Tag Archives: taxes

Taxes and Deduction Caps

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New York thinks it’s found a way around the tax reform act that cut Federal income taxes and capped the deduction taxpayers can take for State and Local Taxes (vis., State income and property taxes).

The idea, which became law last month, creates a new optional payroll tax that shifts the state and local tax deduction from individuals who can no longer fully take it to businesses that can.

However,

Employers are worried about compliance costs, interactions with union contracts, complexity across state lines, and the difficulty of explaining to workers how a plan that might lead to smaller pay raises still puts more money in their pockets.

In response,

The Wall Street Journal asked the 10 largest private employers in the state and in New York City, along with all Fortune 100 companies based in New York state, whether they would opt for the new payroll tax. None that responded said they would do so

Hmm….

Here’s an alternative idea; work with me on it, it’s simple and not very nuanced.  The State jurisdictions should simply lower their income and property tax rates.  That would bypass the SALT cap by making it less important (and as a happy side effect it would leave more money in the hands of the State’s citizens).

It Still Is

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The Supreme Court is hearing a case, South Dakota v Wayfair Inc, wherein South Dakota is looking to overturn a generation-old ruling that exempts out of state retailers from State sales taxes unless the retailers also have a physical presence in the State.  I wrote about one aspect of the matter here among other places.

Here’s another, more critical aspect of the matter [emphasis added].

In a 1992 mail-order catalog case [Quill Corp v North Dakota], the court held that, absent congressional approval, states could impose tax-collection duties only on retailers with a “physical presence” within their borders. Congress, with its constitutional power to regulate interstate commerce, was the place to balance state revenue needs with burdens on business, the court said at the time.

Congress still is the place for such a decision.  This is a political matter, not a judicial one, and the Supremes, by overturning their “precedent”—which was nothing more than a recognition of who has law-making authority and who has only law-applying authority—would be usurping law-making authority to themselves.

Unfortunately, it doesn’t end there.  South Dakota’s Attorney General, Marty Jackley, argued with a straight face that

the states—45 impose sales taxes, and nearly all support South Dakota’s case—wouldn’t make draconian demands of remote sellers….

Never mind that it’s already draconian to demand that retailers pay taxes they don’t owe.

And this from our favorite Living Constitution Justice, Ruth Bader Ginsburg:

If time and changing conditions have rendered it obsolete, why should the court, which created the doctrine say, “Well, we’ll let Congress fix up what turns out to be our obsolete precedent?”

Except for the small matter that the Court didn’t create this “doctrine,” our Constitution did.  That document says, in so many words, that all law-making authority resides in the Congress and nowhere else, and it says further that regulation of interstate commerce is one of the enumerated tasks of that same Congress and not any business of the judiciary.

State Taxation of Internet Businesses

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The Supreme Court is hearing a case, South Dakota v Wayfair Inc, that seeks to overturn an older precedent that prevents States from taxing businesses doing business in the State that don’t have a physical presence there.  South Dakota is claiming that

…the 1992 precedent harms state treasuries and disadvantages taxpaying home-grown businesses.

That argument might hold water if the States were powerless. They’re not. There’s nothing at all preventing them from lowering the tax rates they impose on the brick-and-mortar and home-grown businesses resident in those States so they can compete. There’s nothing at all preventing the States from lowering their spending rates and thereby protecting their treasuries.

There’s nothing at all preventing the States from taking advantage of the increased economic activity that would result.

Tax Cuts, Deficits, and Economic Growth

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The hype is that the tax cuts enacted at the end of last year will lead to trillion dollar Federal government deficits.

On the other hand, there’s this bit about economic growth in the CBO’s report that also carried that deficit forecast [emphasis in the original].

  • Last June, the CBO said GDP growth for 2018 would be just 2%. Now it figures growth will be 3.3%—a significant upward revision. It also boosted its forecast for 2019 from a meager 1.5% to a respectable 2.4%.
  • [T]he CBO now expects GDP to be $6.1 trillion bigger by 2027 than it did before the tax cuts.
  • before accounting for economic growth, the tax cuts Trump signed into law late last year would cut federal revenues by $1.69 trillion from 2018-2027.
    But it goes on to say that higher rate of GDP growth will produce $1.1 trillion in new revenues. In other words, 65% of the tax cuts are paid for by extra economic growth.
  • CBO now expects GDP to be $6.1 trillion bigger by 2027 than it did before the tax cuts.

Blame tax cuts for deficits?  No, Federal government deficits are caused by the Federal government spending more than it takes in from its various revenue sources, of which taxes are a prominent part.  And there’s still no concrete justification for the spending levels, just glittering generalities.  And every special interest has an especially sparkling generality to justify its spending.

Here’s some tax cut-created spending reduction (because of economic growth and the resulting increased prosperity of some of our poorer friends, not because of any Congressional courage in doing outright cutting):

[F]aster growth will also reduce federal entitlement spending keyed to the economy—unemployment insurance, food stamps, welfare and the like—by $150 billion, the CBO says.

But increasing prosperity isn’t a proper topic for hyping.

 

ht/ Powerline

Taxing vs Spending

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In a Wall Street Journal piece about Tennessee’s required closure of failing bridges problem, a Leake County Democrat supervisor, Joe Andy Helton, had this:

…he was frustrated by politicians being afraid to raise taxes—even to pay for basic services like roads and bridges.

“There’s only but one way to fix things on the local, state or federal level and that’s taxes,” he said.

Of course. Reallocating spending is utterly inconceivable to him.

The two bridges in Helton’s county that must be closed until repaired would cost, at most, a bit over a half-million dollars, together.  That’s not pocket money for a rural county like Leake, but it’s not that much, either.  County and State spending could be (re)directed toward the repairs.

This is a local failure of performance, but rising taxes and no spending responsibility nationally are what we can expect if Progressive-Democratic Party politicians like this one gain the majority in the House this fall.