Income Taxes and Retirement Savings

Professor Benjamin Harris (Kellogg School of Management) made a case for redoing our 401(k) retirement savings system.  He had several good points, too: the tax break today compared to the taxes due on withdrawal during retirement’s usually lower tax rate is irrelevant to those whose current income is low enough to go untaxed or not taxed much.  Contributions are tax deductions vs tax credits equal to a portion of contributions.  The whole system is complex from a tax-figuring perspective (what are the tax brackets in play for a particular saver, what taxes will be in play when the saver retires, how will investments perform in the interim).

Austerity

Continuing the theme that other parts of the world still exist, this thought on Brazil’s upcoming presidential election.  In a Wall Street Journal piece about the Brazilian presidential candidates’—all 13 of them—big economic plans with no money to implement them, the item’s author offered this bit:

Mr. Bolsonaro has raised the most hopes in financial markets of tackling the endemic spending problem. …his top economic adviser, economist Paulo Guedes, has promised investors fiscal austerity….

Taxes and Caps

Howard Gleckman, Senior Fellow at the Tax Policy Center, wants the $10,000 cap on the federal deduction for state and local taxes repealed.  After all, he worries [emphasis added],

what will happen to state budgets if high-income residents resist tax increases that are now less subsidized by the federal revenue code[?]

Further, Gleckman is arguing,

restoring the old distortion “may indirectly benefit low- and moderate-income households” by propping up state spending.

Budgets and Austerity

The Italian coalition government (interesting in its own right, consisting as it does as a teaming up of the far left 5 Star Movement and the far right Liga) has decided to increase government spending and decrease taxes.  This has been projected to produce a 2.4% budget deficit.  For a government already badly in debt, this deficit isn’t good.

Cutting taxes has been decried by others as being the cause of such deficits and debts.  Spending cuts cannot be allowed, say the same folks, because that would be an austere measure.

They’re wrong.

Ignorant Voters

Recall the erstwhile tax on job creation that the Seattle city government passed a while back, and then repealed.  The tax would have charged businesses making more than $20 million in annual revenue a per employee tax of $275.  Although, in response to business and public outcry, the city repealed the tax a couple months later, the commentary of the tax’s chief supporter is illuminating.  Seattle City Councilwoman Lorena González, the lead proponent of the jobs tax:

Foolish

Senator Bernie Sanders (I, VT) has offered legislation, in coordination with Congressman Ro Khanna (D, CA), that is his latest bit of socialism.  His legislation would hit large businesses with a tax equal to 100% of the welfare payments any of their employees might receive while working.

Sanders and Khanna say—and they’re actually serious—that this would pay for the welfare programs involved.

Andy Puzder has a different view of such legislation.

A Change in Tone?

Recall the start of President Donald Trump’s response to the People’s Republic of China’s economic conflict with us, when he began imposing tariffs on PRC goods over their continued theft of American companies’ intellectual property.

Vice President Wang warned US business chieftains there would be corporate casualties. President Xi told others that Beijing would “punch back” at the US.

Now we’re getting sweet words.

Liu He, President Xi Jinping’s economic-policy chief, told visiting American business representatives that US companies’ China operations won’t be targeted in Beijing’s trade-brawl counterattacks. “We won’t allow retribution against foreign companies,” Mr Liu said[.]

Greece and Austerity

Greece finally is out from under its EU/IMF bailout yoke, and now it wants give its citizens relief from the austerity measures it implemented during its years-long crisis.

[Prime Minister Alexis Tsipras]…announced ambitions to cut taxes as well as increase spending to boost employment and on welfare programs.

Reducing taxes is consistent with reducing austerity—provided the government also tightens its tax collection regime.

Increasing spending, though, increases austerity: it crowds out private businesses as government, which doesn’t have to worry about the cost of money, outcompetes businesses, both for sales and for the resources needed for production. That increased spending also drives up the cost of money for those private enterprises.

Corporate Free Rides

Alex Sanchez, Florida Bankers Association President and CEO, is worried about corporate welfare.

The problem with modern American credit unions boils down to a simple question: why should a family of four pay more income taxes than a $90 billion financial institution? That’s the total amount of assets held by Navy Federal Credit Union. Yet it is exempt from federal and state corporate income taxes, as well as sales taxes (and, in my home state of Florida, intangible taxes). This is corporate welfare.

Serious or Not?

European Commission President Jean-Claude Juncker came to DC Wednesday, allegedly to talk about trade.  Juncker came with no offers, or even ideas, to propose concerning the European Union’s trade status with the US , and he was proud of that lack.  Apparently, he just came for some idle chit-chat and to see the sights.  EU Trade Commissioner Cecilia Malmstrom, though, had some concrete things to say before Juncker left to come over.

If the tariff dispute were to include cars that would be a “disaster,”

Deutsche Welle cited her as saying.  And this, as paraphrased by DW: