Trump's tax plans

[stpioc]

Hmm, that pass-through tax reform, who might it favor, and how exactly got it sneaked into the final compromise version?

Inquiring minds like to know!

Under the new tax plan, Americans who make most of their money from wages and salaries could see their after-tax income rise by 1.5% on average. Pass-through business owners, however, could get a boost about three-times as large. Highly paid professionals might want to turn themselves into LLCs to take advantage of special tax cuts for business owners.

You may want to turn yourself into an LLC under Republican tax plan - Business Insider

Senator Bob Corker wrote to Senate Finance Committee Chairman Orrin Hatch asking for an “explanation” of how a provision on pass-through businesses that would benefit real estate investors came to be included in the final version of the Republican tax bill.

The change would give real estate businesses a hefty tax break, and could potentially benefit people like Corker, who has commercial property holdings in his home state of Tennessee, as well as President Donald Trump and his family. The provision wasn’t present in the Senate version of the tax plan, but appeared in the bill assembled last week by a conference of lawmakers from both chambers of Congress, and released late on Dec. 15. Corker said he received a call Saturday from a reporter asking about the provision. “The suggestion was that it was airdropped into the conference without prior consideration by either the House or Senate,” Corker said in the letter.

Corker Pushes for Details on Pass-Through Provision in Tax Bill - Bloomberg

[stpioc]

And some more tax consequences, if even half of this is true..

Puerto Rico Gov. Ricardo Rosselló said Friday that Republicans’ decision to leave a pair of provisions in the tax reform legislation that experts say will hammer Puerto Rico’s already struggling economy was “unconscionable.” “It is devastating and unconscionable that Congress would do this at this juncture,” Rosselló told NBC News after it was clear the provisions remained in the bill.


Republicans released the latest version of their bill Friday evening and plan to vote it out of the House and Senate early next week. The tax bill, as written, would include taxes on payments between US companies and their foreign subsidiaries and profits from intellectual property. At a Friday news conference in San Juan, Rosselló called the tax reform plan “a huge blow for Puerto Rico,” according to Caribbean Business, and, the paper writes, the bill would have an “adverse impact” on 50 percent of the island’s gross domestic product, 30 percent of the government’s revenue, and 250,000 direct and indirect jobs. 

Rosselló’s administration estimates that recovery from Hurricanes Irma and María will cost roughly $95 billion. The island was already grappling with more than $72 billion in outstanding debt, $49 billion in unfunded pension liabilities, and a 45 percent unemployment rate, the result of a decade-long economic downturn. That crisis had already fueled an exodus of roughly 400,000 peopleover the last decade, a trend that has only intensified since the hurricanes.

The Final Republican Tax Bill Screws Over Puerto Rico – Mother Jones

And much of the island is still without power..

[stpioc]

And yet another study, but familiar conclusions:

One of Republicans' major selling points on the bill, which allows for $1.5 trillion in tax cuts, is that the cuts would pay for themselves in increased growth. The TPC's analysis concluded that growth resulting from the plan would not be enough. The analysis did find that the Tax Cuts and Jobs Act, which Republicans passed last Thursday, would increase US gross domestic product over the next 20 years. The report estimates that the bill would directly boost GDP by 0.6% in 2018, an amount it said would taper to 0.2% by 2037. The analysis predicted that the growth would create $169 billion in new tax revenue in the first decade after passing and $136 billion in the second, well short of the amount needed to pay for the legislation.

Tax Policy Center: Trump, GOP tax plan would deliver little growth - Business Insider

[stpioc]

And this is according to the most aggressive analytical approach by far which includes a heft of 'dynamic scoring'

According to the Tax Foundation's model, which is generally considered aggressive in its assumptions about economic growth, the conference committee's version of the Tax Cuts and Jobs Act (TCJA) would boost GDP by 1.7% over the long run. In the short term, the model found that the bill will boost the GDP growth rate to 2.45% in 2018 from the current projection of 2.01%. While the economic boost estimated by the Tax Foundation's model is significant, it still falls well short of a series of Republican promises. Based on analyses by Trump administration economists and other Republican economists, GOP leaders said that the tax bill could increase GDP by 3% to 5% over a ten year period. Additionally, the GDP growth boost would still fall short of the president's promised 3% annual growth.

