$1.5 Trillion GOP Tax Cut Thread

[#gravelgang #lessiglad]

trih

[#gravelgang #lessiglad]

Rand Paul signals he'll vote no if the budget eliminates sequester caps on defense spending.

https://twitter.com/RandPaul/status/920307764609667077

[#gravelgang #lessiglad]

Won’t be on for long, but I thought I should note that if a 5% VAT would raise $1.8 trillion(which I saw in one source), a 17.5% VAT would raise $6.2 trillion, and even a 10% VAT would raise $3.6 trillion. At that rate, surely some way could be found to balance the budget.

A VAT would raise even more. A broad-based VAT (which includes things like food though) would have a tax base of 40-50% of GDP, which means a 5% VAT would raise 2-2.5% of GDP (I guess that's $5-6 trillion over a decade).

I strongly believe the VAT is the solution to all American tax problems. Just use a VAT to repeal the corporate income tax (Republicans must like this) and to expand working/middle-class tax breaks like the child tax credit and the standard deductions (Democrats should like this) and you have a tax code that's much more efficient and much simpler and while also raising the same amount of revenue (and if you partially offset the cost of corporate tax repeal with small tax increases on capital gains it also wouldn't increase inequality).

But it's a political nonstarter because Democrats don't like regressive taxes (they're afraid Republicans will raise it because it's regressive) while Republicans don't like new taxes in general (and indeed there is a case to be made that it's the VAT which caused bloated European welfare states).

A VAT is the most efficient form of tax currently in use by advanced nations. I have always been in favor of a VAT being used to finance some form of universal health care; its visibility would link the tax to health care, while the universal aspect would make it more difficult to repeal.

Realistically from a policy perspective, the best policy is a blend of multiple taxes, some of which are visible and linked directly to government spending and some of which are opaque

[#gravelgang #lessiglad]

So the Dems are now defending a tax deduction that disproportionally favors the wealthy. Why would you do that when you could also vote for a tax cut that disproportionally favors the wealthy ?

It's actually not that incompatible. SALT is used more by middle- to upper-middle-income earners in these suburbs (and yes, the super rich, but the middle income earners outnumber the super rich in the beneficiaries group). This would likely still bring taxes up on people already highly taxed in those states while not closing any real loopholes and slashing income taxes across the board for every other bracket.

Anyway, why would a political committee not do this? Isn't the point of committees to win elections?

Right. Also, a cap on the SALT deduction wouldn't be a horrible idea, but getting rid of it would be so stupid. Texas doesn't even have a state income tax, but does have high property taxes. It's not commonly on the list of high-tax blue states. There are tons of people here that would be affected by that.

Without the deduction, you're also taxed twice on the same income. SALT really should be a credit, but that's beyond the scope of this discussion.

[#gravelgang #lessiglad]

Latest news is that under the GOP plan charities, mortgage interest and real estate taxes will stay as deductions but state and local income taxes will not.  401K deductions not clear.  The plan might raise the cap on how much one can contribute but lower the amount that one use to lower the taxable income.

But that's literally lowering the cap... The whole point of 401(k)s are to lower one's taxable income. Putting money in after tax is just a Roth IRA.

Also, no SALT is probably a deal breaker for at least 15 GOP members, not to mention keeping property tax deduction while ditching the deduction for income taxes inserts the heavy hand of the federal government into local financing decisions, pushing localities to favor a property tax instead of an income tax, which as illinois can attest, can have catastrophic impacts on the finances of a state in the event of another housing bubble / collapse in values.

[#gravelgang #lessiglad]

Latest news is that under the GOP plan charities, mortgage interest and real estate taxes will stay as deductions but state and local income taxes will not.  401K deductions not clear.  The plan might raise the cap on how much one can contribute but lower the amount that one use to lower the taxable income.

But that's literally lowering the cap... The whole point of 401(k)s are to lower one's taxable income. Putting money in after tax is just a Roth IRA.

Also, no SALT is probably a deal breaker for at least 15 GOP members, not to mention keeping property tax deduction while ditching the deduction for income taxes inserts the heavy hand of the federal government into local financing decisions, pushing localities to favor a property tax instead of an income tax, which as illinois can attest, can have catastrophic impacts on the finances of a state in the event of another housing bubble / collapse in values.

