Republican tax bill ready to rescue hard-up tech giants, struggling rich Wealthy individuals and businesses can direct their underlings to ice the Dom Perignon and fuel their private jets in celebration of the US Senate's expected passage of the Republican tax bill on Wednesday. It would have happened Tuesday but for a procedural problem that required two provisions to be removed from the bill. The …
So, corporations legally keeping their funds outside America = bad, but then establishing tax rules that encourage the repatriation of that cash also = bad because it somehow doesn't punish "the rich"? It seems that whatever Trump proposed the journalistic population of San Fran was going to whine.
Why would corporations repatriate money and be taxed on it - even at 15% ?
At the moment Apple can borrow money from Apple (Bermuda) and pay 15 % interest, which it gets a tax write-off on, and then us that to buy back its own shares.
Somehow this will benefit the average American by $4000 / year
> Somehow this will benefit the average American by $4000 / year
There was a claim about $4,000 average, but it wasn't about the 'average American', it was the 'average tax cut'.
If there are 250 households, one gets a cut of $1,000,000 and 249 get nothing, then the average is $4,000 per household.
"Why would corporations repatriate money and be taxed on it"
so they can effectively make the money WORK [and earn more] instead of [effectively] being STUFFED INTO A MATTRESS. Stagnant money is bad. Working capital is good. That sort of thing.
I would've made the corporate tax ZERO. I also would FLATTEN the income tax so everone pays the SAME RATE [with no deductions other than 'how many people in your household'], no special rates for married/single, no special deductions for children over others, ALL income treated the same, and a large enough personal deduction so that "poor" individuals pay NO federal tax.
But no politician has the TESTICULAR FORTITUDE to actually do that.
And what we have here is a "good first step". I expect even those whiners that can't deduct their state/local taxes [as much] any more, who NOW have higher 'effective' tax rates [they're all "super rich" anyway, not middle class, so class envy types SHOULD be happy they're getting 'soaked'], will actually take home MORE money than before because of the economic boon. So, in reality, it would help THEM too.
What I did _NOT_ see in the article is the repeal of the [unconstitutional] INDIVIDUAL MANDATE to PURCHASE health insurance that meets certain [ridiculous] requirements as specified by OBAKA-"Care". Buhbye!! THAT is probably the BEST news [to me].
In any case, "nice first step". I hope to see MORE of the SAME from con-grab over the next few years.
Oh - I also predict that the UK will benefit indirectly from this, as well as everyone ELSE in the world. You should be happy! "A rising tide lifts all boats". When the USA does well, so does EVERYONE ELSE. This is why I hated the globalist "hamper the USA so the others can catch up" approach. That's really wat it was, ya know? A nice recession followed THAT approach. I think the 80's method is BETTER. And so it will be, AGAIN, in the late twenty-teens and 20's
I worked in the Cayman Islands for 5 years. The entire world financial system is a disgusting abuse of, well, everything. Repatriation of funds is an inevitability; doing it on the books at least means there is a chance of re-investment.
Stop using banks, stop buying from corporations. That, or we should stop complaining because it's our own fault. (Don't give me smug European non-sense, I saw you drink that Coca-Cola while you were playing on your iphone).
I did the math, using the just the straight tax tables, for the average techie making $100K filing single, taxes drop from the present $21,036.75 to $13,979 annually.
Personally I don't give a damn what the "rich" do with their money. Call me selfish, but I care about MY money and I taking care of MY family.
The side effect of this is that your health insurance is likely to double or triple.
Why?
Because there is no longer an individual mandate and programs like Medicare are going to be cut, thus massively increasing healthcare costs overall.
And most of the deductions for medical care have been eliminated. Never mind the cap on your mortgage deduction. Whatever you do, just don't get sick until a sane group of politicians actually decide they care about middle income Americans.
I'm in the top tax bracket, so my taxes will be going down enormously - at least 7%, probably more as I will restructure payouts from my company to give myself a roughly 20% tax cut (from 39.7% to 20% passthrough). I still think this whole thing blows.
Basically, anyone middle class in a very affluent (e.g. successful, growing, job-creating) areas is being screwed over, and, if you are a millennial (or younger), you are doubly screwed. It may not be clear right now, but creating a $1.5 trillion deficit is just a excuse to cut that much out of the federal budget. And if you don't think that's going to affect anyone making less than $500k, I have a bridge to sell you.
"The side effect of this is that your health insurance is likely to double or triple"
FUD. WRONG. CLUELESS. prices/costs already _DID_ that because of OBAKA-"Care".