Tax Foundation report: GOP tax bill will boost economy, but still fall short - Business Insider
All other studies are predicting substantially less growth.

[stpioc]

The Trump administration is pitching its tax cut plan as a boon to the middle class even though a wide range of independent analyses shows the proposals outlined so far would overwhelmingly benefit the wealthiest Americans.  In the latest pitch, Kevin Hassett, head of the president’s White House Council of Economic Advisers, argued the following about the corporate tax portion of the Trump plan, which envisions a cut in the rate from 35% to 20%: "Conservative estimates from the literature imply an increase in average household income of $4,000 and more moderate estimates show increases of $9,000." 

That was too bold a claim for Hassett’s predecessor at the helm of the Council of Economic Advisors, Jason Furman, to let it slide. In a Wall Street Journal op-ed, Furman makes a convincing case for why Hassett’s claims rest on some rather dubious assumptions. "If all 125 million households got a raise like that, it would amount to an annual increase in total wages of between $550 billion and $1.1 trillion," writes Furman, now a senior fellow at the Peterson Institute for International Economics (where I used to work). This amounts to between 275% and 550% of the $200 billion corporate tax cut’s total cost, says Furman, implying growth benefits to workers that are "more than a little far-fetched."

EX-OBAMA ECONOMIST: The Trump team’s claim that tax cuts would boost wages is 'more than a little far-fetched'

In short, the usual Voodoo math..

Rep. Dan Donovan (R-N.Y.) in an interview on Sunday slammed his party’s tax reform plan, saying residents in his state could lose their homes. "What they're proposing, John, is to eliminate a deduction from your federal tax return that's very important to every New Yorker.… to deduct your state and local income tax and your property taxes,” Donovan said in an interview with John Catsimatidis on AM 970 in New York. “That's essential for hard-working New Yorkers,” he added. “It's been in the tax code since 1913.” Donovan said eliminating the deduction would mean that people in New York “couldn’t buy homes anymore, couldn’t pay their mortgages, couldn't pay their children's tuitions.” Lawmakers have argued that the GOP proposal would hit high-tax states like New York, New Jersey and California especially hard.

New York Republican slams GOP tax plan | TheHill

A funny thing happened when Litterman decided, around the time he left Goldman, to apply basic tenets of Wall Street risk management to climate change: He came to the conclusion that taxes on greenhouse gas pollution should be higher than anything proposed or enacted almost anywhere in the world, and he decided to make it his mission to push for that unlikeliest of outcomes in the U.S. As Washington scrutinizes House Republicans' new tax package, Litterman, 65, and his allies on both the left and right are pushing for a new carbon policy. It could be what Washington calls a “pay-for,” a way to offset tax cuts by increasing government revenue in other ways. A $25 per ton carbon tax would go a long way—almost $1 trillion over 10 years, according to the Congressional Budget Office—toward balancing out the cost of reforms. Congress has approved a 2018 budget resolution that allows room for enough tax reform to increase the federal deficit by $1.5 trillion over 10 years, not accounting for growth sparked by the changes.

There's One Unspeakable Fix That Would Help Pay for the GOP's Tax Cuts - Bloomberg

[stpioc]

Republicans have made a lot of promises on their tax bill. They’ve said their bill will simplify the tax code by having American taxpayers file their taxes on a postcard, and that the tax cuts will pay for themselves, unleash corporate investment, and spark unprecedented economic growth. President Trump and America’s highest earners won’t benefit from the tax bill at all, he said. “This is going to cost me a fortune, this thing, believe me,” Trump said. “This is not good for me. ... I think my accountants are going crazy right now.”