Agree with you on 401k.  What seems to be proposed is lowering the 401k limit and de facto expansion of Roth IRA limits.  In many ways this new system rewards those that can defer spending until later in their life since under Roth one gets taxes first then lets your investment growth increase tax free while 401k defers taxes allows one investment growth continue tax free but one withdraw the entire amount gets taxed.  Frankly I think we should have neither but if I had to pick one Roth is superior as it rewards savings versus bribing  someone up front to save.

I agree on reasoning, but probably disagree on policy. A lot of behavioural economists seem to believe that shifting people into Roths would discourage savings, since psychologically the benefits aren't as immediate or prominent (401(k)s have the dual advantage of being pretax money and generally companies are better about offering direct deposit for 401(k)s than Roths, in my experience).

 Not to mention that for most people, the tax benefits of immediate pre-tax contributions into 401(k) accounts are more substantial than the after tax benefits from a Roth (consider one's income at expected times of contribution - generally in the prime of one's career, one's earnings are higher than in retirement; as a result, one's tax benefit from a pre-tax retirement savings account such as a 401(k) is likely to be higher than the Roth's status as not taxed upon withdrawal/appreciation in value).

The thought goes that by the government forgoing the 401(k) revenue in the short run, they're saving on welfare expenditures for those who didn't save adequately in the long term.

[#gravelgang #lessiglad]

Latest news is that under the GOP plan charities, mortgage interest and real estate taxes will stay as deductions but state and local income taxes will not.  401K deductions not clear.  The plan might raise the cap on how much one can contribute but lower the amount that one use to lower the taxable income.

But that's literally lowering the cap... The whole point of 401(k)s are to lower one's taxable income. Putting money in after tax is just a Roth IRA.

Also, no SALT is probably a deal breaker for at least 15 GOP members, not to mention keeping property tax deduction while ditching the deduction for income taxes inserts the heavy hand of the federal government into local financing decisions, pushing localities to favor a property tax instead of an income tax, which as illinois can attest, can have catastrophic impacts on the finances of a state in the event of another housing bubble / collapse in values.

Eh, it's what Texas has.

Anyway, I'm satisfied now selfishly. I'd like to see this reform favor the poor, but we all know that's not going to happen so!

Texas also imposes a franchise tax on entities operating in Texas, which to my recollection is a fairly significant revenue raiser for the state. I mean, don't get me wrong, I'm also selfishly quite happy they're keeping the prop tax deduction, as a homeowner in Illinois.

But from an administrative and policy standpoint, it really doesn't make sense to push local governments into certain revenue decisions. Realistically, the deduction would be a nebulous "state and local taxes" deduction, where the taxpayer deducts any state/local tax, whether that be an income tax, property tax, sales tax or any other tax paid.

 The feds should be encouraging a diverse mix of state revenue raising in order to mitigate to the best extent possible the risk of an economic downtown harming long term fiscal health of a state.

[#gravelgang #lessiglad]

Tax plan delayed at least a day.

You must be logged in to read this quote.

You must be logged in to read this quote.

You must be logged in to read this quote.

You must be logged in to read this quote.

You must be logged in to read this quote.

[#gravelgang #lessiglad]

Schools with > $100,000 in assets per student would be taxed on their endowment at 1.4%.

https://www.bloomberg.com/news/articles/2017-11-02/house-bill-is-said-to-tax-university-endowment-income-at-1-4

Apparently, it would exempt "small schools," but the definition of a small school isn't yet released.

[#gravelgang #lessiglad]

Meh, not a fan of the student tax, but overall it seems like a decent plan (though it could have been cheaper and beter). But slashing rates and eliminating loopholes is the way to go .

they're leavin the biggest loopholes out there for the sugar daddies

The reduced rate on flow throughs is a loophole that any halfway competent tax attorney can drive a truck through.

[#gravelgang #lessiglad]

I'm not sure if I should post this here or just save time and post in the unpopular opinions / deplorable posts thread, but expanding the child tax credit and not capping the charitable deduction is awful policy.

 The enforcement on qualified (c)(3) vehicles is abysmal and there's a spectacular amount of fraud among wealthy people in charitable deductions.

Not to mention that the population globally is creeping up on a point of maximal saturation and global resources are already strained so subsidizing limitless childbirthing is stupid policy. CTC should have been wrapped up with EITC and capped at 2 children, so there's both an incentive to work and to not overpopulate.