I will continue to *REFUSE* to purchase insurance UNTIL it becomes "affordable". for ME. with the features _I_ want, and ONLY what _I_ want to pay for. Until then, if I need something, there's a "doc-in-a-box" a mile from my house, in a shopping center. I've used those before. They're reasonably priced, and it's easier to just use a credit card or cash than to deal with insurance-style bureaucracy.
It is _NOT_ the business of a _GUMMINT_ to _FORCE_ me to _BUY_ something! it's un-American, too, to even THINK that way. What part of "freedom" includes GUMMINT FORCING YOU TO BUY SOMETHING??? [oh, "for your own good", I forgot, duuuhhh... </sarcasm>]
'FUD. WRONG. CLUELESS. prices/costs already _DID_ that because of OBAKA-"Care".'
Last I checked, just because something already happened doesn't mean it can't happen again. Want to try your comment again with an actual explanation for why ckm5 is wrong? I am genuinely interested to hear it.
First, if you're making $100k filing single, you're well above middle class income -- you're at the very lower edge of the group of people who the tax plan is intended to benefit.
Second, the tax break you're anticipating is a temporary one, as opposed to the permanent one that the truly wealthy and corporations are getting.
Third, if you're only looking at your tax bill rather than the impact on the totality of your expenditures, you're falling for the scam. Look at the overall impact and you will likely see a very different picture.
Just who is wealthy? And how does wealth figure into income tax? Is an individual making 250,000 per annum a high earner? Or 10,000,000? A sports figure such as a footballer may make a tidy sum while playing for the few years that they play but then that income evaporates afterwards. It is times like these that I miss Tim Worstall for information and analysis that makes me think. I may not agree or start yelling and disturb the cats, but he does make me think.
Is an individual making 250,000 per annum a high earner? Or 10,000,000?
Aim higher than 10M and make sure said individual does not do anything particularly productive like run/own companies that provide services or build goods. Think real estate scum or people whose entire investment portfolio is run by someone else on their behalf. The Golfogarchy. They can all declare themselves pass-through entities and pay < 5% effective tax rate.
Anyone who actually does something economically productive benefits very little.
As far as company funds repatriation, the current standard arrangements for loans, payments for IPR, etc are still more tax efficient so any funds to come this route will be for PR purposes. Majority will stay abroad.
Wealth and income is one of those difficult problems to which there is no correct answer. Take our footballer, makes a mint for a decade, then lives off it. If we tax both wealth and income then that pattern of lifetime earnings pays more tax than earning the same total amount over a lifetime but at a lower annual rate.
Is that a fair way to do it? Dunno myself but it is a problem, one with perhaps no right answer.
My own prejudice (and it is prejudice, this is not an economic point, it's a gut feel) is that people on less than median earnings should not be paying income tax. Pigou taxes (carbon, congestion etc) yes, sin taxes yes, VAT even, but not income taxes. Those on above median should be paying for society. There's a limit on how much you can get out of them meaning that government will be smaller than it is now. But, you know, there's prejudice for you.
Re Trump's tax bill. Some bollocks in it, the cut on pass through entities is bollocksy in a bad, bad way. They already pay much less than other forms of business organisation. The personal tax cuts being time limited is a result of the silly way they measure. It's the effect upon the deficit in a decade's time which is used as the benchmark. Thus tax cuts (like some of Bush's) have a roughly decade sunset clause. The clause to benefit Trump - weeeell....that's much more like making sure than an extant break (depreciation on buildings and yes, buildings do depreciate, even if land doesn't) stays on the code rather than inventing something new.
Good stuff too. Doubling the standard allowance takes many more on less than median earnings out of the Federal tax net (which is largely, not exclusively, taxes on incomes, sales and property tax are State or even more local) which accords with my above prejudice. Limiting the mortgage deduction is good. Reducing the state tax allowance is good (for you can deduct your state and local taxes from your taxable income, thus saving your marginal Federal tax rate on what you've paid more locally. This means that high tax states are being subsidised by lower tax ones at the Federal level, shouldn't be happening at all. People want a high tax state in NY? Great, you pay for it, why should Kentucky?).
All of those above are unremittingly good.
There are good arguments either way about the corporate tax cut. The US rate is waaaay too high (even if we're going to commit the mistake of thinking that companies pay tax, rather than the true mixture of shareholders and workers in some portion). You have to add the dividend tax rate (15%) to the corporate income tax rate of 35% (because dividends can only be paid from tax paid profits, that offshore cash etc cannot be used) and standard economics says returns to capital should be taxed lower, not higher, than labour income.
