quote:

It is already between 7 and 10 percent here with state, county, and local sales tax.

.... and going up!
It will soon be closer to 10 percent than 7 percent in most parts around here.

Tax reform isn't any easier than repealing and replacing Obamacare....

Trump Scraps "Phenomenal" Tax Plan, Goes Back To Drawing Board

Apr 10, 2017

Remember when Trump promised in early February that he would unveil a "phenomenal" tax plan within two to three weeks? Well, it was just scrapped, because as AP reports, Trump has scrapped the tax plan he campaigned on and is going back to the drawing board, hoping to find a plan that will have Republican consensus, something his current proposal has failed to achieve. In doing so, the president threatens the timetable of what many had seen as the primary driver behind his entire first year agenda, which is not in peril, and may not come until early 2018 if not later.

According to the AP, while Trump's first attempt to write legislation is in its early stages and the White House has kept much of it under wraps, it has already sprouted the consideration of a series of unorthodox proposals including a drastic cut to the payroll tax, aimed at appealing to Democrats. Some view the search for new options as a result of Trump's refusal "to set clear parameters for his plan and his exceedingly challenging endgame: reducing tax rates enough to spur faster growth without blowing up the budget deficit."

The good news: the ambitious pace to figure out a plan reflects Trump's haste to move quickly past a bruising failure to broker a compromise within his own party on how to replace the health insurance law enacted under President Barack Obama.

The bad news: administration officials cited by AP say it's now unlikely that a tax overhaul will meet the August deadline set by Treasury Secretary Steve Mnuchin.

Why is the White House, by which we mean Gary Cohn and Goldman Sachs, bypassing Congress and coming up with its own tax plan? One reason proposed is that it is trying to learn the lessons from health care: rather than accepting a bill written by the lawmakers, White House officials are taking a more active role (again: see Gary Cohn).

While administration officials have signaled that they want to pass tax legislation with only Republican votes, yet they've also held listening sessions with House Democrats, in other words there will be concessions for both parties. One problem, however, is how to raise offseting government revenues to make the plan revenue neutral and not add to the budget deficit, something which would lead to further clashes with conservative and even moderate republicans.

White House aides say the goal is to cut tax rates sharply enough to improve the economic picture in depressed rural and industrial pockets of the country where many Trump voters live. But the administration so far has swatted down alternative ways for raising revenues, such as a carbon tax, to offset lower rates.

More details: "Trump, who brands himself as a deal-maker, has not said which trade-offs he might accept and he has remained noncommittal on the leading blueprint, from Rep. Kevin Brady, chairman of the Ways and Means Committee."

One notable change: as expected, the BAT is dead.

Brady, R-Texas, has proposed a border adjustment system, which would eliminate corporate deductions on imports, to raise $1 trillion over 10 years that could fund lower corporate tax rates. But that possibility has rankled retailers who say it would lead to higher prices and threaten millions of jobs, while some lawmakers have worried that the system would violate World Trade Organization rules. Brady has said he intends to amend the blueprint but has not spelled out how he would do so.

Among the other options are being shopped on Capitol Hill, include changing the House Republican plan to eliminate much of the payroll tax and cut corporate tax rates. This would require a new dedicated funding source for Social Security. It would also mean that the Trumpflation trade, and any stock market upside as a result of reduced effective taxes are similarly dead.

As previously reported, instead of a BAT the administration is currently contemplating a VAT.

The change, proposed by a GOP lobbyist with close ties to the Trump administration, would transform Brady's plan on imports into something closer to a value-added tax by also eliminating the deduction of labor expenses. This would bring it in line with WTO rules and generate an additional $12 trillion over 10 years, according to budget estimates. Those additional revenues could then enable the end of the 12.4 percent payroll tax, split evenly between employers and employees, that funds Social Security, while keeping the health insurance payroll tax in place.

This approach would give a worker earning $60,000 a year an additional $3,720 in take-home pay, a possible win that lawmakers could highlight back in their districts even though it would involve changing the funding mechanism for Social Security, according to the lobbyist, who asked for anonymity to discuss the proposal without disrupting early negotiations.

While the White House would not comment on the plan, it has recently said a value-added tax based on consumption is not under consideration "as of now."