-----

I'm also going to rail against the capping of the mortgage deduction. Economically, we should adjust for local cost of living... A 500k house in San Francisco isn't nearly the same house as in Tulsa, OK and there's little economic justification for any policy that is blind to those differences.

I also must once again point out that only allowing property taxes to be deducted is a recipe for state financing catastrophe. The correct policy would be capping total deduction for state and local income, sales and property taxes at something like 25,000 base, adjusted upward or downward for an area's cost of living.

BLS already maintains COL figures by zip code, so it wouldn't be a heavy lift to incorporate this into the tax code and would promote individual choices for where people live.

[#gravelgang #lessiglad]

BLS already maintains COL figures by zip code, so it wouldn't be a heavy lift to incorporate this into the tax code and would promote individual choices for where people live.

Why should I, a person who lives where home prices are reasonable, subsidize excessive prices elsewhere? $500,000 is a luxury home where I live. Lakefront property or the like.

This is certainly a reasonable critique. My issue is that there's already plenty of cross-subsidizing within both the tax code and federal spending generally. Most studies already show high state tax states like California, New York, New Jersey, Massachusetts, Illinois, etc sending more dollars to the federal government than they get back in federal spending (some contend that this isn't a fair comparison because it includes military spending and spending on old age programs, to which I would counter by saying it's still using one state's dollars to prop up another state's economy).

And the proposal in it's current form only exacerbates these kind of who-subsidizes-whom claims by curtailing deductions that benefit the type of voters who didn't vote for Donald Trump (student loan interest disproportionately benefits younger voters, SALT disproportionately benefits blue staters, etc) to pay for things that do benefit his voters and donors (estate tax repeal specifically, child tax credit, raising the standard deduction, etc). It also includes patently political ideas like axing the electric car credit and taxing University endowments.

Which really is the biggest issue. The '86 overhaul was so successful because it was a bipartisan lift. Businesses could plan for the code to be in place for the long haul because both parties' constituents benefited. A purely partisan overhaul leaves a lot of uncertainty that'll blunt the economic impact, because Dems could sweep in a trifecta in a few years and change the code and federal spending to tilt the benefits to their voters. And then the Code becomes just another uncertain political tool, which would be adversely impactful to the economy.

Plus the whole thing has to sunset after 10 years due to reconciliation, right?

Edit: to add to the point of this being a giveaway to Trump voters and/or red state, the casualty loss deduction for property damaged or destroyed by weather incidents was removed for all weather events, except hurricanes. .

Edit 2: Benefits relating to adoption were also curtailed, no doubt reflecting an ideological opposition to same sex couples adopting.

[#gravelgang #lessiglad]

This bill is so f**king toxic and it is very clear the GOP is cynically going after the groups that didn't vote for them.  Lots of people will see a tax hike while corpoations and the super rich make out like bandits. 

This pile of bullsh**t needs to be killed with fire.

The GOP is going for lower tax rates, an higher standard deduction paid for by less loopholes (and higher deficits). That's pretty much the standard formula for tax reform. The only thing in the tax plan that I would describe as downright cynical is the endowment tax (and perhaps some of the measures for students). Repeal/limitation of the SALT deduction always was going to be part of a tax reform, it costs a huge amount of revenue so not touching it means you'd have to slash even more popular deductions/tax breaks (or you'd have to look at things like the VAT or the carbon tax).

I'm disappointed that they're not going further in limiting the corporate interest deduction. They could have used the revenue for further corporate tax cuts or deficit reduction.

And removing casual loss deductions for anything other than hurricane damage

[#gravelgang #lessiglad]

The vast majority of deductions are special interests at work, with a handful of exceptions. However, cutting the income tax rates is fiscally insane, and raising them is politically suicidal.  Cutting at deductions would be fine, though. That said, we really, really need to find a new way of raising money.

We really should be cutting the corporate rate though. But it is insane to not cut the taxes on small business at the same time and it is political suicide to cut business taxes and not poor people and the middle class.

So rates end up coming down for most of the individual brackets by necessity.

I'm not sure if this is simply a terminology difference, but there isn't a special "small business" rate, other than corporate rates progressively increasing based on an enterprise's income.

Any current business is plenty capable of paying $150 to incorporate in Delaware and availing itself of any lower corporate rate, whether the business has gross receipts of $100K or $100M.