But what's really interesting here is that no economist - not even Paul Krugman who really doesn't like the idea at all - is saying that it won't boost growth. It will. Absolutely. The argument instead is over "How Much?" Some trivial amount we don't care about while the plutocrats make out like bandits (copyright P Krugman) or a substantial amount that will benefit all (Trump and friends and a few others but not many).
If the state and mortgage deductions had been abolished overall I would have supported this as being excellent, whatever else was going on. Limiting them is a benefit but, you know, Meh for the overall.
Tim,
Thank you for that. Would just like to say that I miss your regular contributions to The Reg too.
I can only hope that the lack is caused by your time and energy being taken up by managing the massive profits from your rare earth metals bet.
Merry Christmas.
It's probably easiest to define as what percent your earnings fall into. I would argue that anyone in the top 2% of earnings is 'rich' (over $400k/year in the US)+. Of course, a lot depends on geography as well, but I have yet to see a geographically weighted earnings percentage chart.
Just as a side note, in San Francisco a family of four is considered below poverty if they earn less than about $105k*, which in some parts of the US would make them rich....
+ http://money.cnn.com/calculator/pf/income-rank/index.html
* see https://www.huduser.gov/portal/datasets/il/il2017/2017summary.odn
I'm sure I'm going to be downvoted into oblivion since saying anything positive around here these days seems to be frowned upon, but...
The source quoted in the article says "increasing overall average after-tax income by 2.2 percent", and yet the entire article is full of snarkiness about how great is it for the companies. Isn't having 2.2% more income great for EVERYBODY?
It depends. If we all get 2.2% more income at the expense of desperately needed social and medical programs, it would be wrong. If the 2.2% bump is just a bribe so we ignore a much higher percentage going to billionaires, that too is wrong. If it were 2.2% coming from government waste, the war on drugs, and efficiency gains, then it would be great.
> "It depends. If we all get 2.2% more income at the expense of desperately needed social and medical programs, it would be wrong."
Aren't all taxpayer funded social and medical freebies "desperately needed" at ALL times? By your logic we would NEVER get a tax cut, and the only moral thing to do would be to double.. no, triple the tax rates, because the "most vulnerable" amongst us are so very, very desperate.
"Aren't all taxpayer funded social and medical freebies "desperately needed" at ALL times?"
To some rabid lefties, yes. To most reasonable people, no. But there ARE some core social programs that ARE needed at all times and need to be funded. Cutting taxes for a large majority of people, or even for everyone is good. Cutting taxes so that the richest of the rich are the biggest benefactors - Not good.
And I say 'Not good' not from an ideological point of view, but a pragmatic one, in 2 points:
1) "trickle-down economics" does not work. It was tried in the 30s and resulted in spectacular market blowout and depression. It was tried by Reagan and ended in the end-of-80s recession. Republicans refuse to admit it, but it doesn't work. And Clinton's minor tax increases resulted in a booming economy and a budget surplus that was then wanked away by Bush II
2) In the last 8-10 years of growth, the richest of the rich have already grown far richer, raking in almost all of the recent growth, while most people saw their incomes flatline even as the economy recovered. The playing field is already heavily tilted towards the richest of the rich, it shouldn't be tilted even further their way
Here is the problem with supply side economics and every first year econ student knows its. The basic fact of the supply and demand curve.
Lets look at how they say trickle down is supposed to work:
Give businesses more capital and they will hire people to increase production.
But increasing production increases supply, and increasing supply with a static demand means prices have to go DOWN. No business is going to invest in new employees and capital just to see revenue per widget drop. So they will sit on the cash, buy back shares, give bigger bonuses to C-level management, or make financial investments.
You have to work on the demand side because increasing demand always increases supply side revenue. Don't believe me, it's Christmas, look at the prices of the hot toys on eBay.
If the demand is there, businesses will increase production without external forces. Or their competitors (existing or new ones) will.
"Supply-side economics: works EVERY TIME it is tried! JFK, Regan, Trump."
I guess that depends what you mean by "works". Supply-side economics "works" as intended by giving the rich more money. But for me what "works" bst is a slowly but steadily growing economy, maybe with some wobbles but no major crashes, where both average and median incomes steadily rise (inequality is growing less).
Supply-side economics might make an initial economic improvement (enjoyed mostly by the richest) but results after a few years in a big crash and long recession / depression. Happened in the 30s, happened with with Reagan, happened with Bush II (I don't really know about JFK).
