Sunday, 19 January, 2020

Tax cuts not a cure-all

Tax cuts not a cure-all Tax cuts not a cure-all
Debra Rodriguez | 08 May, 2017, 06:21

In a remarkable interview with John Dickerson on CBS, Trump talked about his rough adjustment from the private to the public sphere: "I think the rules in Congress and, in particular, the rules in the Senate, are unbelievably archaic and slow-moving in many cases".

That is why we are cleaning up the code, streamlining deductions, and eliminating many special interest tax breaks that largely benefit only the wealthy.

Too many Americans have an attitude that it's okay for the wealthy to pay 39.6% and even more but realistically every American gets tax tired. President Reagan tried to eliminate it in 1986 but failed.

Just as point of reference, now the mortgage interest deduction is a $60 or $70 billion tax expenditure a year.

"American tax payers spend billions of dollars each year, complying with our archaic tax laws, reducing economic production and creation".

The governing law, the Budget Act of 1974, forbids a relevant tax bill from increasing the deficit beyond the time frame contemplated in the enabling budget resolution. Numerous recently enacted tax cuts have been phased in over a number of years. But in reality, nobody paid tax at those rates. You can call on your tax professional for a review. However, when you get to cutting the corporate tax rate to 15 percent only 37 percent approve. It did not matter how the underlying investment performed; the tax savings alone made the investment worthwhile. I am a responsible steward of my income. "Despite some efforts to eliminate it, the deduction for state and local taxes remains one of the largest deductions in the federal tax code". It was no longer possible to invest in tax shelters. With the pass-through rate dropped to 15 percent, those taxpayers would receive an enormous tax cut.

Federal corporate tax rates of 35%, combined with state taxes, bring the average marginal corporate tax rate in the U.S.to about 40%. The Trump administration hopes to generate economic growth of 3 percent - measured by annual rate of gross domestic product. Divorce decrees often contain wording that has a different tax result than what was intended. Still, it highlights the tightrope Washington lawmakers are walking in devising a tax plan that does more than reward companies and the wealthy. But neither of these challenges should prevent us from enacting dramatic, pro-growth tax reform. This time, Trump started the process by releasing a one-page schematic. "If those dynamics change, Mr. Trump's growth plans could face yet another impediment".

First, their proposals are not revenue neutral. And aside from the hard politics of enacting a major tax overhaul, the proposed changes might not be enough to get hesitant businesses to open their wallets.

Jared Kushner's sister makes $150M pitch to Chinese investors
Promotional materials tout the buildings' proximity to Manhattan and note that the project will create more than 6,000 jobs. No doubt the word has gone out to rich, tapped-in Chinese investors looking to plant some roots in the United States too.

Hoylman also filed another piece of legislation in December, the T.R.U.M.P. (Tax Returns Uniformly Made Public) Act, requiring presidential and vice presidential candidates to disclose at least five years' worth of federal income tax returns to appear on the ballot in NY state and receive votes from New York's representatives in the Electoral College. This indicates that very top incomes do not reflect differences in merit.

Many nations have a value-added tax, or VAT, which is similar to a national sales tax.

Although I am retired, I still prepare a number of returns for friends and family.

Making major tax reform temporary - even for 10 years - undermines its effectiveness because many business projects and decisions depend on forecasting beyond that period.

Yet the proposal so far remains short of vital details, including how it would be paid for. We have our Congress people to keep up in their lifestyles. But this exercise did reinforce my perceptions that the current proposals bear little resemblance to Reaganomics.

Finally, Trump plans to repeal the federal death tax. His idea of only three tax levels of 10%, 25% and 35% will encourage the current workforce and stimulate the economy with more working people. It depends on who falls in the tax brackets. He put his analysis into a perspective that all Dodgers fans can understand.

Jim de Bree is a retired CPA who resides in Valencia.

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