The general political calculation seems reasonable and makes sense to me, but I'm just not sure where this idea that cutting the rate on partnerships = small business cut when that really just isn't the case. Any semi-savvy operator would just incorporate the business and take advantage of those rates.

Which is why I really think that the end result of this tax package exercise will be a moderate rate cut across the board (think down to 29% corporate rate, similar cuts for individuals) with a few revenue raisers to help neutralize any talking points about benefits accruing to the top 1%.

[#gravelgang #lessiglad]

Something to watch that hasn't gotten much play: a proposed excise tax of 20% on gross payments from a US multinational to a wholly owned foreign subsidiary (https://www.politico.com/story/2017/11/06/house-gop-reform-corporate-tax-avoidance-244591).

It's a revenue raiser of $155Bn over 10 years, but is being fought by, among others, Koch-backed AFP. If it's successfully killed, the bill loses the ability to pass through reconciliation, assuming there aren't any other revenue raisers added to make up for the lost revenue.

[#gravelgang #lessiglad]

Something to watch that hasn't gotten much play: a proposed excise tax of 20% on gross payments from a US multinational to a wholly owned foreign subsidiary (https://www.politico.com/story/2017/11/06/house-gop-reform-corporate-tax-avoidance-244591).

It's a revenue raiser of $155Bn over 10 years, but is being fought by, among others, Koch-backed AFP. If it's successfully killed, the bill loses the ability to pass through reconciliation, assuming there aren't any other revenue raisers added to make up for the lost revenue.

Ironically, this was one of Hillary Clinton's biggest pet causes.

Eh, the excise tax isn't exactly aimed at inversions. It's more of a base-broadening provision that'd make international planning strategies (e.g., using creative transfer pricing, loan interest payments, etc. to shift profits to low tax jurisdictions such as Luxembourg, Ireland and the Netherlands) less lucrative.

In the current Code, base shifting to the point where no country has claim to a particular income strain is the problem that this provision is intended to correct. For some more background, the NYT has a great article out today about Apple's international tax strategies over the past decade, particularly incorporating in the small channel island of Jersey (https://nyti.ms/2hMV2Gw)

Inversions have already become a less lucrative strategy with the negative publicity and IRC 7874's passage.

[#gravelgang #lessiglad]

The vast majority of deductions are special interests at work, with a handful of exceptions. However, cutting the income tax rates is fiscally insane, and raising them is politically suicidal.  Cutting at deductions would be fine, though. That said, we really, really need to find a new way of raising money.

We really should be cutting the corporate rate though. But it is insane to not cut the taxes on small business at the same time and it is political suicide to cut business taxes and not poor people and the middle class.

So rates end up coming down for most of the individual brackets by necessity.

I'm not sure if this is simply a terminology difference, but there isn't a special "small business" rate, other than corporate rates progressively increasing based on an enterprise's income.

Any current business is plenty capable of paying $150 to incorporate in Delaware and availing itself of any lower corporate rate, whether the business has gross receipts of $100K or $100M.

The general political calculation seems reasonable and makes sense to me, but I'm just not sure where this idea that cutting the rate on partnerships = small business cut when that really just isn't the case. Any semi-savvy operator would just incorporate the business and take advantage of those rates.

Which is why I really think that the end result of this tax package exercise will be a moderate rate cut across the board (think down to 29% corporate rate, similar cuts for individuals) with a few revenue raisers to help neutralize any talking points about benefits accruing to the top 1%.

The post was about political optics. Of course they can incorporate to get that lower rate.

That's what I figured, but it's a common mistake when folks discuss taxes and I wanted to make sure we were on the same page

I would prefer a 25% corporate tax rate with far more aggressive approaches to things like the Carried interest deductions and hedge funds generally.

Agreed generally, but there just isn't enough revenue in those two things to make up for the lost revenue from lowering rates. The policy ideal would be a marginally lower corporate rate (in the 25-30% range) while removing some popular but no longer really necessary corporate deductions.

The corporate reform would, in an ideal world, be packaged separate from individual reform, allowing enough moderate Dems to sign on to make it something that'd be permanent, which would provide stability that businesses desire in reform.

[#gravelgang #lessiglad]

Rep Collins on tax package: "My donors are basically saying, 'Get it done or don’t ever call me again.'"

