The Trump Tax Cut

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pmconusa
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The Trump Tax Cut

The United States Constitution gives the Congress the power to levy taxes to pay the debts and for the defense and general welfare of the UNITED STATES, not the individual citizens of those States. That responsibility lies with the States themselves as evidenced by the similar wording in the State Constitutions. Maine’s reads, “the legislature ….. shall have full power to make and establish all reasonable laws and regulations for the defense and benefit of the people of the State”. In both cases it is a police power that is referred to and not welfare per se but as a compound requiring the defense to be beneficial or contribute to the wellbeing of the States and in the case of the States, to defend the people’s ability to live, be free and to acquire property.

Taxes then have to be raised in order to pay for this service. In addition to this service the federal and State governments have undertaken tasks that are not covered by the charters given the Congress or the State legislatures, that is welfare entitlements, Social Security, Medicare, Medicaid and the numerous other programs paid for with EBT cards. That these programs are not fully paid for is evidenced by the $20 trillion federal debt and the States about $5 trillion. Not included in these totals are the unfunded pension liabilities of government to its employees that will continue to add to the debt and the treasury prints (borrows) more money to pay them. It is in effect a death spiral that is a characteristic of an economic system where the means of exchange is not consumed but accumulates. This is evidenced by the fact that it now takes about $23.39 to purchase what $1.00 bought in 1914, about the time the former backing of the currency (gold) cost as much to produce as was its imputed value.

Trump’s administration may not introduce more currency into the system through borrowing as did the previous one’s but he will not balance the budget and deficit spending will continue to a point where the amount being doled out in welfare payment is insufficient to purchase the necessities of life which are shelter, clothing and food, in that order as the dollar decreases in value. That time will come when the thing that actually backs the currency, the production of the kcal or the energy value of food is equal to its consumption. The earth’s population continues to increase while the production of kcal continues to decrease. The United States reached its peak production in the mid-1980s and since then it has been in decline. For every individual added to our population, at least 1 acre of land must be converted to food production in order to supply the necessary kcal for life. The event described is already occurring in Africa and the Middle East and even in Latin America. In many areas it is exacerbated by the lack of an adequate welfare system that accounts for the current migration of millions around the world to where welfare states exist.

There is an answer to this dilemma but the politicians will never employ it because it is government itself that determines the distribution and its inequality is affected by the politicians who have the power but not the will to rebel against those who gave them that power.

johnw
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So ..... does anyone have any

So ..... does anyone have any info on what they might be proposing in regards to 401k plans???

Roger Ek
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Untouched

Untouched

JackStrawFromWichita
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” does anyone have any info

” does anyone have any info on what they might be proposing in regards to 401k plans???”

Reduce the pretax contributions currently $18,500 plus another $6,000 if one is 50+ for 2018 to $2,400. I don’t know if that includes non-taxable employer matches.

I don’t get this for several reasons:

1. With the demise of traditional pensions there is a retirement savings problem in this country. I sometimes think we are going to be a nation of bag ladies in another 20 years. Making it more expensive up front to save can only make this worse. Delayed gratification runs contrary to human nature…

2. Many older middle/upper middle income wage earners jack up their contributions after the children are on their own and they realized they’ve gone as far as they’re going to in their careers and don’t know how many years they have left before the next downsizing wave hits. If the above happened and they took out the same amount as the previous year, moving much of the contribution from pretax to after-tax could result in a lower paycheck and they are going to be irate after reading all the news headlines about tax cuts. This could be 10s of millions of wage earners.

3. I don’t really follow the logic/philosophy of paying to eliminate the estate tax (estates above $5.5 million/individual, $11 million/couple) which currently impacts about 1/500 estates by making it more expensive up front for a middle income person to stash away a few $100K over their working years for their retirement years, but then again, I’m neither a Republican nor a conservative…

pmconusa
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JackStraw; So Called

JackStraw; So Called traditional pensions did not exist until the 1930s and then only with a few companies who were basically monopolies and could pass on this cost to their customers. AT&T comes to mind. They were used to retain workers and keep them from jumping to another employer. Benefits, such as health insurance, and deferred wages (retirement benefits), were used by employers in the World War II era when the government put a cap on wages and prices. Unfortunately, when these controls were lifted, the benefits remained and were protected by tariffs on competing foreign goods. When the tariffs were removed, the jobs evaporated and condensed overseas where labor costs are less and continue to be because our government allows collective bargaining and continues to raise the minimum wage. With these things in place, any employer seeks to either reduce his labor force, produce overseas, go out of business or not start one because the cost of labor cannot be recovered in the price of the good or service.

401K plans shelter current income from taxation. They are used by private industry to attract and retain workers. In addition to these is Social Security which almost everyone pays, except those in the growing underground economy. The government is not going to touch these programs although they already tax Social Security benefits for those under 70. It is the people who have these benefits that keep the government in power and it is unlikely. Revenue that keeps the government running is made up of taxes and borrowing, now to the tune over $20 trillion and growing. The government is not likely to reduce its spending and will be forced to increase its borrowing. Welfare spending is almost certain to increase as more and more people become jobless. When you are jobless you don't pay federal taxes, except on things like alcohol, tobacco and gasoline. Therefore the governments income from taxes will go down, requiring even more borrowing. It is the death spiral I point out in my book The Real Economy and it is inherent in the economic system that replaced barter when coinage was introduced. It is not curable but there is a better system that will sustain the human race for a longer period. It is described in my book but will never be implemented by any government except self-government.

