$1.5 Trillion GOP Tax Cut Thread

[Torie]

The taxation of tuition remissions for graduate students would make sense if the reason for the remission is that they are performing services, e.g. as teaching assistants, as opposed to it just being a discount ala a scholarship. The amount of tax would be low anyway, if any at all, given that the remission amounts would typically be relatively small.

[Torie]

The Economist backs repealing the SALT deduction, and as a Very Serious Person™ who bases his opinion exclusively on what The Economist says I now officially endorse repealing the SALT deduction .

While not a concern at current tax rates, there is a very good reason for the SALT deduction, to keep the Federal government from starving State and Local governments of tax revenue by taxing it all.  Back when the top brackets were being taxed at 90% or more, the SALT deduction was essential.

The correct position in my opinion is the moderate hero position. I don't think the federal government should subsidize high tax states. So I would favor a deduction capped at say a 5% state income tax rate (the cap amount is negotiable, but 5% seems reasonable), and actually give a higher deduction or credit to states with a rate lower than 5%, so the amount of the federal subsidy is neutral and does not fluctuate based on the rate. That has always been my position since I was in business school and thought about this issue.

Oh, on the corporate tax issue, it is not clear that is even a progressive tax. It is a tax on a legal entity, and much of that tax is passed through in the form of higher prices (rather than a tax on capital), and is really in the nature of a sales or VAT tax. The corporate rate should certainly not be so high that it hurts the US economy by driving economic activity abroad, and keeps cash from being repatriated. That is just dumbass.

[Torie]

I played around with my income tax plan calculator that I built based on the House and Senate plans and added in the feature to do calculations for Singles and Head of Household recently. One thing I noticed about the House and Senate plans is that both closes the gap on the marriage penalty for higher income taxpayers.  But it seems the Senate plan is much more aggressive on closing that gap than the House.  High income singles will get hit badly by this.  It seems the greatest net loser in the Senate tax plan, by far, is the high income single salaried taxpayer living in an ultra-high tax area, say, San Francisco or NYC.   Wow.  My wife tells me some of her single investment banking friends in NYC are very steamed by this plan.  I can see why.  I put in some numbers and nearly fell off my seat on how badly they will get hit.

Combine this with the Republican Party's "family values" rhetoric, and I can't help but wonder if there's a motive for this.

I think it is a bit more complex then that.  It is more about assortative mating at the higher income levels.  The current tax code actually make is neutral or even slightly advantageous for a doctor to marry a nurse but carries heavy punishments when a doctor marries a doctor.  The House and to much a bigger extent the Senate plans reduces or even eliminates this punishment.  This would be a non-issue 50 years ago but with the change in social norms and social expectations of women in professional world this is a relevant issue.  To some extent assortative mating at the top plus the rise of services in the economy are major drivers of household income inequity last couple of generations.  This marriage penalty in the tax code partially offset this trend.  Now if the Senate plan passes, with my total support, this economic constraint on assortative mating will be removed, as it should be.

You really believe this, or is it just trolling? I mean such a policy in my feeble old mind, is just so wrong on so many levels. It has that odor of eugenics about it for starters. But then again, such "power couples" may be too engaged in other endeavors to have much desire to be bogged down with rug rats. So maybe not. Anyway, just ugh, in my opinion. Meanwhile I am hooked up with a talented artist who makes next to no money. Maybe it is time to get married under the new tax code from hell!

[Torie]

One idea is to leave the corporate rate alone, but allow a deduction for the payment of dividends, which would be taxed at the capital gains rate by the recipient. Right now C corps have an incentive to buy back stock rather than pay dividends, which is not good policy. This would eliminate that bias, and cause corporations not to hoard cash, and buy other companies, for tax as opposed to economic efficiency reasons.

[Torie]

This thread has turned into AIDS

Yep. I am going to urge "tough sister" TG to come in here to restore order or something. I am getting too old to handle mass insurrections like this. Anyway, we have way too many posts here that are borderline personal attacks, and chat about your beliefs suck even more than mine, and so forth. It is very much like recess at an elementary school play yard. Odd since the minimum posting age here is 14.

[Torie]

It's hard to talk about whether this bill could spur growth when currently we have close to full employment in the economy and our government is driving out undocumented immigrants and aiming to lower legal immigration, and where the cost of borrowing capital is close to zero. Our economy doesn't need growth to be spurred, and certainly not by favoring capital further.

I think the theory is not so much about reducing the cost of capital (which as you suggest adjusted for inflation is at about a zero risk free rate), but rather inducing companies to locate more jobs here because the corporate rate is competitive with other companies. Sure unemployment in the US is low, but such a job transfer would tend to push up real wages if that is the case. One of the major issues in the US is that the Fruited Plain is awash with minimum wage jobs, which is obviously not good, particularly when the government then has to subsidize them with the earned income tax credit and so forth.

I think on this issue, most economists believe the corporate rate should be reduced to a competitive rate. So I like this aspect of the tax bill, unlike much of the balance of it.

Another idea which I mentioned before, would be to allow corporations to deduct dividend payments, with dividends then taxed on the recipient at a much higher rate than the top 23.8% current rate, perhaps at the ordinary income rate.

[Torie]

There are going to be any number of glitches like this. This is why you don't write massive bills like this.

Indeed. Thus the glitches with Obamacare, although there the Dems were jammed when they lost their 60th vote at an inopportune time. I always in local politics urge our alderpersons to vote no when complex things are rushed, and then I need to go in and try to clean things up. Folks are beginning to listen to me. Politics trumps good policy all too often these days, even given an ideological perspective. At least make the internal mechanisms work well, so that the anticipated results are realized.

[Torie]

I thought my congressman Faso was against this bill. Now he voted to move it along? What happened?

[Torie]

I thought my congressman Faso was against this bill. Now he voted to move it along? What happened?

Due to a bunch of republicans being absent, they had to do some last minute whipping right on the house floor, and the number of defections dropped from 17 to 7 during that time. Also keep in mind that this is just a procedural motion, it's not uncommon for those in the President's party to vote to "move the process along", while still casting a (worthless) no vote on final passage.

Good point. Sometimes the mere "procedural" vote is where the rubber meets the road, but it is something politicians try to hide behind when under political stress.