Tag Archives: taxes

Rahm Emanuel’s Latest Installment

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Over the last several weeks, Progressive-Democratic Party Presidential candidate hopeful Rahm Emanuel has been publishing sections of his campaign platform in The Wall Street Journal. His latest installment is here. Emanuel talks a good game, but as Long Time Reader might expect, I have thoughts on it.

The carried-interest rule suggests that those in the business of buying and selling companies need the incentive of a special tax break. They don’t.

This is a conveniently plausible assertion, but it’s wholly unsubstantiated. Let Emanuel supply the facts and logic underlying his claim.

To be effective, reforms will need to work hand in hand with an enforceable international floor.

Absolutely not. Such a move gives foreign governments too much influence over our domestic economic policies. The only legitimate “international floor” needs no enforcement mechanism; the floor is however low individual nations let their domestic tax policies go and stay competitive. Progressive-Democrats spend ‘way too much time and energy trying to limit competition.

[R]aise the capital-gains rate closer to the rate that prevailed during the late 1980s, when it was the same as the tax on ordinary income. … You can’t claim that narrowing the gap between passive income and earned income would undermine the incentive to invest when we saw robust growth in exactly those conditions.

Yes, I can. Emanuel first needs to prove–or at least provide evidence–that the growth under those conditions would not have been even more robust had that gap not been narrowed. Showing a counterfactual is hard, but Emanuel isn’t even trying.

[E]liminate the stepped-up basis that allows them to pass fortunes from one generation to the next free from capital-gains taxes. This policy has nothing to do with driving economic growth and serves only to preserve inherited wealth.

 Contra Emanuel, there’s nothing wrong with a family preserving its wealth. Aside from that, it’s not for Government, or for Progressive-Democrats who want to run Government, to dictate to the rest of us the proper way to handle our wealth.

It’s instructive, too, that Emanuel is not proposing even working toward a single low (in the range, I suggest, of 10-15%) tax on all income regardless of source (viz., those capital gains), with no deductions, credits, subsidies, loopholes, or other froo-froo.

In that environment, private-equity fund managers, firefighters, police officers, and teachers–and Warren Buffet and his (ex-?) secretary–all would be paying the same rates, with the rich still having their bigger bills.

Progressive-Democrats as Taxmen

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There is a way for the Evil Rich to provide for their heirs in a remarkably tax favored, if not tax-free, way—private-placement life insurance, a customizable insurance contract that allows unlimited investments to grow tax-free. The contents would go to the beneficiary(s) on the account creator’s death as a death benefit, and so be free of income taxes at that point, also. These accounts were designed that way explicitly to encourage folks to provide for their dependents. The tradeoff is that the account must be under the control of an independent account trustee of some sort; the account creator cannot have even influence over how his money is invested within that contract. The mechanics of how this works isn’t relevant to this post. The outcome, though, is.

In one relatively extreme case, one Rich Person’s account, set up in this way,

could [could, mind you; the account’s manager may make bad or unlucky investment decisions] one day be worth hundreds of millions of dollars, and he won’t have paid a dime in ordinary-income or capital-gains taxes on their growth. He can take withdrawals or loans against the policy’s cash value but generally doesn’t expect to tap the proceeds. When he dies those will go to beneficiaries income-tax-free in the form of a death benefit.

Enter Progressive-Democrats with their hatred of the wealthy and their jealousy of the wealthy’s success and their demand to confiscate other people’s money, especially that of the so hated rich.

Senator Ron Wyden (D, OR) has introduced legislation that would separate these insurance policies from traditional life insurance, making those earnings and losses taxable to the policyholder as they are earned each year.
“We cannot have a bunch of ultrarich tax dodgers abusing its special tax treatment to set up tax-free hedge funds and shelter mountains of cash[.]”

It’s abuse to follow tax law? And: why can’t we have successful people take advantage of the government’s tax law to take care of their families? Never mind that. The Evil Rich Man cannot be allowed to pass his good luck on to his dependents. He owes Government and must pay the Progressive-Democrat government’s vig.

SNAP Reforms

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The Senate’s Progressive-Democrats object to States having even minimal fiscal responsibility for managing Federal outlays to them for welfare programs. Their latest objections concern reforms to SNAP payments. Currently, the Federal government forks over 100% of the funding for a State’s SNAP program, and the State is solely responsible for disbursing those funds to eligible recipients. The current reforms, enacted last year, require those States with error rates—paying out to fraudulent recipients, for instance—above a low level (10%) to begin picking up a small part of the SNAP tab, with effect in 2028.

