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Republican Tax Plan

prof brofman wrote:

The most significant impact could be felt in New York City. In theory, New York and New York City in particular, could reduce income taxes and make up the difference by raising property taxes. This would make sense since New York City residents pay one of the highest state and local income taxes in the nation. Additionally, in terms of tax as percent of market value, New York City residents pay one of the lowest property taxes in the nation.
The flight of businesses from New York City could prompt the government to see the advantage of real estate taxes as compared to income taxes, in that real estate cannot be relocated to another tax jurisdiction. However, given the immense power of the real estate interests in New York City, a much more likely scenario would be that as tenants fled New York City, in response to the tax bill, the real estate interests in New York City would force the government to reduce real estate taxes and make up the difference by raising local income taxes. This scenario or something similar might be played out in various other high-tax localities.

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neat article that shows diff between house and senate

https://cnbc.com/2017/12/04/republican-house-and-senate-tax-plan-dif...

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havent been following incredibly closely - i saw some senators were pushing to maintain sales tax breaks - would it be possible for high income tax states to just do a tax restructure that increases sales tax & removes income tax? Not sure it would be incredibly popular in those states as it would be regressive but just a thought.

'A flute with no holes, is not a flute. And a donut with no hole, is a danish'

The final bill allows deductions of local taxes up to a limit of $10k, regardless of whether those taxes come from sales, income, or property ownership. The inclusion of sales tax will have a very small effect, since people who pay a lot of sales tax would normally also have lots of income and/or property taxes as well.

Furthermore, that sales tax deduction is progressive, not regressive; high income people would already be hitting the $10k cap from other taxes. So, the only beneficiaries of sales tax deduction would be relatively low earners.

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"You want a quote? Haven’t I written enough already???"

RIP

I glanced at an overview. My taxes are easy, as basically I don’t have income in Amerika, other than investment gains. Seems like I’ll get more money now, because I get to deduct $24K or whatever, but then less money later, because they will default on social security.

Basic finance, shift cash flows forward. 

I took the opportunity this morning to voice my opposition to the plan.  

I do like the repeal of AMT, the repeal of estate tax (or increase in the exclusion), and the repeal of the individual mandate.  

Other than that, I think this is nothing more than a political fight.  This is the DJT trying to give himself a handout and the Republicans trying to push through a bill (any bill) that they can throw in the Democrat’s faces.  

(On a side note - does anybody remember a few years ago when Obamacare passed?   It did not receive one single Republican vote.  And the GOP took that opportunity to b!tch and whine and complain to no end, saying how unfair the political process was.)  

82 > 87
Simple math.

However–in order to be fair (and take an opportunity to equal-opportunity bash the Democrats) - When did the Democrat Party begin to believe that we should have a balanced budget? 

82 > 87
Simple math.

Greenman72 wrote:
(On a side note - does anybody remember a few years ago when Obamacare passed?   It did not receive one single Republican vote.  And the GOP took that opportunity to ***** and whine and complain to no end, saying how unfair the political process was.)  

Repubs/Dems are same/same. Corporate heath care plan, corporate tax cuts…both parties are in favor of both…they just can’t be seen as favoring it, or the illusion of choice dissipates. So lots of virtue signaling, and complaining now. 

But I can forecast with 100% certainty—when the corporate-dems are back “in charge” they will push thru a corporate scam, wrapped in socialism and “helping people”.

Greenman72 wrote:
…the Republicans trying to push through a bill (any bill) that they can throw in the Democrat’s faces.  

The S&P just blocks all attempts at non-corporate maneuvers (Bannon and the anti-corporatist things people voted for are dead), until Repubs get desperate, then puts forward this. Now the corporate-media will virtue signal, “oh those corporate republicans!” It’s such a joke.

https://twitter.com/johncornyn/status/943136421765840896

When you’re in touch with your average constituent 

The final tax plan is definitely influenced by politics. However, some principles are improvements over the old rules. The corporate tax cut, which was the main purpose of the plan, was overdue. It was funny how other countries threatened WTO action - obviously motivated by the fact that if companies start to pay taxes in the US, they’ll pay less taxes to tax haven countries - suckers!

Reducing distortions is another goal. Reducing SALT deduction makes sense - why should the Federal government subsidies bloated state budgets*? The mortgage interest tax deduction still makes no sense and has been harmful in creating asset bubbles. It should have been eliminated, if not for political opposition, but a reduction in the notional limit is a step in the right direction.

Furthermore, more Americas will choose the standard deduction now, meaning less paperwork will be processed for itemizations.

So overall, the plan is based on reasonable motivations. I will pay slightly more taxes, and maybe might have chosen a few adjustments for the sake of budget. However, I can see a reason to support it.

*But, but ohai, high tax states pay more Federal taxes because of higher incomes! Well, why don’t we just reduce Federal taxes and make the brackets less progressive? Boom!

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Do you think the tax cuts will lead to any meaningful economic growth/capex?  Or will companies just buyback stock and enlarge C-level pay packages?

