TRUMP Tax Reform – Dissected

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There were a few agendas:   1) the Obamacare mandated penalty for not having health insurance was repealed.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 Tax Reform Unfair Says EU Ministers!

European Finance Ministers are voicing concern and outrage over Trump’s tax reform. They wrote numerous letters to Steven Mnuchen and all senior Republican Senators and members of Congress weeks ago asking/demanding that they vote against the Bill because the policies were unfair to Europe…

I wasn’t aware that Europe had control over our US tax policy. But apparently, they do, or at least they did.

Even more curious is what they were targeting. Apparently they are quite furious over the fact that Excise and Base Erosion fees will be levied on corporations that utilize the fake tax haven headquarter scheme by establishing a base in an EU country that offers lower tax rates. An Excise fee of 20% will latch to corporations utilizing goods and/or services of a foreign corporate entity. And lastly, Intangible Income such royalties derived from the EU would no longer have preferential tax treatment which resulted in what was considered a subsidy payment benefiting EU property.

In other words, Trump went through with his promise to entice corporations back to the US. Good for the US, bad for the EU. And so, they are miffed.

The EU Economists are concerned because their revenue base will suffer given they recognized that corporations relocated to preferred EU countries in order to avoid/evade higher tax rates in the US.   With Trump’s reform, corporations will likely do exactly that – return home giving the US a bump in revenue, and burning the EU advantage.

As a result of the Tax Reform, over time the economies of these EU tax haven countries will begin to contract without the boost of US corporate tax revenue, and ultimately the withdrawing of jobs as headquarters and employees move back to the states.

Obviously this tax haven arrangement has been bolstered and supported by the EU for decades and might help explain why their PM’s and President’s are roiling while making derogatory comments about Trump. Their argument is that making ‘America First’ comes at their expense given they have reaped our rewards and thus international trade between the EU and the US will falter. But given that trade was built on a tax subsidy at the expense of our economy seems to allude their ‘me first’ agenda.

Bottom Line, the call to arms by the EU Ministers is that the US tax reform is ‘not fair’, because it puts US money back in the US instead of in the EU… Awwww, shucks.

Trump TAXES – and the Naysayers of Doom

The complainers are coming out of the woodwork like termites wondering why their particular agenda hasn’t been fulfilled yet like a society of entitlement soothsayers…  “What about what I want?  Me! Me!”  Without considering what  is required in order to get anything actually – done:

 

TRUMP ON TAXES – nutshell

  1. Double the standard itemized deduction value for single taxpayers – $12,000 and married taxpayers – $24,000
  2. Standardize tax rates to 12%, 25% and 35% – the income levels have not yet been released.
  3. Curb the itemized deduction for home interest to $500,000 vs $1 million, which effects homeowners who currently write-off on home asset values of $22 million…
  4. Repeal and curb itemized deductions for taxes, tax prep fees, moving expenses, medical expenses, and theft and personal losses
  5. Repeal deduction for alimony (not taxable deduction or expense)
  6. Eliminate recharacterization of IRA’s between traditional and Roth
  7. provide a one time incentive to bring offshore money home for a 10% tax bill – current estimates state that offshore money worldwide is valued at about $40 trillion.
  8. Flat tax the corporate rate at 20%.
  9. Repeal certain depreciable assets and enable 100% of cost as write-off
  10. Allow businesses a $25 million threshold for cash vs accrual accounting and inventory
  11. Remove limitations on interest deductions for small businesses
  12. NOL would be capped at 90% of current year taxable income
  13. Increase estate tax exclusion to $10 million until 2023 when repealed and gift tax rate lowered to 35%
  14. Cap small business tax rate at 25%, LLC filers and Sub S Corporations
  15. Increase child tax credit
  16. Repeal Alternative Minimum Tax
  17. Elimination of certain business tax credits, except; research and development, investment and low income housing credits
  18. Elimination of tax free bonds used to fund the construction of Sports Stadiums
  19. Simplify and streamline Education credits

Apparently, the plan has drawn criticism… surprise! Ann Coulter thinks it isn’t even an issue with anyone, and instead Trump should be prioritizing building the wall. Paul Ryan doesn’t like it, but few people like Paul Ryan, so his opinion is a non-issue. The complainers have come out of the woodwork and don’t realize that complaining is why nothing gets done!   Their complaining is Swampish.

According to Gallup, the biggest issue American’s identify is government corruption. Yet, as Trump slashes the Swamp, everyone complains. Why? Americans have become so paralyzed by party definition that we fail to recognize that Trump is doing exactly what we claim to want. He is tackling the Swamp, and it is far deeper than anyone can imagine crossing party lines, gender lines, and judicial lines.

Issue #2 – The Economy. Ann Coulter seems to have forgotten that one of the prime ways to stimulate the economy is through a reduction in taxes. But Trump has actually gone a step further and is offering to bring back into the US potentially trillions of dollars in offshore accounts!  Investable money. Money to ‘stimulate the economy’!

Issue #3 –  Immigration. A work in progress, sanctuary cities are the battle ground. The border is the battle ground, and el Salvadoran gangs, etc…are the battle ground.  Trump has meticulously attacked each area, and still the sky is falling Chicken Littles – complain. But the race is not won by the Hare who acts impatiently, but by the Tortoise who acts with ingenuity.  The immigration problem has been manifested over a 40 year time frame with each successive president prodding its continued growth. It’s like giving birth; the weight gain occurred over nine months, you don’t lose it in one day.

And lastly, Healthcare, which for me is a personal issue that literally takes my breath away at an annual cost of $16,000 including deductible! That’s $8 per working hour, which is about equal to the minimum wage…

UPDATE:  My nephew in Arizona was just issued a statement that his private health insurance premiums will increase by 80% in 2018.  Thus the premium for him and his wife will be $23,000 with an $11,000 deductible!  He ‘was’ retired…

You Can’t Please All Of The People All Of The Time!  

But apparently, everyone would like to think that their ‘pleasing’ is most important, and to sit back and complain loudly about everything is their call to action – bonbons and all. There is no such thing as a Bill that will appease everyone, but if we are so self centered that a Bill that has tremendous potential for solving Economic issues through Tax Reform is tabled, then how can we possibly move on to the next issue with any confidence or hope?

If both sides of the media raucously wag gnarly fingers of doom, then that is ultimately exactly what we deserve.  Which is to say – NOTHING.

Lets get this done!  NEXT!