The very fact that you are claiming it "works" with Trump before the cuts have even come into effect shows that for you this is a matter of faith, not evidence.
Social Security and Medicare are paid for by wage earners. Every paycheck up to $108k a year has deductions for them. This is cutting taxes on the top 5% while stealing what is in truth an insurance payment (for retirement care) from workers. It has been proven over and over these last 40 years, tax cuts do not pay for themselves, they do not create jobs and they do cause worsening income inequity.
Isn't having 2.2% more income great for EVERYBODY?
Not if you're doing it by taking out loans that the following generation of taxpayers are going to have to pay for. It's quite ironic that (many) Republicans are fixated on the "rights of the unborn" except when it comes to adding over $1T to the deficit tomorrow so they can party like drunken sailors on their golf courses today.
Dude, are you aware of how many trillions of dollars were added to the US debt during the last admin? I'd guess not, or you wouldn't make such an asinine comment.
Also, when an economy grows the debt shrinks, something that NEVER happened under Obama...
You walked into a lamp post yesterday so you are obliged to do so again today because ... precedent? Tradition? Bone-headed stupidity?
You're so locked into your little dichotomy that you assume that everyone who criticises Republican legislation must be a Democrat and consequently a supporter of the Obama Executive, even though the Executive branch isn't empowered to control taxation and spending (other than vetoing it) which makes Obama (and Trump) essentially irrelevant in this context..
Democrats want to borrow and tax so that the government can spend whereas Republicans want to borrow and cut tax so that the electorate can spend. What if you're a fiscal conservative? What if "borrow" is the consistent feature that concerns you so you want to both cut spending and raise taxes? Too complicated, right? Reasoned analysis be damned. All we need to know is whether Satan Obama would approve and that determines which side we're on.
Yes, tons of debt was added during Obama's administration. All the more reason to actually CARE about it now, and not decide that we should add another $1.5T to it on the hope that economic growth will magically pay for it (which it provably didn't for Bush's tax cuts)
The CBO already estimates based on Trump's budget wanting big defense spending increases that the deficit will top $1T per year in FY 2021, and continue to grow beyond that. If he's in office eight years (which thankfully looks extremely unlikely) he would easily beat Obama's record for adding to the debt.
Also don't forget, if the economic growth being wishfully projected by republicans comes to pass, interest rates will have to rise, and fast. Then the interest expense on our outstanding debt starts rising FAST so strong economic growth could actually be worse for us than the tepid growth we've had the past seven years.
Trump knows a thing or two about interest rate increases causing problems for outstanding debt, it caused multiple bankruptcies in his businesses in the 90s where he was saved only by huge loans and guarantees from his father - that part is a matter of public record. There are also rumors his entire empire came very close to going under in the aftermath of 2008 - and that perhaps that's the reason he 1) won't release his tax returns and 2) he was rescued by dirty Russian money which is what enables Putin pull Trump's puppet strings.
Claiming the explosion in the deficit at the start of Obama's term was due to the crash of 2008 that happened during Bush's watch goes in one ear and out the other of hyperpartisans like Big John. He'll tell you the crash was the democrats fault for mortgage policies started under Clinton in the early 90s even though Bush had been president for 8 years and could have reversed them if they were so dangerous. He'll also tell you 9/11 was Clinton's fault, even though Bush was in office when it happened. But had another 9/11 type event happened in 2009 it would have been 100% Obama's fault and not Bush's!
He'll give Trump full credit for this year's growth in the stock market - and probably for last year's growth too (he'd probably tell you because the market expected/hoped Trump would win) but if the market crashes next year it will be Obama's or the democrats fault somehow.
Basically anything good = republicans get the credit, anything bad = democrats get the blame. That's seriously how guys like that think - but what's worse they really, truly and honestly BELIEVE it!
But it's not 2.2% more income for everybody; not sustainably. Not even nation-states can create money from nothing.
In a few years, in order to prevent the deficit from exploding, they will have to raise taxes again or cut something or both. At that point, if you are in the groups which get hit by the tax hike and/or public spending cut, then the net consequence of this tax reform will likely put you in a far worse situation than before.
Or, of course, they could just let the deficit grow; this will push the problem on to the next generation and make it much worse.
Unless the tax cuts result in such a big GDP increase that they pay for themselves, but that's crystal-ball logic. You can believe it, or not, but I wouldn't bet the farm on it.
