OaktownBear said:
calbear93 said:
That's a fair point. I personally would hope that the offsetting revenue can be found elsewhere. However, every special interest group will have a reason why increasing taxes on them would be catastrophic. This one probably creates negative long term growth, but I don't know enough about this aspect of the proposal.
You will note that I was responding to the post about how the tax proposal disproportionately affects the wealthy in California (who also happen to have disproportionate wealth overall). My point is that the tax proposal will raise taxes for many wealthy folks in general and that there was no compelling reason for the federal government to get less tax revenue because a state decided to raise its taxes or because the company elects to defer payroll through equity instead of cash. People know about state taxes like they know about other higher cost of living in the coasts. They make their choice accordingly. There is no tax benefit for paying other higher cost for living on the coasts. Likewise, there is very little objective reason why home owners should be rewarded by the government more than those who have to rent. 500K is just a compromise. Everyone wants to raise taxes until it impacts them. One way to simplify is to get rid of all the special interest exemptions. I am not saying that this accomplished the goal, but some rich folks will just have to pay more for the benefit of all. If this passes, those rich folks will also include us. I'm OK with us privileged folks on the coast paying more.
I'm sorry, but you are a sucker. Rich people do not ever pay more, least of all with this proposal. First of all, they don't give a damn about a couple percentage points on the upper tax bracket because most of their income is taxed at the much lower capital gains rate. See Romney's tax rate compared to people like Gingrich. If you aren't an athlete or actor who makes an extremely high salary and comparatively low investment income you don't get hit hard. The bulk of the cuts go to wealthy by eliminating alternative min tax and drastically cutting the corporate rates. Over all, they have a big plus.
Stock options are not just the realm of the wealthy. It is a major form of compensation for the rank and file in the tech industry. Often, stock options will amount to a few thousand dollars for an employee. They aren't just multi million grants to management.
Basically the republicans wanted to give a fat tax cut to their friends and they are doing so by screwing their enemies. Screw universities and anyone with an education by doing away with tax breaks for education including those that can only be claimed by people making $80k or less. Screw the tech industry. Screw people in high tax, high cost of living states in the $150k - $300k range REALLY hard so the can't contribute to the democrats while giving the same income range in red states nice cuts. Reduce the mortgage deduction so that blue states pay more and it destroys their housing market. But hey, according to you I can choose not to live in a blue state. My expectations as an American should be to assume the party in power will screw over the other side and I should move to a red state to enjoy the spoils. Hope you feel the same way when the democrats retaliate as I will demand such from any democrat in office.
Corporate taxes needed to be restructured. The nominal rates were high. However, the effective rates were average because of the stupid loopholes. They could have created and paid for a reasonable system by lowering the rates and eliminating the loopholes. Instead, they gave them 100% of the benefit and 0% of the pain.
I like your theory of compromise is great. You pay zero now. I want you to pay $50k. Okay. You pay $25k. Compromise! I'm just glad they didn't ask me to pay a million or I'd be paying $500k for the compromise.
This bill is designed to massively screw over the educated and every democratic group they can hit not just on taxes but on economic impact. Any Californian who votes republican after this is a complete and utter moron.
I tend to agree with Oak, but come at it from a different perspective.
The proposed tax law does have a bias against high tax states like California. My guess is professionals in California from the 100K to 500K area will be hurt the most (beyond that income level you lose most of your deductions anyway). Still, most Californians earning between 50K to 100K will pay less tax. But do understand that for people in high income/high tax states, there are losers at the high-income levels, which makes for an amusing irony on the BI site where everyone was complaining about income distribution, other than those BI posters in say Texas. I'm not surprised at some of the take-aways in the name of "tax simplification" or "revenue neutrality" (actually one dealing with eliminating the adoption credit has pissed off the pro-life lobby) are biased against liberal causes. If the Dems want changes they have to negotiate and some moderate Dems must be willing to sign on, or they simply will have to take what the GOP wants. The answer, of course, is the famous line from Obama: win an election. The GOP controls the legislative and executive branch. Obamacare will fail, in part due to executive actions, DACA is going, governmental environmental and global warming regulation is going, and so are a lot of other Democratic causes, unless they come to the table. The GOP blames Obamacare on the Dems, but the GOP refused to work with the Dems, so they got a bad bill shoved down their throat. Well, here we go again. Obama may have been somewhat divisive, but he got two terms. Like it or not, so may Trump, and now Trump is reversing everything Obama did. The shoe has fallen on the other partisan shoe so to speak, and I guess people like Oak are feeling like people in the fly over states. Me, I want my taxes reduced and simplified. I'm probably getting neither.
Corporate taxes. I appreciate this is an emotional issue, but currently we are talking about less than 10% of income taxes paid, and probably only a couple percent reduction in revenues assuming no growth leading to increased revenues. The effective tax rate is a little under 20% due mostly to:
1) Accelerated depreciation, which is a tax deferral not reduction, and applies to companies that actually depreciate things. For example, pubic companies tend to ignore things like accelerated depreciation in order to report higher earnings (as an aside if you look at the financials of most public companies, they have a surprisingly high tax level), and depreciation doesn't help all that much in a service industry. However, accelerating depreciation means capital investment, so from a bipartisan standpoint, politicians tend to like it.
2) Offshoring income. This means things like holding patents in oversea subs, that then ripping out domestic profits through licensing fees, etc. (think tech companies, though everyone does it). Another variance that is broad based for multinational companies is holding massive cash/profits in foreign affiliates (this is a huge domestic investment drain). Reducing the corporate tax rate will help with this in theory, since the companies do pay taxes in foreign jurisdictions on this income, and lower rates mean repatriation of income, and less incentive to overseas future income.
3) There are some domestic industries that get specific tax breaks. Make a car in the US, get a credit. Make an electric car in the US, we gave your customers tax credits. Surprisingly, these give always seem to have bipartisan support. I don't see much of this going away given lobbying efforts.
4) Net operating loss carry-forwards or carry backs. Every country allows losses against future profits. It's standard tax practice and is incorporated into many US tax treaties with most countries. Not gonna change.
There are tons of articles and scholarly papers dealing with this, but a lot of time is wasted on corporate taxes considering their small impact on tax revenues and the huge potential upside for growth and domestic investment. There seems to be bipartisan support for corporate rate
Capital gains: I say this with some irony, but the tax prorposal is rather neutral toward existing capital gains rates because your not reducing the income rates on top earners so they are more incentivized toward salary. In fact, the taxation of pass through entities at a reduced rate with no pass through, provides a huge incentive towards income, rather then capital gains. We will need to see what small business means.