[#gravelgang #lessiglad]

I've been saying it for months now and now Chuck Schumer is hopping on board. Republicans killing SALT will accelerate the suburban move away from the Republican Party. The Virginia results offer sobering proof of that fact

[#gravelgang #lessiglad]

I've been saying it for months now and now Chuck Schumer is hopping on board. Republicans killing SALT will accelerate the suburban move away from the Republican Party. The Virginia results offer sobering proof of that fact

I totally agree this would be the case for certain high tax high income suburbs.  But in most of those places the trend toward Dem has been going on for a couple of decades.  Most high income voters (the same bunch that now gets killed by SALT removal)  in my neighborhood were almost 100% anti-Trump anyway in 2016.  Also a lot would depend on who becomes the face of the Dems.  If it is clone of Clinton/Cuomo then this trend will continue but if it is Bernie Sanders then a lot of them will run back to GOP (despite Trump and this SALT removal proposal.)

We're on the same page. That's why I went with accelerate the move away from the R's. In my precinct in Illinois, the split was 45/55 R/D. If Republicans raise their taxes, which is an especially high likelihood if the Senate version without property tax deductions, the split will easily be the opposite in favor of D's, and my area is an area with high turnout.

On another note, it may make it easier for Bruce Rauner to hang on with a message of "the Feds raised your taxes through double taxation, JB Pritzker will make it worse."

Not all suburbs are in high tax states. The suburbs are trending away from the Republicans because of their virulent anti-intellectualism and because of Trump's general incompetence (they probably know how Europe views Trump lol). If Roy Moore takes over the GOP they're f**ed in the surburbs. But I doubt this tax plan will cause much anger in suburbs outside of NY, CA and NJ. 88% and 87% of voters in the fourth and fifth quintile would see a tax cut under Trump's plan in 2019. By 2027 these numbers would have dropped, but they still would be 71% and 62%.

Illinois voters will hate the Senate plan, which kills the property tax deduction; Texas suburbanites too. Minnesota has a high income tax as well and the growth of business in the MSP area could hit hard there too. Otherwise, good points

[#gravelgang #lessiglad]

Politico is featuring this opinion article, which is throwing Cold Water on this tax reform thing actually passing: https://www.politico.com/agenda/story/2017/11/10/gop-tax-plan-programs-face-the-ax-000581

If this Congress can't pass tax reform then the GOP will collapse

That's why they are guaranteed to pass something at least

This is why I think the most likely outcome is a small cut in rates across the board that would cumulatively cost $1.5T.

[#gravelgang #lessiglad]

Hatch wants a vote on eliminating double taxation on dividends, while also eliminating the deduction preventing double taxation on SALT. I support eliminating double taxation on dividends, as this policy introduces a number economic inefficiencies (including the promotion of debt over equity in funding an enterprise, which the Code should not do), but to eliminate one form of double taxation while introducing another is patently ridiculous and clearly politically motivated.

The Republican caucus also wants to include a deduction for contributions to private, religious schools while removing the deduction for property taxes, which fund public schools. Which, again, is introducing a new form of double taxation, while at the same time introducing more complexity into the Code.

This plan is in no way about a simplified code or a more justified system; it is instead a plan that rewards those who vote Republican and who donate to Republicans at the expense of those who do not.

My clear preference here would be to simplify corporate taxes in a deficit neutral manner, which has the potential to deliver marginal economic gains. There are clear giveaways in the code and some goodies that can be axed in exchange for a rate drop into the mid to high 20's, which would indeed keep the US competitive in a global landscape.

The individual rewrite, however, is clearly not about efficiency or simplicity or economic gains. It is about punishing Democratic voters at the expense of chiefly Republican donors. Which I cannot abide.

[#gravelgang #lessiglad]

Mandate repeal accepted by committee

 https://nyti.ms/2jqD6W7

[#gravelgang #lessiglad]

Matt fuller puts o/u on 15 republican no votes

They can only afford 22

Predictt has it .45 that it doesn't pass house Tmw

Fivethirtyeight.com said mid-20s when you combine the NY/NJ Republicans that voted no on the budget resolution with Tuesday Group members that were against OCare repeal.

Not that I think there'll be 25 that vote against it, of course. But I would take the over on 15.

[#gravelgang #lessiglad]

Murkowski is a no, RoJo is a "no," Paul is a "no." I'd feel more comfortable if Collins or someone else with stronger convictions announces a no.

Paul and RoJo will surely fold, but I doubt Murkowski will.