Trump's tax plans

[stpioc]

But while the White House’s latest tax reform proposal aims to end “the perverse incentive to keep foreign profits offshore,” many say the Trump administration ultimately has limited influence on how repatriated profits are deployed. In fact, a study conducted by Bank of America Merrill Lynch found that companies are most interested in taking repatriated earnings and using them to pay down debt and buy back shares. But Director of the National Economic Council (NEC) Gary Cohn told Yahoo Finance he’s okay with that. Furthermore, he said the administration’s plan wouldn’t set restrictions on the use of repatriated cash, which was the case during the 2004 repatriation tax holiday.

“We’re not going to put conditions on it,” Cohn told Yahoo Finance. “We need to get the money back into the United States. There’s trillions of dollars offshore.” Cohn said he’s okay with companies using the money as they wish. “If they buy back stock, okay so they buy back stock,” he said. “That means the government collects a tax on the capital gains or the ordinary income from whoever they buyback stock from. Let’s call it 23.6%. The government gets 23.6%.”

Gary Cohn says will not place conditions for repatriated cash [Video]

[stpioc]

You couldn't make this stuff up if you wanted to..

Both as a candidate for president and again as recently as mid-September, Donald Trump promised that his tax program wouldn’t help rich people “at all.” His Treasury Secretary Steve Mnuchin vowed as much in January. These pledges have always been at odds with the plain text of Republican Party tax promises. Trump rolled out three or four different tax plans over the course of the campaign, and they all involved huge tax cuts for the rich. House Republicans’ “Better Way” tax framework released last year involved huge tax cuts for the rich, and the conceptually rather different tax framework they are uniting around this fall also involved huge tax cuts for the rich. But the administration has always at least been committed to pretending that these plans didn’t involve huge tax cuts for the rich. 

Now, however, there’s a new story. They really wanted to avoid a huge tax cut for the rich but they couldn’t figure out how. “So when you’re cutting taxes across the board, it’s very hard not to give tax cuts to the wealthy with tax cuts to the middle class,” Mnuchin tells Politico’s Ben White in a new podcast. “The math, given how much you are collecting, is just hard to do.” A rather credulous Washington Post article noted that among the hurdles still facing tax reform is that Republicans “haven’t sorted out how to ensure that the majority of any tax cuts don’t benefit primarily the wealthy.”

The truth, however, is that avoiding a tax cut for the rich is really easy. The reason Republican plans cut taxes for the rich is that Republicans believe rich people are paying far too much in taxes, not because there’s some conceptual barrier to not cutting their taxes.
The GOP plan has lots of tax cuts only for the rich. Consider that the GOP’s unified tax framework contains the following provisions:

• A cut in the top tax rate that only applies to households with well over $400,000 in annual income.
  
• A tax cut for business owners that you only get if your business delivers your family more than $150,000 a year in take-home profits.
  
• A tax cut for people who inherit estates that are worth more than $5 million.
  
• A steep cut in the corporate income tax rate, whose benefits primarily flow to stock owners rather than wage earners.
  

A person who did not want to cut rich people’s taxes would, rather clearly, simply not include those provisions in the tax bill.

Republicans say they can’t figure out how to not cut taxes for the rich - Vox

[stpioc]

More Voodoo justification that is out of a science fiction novel:

The President’s Council of Economic Advisers claims that slashing the corporate tax rate to 20 percent would boost the average American’s wages by $4,000 per year (“very conservatively”) — and perhaps by as much as $9,000. If true, that would be a remarkable gain for working Americans. Unfortunately, it’s extraordinarily unlikely to be true.

The two of us can think of dozens of objections to the CEA claim, presented in an official report, but perhaps the place to start is with the United Kingdom, which has already run this experiment. Over the past decade, the United Kingdom has slashed its corporate tax rate, in several steps, from 30 percent down to 19 percent. At the same time, the United States has kept its corporate tax rate constant at 35 percent. Like the United States, Britain has a large open economy, investors in British firms come from all over the world, and Britain provides a sound legal and regulatory environment.

So what happened to wages after Britain cut corporate taxes? The following chart tells the story. As UK corporate tax rates fell, so did real (inflation-adjusted) median wages. That is, wages moved in the opposite direction from that predicted by the CEA. Meanwhile, in the United States, real median wages crept up — not quickly enough, but at least moving in the right direction. Even if you start the clock in 2013, after the Great Recession, UK wage growth didn’t keep pace with that of the United States.

Trump’s economists say a corporate tax cut will raise wages by $4,000. It doesn’t add up. - Vox

[stpioc]

Running into some sharp objects..

The National Association of Home Builders on Sunday came out against the forthcoming Republican tax bill. The NAHB was working with lawmakers on changes to the mortgage-interest deduction in the plan, but did not support the proposed changes and said the bill would not incentivize homebuying. The NAHB's position indicates a broader problem for Republicans as they try and eliminate various deductions.

