Tag Archives: taxes

Pen and Phone

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The editors at The Wall Street Journal expressed worry about President Donald Trump’s use of his “pen and phone” over the weekend to render the Congressional Progressive-Democrats’ obstructionism regarding Wuhan Virus relief for Americans irrelevant. They think he’s aping too closely ex-President Barack Obama’s (D) pen and phone.

It’s true that Trump is using his pen and phone. The differences between his actions and Obama’s, though, are two: Trump is undoing Obama’s pen and phone actions, not creating new things—with this exception, which is the other critical difference: Obama’s actions were largely illegal, struck down on legal challenge; Trump’s have proven legal, in the main, upheld on legal challenge.

The editors are worried about this use in particular:

Mr Trump’s FEMA order is a bad legal precedent that a President Kamala Harris could cite if a GOP Congress blocked her agenda on, say, climate change.

This is mistaken. For one thing, not doing a useful thing because a bad person (of either party) might misuse it later is simply foolish. If the thing is useful, it’s usefully done. Full stop.

For another thing, Obama already set the general precedent—Congress not performing to his satisfaction was his rationale for his own pen and phone use.

Finally, the question of precedent enabling a President Harris to use FEMA funds on her global warming agenda—to take a particular example—is plain wrong. Harris needs no precedent to use FEMA funds for her agenda; she’d do that anyway. And set her own precedent, without a care.

RTWT, though. Aside from this last item, it’s a generally soundly reasoned piece.

“We’re Losing Taxpayers When We Need Them Most”

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That’s what Congressman Tom Suozzi (D, NY) said on the House floor, with an absolutely straight face, as he was attempting to add the Progressive-Democrats’ current move to protect their rich constituents: repeal of the $10,000 SALT cap, which limits the State and Local Taxes that can be deducted from Federal income taxes.

The SALT limit only hits the rich, and it only hits those in Progressive-Democrat-run jurisdictions.

We’re losing taxpayers when we need them most.

They’re not human beings, citizens who pay taxes. They’re taxpayers. In particular, they’re rich taxpayers who happen to be human beings, citizens. Progressive-Democrats don’t care a fig about their citizen-constituents, and they’re especially not really protective of their wealthiest citizen-constituents.

They just want their money.

There’s this bit of cynicism, too, from Suozzi:

The people who can’t afford to move or just don’t want to move are the ones left behind holding the bag.

But the bag they’re left holding is the Progressive-Democrats’ spendthrift ways and usurious tax schemes.

It’s inconceivable that these folks should adjust their tax rates and their spending so as to not send citizens packing.

The Biden Tax Plan

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Progressive-Democratic Party Presidential candidate Joe Biden thinks American businesses don’t pay enough taxes into Government’s coffers.

“Vice President Biden has been clear that it’s absolutely unacceptable for some of the biggest companies in America, like Amazon, to pay next to nothing in taxes,” Michael Gwin, a campaign spokesman, said.

This is a carefully misleading claim that Biden is making through his spokesman. Some of the biggest companies in America actually pay billions of dollars in taxes for all that each of those companies pay a net amount of close to zero. That, though, is an outcome of our byzantine tax code that lets companies—big and small; although it’s the biggest that are able to make the most of it—balance a tax bite here with a subsidy, write-off, credit, or what-have-you there in order to achieve low/zero overall liability while paying those individual billions.

Biden knows this full well. It is, after all, his Senate and his Obama-Biden administration (and far too many Republican Senates and administrations) that have set up our present tax system.

That aside, though, the real, underlying, problem is that business taxes hurt consumers and our economic performance, and higher taxes would damage us and our economy even more.

Nevertheless, Biden wants to eliminate those tax breaks and impose higher rates. And more: Biden wants to

impose a 15% minimum tax on profits reported to investors….

That alone would raise somewhere between $166 billion and $400 billion over the next 10 years. Another way to look at it is that this minimum tax would take between $166 billion and $400 billion out of our companies’ treasuries and consumers’ pockets over the next 10 years.

Money taken from a business reduces its ability to fund R&D, market research, improve physical plant, and pay workers more or pay more workers.