Yes, there will definitely be some economic growth, even if it does not fully offset the revenue cost of the cuts. Even if, as you said, only executives and stock owners benefit directly from the cuts, those people will spend more money on others. I know I have.

Some parts of the bill, like repatriation taxes, are costless benefits to the US. No one in the US benefits from Apple holding a trillion dollars in Ireland.

If we are along the train of thought that more corporate taxes = better, why don’t we just tax companies 80%? 100%?

“Visit the Water Cooler forum on Analyst Forum. It is the best forum.”
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Sorry I wasn’t trying to make a point, was genuinely curious.  Tank.

ohai wrote:

The final tax plan is definitely influenced by politics. However, some principles are improvements over the old rules. The corporate tax cut, which was the main purpose of the plan, was overdue. It was funny how other countries threatened WTO action - obviously motivated by the fact that if companies start to pay taxes in the US, they’ll pay less taxes to tax haven countries - suckers!

Reducing distortions is another goal. Reducing SALT deduction makes sense - why should the Federal government subsidies bloated state budgets*? The mortgage interest tax deduction still makes no sense and has been harmful in creating asset bubbles. It should have been eliminated, if not for political opposition, but a reduction in the notional limit is a step in the right direction.

Furthermore, more Americas will choose the standard deduction now, meaning less paperwork will be processed for itemizations.

So overall, the plan is based on reasonable motivations. I will pay slightly more taxes, and maybe might have chosen a few adjustments for the sake of budget. However, I can see a reason to support it.

*But, but ohai, high tax states pay more Federal taxes because of higher incomes! Well, why don’t we just reduce Federal taxes and make the brackets less progressive? Boom!

Removing the SALT deductions has merit, but it is a tax increase and tax increases have consequences.  If we were using the money to face some sort of national crisis, I’d say it makes sense, but dumping the money on pass-throughs and corporations doesn’t really seem like the most efficient use of money.

And, yes, the high tax states pay more in taxes and subsidize the rest of the country (it’s why people making 100k in middle America live in McMansions and people making 300k in NYC suburbs live in dated homes or small condos). 

Why don’t we just remove SALT deduction, and lower taxes on people who earn $300k? Wouldn’t this accomplish roughly the same thing, while not causing an overweight incentive to increase local taxes?

What are you saying anyway, tax increases have consequences? So we should lower taxes? Or do nothing, because the current tax code is somehow 100% optimal?

“Visit the Water Cooler forum on Analyst Forum. It is the best forum.”
- Everyone

ohai wrote:

Why don’t we just remove SALT deduction, and lower taxes on people who earn $300k? Wouldn’t this accomplish roughly the same thing, while not causing an overweight incentive to increase local taxes?

What are you saying anyway, tax increases have consequences? So we should lower taxes? Or do nothing, because the current tax code is somehow 100% optimal?

I’m saying if you want to remove SALT deductions, fine, but don’t use the money to fund tax cuts in different areas of the tax code.  If they actually did reform where they removed the SALT deductions with the smallest footprint possible I could probably get on board.  But that’s not what happened here, they basically cut the corporate rate to some arbitrary number and found offsets elsewhere in the code.  And then, when people started complaining about it, the Republicans just threw tax cuts at people until they could do some online calculate which says they get back another 50 bucks under the new plan. 

Let’s not forget this adds to the debt, even more than the 1.5 T which is based on the assumption that the personal rates will revert after a few years (probably never gonna happen).

corporations dont need a 15% tax cut LOL

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I agree with Ohai that the US tax code, in its present form, is more about social policy than it is about revenue generation.  And I think that’s a bad thing.  

If you want to argue that we should do away with certain deduction, I’m all for it.  I agree that the mortgage interest and property tax deductions are nothing more than incentives for people to buy their own houses.  And I’m not sure why we should incentivize that.  

But as Ohai pointed out–once you have a handout written into the tax code, it becomes the new de-facto norm, and any changes to it will have strong opposition, even when the handout makes no economic sense.  (EG - When you drill an oil well, you can expense the entire cost of drilling the well, rather than capitalize it and recapture the costs over several years, which is the norm in every other industry.  This is vigorously opposed by virtually everybody in the business, because that’s a handout that people have become used to.)  

But the new “Republican Tax Plan” isn’t some new tax law.  Rather, it’s just a twist on the existing pile of crap that we already have.  If they really wanted to simplify the current code, they could just do away with (or change the amount of) personal exemptions, standard deductions, and move the tax brackets.  That would be much simpler.  

But I suppose it’s too much to ask the government to do something simple and sensible.  

82 > 87
Simple math.

"You want a quote? Haven’t I written enough already???"

RIP

ohai wrote:
…some principles are improvements over the old rules. The corporate tax cut, which was the main purpose of the plan, was overdue.

So overall, the plan is based on reasonable motivations.

HA! And what about the downside, USG default? We don’t get to just lazily analyze one side of the equation.

