Next on 'Trump Agenda': Taxes [Update with 2018 tax data] (1 Viewer)

superchuck500

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Some financial observers think that the effort for tax reform will be 'easier' than repeal/replace because 'everyone [in the GOP] is in favor of tax cuts.' While that is essentially true, the revenue component can be tricky. The Freedom Caucus and other budget hawks have been beating the drum of fiscal responsibility for many years and they aren't going to simply cut taxes on the back of deficit spending. The revenue side of the equation has to make sense.

In addition, if the GOP intends to use the reconciliation process for the tax bill to avoid Senate filibuster, it has to be revenue neutral. This was going to be challenging anyway, and now without the tax savings that a repeal of ACA would have brought, it makes it an even tougher nut to crack.

Finally, the GOP will need to figure out where the tax proposal is coming from. Trump is likely going to want it to come from the executive (Treasury or White House), especially after getting burned on the ACHA, which came from the House. But Trump doesn't like to give public support to specific plans - he has refused to be pinned down on aspects of tax reform and his support to the ACHA came late and without a command of the bill's particulars. Further complicating the matter is Trump's leadership style, where he likes to have different power centers, with overlapping areas of focus, and all reporting to him directly. This makes a singular effort with unified support difficult.

As Forbes put it today, it isn't going to be easy and could likely be more difficult that healthcare:

Following the collapse of the House GOP health plan, President Trump and many congressional Republicans say they will pivot to tax reform. Passing that initiative, they insist, will be easier. For example, on Friday Treasury Secretary Steve Mnuchin put it this way: “In a way, it is a lot simpler. In health care, it’s a much, much more complicated issue.”

Mnuchin and others could not be more wrong. If lawmakers think rewriting the nation’s health laws are hard, just wait ‘til they tackle full-blown tax reform. There is a good reason why a major rewrite of the tax code has not happened for more than three decades.
https://www.forbes.com/sites/beltway/2017/03/27/no-tax-reform-is-not-easier-than-rewriting-the-health-law/#8c6f2925262a



For a detailed account of how the process is setting up and how the fissures from healthcare are going to carry over to tax, from the Washington Post: https://www.washingtonpost.com/news/wonk/wp/2017/03/27/divisions-threaten-trumps-hope-of-winning-his-next-big-legislative-battle-taxes/?hpid=hp_hp-top-table-main_wb-taxes-1145a:homepage/story&utm_term=.98e542572fd0


A revenue-neutral simplification of the tax system that lowers corporate tax and brings "repatriation" of off-shore funds would be a big success for all involved, and if they do it smartly, it could be a significant benefit to the economy. Right now, there's not a lot of reason to be optimistic.
 

SystemShock

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I like charts too!
But the reason for that rise during the 1990's wasn't high or low taxes. It was the internet bubble expanding.

You can't just pick a chart and not take into consideration what was going on at the time.
 

Saint_Ward

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I like charts too!
But do you understand them?

The Dow Jones Industrial Average is the average of the largest 30 stocks on the NYSE. It grows as their prices grow.

price growth, like interest, is exponential growth. So, you could put anything next to that DJIA chart and it will show exponential growth in the long haul, because that's how the market is designed to work.



So, on the average, steady growth will give that type of chart. What it shows is that the tax levels didn't impact the DOW at all. And why would it? It's based on a combination of corporate decisions, their tax rates, their loopholes, and investors seeing it as the best option for making money. Also, long term investment income isn't even taxed at the high marginal income rate.

The chart doesn't show a connection. So, thanks for the data that is devoid of meaning.
 

not2rich

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price growth, like interest, is exponential growth. So, you could put anything next to that DJIA chart and it will show exponential growth in the long haul, because that's how the market is designed to work.

The chart doesn't show a connection. So, thanks for the data that is devoid of meaning.
Your post reminds me of this chart:

 

dtc

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I like charts too!
As a trained economist, I also love charts.

The one you posted is a joke of the highest order.

Health of the economy is not equivalent to the DJIA and the highest marginal tax rate is not what the richest pay.

Aside from the two most basic misrepresentations that chart could make, I suppose it's pretty.
 

UncleTrvlingJim

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You’re missing the point. I’ve said countless times that the problem isn’t paying taxes the problem is what people consider fair.
There's no such thing as fair, just focus on what produces the results we want.
 
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Hmmm, well looks like there's more impact than at first spotted.

https://www.npr.org/sections/ed/2018/01/08/575167214/congress-changed-529-college-savings-plans-and-now-states-are-nervous

"This change allows private school families to put their money through 529 accounts and avoid state income taxes," says Nat Malkus, who studies education policy at the American Enterprise Institute, a conservative-leaning think tank. "It is a mess, no matter how you slice it. It's a change from the federal level that puts a number of states in a pretty tough position moving forward."

That's because, Malkus says, if this move entices lots of new families to sign up and many current families to contribute more, then states could end up losing a lot more money to tax breaks.

"I think it would immediately create an unintended hit to the state's budget," agrees Greg Berck of the New York State Council of School Superintendents. "States plan ahead, sometimes multiple years ahead, and New York state will be required to provide a state tax deduction [to parents of students in K-12 private schools] unless the legislature acts to amend our state law."
Not certain how to feel about this. I like encouraging education, but dislike privatizing education.
 