Trump tax plan opposed by National Association of Home Builders - Business Insider

Republican tax reformers face a math problem. They want to do about $5 trillion worth of tax cuts over a decade, but they only want to grow the budget deficit by $1.5 trillion. That means they have to find ways to raise about $3.5 trillion in offsetting revenue, and they need to resist the temptation to add new tax cuts demanded by various constituencies — such as the homeowner credit sought by the homebuilders. A lot of the support for the tax reform comes from people who think they're going to get something specific out of the tax plan. But the need to fit the plan in the $1.5 trillion box is going to require telling a lot of those people they aren't going to get what they expected.

How tax reform is likely to pan out - Business Insider

The Republican tax plan expected to be released this week will explode the deficit, according to a study from the University of Pennsylvania's Wharton School released Monday.   The study, which relies on the Penn Wharton Budget Model (PWBM), found that the deficit would increase by $1 trillion to $3.5 trillion over the course of the first decade, based on differing estimates of how the final plan will look. By 2040, the plans would cost between $2 trillion and $10.6 trillion.

GOP tax plan will explode deficit: Wharton study | TheHill

Republican Senator Susan Collins of Maine said Monday she’s opposed to two tax breaks for the wealthy that her party leaders are pushing for, indicating that her vote won’t be easy to win on President Donald Trump’s top legislative priority. “I do not believe that the top rate should be lowered for individuals who are making more than $1 million a year,” Collins said during an interview with Bloomberg News. “I don’t think there’s any need to eliminate the estate tax.” Repealing the estate tax and cutting the individual rate from 39.6 percent for top earners “concern me,” she said, adding that she’s conveyed her opposition to party leaders.

Key GOP Senator Susan Collins Lays Out Her Demands for Tax Bill - Bloomberg

[stpioc]

• They overpromised. On healthcare, Republicans promised lower government spending, lower deductibles, better plans, and more coverage, which was an impossible combination. On taxes, they have promised big middle-class tax cuts, big tax cuts for the rich, big tax cuts for business and no more than $1.5 trillion in budget deficit increases, which is an impossible combination.
  
• They prioritized the donors over the voters. Republicans seem most wedded to the tax cuts that skew most toward the rich: a sharp cut in the corporate tax rate, a "small business" tax cut that's actually a giveaway for people whose finances resemble Trump's, repeal of the estate tax. The need to make room for all those tax cuts for the rich led them to write a plan in which 25% of families would see a tax increaseby 2026, according to the Tax Policy Center. This is a flashback to healthcare, wherein Republicans consistently treated spending cuts as their most important promise, and set about breaking others — for example, kicking millions off health insurance instead of providing the "insurance for everybody" that is "much less expensive and much better" that Trump said he would provide. In each case, they paid attention to the demands of the rich and chose to screw the masses — and the masses cast a lot more votes.
  

Tax reform: Republicans repeat healthcare mistakes - Business Insider

[stpioc]

And of course, when presented by evidence that this inverse Robin Hood tax plan isn't popular with voters, Republicans feign disbelief:

Republicans really want to cut the corporate tax rate. It’s the centerpiece of every plan they have released, and they’ve spent weeks floating wildly unpopular ways to pay for it. There’s just one problem: It’s really unpopular — even among Republican voters. Just 60 percent of registered voters think corporations pay “too little” in taxes, according to a September poll from Morning Consult and Politico, surveying a little under 2,000 Americans.

A more recent Morning Consult and Politico survey from October found only 39 percent of Americans think it should be part of the tax plan — with 59 percent of Republican voters supporting it. Another poll from Pew Research Center showed that 53 percent of Republicans think corporate tax rates should either be raised or stay the same.

But confronted with these numbers, House and Senate Republicans seemed unfazed. “Who cares?” Rep. Chris Collins (R-NY) said before I had a chance to say what the polls showed. Others said they didn’t believe the numbers. “I don’t believe that poll,” Rep. Greg Walden (R-OR) said. “I don’t believe it. It’s in all of our best interest to have these tax cuts for corporations...” Lowering the corporate tax from its current 35 percent to 20 percent, as Republicans are proposing to boost economic growth, is costly — the Tax Policy Center estimates it would cost the country $2 trillion over the next 10 years. But it also has potential to be politically expensive. 

James Wallner, a fellow at the conservative R Street Institute think tank and former executive director of the Senate Steering Committee, tweeted that it “isn’t ideal” for the GOP that only 59 percent of Republicans support cutting the corporate tax rate — the proposal’s popularity will likely drop more as more details emerge about the various ways Republicans plan to pay for cutting the corporate rate, Wallner pointed out.

“I don't believe it”: Republicans are unfazed that corporate tax cuts poll really badly - Vox

I mean, present Republicans with evidence for positions that don't support their ideology and they will simply discard it.

[stpioc]

The first real tax bill is there, here are the main items, from Vox:

The bill would good for corporations and the wealthy
Before delving into the bill’s details, it’s worth taking a moment to consider who, all told, comes out ahead and behind. Here’s who would be better off:

• Corporations, broadly, are the focus of most of the tax cuts. According to the Joint Committee on Taxation, cutting the corporate tax rate from 35 percent to 20 percent, as the bill does, costs nearly $1.5 trillion over 10 years. They also gain new, more favorable treatment of income earned abroad, which is either not taxed or taxed at an even lower rate than 20 percent.
  
