Tag Archives: taxes

Going Soft

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Senate pseudo-Republicans are balking at one good item that was contained the House-passed American Health Care Act: repeal of Obamacare’s trillion dollars’ worth of taxes.  These guys actually don’t see the value of that repeal.  Senator Susan Collins (R, ME) is typical:

I don’t see how you can repeal all of the pay-fors…and still meet the goal of providing health-insurance coverage for people who truly need assistance[.]

Aside from the false premise of needing Federal government “pay-fors” as a default position, rather than a last result, the Lady from Maine and her fellows plainly either don’t understand free market principles, or they have no confidence in free markets.

One path for the Senate could be a repeal of the taxes but a delay in the effective dates.

This is the only legitimate point of discussion on the repeal of these taxes.  The AHCA makes the repeal retroactive to 1 Jan 2017.  It’s the repeal that’s important, not its date of effectivity.  Effective 1 Jan 2018 is fine, so is a date (certain) in 2019, to the extent health coverage providers, businesses, and individual citizens need time to plan and prepare.  The repeal itself, however, must be inarguable.

I’ve decried the House’s Freedom Caucus of No, but the Caucus of Squish in the Senate is going too far in the other direction.  These folks need to do the job they were sent to the Senate to do vis-à-vis Obamacare and our nation’s health provision and health coverage industries.  Failing to repeal the Obamacare taxes in addition to the reductions in other business and personal taxes that have been proposed is unacceptable.  If the Caucus of Squish fails to do this, its members need to be replaced at the next available elections for each of them.

If that costs the Republican Party control of the Senate, well—how will we tell the difference?  The Caucus of Squish is, with its timidity, worse even than the Progressive-Democratic Party.

Confusion

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The latest whiner pundit to weigh in on President Donald’s tax reform principles, laid out in a concise one-pager.  And yet these pundits pretend to confusion over it.

President Donald Trump’s plan is silent so far on crucial details Americans need to calculate their tax bills, including the personal exemption and the size of the tax brackets.

And

The president’s latest plan for middle-income households…has left tax experts puzzled. That is because his one-page tax outline released in April is silent on essential details, including how the tax code will treat the personal exemption that reduces taxable income depending on family size. It sets tax brackets of 10%, 25%, and 35% without establishing the income levels that divide them.

And

[T]he plan says nothing about how personal exemptions or head-of-household filing status would be treated….

Geez.  It’s an outline; it’s not intended to be finely detailed. The President has proposed the principles and broad parameters of the taxation portion of his budget, and that’s both entirely appropriate and sufficient.  How personal exemptions, head-of-household filing status, etc, might be treated easily follows from those principles.

The fleshing out—the actual legislation, including bracket income boundaries and those other matters—is Congress’ responsibility, even though it would in an ideal world work with the President in the development of that legislation.  Oh, wait:

The White House is now working with the House and Senate on a unified GOP tax plan, including on the core issue of how much of a household’s income should go untaxed.

It seems more likely that these guys are just bellyaching because nobody is consulting their august selves.

Little Compelling Evidence?

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Greg Ip, in his Monday Wall Street Journal piece on the matter of corporate tax cuts, says that

most of the US’ largest trading partners cut their corporate rates. But their experience offers a reality check. There is little compelling evidence any enjoyed substantially faster growth as a result, and certainly not on the scale of Mr Trump’s ambitions….

He offered some examples:

Britain reduced its corporate rate from 30% in 2007 to 19% now. A 2013 study by the British Treasury predicted the tax cuts since 2010 would eventually boost the level of gross domestic product by 0.6%. That is certainly worth having, but spread out over, say, six years, would boost the growth rate by a barely noticeable 0.1 percentage point.

British investment as a share of GDP is actually lower than before 2007….

But the EU, which included a full-throated Great Britain at the time, suffered even more deeply from the Panic of 2008 than the US, and its “recovery” has been even poorer than ours, albeit Great Britain was one of the nominal leaders of that sham recovery.  Not many of the EU member nations have recovered to their pre-Panic levels.

And

Canada cut its corporate rate from 28% in 2000 to 21% in 2004. While growth from 2000 to 2004 was about half a percentage point faster than the prior decade, it has since slowed.

A couple of other things contaminate Ip’s thesis that “[t]here is little compelling evidence” that corporate tax rates actually stimulate economic growth. In Great Britain’s and Canada’s cases in particular, and in the EU generally, the presence of VAT taxes (20% for Great Britain, 13% for Canada, similarly high rates for the continental nations of the EU) vastly dilute the impact of a mere corporate income tax cut.

Also, the existence of régimes of heavy regulation in Great Britain, Canada, and in continental EU add costs that heavily dampen the favorable impact of corporate tax cuts.

The small bumps in economic growth that followed those corporate tax cuts came despite those road blocks.

“We pay a lot to feed the civil servants”

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That’s what Zhou Dewen, Zhejiang Private Investment Enterprise Association Director, a business lobbying group in the People’s Republic of China has said.  He, like business representatives anywhere—including here in the US—is right to be concerned.  That concern is compounded by President Donald Trump’s tax proposal.

Now, Chinese officials and executives worry that the tax proposal Mr Trump announced last week will set back China’s global competitiveness and spur companies to invest in America instead of China.

