Perfect Storm of Tax Reform

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Toolsmith
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Perfect Storm of Tax Reform

You don't like this bill if you're from a rich state with high property taxes...

http://money.cnn.com/2017/12/20/pf/salt-deductions-new-tax-plan/index.html

Amazing that so much of the SALT deduction was going to so few... in dem strongholds of high taxation.

Cutting that won't hurt repub areas, except for the wealthy there. No wonder it's in the bill.

johnw
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Seeeing that corporations are

Seeeing that corporations are people,which makes them citizens I’m wondering if Trump will ask health insurance companies to reduce or hold down premiums and for profit health care corporations and big pharma To reduce rates in light of the new 21% income tax rate........Wouldnt that be a demonstration of their willingness to show their patriotism .......Wouldn’t that be a real bonus to middle class Americans......

Ugenetoo
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No, johnw, that would be a

No, johnw, that would be a Christmas miracle.

pmconusa
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Joined: 04/20/2000 - 12:01am
To repeat, corporations do

To repeat, corporations do not pay taxes, their customers do. I have indicated what will happen with the reduction in corporate taxes. No new jobs will be created, the unions will extort some of it for themselves and the remainder will end up in higher salaries for corporate executives.

When the personal income tax was set at nearly 90% the lawyers got busy finding ways for no one to have to pay them and they were very successful. When it dropped to 39% still no one actually paid that rate. The government has been purportedly trying for years to remove the loopholes, but those loop holes have been intentionally inserted by the very people who enable their congressmen to do so.

Melvin Udall
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What's that song...."Always

What's that song...."Always look on the bright side...?"

To repeat, corporations do not pay taxes, their customers do. I have indicated what will happen with the reduction in corporate taxes. No new jobs will be created, the unions will extort some of it for themselves and the remainder will end up in higher salaries for corporate executives.

I realize I don't have the wisdom and certainty that you do in all earthly matters, but I'd like to suggest a bit more precision, should you find a need for it in the book you are working on.

As to corporations not paying taxes, a more nuanced and precise view would go something like this:

1) Corporations do file income tax returns and make payments of the taxes owed to the Federal Government. These payments come out of corporate operating accounts.

2) Analogous to the truism that the government can only give away what if first takes from someone else (or prints or borrows), corporations can only make payments (in general) from accounts which get their cash from customer payments for goods or services. So it is fair to say that customers pay the taxes levied against corporations, and these entities must determine how taxes levied, and changes to them, influence prices and other operating parameters.

I think it was Pelosi who commented in the last day or two that the new bill robs funds from the US Treasury and gives them to the rich. This is consistent with interpretations in states like ours, where various deductions, exemptions, etc for income tax purposes are formally described as "Tax Expenditures," because to a govvy, any such "loophole" is grand theft from state coffers, even though the fine points at stake are in law created by the very same government.

But thanks for the reminder, pmcon. As you know, no one else on AMG is capable of retaining your daily lessons, nor did they have the knowledge imparted before you thought to hand it down.

Now what was that item about ckals?

Economike
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Toolsmith -

Toolsmith -

Good point. This part of the Trump tax reform will make residency in high-tax states (i.e. Democratic strongholds) more expensive. For too long, wealthier residents of these "Big Government" states have gotten a kickback from residents of all states when they filed federal income taxes.

Economike
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Joined: 11/28/2006 - 9:09am
Mel -

Mel -

Your explanation of corporate tax incidence is sound and agreeable.

Yes, customers, as the source of corporate revenue, must and do pay corporate income tax.

However, a principle in understanding tax policy is "Tax incidence is not tax burden." I think this is important to consider in teasing out the consequences of the current tax reform.

Here's an example. Imagine that you're CEO of Consolidated Gizmos and your lobbyist calls to tell you that congress is going to raise corporate rates next year. Let's assume this increase represents 8% of your expected revenues. How to meet this new cost?

You could raise prices, trying to get your customers to pay your tax bill. But your prices are already competitive. Your sales will fall, to some unknown yet certain extent, if you raise prices.

You could reduce costs, trying to pay your suppliers and workforce less. But your production costs are already competitive, so your production and quality will fall, to some unknown yet certain extent, if you reduce production costs.

You could reduce dividends and reinvestment. But Consolidated Gizmo will become less valuable, to some unknown but certain extent, if you reduce profits.

The point here is that no one really knows who bears the burden of the corporate income tax. It is some combination of owners, suppliers (including labor), and customers.

Melvin Udall
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Gee....Econ, you make it all

Gee....Econ, you make it all sound so complex, like multiple factors and inter-dependencies form a sort of economic "system," or "fabric" if you will. Pull one thread, and the fabric can react by showing effects in a variety of ways. Position in the marketplace, and all the far flung reactions to price and quality posture, and everything else, seem like they could require savvy experience and leadership to optimize things, not to mention defining what optimal means in the first place, right? On the other hand, if all you do is drill for and pump oil, things are much simpler.

Makes me think folks who are really good at it deserve to be very well compensated, but that would be unfair, I suppose.

Watcher
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The Prager U video linked

The Prager U video linked below is a timely explanation of where the Gubbmint gets all that money.. Most we have heard before but it bears repeating...

1. 72% of all income to the govt comes form individual and payroll taxes. Corporations pay in only 8%
2. 77 million Americans (44%) pay zero Federal Income tax. That, in my opinion, is just wrong. Even the poorest can afford $100 per year. The poor people in my town have no problem coughing up money for their $10/pack of cigarettes. Nobody should live in America free...on the backs of others. I think the new tax law increases the number who pay nothing.
3. The top 50% of Americans pay 97% of all Federal income taxes. Heck, the top 5% pay 60%. The bottom 50% of Americans pay only 2.75%.

Ignorance is the overwhelming condition of most Americans. Ignorant and proud of it. When an American is asked if they really are ignorant and apathetic, he/she responds..."I don't know and I don't care".

Prager on taxes

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