No matter what final shape Trump's proposal takes, it appears almost inevitable that the president will again face significant internal opposition:

The lack of detail about how to significantly rewrite tax laws for the first time in 30 years may provide Trump some time to build consensus among Republicans. But without Trump laying down his hand, lawmakers appear reluctant to back a plan that will likely stir controversy. "Because there are trade-offs, congressmen need cover from the president to withstand the lobbyists and constituents who are going to complain," said Bill Gale, an economist at the Brookings Institution who worked at the White House Council of Economic Advisers during President George H.W. Bush's administration.



The Trump administration appears to have shut out the economists who helped assemble one of his campaign's tax overhaul plans, which independent analyses show would have increased the budget deficit. "It's a little frustrating that they feel they have to write a new tax plan when they have a tax plan," said Steven Moore, an economist at the conservative Heritage Foundation who helped formulate tax policy for the Trump campaign.



Sen. Rob Portman, R-Ohio, a member of the Senate Finance Committee, said that all of the trial balloons surfacing in public don't represent the work that's being done behind the scenes. "It's not really what's going on," Portman said. "What's going on is they're working with on various ideas."

Meanwhile, as we showed several weeks ago...



... investors no longer believe Trump can deliver a tax plan, with Goldman's high tax basket having wiped out all gains since the election.

Stocks rallied after his election on the promise of lower taxes and fewer regulations, but the Dow Jones Industrial Average has dipped 1.2 percent over the past month as the path for health care and tax revisions has become muddied.

"The White House is going to need its own clear direction, or it's going to need to defer to Congress, but saying that your plan is forthcoming and then not producing a plan kind of puts everything in stasis," said Alan Cole, an economist at the conservative Tax Foundation.

http://www.zerohedge.com/news/...s-back-drawing-board

Should the FICA tax be eliminated?
Apparently, Trump is considering a proposal to get rid of the FICA tax.... (15.3 percent of wages, including the employer share).

quote:

Originally posted by chellim1:
Should the FICA tax be eliminated?
Apparently, Trump is considering a proposal to get rid of the FICA tax.... (15.3 percent of wages, including the employer share).

And these are not the only federal taxes that are buried in our payroll system, not to mention all those other excise taxes, etc etc ad nauseum

I know it will never happen, but either the fair tax or flat tax would be infinitely better than this shit sandwich we have. And just think, if all those horse pucky exemptions for special interest groups were eliminated as well.

Tax reform without massive spending cuts is like dieting without exercise

April 17, 2017 by JD Rucker

We’re coming to the end of tax season. Millions of American tax payers are likely upset about something, whether it’s having to pay more than they expected, not receiving back as much as they’d hoped, or simply having to deal with the mess our tax system has become in recent years. To put it bluntly, tax season is depressing for many, but there’s hope! The GOP is in control across the board, so things are going to get easier by next year, right? Well, no. Probably not. If things go as Paul Ryan and Donald Trump have planned, we could be looking at a situation over the next three or four years that’s negligibly better than it was under the last administration.

The biggest misconception that Republicans often perpetuate is that the benefits of tax cuts on the economy will be enough to compensate for lost percentage points in federal revenue. This is true to some extent, but it’s misleading because the two aren’t temporally aligned. Yes, reducing taxes, particularly on the middle class, will prompt people to spend more and thus improve the nation’s economic health, but the benefits come later. In other words, we’ll have to suffer through budget deficits, national debt increases, and market instability unless they couple tax reform with massive spending cuts.

Even that breakdown is incomplete. It doesn’t take into account the actions and corrections of corporate America. Most large companies don’t wait to see what happens before reacting. They plan based upon assumptions. The most prominent assumption they planned for 2017 was favorable tax changes for their companies as well as their direct or indirect consumers. These actions helped cause initial spikes in first quarter growth numbers, but the corrections that are coming have many worried. Why are they correcting? Because there are mixed signals coming from the administration. From tax reform now to tax reform next year to tax reform next month back to tax reform now… every day (and often multiple times in the same day) we’re hearing about a new plan.

For the sake of transparency, I must admit I’m biased. As a proud member of the new Federalist Party, it behooves me to call out the foibles of the GOP. They were my party for decades, but consistently broken promises and faux-conservatism forced me to look elsewhere. With all other third parties failing to make any sort of impact, it became apparent that we need to build real change similar to what Ronald Reagan pushed for with his “new Federalism.” Still, I always put America above any party loyalties, so offering this advice to current Republican lawmakers is acceptable.