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superchuck500

superchuck500

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As a trained economist, I also love charts.

The one you posted is a joke of the highest order.

Health of the economy is not equivalent to the DJIA and the highest marginal tax rate is not what the richest pay.

Aside from the two most basic misrepresentations that chart could make, I suppose it's pretty.
Because its red and green?

I'm not a trained economist but I know enough about macro-economics to know that the chart doesn't demonstrate anything. There isn't even a relationship between the two metrics charted.

But the notion that income tax rates influence capital spending has been widely debunked. There are components of the tax landscape that do influence capital spending but not the overall rates.
 

Saint_Ward

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https://finance.yahoo.com/news/tax-cuts-going-keep-boon-shareholder-class-185047405.html

he stock market’s rally was the tell.

But as the impacts of the corporate tax cut passed late last year by the Trump administration begin to be seen across the economy, it is clear that the shareholder class will be the largest beneficiary of this overhaul to the tax code. This continues a theme we’ve seen since the election — shareholders winning.

On Wednesday, two separate corporate announcements highlighted what is likely to be a theme during a fourth quarter earnings season that will pick up steam in the coming weeks.

Bank of America (BAC), which reported earnings before the market open on Wednesday, said that most of the benefits it gets from tax cuts will be used on capital return. On the company’s earnings conference call Wednesday, Bank of America Brian Moynihan said “most of the benefits” from tax cuts “will flow to the bottom-line through dividends and share buybacks over time.”

Moynihan noted that in 2017, Bank of America had $16.6 billion of net income available to shareholders and returned $16.8 billion through dividends and buyback. “So, yes, we will expect to return more capital to shareholders given the tax [cut],” Moynihan said.
Looks like mostly stock buybacks and dividends. Not re-investing in employees or the economy.
 

Saint_Ward

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http://money.cnn.com/2018/01/21/news/economy/davos-oxfam-inequality-wealth/index.html?iid=surge-grid-dom

Not exactly Trump tax related, as this is global and before the plan, however, lowering the taxes on the Rich don't fix this at all.

Oxfam said Monday that it is time for the global elite to stop talking about inequality and start changing their ways.

"It's hard to find a political or business leader who doesn't say they are worried about inequality. It's even harder to find one who is doing something about it," said Byanyima.

"Many are actively making things worse by slashing taxes and scrapping labor rights," she added.

Oxfam said that governments should focus on policies that would lead to fairer distribution of wealth and stronger workers' rights.

These could include introducing a living wage, supporting labor unions and tackling gender discrimination.

Governments also need to tackle tax avoidance and put limits on shareholder returns and executive pay, Oxfam said. The group argues companies should not issue dividends to shareholders unless they pay their workers a living wage.

Oxfam also said that tax policies should be used to reduce extreme wealth.
 

Galbreath34

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1% amassing 82% of all the wealth last year should have people reacting.

<iframe src='https://gfycat.com/ifr/TallImmaculateAiredale' frameborder='0' scrolling='no' allowfullscreen width='640' height='1138'></iframe>
 
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https://www.marketwatch.com/story/tax-overhaul-will-have-a-limited-effect-on-us-economy-moodys-says-2018-01-25?link=MW_latest_news

The U.S. tax bill signed into law in December will have a limited effect on the U.S. economy, as companies are unlikely to spend their tax savings on growth initiatives while the tax cut for the wealthy will not trickle down.

That&#8217;s according to Moody&#8217;s Investors Service in a FAQ on the credit impact of the tax bill published Thursday, which warns of a number of negative consequences for federal debt, local governments, utilities and homeowners.

&#8220;We do not expect a meaningful boost to business investment because U.S. nonfinancial companies will likely prioritize share buybacks, M&A and paying down existing debt,&#8221; said Moody&#8217;s analysts led by Rebecca Karnovitz. &#8220;Much of the tax cut for individuals will go to high earners, who are less likely to spend it on current consumption.&#8221;

More than three-quarters of the $1.1 trillion in individual tax cuts will go to people who earn more than $200,000 a year in taxable income, who constitute only about 5% of all taxpayers, said Karnovitz.
 

Saint_Ward

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Why Companies Aren’t Investing Their Tax Cut Windfalls

We’re five months into the new business tax system in the U.S., and while companies are clearly pleased with the drop in the top rate to 21 percent, they’re not quite sure what to do with the cash that’s piling up, says Howard Gleckman of the Tax Policy Institute.

One big problem is uncertainty surrounding some of the new rules, especially as they relate to the taxation of international profits. Reflecting on recent discussions he had at the National Tax Association’s annual meeting, Gleckman says that “large multinational businesses—and their tax advisers—do not yet understand the new law, and thus are reluctant to commit to major investments.”


....

There are plenty of possible reasons that companies aren’t making big investments with their tax windfalls, Gleckman says, including a sense that the economy is near the peak of its cycle, a lack of good new projects to invest in and continued weakness in overall demand. But the uncertainty surrounding the new, hastily written tax rules on foreign profits probably hasn’t helped.
A sense that we're near a peak of the cycle and weakness in overall demand?

Hold on to your butts.
 

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