  
• Wealthy, particularly ultrawealthy people, who tend to earn a disproportionate share of their income from capital (like stock sales and dividends) and thus benefit from cuts to the corporate tax, which is largely a tax on capital. If the corporate tax also reduces wages, as some conservative economists allege, then corporate cuts still disproportionately help the wealthy, as a huge share of wages go to high earners, not low- or median-wage workers. Additionally, the pass-through cut could enable some wealthy people who either own pass-throughs or create new ones to shelter some of their income from high rates.
  
  
• People making mid- to high six-figure incomes, who arguably should count as wealthy or rich too. By raising the threshold for the 39.6 percent rate on individual income to $1 million for couples, up from $470,700 today, people with incomes in the $600,000 to $700,000 range will get a sizable reduction, in addition to the low-end tax cut they get because the new 12 percent bracket will apply to income now taxed at 15 or 25 percent.
  
  
• Pass-through companies, like the Trump Organization, which get a new very low rate. There are some provisions included meant to prevent rich individuals from using this tax break as a way to shelter income, but they only limit the benefit in many cases. The overwhelmingly rich owners of these companies will still come out way ahead.
  
  
• Heirs and heiresses, as the estate tax is first reduced (by increasing the exemption and applying it to an even smaller sliver of the hyperrich) and then eliminated entirely.
  

But the bill would hurt the poor and increase the deficit
The GOP’s tax reform proposal would leave other groups worse off:

• Blue state residents would pay higher taxes, as the state and local income/sales tax deduction is eliminated and the one for property taxes is somewhat curtailed. That said, wealthy people benefiting from these deductions will likely see this tax hike offset by the other tax cuts in the package.
  
  
• The housing sector faces a new limit on the mortgage interest deduction. For individual taxpayers, the rate cuts largely make up for this, but it reduces the incentive to buy and build homes, which could affect lenders, construction companies, real estate firms, etc.
  
  
• Poor families were rumored to be getting a tax cut due to a change in the refundability formula for the child tax credit — but that didn’t make it into the bill. The credit only goes to families with $3,000 in earnings or more, and phases in slowly; some in Congress were pushing to lower the threshold to $0, but they didn’t succeed. Instead, a provision denying the child tax credit to American citizen children whose parents are undocumented immigrants is included.
  
  
• And it would increase the deficit; the Joint Committee on Taxation has reportedly scored the bill as costing $1.51 trillion over 10 years, about what the House/Senate budget allocated for the bill but still a sizable increase in the public debt.
  

[stpioc]

A major criticism of the Republican tax framework released in September was that it appeared to raise taxes on a large number of families, especially those with upper-middle incomes. Now that House Republicans have turned the framework into legislative text, they've tried to address that problem. But now there is a new problem. Two of the key provisions in the plan meant to protect middle-income families would vanish in 2023.

The good news: The plan would permanently increase the child tax credit from $1,000 to $1,600. This credit is generally available to parents of children 16 and under. The plan would also create a $300 credit for "non-child dependents." Confusingly, your child might be a non-child dependent. This credit would essentially apply to any dependent who doesn't qualify for the child tax credit, which could mean an elderly parent but could also mean your dependent child aged 17 or over. Finally, the plan would create a $300 "family flexibility credit." This would be a credit of $300 for yourself and $300 for your spouse. But both the non-child dependent credit and the family-flexibility credit would last only for five years — meaning the tax plan, as written, would impose a sudden tax increase on middle-income families in 2023.

Child tax credit, key middle-class break in GOP plan, would be temporary - Business Insider

[stpioc]

Open season has started..

A government ethics watchdog argued Thursday morning that the newly released Republican tax bill was written to lower President Trump’s taxes. Citizens for Responsibility and Ethics in Washington, a nonprofit that aims to reduce the influence of money in politics and foster government accountability, cited the bill’s intention to repeal the alternative minimum tax. “In 2005, the one year of Trump’s taxes we’ve seen, the Alternative Minimum Tax cost him an extra $31 million,” the organization, which is linked to Democratic operative David Brock, tweeted. “This bill was written for him.” The alternative minimum tax applies to certain high-income individuals and helps close loopholes to ensure those people pay at least a minimum amount of tax, according to the IRS. Trump broke with tradition and refused to release his tax returns while running for president. But in March, MSNBC’s Rachel Maddow revealed Trump’s 2005 Form 1040. The document showed Trump reported $150 million in income and paid $38 million in federal taxes, largely because of the alternative minimum tax.

Ethics watchdog: GOP tax bill written to cut Trump's taxes | TheHill

[stpioc]

The Republican tax proposal revealed Thursday could make it harder for borrowers to pay back their student loans. As part of the Tax Cuts and Jobs Act, Republican members of Congress are proposing scrapping the student loan interest deduction, which allows borrowers to deduct up to $2,500 in interest payments on their student loans from their tax bill. House Republicans claim that repealing the deduction along with other education-related tax breaks could save the government $47.5 billion over the next 10 years. But it could also upset a vocal group of constituents.

Republicans propose getting rid of tax break for student loan borrowers - MarketWatch

Just what was needed as student loans are already in crisis territory..