My advice: start cutting spending immediately and at a grandiose scale. For years, we’ve heard about how important it is to balance the budget. We’ve been told that all we need to do is give the GOP control and they’d reverse the national debt trends through fiscal responsibility. Unfortunately, giving them power was not enough. They now have a strong desire to keep power, which means fiscal responsibility is being replaced by populist concepts. Spending cuts, while appealing to some and necessary for the future of the nation, have been directly tied to losing elections. It’s not popular to cut up credit cards and force people into the private sector. It’s not popular to attack some of the biggest economic monsters through entitlement reform. As a result, we’re looking at continuing to increase the budget and balloon the national debt.

Tax cuts in that scenario will not be enough to spark the economy. Again, the benefits will not be immediate, so we’re going to be looking at deficits that would make Obama blush. It’s like cutting down on food without accompanying it with exercise. The diet strategy is fine if you need to lose 20 pounds, but it’s not going to make a dent if you’re 200 pounds overweight. To lose a lot of weight in a short time, you have to burn it. That means better diet AND a serious physical fitness regiment. Our budget was $600 billion dollars in the red, yet we’re now talking about building walls, a huge infrastructure project, and a multitude of other budget increases. Add in a failure to fully repeal Obamacare and the GOP is acting more like the Democrats than the party of smaller government that they claim to be. For the sake of headlines and Tweets, they’re planning on making cuts in many areas such as the EPA. Party members cheer, yet looking at the math reveals they’re simply redirecting the money to other areas. In short, the “cuts” are actually balance transfers. The debt and budget hits will remain and more spending is inbound.

If we could administer sodium thiopental into each Republican lawmaker in DC today and ask them if there’s a dire need to cut spending at a massive scale, the vast majority would say yes. They’re playing politics and focused more on 2018 and 2020 victories than the well-being of the nation. This is why I joined a new party. It’s why we must go after the Democrats and the Democrat Lites (aka Republicans) with everything we’ve got. They’re not going to be able to spend their way out of our problem forever. Eventually, every bill comes due.

http://www.redstate.com/diary/...ng-without-exercise/

quote:

Originally posted by chellim1:
Should the FICA tax be eliminated?
Apparently, Trump is considering a proposal to get rid of the FICA tax.... (15.3 percent of wages, including the employer share).

The problem with eliminating the FICA tax.... rather than reducing rates, is that FICA is the only Federal tax 1/2 the people pay.

I think taxes should be broad and shallow... meaning everyone pays something, but not too steep. We have too many people with an incentive to vote to raise our taxes because they pay nothing:


44% Of Americans Won't Pay Any Federal Income Tax

Yesterday, April 18th was the deadline for filing your taxes

Many Americans discovered they don’t owe the government a dime.

More than four in 10 American households (44.3%) — or upwards of 76 million — didn’t pay any income tax to the federal government last year, according to data for 2016 from the Tax Policy Center. This year that number is expected to be roughly the same, at 43.9%.

Most of these people aren’t paying income taxes because they either don’t have any income that is taxable (many fall below the poverty line), or because they get enough tax breaks and don’t owe the government money. Common tax breaks include the child tax credit, the earned income tax credit (EITC), and the exclusion of some or all Social Security income, explains Roberton Williams of the Tax Policy Center.

Of course, this doesn’t mean that this group is completely tax exempt: “Roughly 2/3 of those paying no federal income tax work and pay federal payroll taxes that support Social Security and Medicare; about 60% of the rest are elderly and thus retired and not working; and most of the rest have very low incomes,” says Williams.

Though millionaires and billionaires not paying taxes frequently make headlines — Warren Buffett is famous for having said he has a lower tax rate than his secretary thanks in part to how investment income is taxed — the reality is that the lion’s share of federal income taxes are paid by those who are rich.

More than 31% of all federal individual income tax is paid by those who bring in more than $1 million a year, who have a net effective tax rate of 25.3%, the highest of any group. Another 14% of income tax is paid by those who make between $500,000 and $1 million, who have a 20% tax rate, the second highest.

http://www.zerohedge.com/news/...y-federal-income-tax

The Main Highlights In Trump's Sweeping Tax Reform Proposal

Having promised "the biggest tax cut in history," and seemingly desperate for a win (given his folding on the funding of the wall), one wonders why President Trump has delegated the announcement of his Tax Reform plan to Treasury Secretaty Steven Mnuchin and Chief Economic Advisor Gary Cohn. Reduction, repatriation, simplification, and de-itemization appear to be the cornerstones.

