The Truth about Tax Reform

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Re: The Truth about Tax Reform

Postby KeithE » Thu Aug 31, 2017 11:39 am

Dave Roberts wrote:
William Thornton wrote:I ignore Keith's selective use of graphs...but I'm liking Sandy's comment above. Not sure what went wrong there. Maybe he ignored the graphs or did his own thinking.

TR is a tough sell since most lower income people don't pay income taxes anyway.


They at least pay Social Security which is more than I can say for the wealthy and super wealthy who get their money without any Social Security deductions since it comes from investment income. Mitt Romney sank after he released his tax returns and people saw how little he paid (15% taxes and no Social Security if I remember correctly). Funny that no TR proposal addresses that one.

Other than some vague references from our serial liar (in MO yesterday) I have not seen any loophole elimination (individual or corporate). Nor is there new anti-offshoring provisions, any repatriation taxes, ending SS income caps, lobbying curtailment, financial transaction taxes, or any innovative true tax reform (TR). The commercials on TV merely claim great “pro-growth” attempting pull the wool of our eyes.
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Re: The Truth about Tax Reform

Postby Jim » Fri Sep 01, 2017 11:29 am

Tax reform, regardless of what's done or the ballyhoo accompanying it (especially by Congresspersons with their precious vested interests) is actually a non-issue and will be until the USA approaches the economic fiasco of a Venezuela. Obama took the road of least resistance—just print money and run up the national debt in 8 years over that of the complete history of the nation. This is still the methodology and the USA can get away with it for a long time yet. The national debt means nothing and the average citizen knows it, will be glad to accept a tax-reduction and look at the Reagan reformation as a baseline. After WWII, the top rates (on the alleged rich) stayed in the 90%+ range until 1964. The lowest rates were at 20% or less. When Reagan left office in 1989, the top rate was 28% and the lowest was 15%. The nation didn't fold despite all the shenanigans Congress could impose. Just stay tuned as the solons spin their webs that are not worth warm spit.
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Re: The Truth about Tax Reform

Postby KeithE » Fri Sep 01, 2017 1:12 pm

Jim wrote:Tax reform, regardless of what's done or the ballyhoo accompanying it (especially by Congresspersons with their precious vested interests) is actually a non-issue and will be until the USA approaches the economic fiasco of a Venezuela. Obama took the road of least resistance—just print money and run up the national debt in 8 years over that of the complete history of the nation. This is still the methodology and the USA can get away with it for a long time yet. The national debt means nothing and the average citizen knows it, will be glad to accept a tax-reduction and look at the Reagan reformation as a baseline. After WWII, the top rates (on the alleged rich) stayed in the 90%+ range until 1964. The lowest rates were at 20% or less. When Reagan left office in 1989, the top rate was 28% and the lowest was 15%. The nation didn't fold despite all the shenanigans Congress could impose. Just stay tuned as the solons spin their webs that are not worth warm spit.

Truth is Obama brought the annual deficit down from that of Bush’s last budget year (2009) back to pre-financial crisis levels.

Image

Your tax rate numbers are correct.

Hoped you are wrong about “warm spit”; but I too have my doubts that Congress/President will do much good wrt taxes, deficits or infrastructure stimulus.
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Re: The Truth about Tax Reform

Postby KeithE » Thu Sep 28, 2017 8:59 am

Well some new details are out and we can see what Trump has in mind - more gifts for wealthy people and large corporations.

Read most of the gory details at (some selected quotes):
Trump's massive tax cut -- for the rich

The Trump tax sketch includes plenty of "wins" for the billionaire class. It lowers the top income tax rate from 39.6% to 35. Saving 4.6% of their income is a nice prize for those couples already making over $470,000 a year. It slashes the corporate tax rate from 35% to 20%. It eliminates the alternative minimum tax, which billionaires like Trump pay. It creates a special 25% tax rate for "small businesses," defined by their legal form of ownership as "pass-through entities."