It’s a tax cut targeting the middle class, Republicans say. A typical American family of four earning an income of $73,000 will save $2,059.
“We’re not just putting higher-octane fuel in an old clunker of a tax car; we’ve proposed to drive a newer tax car that can beat and win against any country in the world,” Rep. Kevin Brady (R-TX), who chairs the tax-writing Ways and Means Committee, said. Now President Donald Trump has signed the final tax bill into law and it’s clear that Republicans will fall short of these promises. True, they made attempts in earlier versions of the bill, and those provisions just didn’t make it through last-minute dealmaking. But some of the guarantees turned out to be straight-up lies..

How Republicans misled the American public on their tax bill - Vox

The article then lists a series of these lies.

[stpioc]

More than 90% of businesses in the US are “pass-through businesses”, meaning their income passes through to the owners’ individual tax returns, where it is taxed at ordinary income tax rates, instead of being filed on a separate business return like a corporation. The sweeping tax bill cuts the top rate on “qualified” pass-through business income from 39.6% under current law to 29.6%. Assuming the full benefit of this, the CAP roughly estimates a tax cut of $11m to $15m for Trump (based on an estimate of $150m of passthrough income from reviewing his financial disclosure, and the $109m in real estate/pass-through income on his 2005 tax return); $5m to $12m for Jared Kushner, White House senior adviser and Trump’s son-in-law; and $2.7m for Betsy DeVos, the education secretary. The bill that passed the Senate had a “guardrail” that prevented businesses with too few employees from claiming the full benefit of the deduction, the CAP noted. But at the last minute, a special exception was added that is especially beneficial to real estate firms. In addition, the biggest element of the tax bill benefitting the wealthy is the corporate tax cut. Again, members of Trump’s cabinet have substantial corporate stock holdings and will be among the winners. The CAP did not try to estimate this because it is hard to quantify the tax cut for any one corporation.

Trump will personally save up to $15m under tax bill, analysis finds | US news | The Guardian

[stpioc]

As Republican members of Congress and President Trump celebrate the passage of their new tax reform bill by declaring it as a “big, beautiful Christmas present” to middle class families, the largest U.S. banks are celebrating their new billions by lining the pockets of their shareholders. In the words of one of Goldman Sachs’ top analysts: large banks will “benefit disproportionately” from the new law, and a lot of the profits will go to shareholders. 

Last week, Richard Ramsden, business unit leader of Goldman Sachs’ Financials Group in Global Investment Research discussed the impact of the tax reform law on large banks, as a guest on the banking Goliath’s in-house podcast. He said his projections were based on discussions with leaders of other large banks during Goldman Sachs’ annual Financial Services Conference held earlier this month.  

“Banks though, do benefit disproportionately in some ways, in that 90 percent of bank earnings are domestic and banks do have relatively high tax rates,” Ramsden said during the podcast Ramsden also estimated that only one-third of the billions large banks are expected to gain from the tax bill — which cuts the corporate tax rate from 35 to 21 percent and creates a low one-time repatriation tax — will be reinvested back into the company, with the rest going to shareholders and their bottom lines.

Goldman analyst: banks ‘benefit disproportionately’ from tax cut, extra cash is ‘not really needed’ – ThinkProgress

Why doesn’t the GOP seem to care that its tax bill will drive up the deficit by $1.5 trillion? After all, for most of its modern history, the Republican party has campaigned on controlling the debt. Many answers have been offered, some quite illuminating. Here’s one that hasn’t been considered, and it may be the most urgent to understand. Running up the deficit so extravagantly would serve two strategic purposes: One, as many have pointed out, is to create a fiscal emergency that justifies massive cuts to and even possible privatization of Social Security, Medicaid and Medicare.

But there’s a second reason you likely haven’t heard about: sealing the case for a constitutional convention. And the real action on this front will not be in Washington, but out in the states, where almost no one is looking.   While the eyes of most journalists and citizens have been fixed on the White House and Congress, scores of organizations and elected officials funded by Charles Koch and his donor network have quietly achieving control over state governments. With the aid of the powerful lobby group American Legislative Exchange Council (ALEC), 28 of the 34 states needed to call such a convention have passed measures calling for one. Many state legislatures were persuaded in part by the lure of a Balanced Budget Amendment. A ballooning deficit could help get the remaining six on board.

