tax reform

TRUMP Tax Reform – Dissected

Posted on by Helena

Twelve Republicans voted ‘No’ on the Trump Tax Reform. Why? Because they represent three states, New York, California and New Jersey, with the highest income and property tax rates in the country and the new limitations will affect their constituents.

California has the highest personal income tax rate at 13.3%. New Jersey comes in first as having the highest effective property tax rate at 2.31%. New York City residents come in a close second with state and local taxes for some districts at 12.96% and an ‘add-on’ property tax for properties over $1million at 1% which would effectively no longer be a deduction given it would ultimately exceed the cap.

Of course, every single Democrat voted against the Bill. Why?

There were a few agendas:   1) the Obamacare mandated penalty for not having health insurance was repealed. That means that the young and healthy are no longer required to carry insurance.   2)   They fear that welfare programs could possibly be impacted with budget cuts  3) They claim that the effect of lowering middle income earners taxes will no longer apply as of 2027 – which is rather nonsensical since the entire Bill expires in 2025.   Hello?  4) They fear that government revenue will decrease significantly creating greater deficits.

INDIVIDUALS:   1.  A number of itemized deductions were eliminated or capped.  2.  The Estate Tax deduction was doubled.  3.  Alimony would no longer be a deduction after 2019 (so don’t get divorced).   4.  Tax rate brackets were lowered.  4.  The standard deduction was nearly doubled while the personal exemption was eliminated. 5.  Child tax credit was revised and tightened to include the requirement of a social security number.  6.  The AMT would have a much higher phaseout threshold.   7.  Repeals the limitation on itemized deductions.

CORPORATIONS:   1.   Rate was lowered to 21%.   2.   A phase in to allow full deduction of capital expenses rather than depreciation.  3.   Eliminates the carryback provision of NOL.   4.  A 15.5% offer for corporate repatriation of overseas cash profits and an 8% rate for reinvested earnings.  5.   And a territorial tax system whereby only domestic earnings are subject to tax (avoid the potential for double taxation).

The Democrat argument is predicated on the fact that government won’t make enough money to pay for all their benefits and perks, and parties… But the reality is in the fact that as corporations come home to their 21% tax rate vs 39.1%, they’ll get troughs of people off the handout roll of welfare, food stamps, and Medicaid because they will actually be working for a living.

It is estimated that $3.1 trillion in US company profits is being held overseas!   Bring It On Home!   There are limitations. This does not mean corporations will no longer hire foreign employees who are better trained, it does mean that the incentive for American workers to become trained will create a revolutionary new training industry as we play catch-up, or ketchup… with hundreds of thousands of new labor jobs available.

Tax preparers and estate planners may see a rollback in their usefulness. H&R Block may want to diversify into training centers for the new generation of employees.

But the biggest gripe the Democrats have regarding the Tax Reform is that it actually might work, and that could disrupt their antagonistic agenda when trying to damage Trump. Today their voice of dissent is based on mere block numbers with the assumption that corporations will remain in the EU, the Bahamas, and the Maltives – some will, but I imagine most will come home like

Prodigal Children.

Trump Trumps the Tax Game – Ex-Patriots

Posted on by Helena

Taxes, we hate them, they are annoying, they are riddled with so much garbage the tax code now has over 74,600 pages of rules. No accountant can possibly know them all. Few individuals can correctly do their own tax return. We buy software… we hire H&R Block, or we hire high end accountants. The end result, we pay money to the IRS, money to an accountant, and money for Social Security and Medicare.

And then there are those who don’t – pay money that is, and therein lies the true fraud within the system.

While politicians banter about changing the tax rates, having ‘fewer tax rates’, and cutting corporate tax rates, the biggest tax losses were addressed by Trump – overseas accounts, international deferment of taxes, and the carried interest break for fund managers. Bada-Boom!

It’s well known at the corporate level who plays and who pays. A board game of engineering feats, it can be as simple as setting up a local office in a country that has little to no tax, such as; Morocco, Bermuda, Ireland, and even the UK and Canada have joined the pool. Some argue that the ‘effective rate’ in the US is lower because of deductions, but this isn’t the entire story. I remember the story (before online filing) of a corporation filling three UPS trucks with it’s tax return. Many corporations hire a team of accountants just to prepare their tax returns which can take years to do.

Between 2011 and 2014 22 companies left the US for a brighter tax future, including Burger King, Eaton PLC, Perrigo, Elan, and Vantage Energy, joining the 25 other companies that had already exited in the last decade. Of 34 countries in the OECD, the US ranks number one highest in corporate tax rates. The argument that the US effective rate is less seems to be lost on the hundreds of corporations that have exited. Insurance companies notoriously have run to Bermuda in the last decade as have a number of their highest paid executives.

How much revenue is lost? Well it depends on who is doing the counting because the figures range from about $40 billion to $150 billion. It’s an accounting thing…  Currently, individual income taxes comprise 37% of the total revenue collected by the government, corporate taxes only 9%. Total federal revenue for 2015 is estimated to be $3.18 trillion. Corporate revenue generated would then be about $286 billion and individual revenue would be $1.176 trillion. If lost revenue to ex-patriot corporations brought in additional sums of $150 billion, this would increase the bankroll by 52%. But is that enough?

Trump would offset the revenue by imposing a one time 10% penalty on all cash held overseas, estimated to be $2.1 trillion. That would amount to an additional $210 billion. But how much would be lost in individual revenue? Not an easy answer. You see, modifying deductions and lowering gaps will encourage ex-patriot individuals back to US shores which could easily offset any reductions of revenue by the little guys. It really is a win-win situation that would have imploding positive effects on the US economy.

The Economic Policy Institute argues that lowering taxes is all poppy-cock, a worthless endeavor that will do absolutely nothing but cost America healthcare and education. Who is the EPI? A very leftist organization supported by labor unions and ta-da – George Soros. No agenda there.

Seems to me, at 74,600 pages, it would be a lot easier to scrap the entire code and start over – fresh, with one covenant, you have to make the entire individual code fit in five pages, and the corporate code fit in seven pages. KISS. Of course, there will be naysayers, perhaps the 1000+ tax team at GE that effectively reduced GE’s taxes to – zero!

What we do know is that doing nothing but expanding the already belligerent tax code will create a ruinous environment as more and more individuals and companies continue their exodus. And right now, Trump’s tax plan would seem to address the larger picture better than Rubio and Bush, and certainly puts Hillary to shame.

Hillary’s 2014 tax return showed deductions for travel (her famous hallmark) at roughly $1.5 million. And on gross income of over $30 million, charitable donations were a paltry $22,700 – not including self donations to their Foundation of Grease – $3 million. And we know that this $3 million personal deduction was spent for more travel. In 2013, travel expenses were an exorbitant $2,220,000, foreign source income (from India) excluded was $7.5 million, $38,000 went to charity and again $3 million to their self Foundation.

In addition, upwards of $26 million in revenue was diverted to the Clinton Foundation and not included in their personal income tax return – and thus non-taxable. And despite the fact that they list themselves as a $3 million annual donor to their corporation on their personal return, they don’t show up on the Foundation Donor list.  Huh?

So yes, our tax system is ripe with flaws. And yes, we need a major overhaul and have for years! And yes, addressing the entire corruption means pushing back against some surly allowances and will make some powerful people quite unhappy. Because, the kicker is not about fudging the tax brackets, that’s just pushing papers around a desk, the kicker is getting back the income, both corporate and individual, that could be taxed here and the only candidate addressing this – Trump.