"Or, of course, they could just let the deficit grow; this will push the problem on to the next generation and make it much worse."
This, this right here is all we've ever done, and all we'll ever continue to do. Just check out the debt charts and you can clearly see every and each time the debt "ceiling" was hit, and then subsequently lifted (rinse, repeat). It will not end, until everyone realizes that we print money and the dollar is worth fuck-all.. or we just do what Japan's been doing for the last few years. :-)
You don't get averages? If Bill Gates and I were in a room the average net worth of everyone in that room would be 10s of billions of dollars. The average savings of 2.2% for you will be substantially less when Mr. Gates gets his 12% reduction.
Add that this is going to blow a USD1.5 trillion hole in the budget that they intend to use as an excuse to steal Social Security and Medicare money (money that working people are paying in every paycheck for) to try and fill and that pittance that is your end is not going to pay the rent. Or anything really.
The source quoted in the article says "increasing overall average after-tax income by 2.2 percent", and yet the entire article is full of snarkiness about how great is it for the companies. Isn't having 2.2% more income great for EVERYBODY?
See that bit you quoted about it being an average of 2.2%?
It isn't distributed evenly. It's distributed unevenly at first. Later on, some provisions expire and then it will be distributed very unevenly. There are also other provisions that are set to expire that will redress the balance somewhat, but the Republicans in Congress have all cheerily admitted that those "temporary" provisions will stay in place as long as they have control, because they'll keep renewing them.
Oh, and there are tax cuts for the rich. Big tax cuts. But if you're rich because you own companies rather than rich because you run companies, you get even bigger tax cuts. So they're not giving an incentive to the CEOs, they're giving incentives to the parasitical major shareholders. If you work your balls off running a big company you get a tax cut. The guy who owns the company and does fuck-all gets a much bigger tax cut.
Oh, and the property/state tax thing adversely affects those in states with high property/state taxes. They won't be able to write off as much of those against federal taxes. Big John and bombastic bob will be along to say that's a good thing, because why should people in Shithole, Alabama subsidize people in New York? Except. New York pays more in federal taxes than it receives (as do most Democratic states). Alabama receives more in federal taxes than it receives (as do most Republican states). So New York already subsidizes Alabama, but now New Yorkers are going to subsidize Alabamians even more.
Oh, and the estate tax thing affects only the incredibly rich.
So yes, it's 2.2% on average. Right now, but not in future years. And the vast bulk of that will end up in the pockets of 0.1% if the population.
Do you get it now?
How about Senator Bob Corker saying he was going to vote against the bill because it would balloon the deficit and Corker is very much against increasing the deficit. Then a provision got added to give more breaks to real estate companies. Then Bob Corker changed his mind for no discernible reason and voted for the bill. It's pure coincidence that he owns a very big real estate company.
Do you get it now?
The maths behind saying the bill will only add $1.5 trillion to the deficit is based on a very unrealistic assumption for growth that sane economists everywhere (and even some of the insane ones at the Chicago School of Economics) say cannot happen.
Do you get it now?
It was written in secret and rammed through Congress with almost no debate, because if the public had chance to learn the full implications they'd have been hanging Congresscritters from lamp posts.
Do you get it now?
@handleoclast - with you on pretty much everything you said, except this:
"not giving an incentive to the CEOs, they're giving incentives to the parasitical major shareholders. If you work your balls off running a big company you get a tax cut. The guy who owns the company and does fuck-all gets a much bigger tax cut."
For a ton of small and medium businesses, the owner IS the CEO and sometimes also CFO, CIO, general manager, tea-lady and janitor. I do not in any way begrudge them their well-deserved tax break, given that company tax in US is (was) much higher than in many other parts of the world.
With respect to the 'owners' of large companies, sure there are many investors raking in a windfall, but keep in mind that a significant portion of those investors are pension funds and mutual funds hat are a large chunk of life's savings of the working class
*ahem*
@handleoclast
rich people (and corporations) don't just stuff their mattresses with extra money when they earn it [exception: expatriated money stuffed into offshore banks, waiting for lower tax rates so it can be re-patriated].
they SPEND IT! You know, on houses, cars, boats, planes, vacations, "things"... and they HIRE people! "Hey I have more money this year, let's hire a contractor/butler/cook/driver/gardner/whatever - or invest venture capital into a NEW BUSINESS, because I can RISK IT now!"
(and of course, THAT creates JOBS and boosts the economy). So let rich people KEEP what they earn, because it's GOOD for EVERYONE when they do!
Do you get it now?
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