The GOP tax bill could kill two birds with one stone | TheHill

[stpioc]

"Frankly, the notion that corporate tax cuts will unleash some renaissance in US real investment and growth would be laughable if the bald-faced corporate giveaway wasn’t so offensive," he wrote.  "The policy not only vastly favors the wealthy, but is even more preferential to wealthy individuals who take their income in the form of profits rather than wages. The current tax legislation isn’t some thoughtful reform to benefit Americans. It’s a quickly planned looting through a broken window in our nation’s character." 

"If our policy makers are interested in boosting long-term structural US GDP growth, they should be providing direct and targeted tax incentives for real investment, education, research & development, and other factors that could, over time, increase our nation’s productive capacity," he said.

Tax cuts benefits to the economy are a delusion, Hussman says - Business Insider

Almost all the companies that responded applauded the legislation, mostly in the broadest sense and largely in corporate-speak without specifics, saying the lowered corporate tax rate would “allow” or “enhance” the ability of U.S.-headquartered companies to compete more fairly with overseas-based companies. The bill lowers the maximum corporate tax rate to 21% from 35%.

Here’s what the companies that make up the Dow industrials think about the tax bill - MarketWatch

Likewise, 4 million top bracket ATM (alternative minimum tax) payers will be relieved of about $80 billion per year of Uncle Sam's extractions; around 5,000 dead people per year with estates above $20 million will get to leave more behind; owners of real estate will be able to deduct another 20% of property income that isn't already sheltered by depreciation and interest deductions; and tax accountants and lawyers will become stinking rich helping America's proprietorships (24 million), S-corporations (4 million), partnerships (3.5 million) and farms (1.8 million) convert their "ordinary income" into newly deductible "qualified business income".

As we have long insisted, America's health care system consists of the worst of both worlds. It amounts to socialism for the beneficiaries, which generates uncontainable demand via third-party paid, cost-averaged pricing; and crony capitalism for the providers, where delivery system cartels of doctors, hospitals, nursing homes, pharma suppliers, medical device makers etc. have implanted themselves deep on K-street and have thereby rigged reimbursement systems for maximum private revenue gain (and minimum system efficiency and competitive discipline). That's why the US spends 18% of GDP on health care compared to 10-12% in the rest of the (socialistic) developed world, on the one hand; and why the GOP couldn't lay a glove on ObamaCare, which embodies in spades this "worst of both worlds" paradigm, on the other.

What The GOP Pols Have Wrought - A Fiscal, Economic And Political Monster, Part 1 | Seeking Alpha

[stpioc]

Under the new plan, Wulf doesn't expect to be able to meaningfully upgrade either of these areas — at least not in the long-term fashion befitting a growing business. And as someone who also serves as the Nevada chapter chair for the National Federation of Independent Business Leadership Council, it troubles him to see how tax reform has played out — not just for his operation but for small businesses as a whole. There are three areas of the tax bill that have him particularly concerned, with the first two directly affecting the higher wages and machinery upgrades he's so keen to deliver. 

Previously, interest counted as a business expense. But under the new tax bill, the net interest deduction is capped at 30% of Ebitda for four years, followed by an even tougher threshold going forward. Wulf sees this hampering growth for small businesses by making it more difficult to borrow money. "You could grow your business on retained earnings," he said. "But that's no way to do it."

Trump GOP tax bill: Small business owner breaks down 3 big problems - Business Insider

Maryland Gov. Larry Hogan ® is promising to offer a bill to the state General Assembly to protect Marylanders from being “negatively affected” by Congress's newly-passed GOP tax bill. “Our goal will be to leave that money in the pockets of hardworking Marylanders,” Hogan said Wednesday, according to The Baltimore Sun. “I am confident that our partners in the General Assembly who have expressed concern over the impact of this tax reform bill will support us unanimously in protecting Marylanders who could be negatively affected."

Maryland’s Republican governor to offer bill protecting state from GOP tax bill | TheHill