What's most striking about this list of losers, of course, is its juxtaposition with the winners -- mainly, the rich. Consider, for example, the proposed repeal of the estate or so-called death tax: a tax that only falls on individuals dying with more than a $5.5 million net worth, nearly $11 million combined for married couples. This is 0.2% of the population.

Read about the losers in the article - mostly the poor and the blue states with large state taxes (that are no longer deductible).

Trump Proposes the Most Sweeping Tax Overhaul in Decades

On the individual side, the plan would collapse the tax brackets from seven to three, with tax rates of 12 percent, 25 percent and 35 percent, the president said. The current top rate is 39.6 percent and the lowest rate is 10 percent. The framework also gives Congress the option of creating a higher, fourth, rate above 35 percent in the tax plan to ensure that the wealthy are paying their fair share.


Not holding my breath about the last statement. But Congress could impose a hefty tax of the super rich (it used to be 91% in the Eisenhower days).
Image

As for what is apparent right now, the Trump team is blatantly lowering the top tax rate (39.5% to 35%) and increasing the bottom tax rate (10% to 12%). Thus the poor have to pay more (assuming that the Earned Income Tax Credit is eliminated - taken them at their word that all other deductions and credits would be eliminated with a new standard deduction*) and the rich will pay less**.

Six Charts

There could be other losers as well. Consider the first “chart” in the above link and note that they still have not said what the breakpoints are between the 12%/25% and the 25%/35% tax rates.

Consider three equally sized tax categories (lower third, middle third and upper third).
If the break point between 12%/25% is $30,000/year (roughly 1/3 of Americans make less than $30,000K/year) then those making between $30,000 and $37,950 will see a tax increase from 15% to 25%.

If the breakpoint between 25%/35% is $80,000/year (roughly 1/3 of Americans make more than $80,000/year) then those making between $80,000/year and $91,900/year will see a tax increase from 25% to 35% and those between $91,900/year and $191,600/year will see a large tax rate increase from 28% to 35%.

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* Much ballyhoo is being made about the so-called doubling of the standard deduction that will enable more people to file a simple (non-itemized) tax return (maybe on a postcard). What they fail to mention is that they are also doing away with personnel exemptions and exemptions for children. While the postcard might come true, the standard deduction doubling only applies to those without children and it is not quite a doubling of the std deduction at that. The truth is:

Single filer sw/o children: Was $6350 deduction ($10,400 deduction + exemption) under existing taxes and moves to $12,000 under proposed Trump plan. That is only a 15% increase in deductions+ exemptions. It never was even a doubling considering deductions alone (Trump cannot tell a truth).

Joint Married filer w/o children: Was $12,700 deduction ($20,800 deduction + exemption) under existing taxes and moves to $24,000 under proposed Trump plan. That also is only a 15% increase in deductions+ exemptions. As in single filers, it never was even a doubling considering deductions alone.

Joint Filers w 2 children: Was $12,700 deduction ($28,900 deduction + exemptions) under existing taxes and moves to $24,000 under the proposed Trump plan. That is a DECREASE of 17% in deductions/exemptions (more if that couple has more than 2 children.

Source: 2nd of six charts link above.
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** This tax plan establishes a new provision that will allow the rich income earner can make themselves a “pass through tax entity” (for what will become a very nominal legal fee) and reduce their individual tax rate from 35% to 25%. Most people with salaries that end up to the top tax bracket will do this. This will greatly reduce the tax revenues and thus expand our national debt.

Source: 2nd of six charts link above. It mentions Congress will have to make provisions to prevent this. But I’m not holding my breath.
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There is a reason they have not said where (1) those breakpoints are or (2) whether or not the EITC is still play or (3) publicly announced the new loophole for the rich (}pass through rate or 25%) - the devil is in the non-disclosed details.