Which is one of the points of Trump’s proposal that, among other things, seeks to drastically lower our usurious business tax rates.

Trump’s proposal also is a much more intelligent, much more moral, response to American companies moving overseas than the iron curtain that ex-President Barack Obama (D) and his Treasury Secretary Jack Lew (D) tried to erect with their punishing (in every sense) taxes that they tried to impose on companies in order to trap them here.  If we’ve got one of the lowest tax rates going, it no longer would make business sense to relocate out of the US.  And, such a decision would be that of the companies’ owners; it would not be driven by Government watchdogs.

Speaking of relocating businesses for tax-based reasons,

Chinese windshield maker Fuyao Glass opened a $600 million factory last October near Dayton, Ohio, and plans other facilities in Illinois and Michigan, creating 4,500 jobs. CEO Cao Dewang caused a stir in December when he told a reporter the decision was driven by tax differences: “Overall taxation for manufacturers in China is 35% higher than that in the US.”

The PRC government is getting involved, too.

In anticipation of the US tax move, the State Council, China’s cabinet, said earlier this month the government will reduce corporate taxes by over $55 billion to “improve business conditions.” The Communist Party’s newspaper, People’s Daily, warned on Friday that the new US plan could trigger a “tax war” if countries start competing to offer the lowest rates.

Such a race to the lowest tax rates would benefit the folks of all nations involved.  Pop Quiz: which type of economy will prosper the most from such a contest?

“We pay a lot to feed the civil servants.”  Don’t we all.

A Tax Code Proposal

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Below is the handout given to the NLMSM at Wednesday’s White House daily press briefing, this time hosted by Chief Economic Advisor Gary Cohn and Treasury Secretary Steve Mnuchin for the purpose of discussing President Donald Trump’s tax reform proposal, which was released today via that handout and press briefing.

Also included, as mentioned during the briefing though not on the handout, is a proposed reduction of the peak capital gains tax to 20%, which Cohn and Mnuchin said will stimulate investment—and, I add, stimulate both productivity and new job creation via that increased investment.

About that doubled standard deduction: it increases from $6,300 to $12,600 for single filers and from $12,700 to approximately $24,000 for joint filers.  That’s a jump of $6,300 and (approximately) $11,300, respectively.  For folks with incomes of $50,000, $80,000, and $500,000, these represent reductions in taxable income of 12.6%/22.6% (single filers/joint filers), 7.9%/14.1%, and 1.3%/2.3%, respectively.  This doesn’t particularly favor the rich.

Then Mnuchin had this to say:

This is about massive reductions in business rates for corporations and for small businesses, and many studies show that 70% of the tax burden falls on American workers.  So, by cutting business taxes, this will increase wages for American workers and create more jobs.

It’ll do more than that.  Business taxes are cost centers for those businesses, which costs are passed, in large part, to their customers, just as all other costs are passed, in large part, to their customers.  This tax reduction, if enacted, will greatly shrink that tax cost center, and so it will tend to lower prices for buyers of the business’ goods and services.

As predicted, this is a major tax reform.  Congress needs to get behind it.  The Trump administration is making a large bet on this (although they and the Republican Congress also are working on the flip side,  reducing spending (not just slowing its rate of growth)) in that, in response to a question during the briefing, Cohn and Mnuchen said that this reform would stimulate sufficient economic growth that the Federal revenue reduction nominally resulting from these tax rate reductions would generally not occur in the realization.

Of course, the Progressive-Democrats in Congress immediately started protesting.

Senator Chuck Schumer of New York, the chamber’s Democratic leader, said the proposal to cut tax rates for pass-through businesses would just benefit high-income people like the president himself.

Never mind that the bulk of American pass-through businesses are mom-and-pop businesses and small- to medium-sized businesses, not the large, wealthy ones.  Never mind that these mom-and-pop and small- to medium-sized businesses produce the bulk of the economic activity in the US.  This is the same objection Congressional Progressive-Democrats have to eliminating the death tax: even though the death tax forces children to sell their parents’ small businesses or farms in order to pay the inheritance tax, that tax is necessary because some rich folks might benefit from its elimination.

And there’s this:

Among the biggest changes is the repeal of the state and local tax deduction; the effect of that would be to shift the tax burden from low-tax states such as Texas and Florida to high-tax states such as New York and New Jersey.

And California, and Illinois.  Democrat-controlled states, every one.  Congressional Progressive-Democrats will squall about this, too.

And this:

Senate Finance Committee Ranking Member Ron Wyden (D, OR) issued a statement calling it an “unprincipled tax plan that will result in cuts for the one percent, conflicts for the President, crippling debt for America, and crumbs for the working people.”

What the Progressive-Democrats in Congress have yet to offer is any reason why our middle class and poor should be denied this tax code improvement with its attendant increased opportunity to become wealthy themselves just because it might also benefit the wealthy.

What the Progressive-Democrats in Congress have yet to explain is why they insist on singling out particular groups of Americans for punishment via our tax code just because they’ve been more successful than the rest of us.

And, of course, there was ABC News Chief White House Correspondent Jonathan Karl and his permanent question, apparently because he can only hold one concept in his head: “Will the President release his tax returns?”  Never mind that President Donald Trump, and several of his spokesmen have answered this question quite clearly for the last year—both during the campaign and since Trump’s swearing in.