Compliance with business tax requirements is an additional cost imposed on each business, not naturally by market imperatives, but artificially by Government fiat—that tax code.

In the end, businesses don’t pay those taxes or compliance costs anyway. We taxpayers pay for the offsets—money out of our pockets—and we customer/consumers pay the taxes not completely covered by the myriad offsets, as well as those compliance costs, in the form of the higher prices businesses charge.

Even a simple Just Gimme the Damn Money tax code that Progressive-Democrats seem so badly to want would only reduce compliance costs (maybe—they’d demand their own proofs of compliance and of revenue). It would not reduce the money taken out of businesses’—or consumers’—pockets.

Tax Misallocation

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The misallocation, this time, is not in the way our tax monies are being spent.

It’s in what our money is not being spent on in lieu of paying those taxes in the first place.

According to a 2018 Bureau of Labor Statistics survey—before the 2017 tax reform bill had been able to percolate into our economy in any serious way—we Americans spent more on the taxes Government exacts from us than we did on food, clothing, and health care combined.

That survey found the average American unit, which consists of both shared and single households, spent an average of $9,000 on federal income taxes last year. Americans also spent an average of $5,000 on social security, more than $2,000 on state and local taxes, and another $2,000 for property taxes.

That’s $3,000 more than we spent on those aggregated necessities.

Aside from a low, flat personal income tax without the exceptions froo-froo currently present, as suggested for corporate taxes (see nearby),  the next tax reform target needs to be on Social Security—whose Trust Fund will be exhausted in a few years, leaving the stark choice of raising payroll taxes (or increasing taxation from other sources) to cover the shortfall, or lowering the payouts to fit within the existing (payroll) tax structure—a roughly 30% reduction in payout for each recipient.

That reform, as I’ve written before, needs to be an elimination of the payroll tax altogether—more wage money left in the hands of the earner, which is especially important for those earning the lowest wages—and privatizing both Social Security and Medicare, and making the payouts for the future benefit of the saver and his family rather than immediate payout to utter strangers. That will leave the saver responsible for his own money and, with his skin on the line, he’ll do a far better job of managing those monies than even the most well-intentioned collection of government bureaucrats ever can.

Oh, yeah: privatization also would eliminate the employer’s payroll tax bite, leaving him more money for R&D, marketing,…

Byzantine Taxing

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Many companies, sitting on billions of dollars of tax credits, want to be able to cash them in promptly.

For example:

Duke has been unable to use all the corporate-research and renewable-energy credits it accumulated because it has been using accelerated tax deductions for capital investments to lower its taxable income, said Dwight Jacobs, the company’s chief accounting officer. That bumped it up against tax-code rules that limit tax credits, leaving $1.8 billion in unused credits on Duke’s books. Under the proposal, the company could get that within months instead of years.
The proposal “would give us more cash today and that would cause us to avoid borrowing money that we would otherwise have to borrow,” said Mr Jacobs.

And

Under the tax code, companies can claim credits for activities encouraged by the government. Among the largest are credits for conducting corporate research, funding low-income housing, and producing renewable energy….
Unlike deductions, which lower taxable income, credits reduce a company’s tax bill directly. But there are limits. Companies can generally offset only 75% of the taxes they owe by using credits. Any leftover credits can be used for one previous year or up to 20 years in the future.

Sound complicated? That’s the point. This isn’t a matter of helping out Duke, et al., with a particular section of the tax code. This is a matter of a too-complicated tax code.

We need, badly, to simplify it. A single, low rate, with no deductions, subsidies, credits, or other froo-froo would be suitably simple.

Better, would be eliminating corporate taxes altogether. In the end, the taxes a business pays are just costs passed on to customers in the form of higher prices; the taxed business doesn’t itself pay very much of its tax liability.

Either move would be doubly beneficial: more money left in the company’s coffers for R&D, marketing, capital improvement, jobs, wage increases from the reduced/eliminated taxes. More money also would be left in the company’s coffers for R&D, marketing,… from the reduced/eliminated tax compliance costs.

And all of that adds up to lowered prices for the company’s customers.