I’ll look at corporate taxes and the revenue side of this tax plan later.
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Re: The Truth about Tax Reform

Postby Dave Roberts » Thu Sep 28, 2017 9:36 am

From what I can read so far of the GOP plan, it seems more of the same--give benefits to the rich so all yachts float higher, refuse a lifeline to the poor, keep the social security cap so the rich benefit, and run the deficits higher as they did in the Bush-43 era. When will they realize that trickle down economics does not work for the country?
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Re: The Truth about Tax Reform

Postby Sandy » Thu Sep 28, 2017 10:32 am

KeithE wrote:Consider three equally sized tax categories (lower third, middle third and upper third).
If the break point between 12%/25% is $30,000/year (roughly 1/3 of Americans make less than $30,000K/year) then those making between $30,000 and $37,950 will see a tax increase from 15% to 25%.

If the breakpoint between 25%/35% is $80,000/year (roughly 1/3 of Americans make more than $80,000/year) then those making between $80,000/year and $91,900/year will see a tax increase from 25% to 35% and those between $91,900/year and $191,600/year will see a large tax rate increase from 28% to 35%.


It's always a nice trick whenever Republicans talk about tax "cuts" and tax "reform" to work the numbers so that people don't realize they are getting a tax increase. I remember being told that when Bush started on his tax cuts at the beginning of his first term, those in our income bracket would get about a $600 cut the following year. I can still pull out the returns and note that my taxes went up $1,100 after he made that promise, even though my income only increased $300.

The rule of thumb that I learned from my Dad was that Republicans don't cut taxes for anyone but the wealthy. And if you do the research, you'll find that to be historically true and easily provable. It's also pretty easy to find their "tax reform" budgets, because they are always immediately followed by deep, lengthy recessions.
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Re: The Truth about Tax Reform

Postby KeithE » Thu Sep 28, 2017 10:35 am

Dave Roberts wrote:From what I can read so far of the GOP plan, it seems more of the same--give benefits to the rich so all yachts float higher, refuse a lifeline to the poor, keep the social security cap so the rich benefit, and run the deficits higher as they did in the Bush-43 era. When will they realize that trickle down economics does not work for the country?

It actually is more like add a “anchor to the poor” so they will sink quicker.

They are claiming that the GDP will grow at a 4-6% annual rate to fund these “tax cuts" - totally unobtainable especially since more of the cuts go to the wealthy who just squirrel it away in stocks. The poor/middle class would spend any tax cuts that might have received by buying products, which would unleash corporations to reinvest their records profits into more production (they will not produce unless there are buyers).

This “tax reform” plan is a millstone that will sink our whole economy (except perhaps the top 1-2% who will float away in luxury).

Do not believe the lies being told by the GOP and Trump that their plan is (a) aimed at the middle class or (b) this will create growth or (c) reduce our national debt. Total lies (or unsubatantiated utopian dreams).
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Re: The Truth about Tax Reform

Postby KeithE » Thu Sep 28, 2017 12:00 pm

Sandy wrote:It's also pretty easy to find their "tax reform" budgets, because they are always immediately followed by deep, lengthy recessions.


For those that what to look beyond the the stories being told by Trump and his GOP allies and to backup what Sandy is saying:

Here is the truth simply stated and plotted (for those willing to read graphs - I guess that does not include my favorite “con"). Note that the plot is 5 year averaged beginning with the x-axis year.

Image

Tax increases help the GDP for at least 5 years, while tax cuts depress the GDP within two 2 years and that lasts at least 5 years (the GDP for 2016 was 2.9% - fortunately Obama has undone the harm caused by the Bush Tax Cuts). But 5-6% under a tax cut is delusional (probably even delusional under a tax increase) - but such is Trump’s exaggeration.

Contrary to popular belief, tax cuts under Republicans (particularly Reagan and Bush II) have increased the national debt more than tax increases under Democrats (particular Clinton). This is due to the revenue side of the money flow.

Image

Truth in plotting: The plot above has Obama data only until 2011 when the plot was made. If we tally Obama’s whole term, the increase through Sept 9, 2017 is up 49% since 2010 when his first budget took effect (more than the 35% in the chart, but still less than any Republican and note Bush I was only 4 years not 8). Also remember that there was a surplus under the latter years of Clinton/Gore - I give credit to Gore’s “Reinventing Government” as well as the revenue-enhancing tax increases in Bush II and the early Clinton years.
Source: https://www.thebalance.com/national-debt-by-year-compared-to-gdp-and-major-events-3306287
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I’ve said all of this before but- THIS IS VERY IMPORTANT. Please read carefully and prayerfully and write your congress people.
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Re: The Truth about Tax Reform

Postby KeithE » Thu Sep 28, 2017 8:14 pm

From the Americans For Tax Fairness: Analysis of Latest Tax Plan

Read it all, but here is the section on Corporate Tax changes which I have not discussed yet. The numbered links provides the references given in the article.