The “plan” is to borrow money from China, and the oldie’s social security, plus print some money—give that money to corporations as bonus profit—which floats horizontal into global financial markets. So it ends up captured by the upper middle class, the 10% who own 80% of the stock, minimal trickle down, more wealth concentration. And it’s not like global markets aren’t going to adjust, this change in US corporate taxes will trigger global changes, which means more global debt, which the system can’t bear. There’s no plan here at all, it’s just the S&P pulling off one last theft, as financial game-over quickly approaches. 

ohai wrote:
If we are along the train of thought that more corporate taxes = better, why don’t we just tax companies 80%? 100%?

That’s called true trickle-down. Corporations spend, so they don’t recognize profits, and any they do recognize go to paying down the USG’s debt. It’s negative for shareholders, as money drifts out of global markets, back down to the ground. Positive for the 90%. That we could say would be based on “reasonable motivations”. 

ohai wrote:

Yes, there will definitely be some economic growth, even if it does not fully offset the revenue cost of the cuts. Even if, as you said, only executives and stock owners benefit directly from the cuts, those people will spend more money on others. I know I have.

Some parts of the bill, like repatriation taxes, are costless benefits to the US. No one in the US benefits from Apple holding a trillion dollars in Ireland.

If we are along the train of thought that more corporate taxes = better, why don’t we just tax companies 80%? 100%?

I actually thought about the theory, high taxation leads to better companies. only because if taxes are high, the corporations will very likely invest more to grow their economic moat against others instead of sending money back to shareholders. just a thought, im sure the idea is easily picked apart.

I love my cheese. I got to have my cheddar.

Nerdyblop wrote:

ohai wrote:

Yes, there will definitely be some economic growth, even if it does not fully offset the revenue cost of the cuts. Even if, as you said, only executives and stock owners benefit directly from the cuts, those people will spend more money on others. I know I have.

Some parts of the bill, like repatriation taxes, are costless benefits to the US. No one in the US benefits from Apple holding a trillion dollars in Ireland.

If we are along the train of thought that more corporate taxes = better, why don’t we just tax companies 80%? 100%?

I actually thought about the theory, high taxation leads to better companies. only because if taxes are high, the corporations will very likely invest more to grow their economic moat against others instead of sending money back to shareholders. just a thought, im sure the idea is easily picked apart.

the first downside that comes to mind is that high taxation would lead to greater conglomeratization which is rife with inefficiency. businesses would have greater incentive to buy companies that have large tax assets, irrespective of their industry.

higher taxes would need to be on a global basis or else you make the global economy very complicated and continue to see tax inversions. if anything, i think the US tax changes will lead to greater economic efficiency because you don’t have droves of US companies spending hundreds of millions relocating to Canada, or Ireland, or wherever, simply to evade tax. i think equal corporate tax, from country to country, is more important than the actual tax %. if all countries had a 40% tax rate, i doubt there would be much difference than if all countries had a 20% tax rate. but once you get to say 80%, you start getting conglomerate issues.

i’m of the belief that 0% corporate tax, thereby eliminating an entire tax collection ecosystem, combined with a high progressive personal tax and no favourable capital gains and dividend tax treatment, again simplifying the tax system, is the most efficient. this would tackle income inequality and any shortfalls or surpluses could be fixed with minor adjustments to rates.

I love my cheese. I got to have my cheddar.

purealpha wrote:

ohai wrote:
…some principles are improvements over the old rules. The corporate tax cut, which was the main purpose of the plan, was overdue.

So overall, the plan is based on reasonable motivations.

HA! And what about the downside, USG default? We don’t get to just lazily analyze one side of the equation.

The “plan” is to borrow money from China, and the oldie’s social security, plus print some money—give that money to corporations as bonus profit—which floats horizontal into global financial markets. So it ends up captured by the upper middle class, the 10% who own 80% of the stock, minimal trickle down, more wealth concentration. And it’s not like global markets aren’t going to adjust, this change in US corporate taxes will trigger global changes, which means more global debt, which the system can’t bear. There’s no plan here at all, it’s just the S&P pulling off one last theft, as financial game-over quickly approaches. 

ohai wrote:
If we are along the train of thought that more corporate taxes = better, why don’t we just tax companies 80%? 100%?

That’s called true trickle-down. Corporations spend, so they don’t recognize profits, and any they do recognize go to paying down the USG’s debt. It’s negative for shareholders, as money drifts out of global markets, back down to the ground. Positive for the 90%. That we could say would be based on “reasonable motivations”. 

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RIP

On the mortgage interest deduction: if you make interest nondeductible for individuals parity would be to do the same for corporations. Think about the effect that would have on capital markets…

With the maximum SALT deduction at $10k and standard deduction at $12k, this plan could be bad for anyone paying over $12k in SALT (township, state, property taxes, etc.). Of course, this will have limited effect on plenty of people who are subject to AMT (usually earning between $200k and $500k). AMT is basically a surtax on high-income people in high-income tax states anyway.

Personally, I believe there needs to be more calculus (to start) in the US tax code. We are making it too easy on tax accountants.

It’s whatever, just make it count.

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