2017 Tax Reform for Economic Growth and American Jobs

The Biggest Individual And Business Tax Cut in American History
Goals For Tax Reform

Grow the economy and create millions of jobs
Simplify our burdensome tax code
Provide tax relief to American families—especially middle-income families
Lower the business tax rate from one of the highest in the world to one of the lowest

Individual Reform

Tax relief for American families, especially middle-income families:
Reducing the 7 tax brackets to 3 tax brackets of 10%, 25% and 35%
Doubling the standard deduction
Providing tax relief for families with child and dependent care expenses
Simplification:
Eliminate targeted tax breaks that mainly benefit the wealthiest taxpayers
Protect the home ownership and charitable gift tax deductions
Repeal the Alternative Minimum Tax
Repeal the death tax
Repeal the 3.8% Obamacare tax that hits small businesses and investment income

Business Reform

15% business tax rate
Territorial tax system to level the playing field for American companies
One-time tax on trillions of dollars held overseas
Eliminate tax breaks for special interests

Process

Throughout the month of May, the Trump Administration will hold listening sessions with stakeholders to receive their input and will continue working with the House and Senate to develop the details of a plan that provides massive tax relief, creates jobs, and makes America more competitive—and can pass both chambers.

Of course the crucial question is - With The White House targeting deductions to help pay for tax plan (but mortgage/charitable are protected), how does this not blow up deficit?

We look forward to Steve Mnuchin and Gary Cohn explaining it all (with as many superlatives as possible we are sure).

Perhaps the most concerning aspect is the apparent expectations management that is being undertaken this morning:

The White House's presentation will be "pretty broad in the principles," said Marc Short, Trump's director of legislative affairs.

In the coming weeks, Trump will solicit more ideas on how to improve it, Short said. The specifics should start to come this summer.

Short said the administration did not want to set a firm timeline, after demanding a quick House vote on a health care bill and watching it fail.

But, Short added, "I don't see this sliding into 2018."

http://www.zerohedge.com/news/...eform-plan-live-feed

the tax code has more than just the personal tax component - eliminating te AMT penalty and the death tax is a great start, getting three rates is a great start - keeping the mortgage interest deduction is wonderful, as is the credit for retirement savings.

You would never want a flat tax - you would end up paying a shitload more

the second part of the code is how we deal with businesses and their tax liabilities

if you screw with that too much, you can kiss business development and the willingness to take fliers on trying to start a business out the window and just watch what happens to the economy

quote:

You would never want a flat tax - you would end up paying a shitload more

Half the people have NO federal income tax liability. So, yes, you are right, lower income people would definitely pay more.
But I would consider that a feature, not a bug. We should broaden tax liability so that everyone has a "stake" in the system. Then, those people would have an incentive to stop asking more of government.

you are correct - I work in the tax business on the federal side so I see a lot of things going on

all in all I think the proposal is going in the right direction

remember, the tax code is not only about taxes but also about incentives

and its not the poor people starting businesses, building high rises or doing major R&D

Taxes should be a piece of cake.

How much did you make last year?

Send us 10% of it.

Thank you.

Have a nice day.

quote:

Originally posted by nhtagmember:remember, the tax code is not only about taxes but also about incentives

IMO: That's a huge part of the problem.

well yes and no

what would you do to entice people or countries to invest in businesses over here? offer them cake and popsicles?

I may have missed a comment here, but one of the important parts of the tax reform proposal is ending state tax deductibility.
Why so important? Because it ends the subsidy the heartland, low-tax red states pay to the taxpayers of the high-tax coastal blue states.
Having that deduction decreases the impact of your CA or NY taxes by up to a third, therefore incentivizing blue states to raise their taxes.
Yes, I will likely pay more under Trump's proposal than existing tax rules if I stay in CA, but it's still a good idea.

No more fed subsidies to rich blue states!

