our government have in the private doings of us common citizens.

After all, rather than spying on those of us average Americans of whom this administration disapproves (remember how narrow the “exemption” really is), the government could simply audit those Evil Rich individuals. No peeking in windows necessary that way.

Besides, I have it on good authority that the men and women in our government already know what income has gone unreported and how much tax is owed. From that, those worthies also already know where that missing income is and who owes it. If anyone.