CORPORATE TAX CUTS

Corporate tax rates are slashed by more than 40%—from 35% to 20%—losing $1.8 trillion over 10 years.[7] Corporations need to pay their fair share not get a tax cut. Corporate profits are at near record highs, while corporate tax revenues are at record lows.[8] Profitable corporations are paying a U.S. tax rate of just 14%, according to the non-partisan Government Accountability Office.[9] Many pay nothing for years.[10] Only $1 out of $9 of federal revenue now comes from corporate taxes; in the mid-20th century it was $1 out of $3.[11] Moreover, 80% of corporate tax cuts benefit wealthier Americans.[12]

Trump-Ryan slashes the top tax rate on business income from hedge funds, law firms, real estate firms like Trump’s, and other “pass-through” businesses from 39.6% to 25%, losing $390 to $660 billion.[13] Many of these big-money outfits organize as partnerships or other business entities that allow them to pay business taxes at individual rates. Claims that this is a small business tax cut is a hoax: Just 4% of pass-through business owners will get a tax cut from the new top 25% rate, as everyone else already pays that rate or less. The top one-tenth of 1% will get a tax cut of $270,000, on average.[14] As the sole or principal owner of 500 pass-through entities,[15] Trump will benefit handsomely,[16] from what’s been aptly dubbed the “Trump Loophole.”[17]

Trump-Ryan temporarily (for at least five years) allows corporations to immediately write off big purchases, which could lose $900 billion to $2.2 trillion.[18] Businesses would be allowed to immediately write off—or fully “expense”—the total cost of big-ticket purchases such as vehicles, equipment, and buildings. Currently, they may deduct (or depreciate) only a portion of the expense each year over a multi-year period to reflect the progressive decline in the property’s value. The wide cost range comes from uncertainty as to the tax cut’s economic effect. Though this is a 10-year estimate, the bulk of the revenue loss occurs in the first five years.[19] The Tax Policy Center has questioned claims about the supposed economic boost from full expensing, suggesting expensing could retard growth.[20]

Trump-Ryan potentially allows American corporations to dodge all U.S. taxes on foreign profits through a territorial tax system. Under such a system, U.S. corporations would no longer pay taxes on profits booked offshore (although Trump’s plan suggests there may be a minimum tax on profits in tax havens). A territorial system will encourage multinationals to shift even more profits and jobs offshore than they do now.[21] Analysis of a similar plan found a territorial tax system would lose $205 billion over 10 years.[22]

Multinational corporations with profits stashed offshore could get a $600 billion tax cut. Big American corporations hold $2.6 trillion in profits offshore on which they owe about $750 billion in U.S. taxes.[23] The new plan promises a big tax break on these profits, but it does not indicate the tax rate. Trump previously proposed cutting the rate from 35% to just 10% on cash and only 4% on non-cash assets, raising about $150 billion.[24] So, tax-dodging multinationals could get an undeserved tax break of about $600 billion. They should instead pay what they owe, just like working families and small businesses do.


Did you know that corporate tax revenues are at an historical record low? Look especially at Chart 2 in http://www.epi.org/publication/corporate-tax-chartbook-how-corporations-rig-the-rules-to-dodge-the-taxes-they-owe/.
Corporations complain about high tax rates stifling economic growth and profitability. But since 1952, corporate profits as a share of the economy have risen dramatically (from 5.5 percent to 8.5 percent), while corporate taxes as a share of the economy have plummeted (from 5.9 percent to just 1.9 percent). That is a 55 percent increase in profits and a 68 percent decrease in taxes.
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