^^^



I know you just moved to the Sandy Eggo area, but you may want to consider migrating a tad further east

Trump tax plan goes for growth
By Thomas Lifson

After President Obama's two terms of anemic economic growth and huge federal deficits, there is a lot of room for growth in the American economy. Targeting "seed corn taxes" that obstruct investment is the smart way to spike growth rates, which will bring jobs, increase taxes (in the long run), and swing political approval toward the GOP president and Congress. It worked for Reagan, and it will work for Trump, if a version of the tax plan becomes law.

The White House briefing and one-page description of President Trump's plan for tax reform issued yesterday contain the bones of an ambitious plan that could indeed jump-start the economy by lowering corporate income and capital gains tax rates, and by repatriating corporate money held overseas to avoid the punitive 35% levy on overseas profits when they are brought home to the USA.

It is now time for the author of The Art of the Deal to start making deals with the Democrats. Treasury secretary Mnuchin is already executing a classic Trump pre-negotiation maneuver. Via the WaPo:

Mnuchin said Wednesday that he would like to negotiate details of the plan with Democrats but would cut them out of talks if necessary and seek only support from Republicans, perhaps by pursuing a strategy known as "reconciliation." Using that process, a tax overhaul could escape a 60-vote requirement in the Senate, but it also would have a 10-year expiration date.

The threat of losing any leverage at all over the nation's taxes is enough to encourage flexibility, and ultimately a bipartisan approach. There is plenty of room for negotiation, especially in the elimination of all personal deductions, save for mortgage interest and charitable deductions. Lurking in this proposal is eliminating the deduction of state income taxes from federally taxable income. This would hurt high-income taxpayers in states like California and New York, where upwards of 10% of personal income goes to state coffers and would be double-taxed by the feds.

This would hit the Democrats' core constituency hard. This map from the Tax Foundation shows who benefits the most from the existing deductibility:



Because the Trump plan doubles the personal deduction to $24,000 for a married couple, low-income families in blue enclaves would not be affected. The damage would go mainly to high-income families in big cities. It would also have the effect of making states much more reluctant to have income tax rates, since the disincentives have just been raised by at least a third for high-income bracket taxpayers.

The Democrats would absolutely hate this, but they have few rhetorical legs to stand on, since they would be defending high income earners – typically demonized by Dems. So let the Dems try to defend their blue enclave base. Maybe they would be willing to trade away some other aspects of their opposition in return for retaining deductibility for state income taxes?

I wonder why the plan does not include a cap on charitable deductions. Wealthy left-wingers use tax-deductible donations to push their left-wing politics. Foundations and universities have accumulated vast stores of wealth that have been seized by left-wingers and put to use for political causes. I would prefer to see a reasonable cap on charitable deductions – say, ten to twenty thousand dollars a year, which would continue to encourage personal charity but which would also eliminate charity as a tax dodge for the mega-wealthy.

I suspect that there will a lot of wheeling and dealing ahead. The Dems know that if they stonewall, they will be cut out entirely, and tax cuts are politically popular.

I don't like all the aspects of the plan, but it is a start.

http://www.americanthinker.com...goes_for_growth.html

I would like to see some limitation on charitable deductions, as per this article.
"Non-profit" and charitable organizations are unaccountable to anyone, and the IRS will likely remain biased against any conservative, pro-liberty organizations while giving taxpayer subsidies to organizations bent on undermining economic and political freedom.

A Tax Expert's Take on Trump's Proposal: 'A Truly Great Tax Plan'
By Jack Hellner

It certainly appears that Trump has more common sense and intelligence on taxes and the economy than many of those advising him, the career politicians from both parties, the bureaucrats, the media and most economists. I am a 64 year old CPA who has been doing taxes for approximately 40 years. This is the most intelligent tax policy I have seen since Ronald Reagan’s and my initial thoughts make me believe that it is better than Reagan’s. It is a simple and logical plan that would give everyone the incentive to earn more instead of spending so much time and money trying to beat the tax man. I believe the impetus it would give to economic growth is immeasurable.

The summary of what I have seen on President Trump’s tax plan looks like it would greatly help almost everyone and especially the overall economy. If the U.S makes the corporate tax rates more competitive, businesses in the U.S would have a great incentive to keep businesses here and/or to move business back from overseas. Foreign businesses would also have a greater incentive to move and build businesses here which is, after all, the biggest economy in the world. Regulatory relief also helps a lot. The lower the regulatory burden, the greater the likelihood that businesses will thrive and keep their prices competitive. If you lower the tax rate, get rid of a lot of the special interest deductions along with reducing regulations, businesses and individuals will become more productive, boosting the economy.