JackStrawFromWichita
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“The government is not going

The government is not going to touch these programs although they already tax Social Security benefits for those under 70. “

Ahh, partial taxability of Social Security benefits has nothing to do with age. If all your other income plus ½ of your Social Security benefit adds up to more than a threshold amount for your filing status then some, up to 85%, of your Social Security benefit becomes taxable income. It doesn’t matter if you’re 67 or 97, age is no factor.

Melvin Udall
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Apparently you haven't read

Apparently you haven't read the book, which says that the author knows all, and cannot be wrong in any statement.

pmconusa
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Jack: Like the welfare law

Jack: Like the welfare law if you earn more than a certain amount your welfare benefit will be reduced. Social Security income is taxed if your adjusted gross income exceeds a certain amount and as you point out it is irrespective of age. However, after age 70, the deduction is capped and you can earn any amount over the threshold without affecting the actual amount you collect.

In any event, the amount anyone collects will in nearly every case be more than you paid in because the life expectancy of people who reach retirement age has increased to about 83 or 84 years. I cite myself as an example who paid in less than $50,000 including the contribution of my employer and has since retiring in 1998 collected over $340,000. My annual income from Social Security payments is four times my earnings in the first year I started full time work. A system with these characteristics cannot possibly survive as I point out in my book The Real Economy.

anonymous_coward
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@Jack: "3. I don’t really

@Jack: "3. I don’t really follow the logic/philosophy of paying to eliminate the estate tax (estates above $5.5 million/individual, $11 million/couple) which currently impacts about 1/500 estates by making it more expensive up front for a middle income person to stash away a few $100K over their working years for their retirement years, but then again, I’m neither a Republican nor a conservative…"

It's a political layup for the Republicans. However it is an establishment GOP thing, I would think that the populist uprising that is Trumpism would disagree with it, but what do I know?

Watcher
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I am for the elimination of

I am for the elimination of State and local taxes as a deduction on the Federal Income Tax calculation. Even though I live in a State with significant income tax (Maine) it is still wrong that a person who lives in...say Florida and who has the identical taxable income as I do, pays more to the Federal government than I do. The Florida residents are subsidizing Maine and New York, Mass et al. Ain't right.

Speaking of NY, here is a short video by John Stossel about a $2 million little public bathroom in NY. This is why they have such high taxes and are too dumb to realize it. Note too that the nitwit bureaucrat thinks that the huge cost and 3 to 7 years to construct a little pee-torium is just ducky.

These drones walk among us.

Pee-Pee Shed

Melvin Udall
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What about double taxation?

What about double taxation?

Watcher
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It is a choice to live in a

It is a choice to live in a high tax state. It is also a choice to allow your state to spend itself into oblivion. In my town, they have never rejected a State bond issue. I choose to live in Maine, for now. When and if I get tired of paying for this welfare state I can move to another state.

We actually have multiple taxation. Federal Income tax to pay for Federal government, State Income tax and Sales tax to pay for State government and Property, Sales and Excise taxes to pay for local government. Just because I pay my State Income tax to pay for my State government does no mean I shouldn't pay by full Federal Income tax to pay for my country.

Florida, for example funds the State primarily through consumption taxes (80% of their budget) ...ie, sales tax...which is 6%. Corporations pay income tax at 5.5%. What confuses me is that Maine has an income tax rate of 7% (50% of our budget) and a sales tax rate of 5.5%.

Melvin Udall
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My meaning of "double

My meaning of "double taxation" is paying state income tax on the same dollars on which you pay federal income tax. At least that's what I was pointing at in my question.

I suppose we could always go to a model where the Feds collect an additional income tax on behalf of the several states, and then 'block grant' out the funds so derived to the individual states.

Yeah; that should work. And it would save us all the need to file two returns, right?

johnw
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Watcher ....one of the things

Watcher ....one of the things I’ve always loved about the Maine tax code is this idea that somehow the state is entitled to colllect sales tax on things you purchase out of state on money you have already paid taxes on............

Watcher
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I understand your point Mel,

I understand your point Mel, but I don't deduct my sales tax when I pay my Federal tax so I am being dinged there also. I am a little waffley on my position but cannot get past the idea that I pay less for, for example, our military to protect me than does a Floridian with exactly the same circumstances who enjoys the same protections. The tax I do not pay the Federal government must be made up by someone else...the Florida guy in this case.

As I have written a number of times, a national/State sales tax is the perfect solution. It catches all the bases. Crooks pay at the check out counter, hookers too. Even those rabidly stupid politicians and butt grabbing Hollywood types pay at the check out counter and...almost as important, we are paying check out clerks to collect the tax. No IRS or Maine Revenue Services.

JackStrawFromWichita
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"but I don't deduct my sales

"but I don't deduct my sales tax when I pay my Federal tax"

Actually you have a choice to deduct either state/local income taxes or sales tax. For Maine residents the state income tax is almost always higher unless you, maybe, buy a big yacht or a private jet. In Florida it's just the sales tax.

johnw
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Watcher..... I’m not opposed

Watcher..... I’m not opposed to a national sales tax.....as you said everyone gets to contribute......how much money gets saved with the elimination of the IRS......how much money gets collected from the underground economy.....And as others have said when everyone is paying taxes , how much more interest is ther in the political process.........

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