Tag Archives: political economy

The New Tax Law and Bankruptcy

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The Wall Street Journal is quick to point out how the tax reform bill passed last December does little to help failing businesses.

The new tax law is a boon to most US businesses, but it will make life harder for one type of company: those that are struggling financially or at risk of filing for bankruptcy.

The new tax law was never intended to help failing businesses, though, it was designed to help the rest of us individuals and our businesses—and to help those who are failing do better next time.

The law eliminated a provision that gave money-losing companies a cash infusion in the form of a retroactive federal tax refund by applying current losses to past tax bills. Experts say these tax breaks, called net operating loss carry-backs, gave companies access to money at a critical time….

No, the provision helped current businesses paper over bad decisions and outright failure by letting them rewrite their history; there’s nothing that helped failing businesses do better in future.

The provision, in fact, was written in the aftermath of WWI, ostensibly to help our economy’s manufacturing sector.  On the contrary, though, the provision was enacted to bail out from Woodrow Wilson’s attempts to nationalize significant fractions of our industrial sector and to attempt recovery from Wilson’s drastically inflationary policies.  Any policy enacted for bad reasons always will fail in the end.

“It doesn’t fix the business, but it fixed the balance sheet,” she [Bankruptcy lawyer Cathy Hershcopf] said of the tax benefits.

Indeed.

A New Welfare Trap

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This one is in the offing at the State level, and comes as a result of the punitive tax for not buying health coverage was repealed last December.

At least nine states are considering their own versions of a requirement that residents must have health insurance….

And

Maryland lawmakers are pursuing a plan to replace the ACA mandate, which requires most people to pay a penalty if they don’t have coverage. California, Connecticut, Hawaii, Minnesota, New Jersey, Rhode Island, Vermont, and Washington, as well as the District of Columbia, are publicly considering similar ideas.

Notice that.  These are Progressive-Democrat-run states.

The less well off who couldn’t afford either the penalty or the remaining costs—high deductibles, low per centage of plan provider payments even after “coverage” kicked in—under Obamacare still won’t be able to afford mandated coverage in these States.

Beyond that, they won’t be able to leave the State and relocate to one that doesn’t inflict these costs.  Their already limited economic resources are a barrier to such relocation.  Added to that, though, will be the lack of portability of the mandated coverage plans: having been dragooned into one by, say California or DC, they won’t be able to take it with them, even to Connecticut or Minnesota.  Or to a State that doesn’t require them to buy something they don’t want.

Progressive-Democrats really are that desperate to keep their welfare “recipients” trapped in welfare cages. Aside from that bit of self-serving…nonsense…the move also demonstrates the Progressive-Democrats’ utter contempt for us Americans.  We are, their behavior and policies say, just too mind-numbingly stupid to be entrusted with our own choices.  We have to be led by our Betters, forced for our own good, to do certain things.

Working for a Living

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Indiana has joined Kentucky in getting approval to add a work requirement to its Medicaid program (separately: Federal approval should not be a requirement; the program should be a State-run and -funded program only).

Of course, there are objections.

Democrats and consumer groups are decrying the GOP push, saying it is antithetical to Medicaid’s goal of expanding health care.

That’s plainly not true, though (I’ll ignore the conflation of health care with health care coverage).  The push is exactly what’s needed to make health care coverage available to all who want it.  The plan, even as minimal as this one is (the work-related requirement would apply only to a small segment of Indiana’s Medicaid enrollees), will facilitate availability, not limit it.  By making it possible for folks to get off this welfare program and into jobs that can enable them to buy their own coverage—if they want it—it will allow the State’s Medicaid dollars be committed to those who truly need Medicaid because they’re too old, too young, and/or too infirm to get desired coverage on their own.

Disparate Impact

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High-tax States, principally States run by Progressive-Democrat regimes, don’t like the tax reform’s cap on State and local taxes.

The governors of New York, New Jersey, and Connecticut said on Friday that they would sue the federal government to overturn the new US tax law, saying the measure unconstitutionally discriminates against Democratic-leaning states.

This is just the raw sewage of disparate impact being spread across a tax bill—never mind that the tax reform is uniformly applied across all States, across all businesses and individual taxpayers.  Never mind, too, that if some taxpayers, if some taxing jurisdictions, are impacted differently than others, it’s solely a result of the conscious individual, business, and State and local government choices.  At least when “disparate impact” is imputed to matters of race, the alleged victims have no choice in their position in the differences alleged.

Here’s an example of the foolishness and disingenuousness of the suit:

The legal action will argue that the new tax law’s cap on state and local tax deductions infringes on states’ rights and amounts to double taxation[.]

The States have no “right” to a Federal income tax deduction.  Beyond that, the cap can’t possibly represent double taxation; the only tax here is the SALT applied by those State and local jurisdictions.  Not being able to deduct a fraction of that (or any of it, come to that) from a Federal income tax bill is no tax at all.

One hopes the Federal trial judge dismisses the suit out of hand and strongly sanctions the governments and Attorneys General of New York, New Jersey, and Connecticut for bringing such a frivolous suit.  Failing that, one hopes the Supreme Court, where the suit will end regardless of the trial court outcome, itself firmly chastises the State governments and Attorneys General.

PRC Economic Opening

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Liu He, head of the People’s Republic of China’s Office of the Central Leading Group for Financial and Economic Affairs, says,

We’ll open wider to the world across the board[.]

Liu promised that the PRC would

  • “substantially” open up the services industry, particularly the financial sector
  • let foreign securities firms own majority stakes in their Chinese ventures and…scrap foreign ownership limits on Chinese banks
  • reiterated past promises to relax restrictions on foreign companies in manufacturing, including in railway equipment, and to gradually lower tariffs on imported products such as automobiles

Even if they do these things (and that’s no certain thing: notice those past, unkept, promises), Liu’s—and Xi’s—rhetoric is just wind in the trees as long as the PRC demands that

  • foreign companies partner with domestic companies as a condition of doing business in the PRC
  • foreign companies are required to “share” technology and other intellectual property
  • foreign companies are required to give backdoors to the PRC government for the latter’s entry into those companies’ critical software and other proprietary information.

This not only is “legalized” theft, it’s backdoor protectionism.