Progressive-Democrat Senators, en masse, object, and they’re blocking a farm bill unless they get that deadline extended. Their real goal is to functionally eliminate the deadline.

There is an alternative that would render this sort of Progressive-Democrat…foolishness…moot, and it’s one I’ve proposed before. Maybe its time has come, in response to Party’s studied intransigence to any reform that would reduce dependency on Party government.

Designate a nearby year as Year0, and add up all the Federal funds transfers for any purpose to each State in that year. Lump that sum into a single payment for the year. In each subsequent year, reduce that lump sum payment by 10% of the Year0 transfer, until the transfer is reduced, in about 10 years, to $0.00.

Federal transfers—taxpayer dollars—in general should not be getting made to any State except in exigent circumstances. The good citizens of Texas should not see their tax remittances pushed on over to New York or California. The good citizens of New York and California should not see their remittances relayed to Illinois or Iowa. Each State and territory in our union should keep its citizens’ tax remittances solely for the benefit of that State’s/territory’s citizens.

Exigent circumstances: when a State-wide or region-wide emergency arises that’s beyond the resources of that State or region, then Federal transfers (a going in allocation, to start the discussion, would be 50% grant and 50% loan at market interest rates) would be an appropriate means of assisting the State or region in dealing with the emergency.

The Answer is Perfectly Straightforward

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New York City has sent letters to folks that city bureaucrats claim are pied-à-terre home owners that contain warnings of impending tax bills on those properties. Many of those homes are primary homes clearly held by their owners, and many others are primary homes that are held in trusts or by LLCs as entirely legitimate devices those homeowners use to mitigate estate taxes and to make things easier for heirs.

Worse, the city is trying to require the home owners to prove their homes are primary residences and not secondary. This throws into a cocked hat the American requirement that government must prove its case, not the one the government is charging or the one government is billing.

It’s true enough that trusts and LLCs can confuse, for some, the ownership of the residence in question. City bureaucrats and their boss, DSA/Progressive-Democrat Mayor Zohran Mamdani, are among the some who are confused, and they’re whining about it.

City officials have said they don’t always have the information they need about a home to know whether it is a primary residence. As a result, they have sent out more notices to homeowners than the tax will ultimately apply to.
“Part of the point of this outreach from the Department of Finance is to ascertain whether or not that reflects a primary residence or not,” Mayor Zohran Mamdani said at a news conference last month, referring to homes owned by trusts and LLCs. “One of the reasons that this is being done now is to ensure that New Yorkers have requisite time before the implementation of the surcharge.”

New Yorkers don’t need any time at all for the city to ascertain whether or not the residence in question is a primary residence or not.

The onus is on the city to prove it is not. If the city’s bureaucrats do not have the information they need about a home to know whether it is a primary residence, then they don’t know that the residence is a pied-à-terre, and if they don’t know, they cannot claim that it is. Thus, no pied-à-terre tax is owed.

The question is answered by a simple declaration by the owner, just as with Federal income taxes, with liabilities attached to lying about the matter, just as with Federal income taxes. And just as with Federal income taxes, city bureaucrats can, after the fact, ask for more information, but they cannot be allowed to assign ownership on their own claim and demand a priori the homeowner prove the contrary.

Of course, it may take a court case to enforce this requirement.

Dodging NYC’s Pied-à-Terre Tax

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Folks subject to New York City Democratic Socialist of America Mayor Zohran Mamdani’s pied-à-terre tax, and folks who aren’t subject but got the threatening letter from Mamdani anyway, are looking for ways to duck the tax.

offshore corporation in the Cayman Islands to hold their New York City pied-à-terre

Nope. Still a pied-à-terre subject to the tax. The owner’s corporation would still have to pay the tax.

pay a stranger to pretend to live in their second home as a full-time resident

Nope. That has other tax implications—income tax, for instance, as well as making the owner now subject to NYC’s landlord laws. And that’s apart from whether the owner can dodge the outright tax fraud aspect of the move.

There’s another way, guaranteed legal and guaranteed to get the owner out from under the socialist’s thumb. This consists of those owners selling those pied-à-terres to folks who want to live in the city, and for the now ex-owner stopping living there altogether. The city, anymore, as very little left to recommend it—even the finance industry is on the move out of the city, some out of the State—so there’s little loss here.