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Much ado about what to do.

September 28, 2017

Assuming most of you use Google as your search engine, clicking on its news tab at noon (Eastern) yesterday and then on the “full coverage” link relative to the then just released tax plan would have given you a pretty comprehensive read on how the MSM opinion writers were  going to report on the news.

That opinion headline montage could be summed up in four words. “We still hate Trump.”

Right-leaning outlets bemoaned the fact that it won’t wipe out the national debt, while the liberal outlets moaned that it actually raised (said in an appropriately outraged tone) the tax rate on “low-income earners,”  conveniently burying the minor fact that it nearly doubled the incomes that are effectively now tax-free, i.e. the zero tax bracket.

And of course the President’s new buddies, Chuck and Nancy , were up in arms over “tax cuts for the rich.”  Ever wonder how long it’s been since either of them lived on 30, 50 or even 100K a year?

So much for bipartisanship.

Americans desperately want and need tax reform, so there will be a lot of people who prefer to only think about the good side of all this, blindly hoping that just because it is the right thing to do, it will happen.

Wish in one hand and do you-know-what in the other and see which one gets full first.

Anyone who thinks this initial offering is what will get passed (assuming anything gets passed) without modification is living in an alternate universe.

For one thing, even the changes enumerated will involve a serious rewrite of some of the 75,000 pages of regulations, and those changes have to be reflected in the legislation.

One honest criticism is the plan’s lack of goal specifics. The nine-page outline does not even hint at actual income bracket breaks, other than specifying that the first $24,000 for married taxpayers and the first $12,000 for singles are to be tax free. We still don’t know at what point Americans are considered “wealthy.”

Evident even at first glance is the impact of failing to realize the trillion-dollar-plus savings that would have accrued from repealing the ACA, recapturing the money now allocated to subsidies and insurer support.

The once suggested 20% small business tax relief rate for pass-through business income is now capped at 25%, while the large corporate rate rises to 20% from the original target of 15%. Given that Congress as a whole and Paul Ryan in particular is looking more toward 22.5%, even those rates are subject to change, the President’s “red line” notwithstanding.

Also left hanging is whether the top 1%, i.e. the (multi-) millionaires and billionaires will receive any real tax relief at all. All indications are that they won’t, if the removal of various deductions is factored into the equation, but don’t count on Chuck and Nancy to point that out.

There has evidently already been some horse-trading going on, reflecting the reality that it still takes “X” revenue to pay the nation’s bills.

One concrete point is that the estate (death) tax  and the generation-skipping transfer tax are supposed to be gone. If that makes it through to the end, (and that’s doubtful since it is widely characterized as only benefitting “the rich”), a lot of family business and farm owners will heave a huge sigh of relief, at least until a new regime takes over.

There’s more of course, such as the elimination of most itemized deductions, presumably including out-of-pocket medical costs. Given the astronomical out-of-pocket requirements of Obamacare plans, that’s sure to bring a cry of foul, given the GOP fiasco on repeal and replace.

Of particular note is the proposed death of state and local tax deductions. While it is supposed to be something to penalize “the rich” most middle income people who don’t live on one of the pricey coasts also pay property, income and sales taxes. The deduction has a much larger impact on someone who makes $50K a year than it does on “the rich.”

And that’s not even considering that taxing the money you pay your personal taxes with is widely seen as double taxation.

Spared from the chopping block are charitable deductions and home mortgage interest while child tax credits are supposed to expand.

Also not addressed is what happens to corporations who moved their headquarters to one of the 20 countries, including Ireland at 12.5%,  whose corporate rates will still be below those here. What happens to them if they decide not to repatriate, or if they do come back, but leave the bulk of their labor force overseas?

All-in-all, the ultimate outcome of the tax cuts is still about as clear as mud. It’s a long shot, but if you think you can use your money more wisely than Washington, now would definitely be the time to let your elected officials know about it.

 

From → op-ed

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