If you get rid of the alternative minimum tax (AMT), the estate tax, and many tax deductions and tax breaks, you take away the incentive to shelter income. The number of potential audits is greatly reduced, minimizing the cost of IRS. People and businesses would structure their personal lives and businesses without much regard for taxes which would make everything run more efficiently and effectively.

Democrats are already saying they are against Trump’s proposed tax policy changes. What a surprise.

Democrats seem to believe the money is all theirs. They decry any cut in taxes as if it was the government’s money in the first place. They call tax cuts a cost to the government. In contrast, when government entities increase taxes and fees, the media and Democrats talk about the additional revenue to the government, not the cost to individuals and businesses to pay the tax.

The following article points out that networks howl about the loss of revenue to the government. I do not recall them decrying the loss of money to individuals and businesses when government increase taxes and fees. Basically the media repeats Democratic talking points.

Democrats, including the media, believe the people work for the government instead of the government working for the people.

Democratic politicians and the media are so lacking in knowledge about economics that they don't even comprehend that as they rail against trickle-down or supply side economics, it's their own policies that are pure trickle-down economics. They believe that more money should go to the government, then they run the money through a major bureaucracy enriching the already huge government entities and finally, they trickle out a much smaller amount to their special interest groups which they claim generates jobs. It is a simple concept that the more money that is left in the private sector, the more potential there is for growth. It is too bad so many don’t understand.

The Democrats really don’t want a simple tax code. With a simplified tax code, politicians can’t bribe as many individuals and businesses with goodies. They can’t buy votes.

According to IRS, only a little over 30% of people itemized their deductions in 2013 and Trump wants to significantly increase the standard deduction along with lower the rates. Then he wants to eliminate and cap itemized deductions. Trump’s policy suggestions help almost everyone and simplify the code so much that most people should be able to fill out the tax forms themselves. Think of all the money that could be saved if they didn’t have to spend so much time and money on tax preparation and/or planning. The only people who may be hurt by limiting itemized deductions would be the truly rich. The poor and middle class will be helped, not hurt.

Then the public is continually fed the myth that when you cut rates that it costs the government. Bush’s across-the-board significant cuts in tax rates in 2003 showed that that was absolutely not true. Bush inherited a recession and a collapsing stock market when he took office in 2001. The economy was stagnant. Income tax revenues dropped from $1.2 trillion in fiscal year 2000 to $900 billion in fiscal 2003. Bush got his tax cuts approved in May 2003, the economy got a huge boost, and income tax revenues shot up to more than $1.5 trillion by FY2007. Rates were cut by around 10% across the board and revenues shot up over 60%. The CBO and other economists did not seem to understand the simple concept that the more money you leave in the hands of individuals, the more they have to spend, save and invest. All of that is more stimulating to the overall economy than having the government confiscate a continually greater share, and then picking winners and losers.

The kneejerk reaction of the Democrats and the media to such effective tax reform, seen whenever proposals to allow people and businesses to keep more of their own money is telling. They would rather have more people dependent on government than a growing, stimulated economy.

I have seen many economies that collapsed because the government got too big. (Venezuela is a current example. The Soviet Union was a previous example.) I do not believe I have ever seen an economy collapse because individuals and businesses have been able to keep a greater share of the money that they, not the government or politicians, earned.

The bad ideas I see on tax reform all relate to some sort of national sales tax. This can be in the form of a Value Added Tax (VAT) or the "fair tax" that former Arkansas Gov. Mike Huckaee supported. These are highly regressive taxes that will widen the wealth gap and destroy the U.S. consumer-driven economy. They complicate the tax system instead of simplify it. The border adjustment tax also sounds stupid because it is so complicated. The best border adjustment there would be is to stop double-taxing earnings that companies legitimately allocate to other countries. Double taxation is absolutely unfair.

Some Democrats in particular seem to be entertaining the idea of a VAT lately, which shows they really don’t care about simplicity or economic growth. They also seem to have little concern for the middle class and the poor because any VAT is highly regressive and reduces purchasing power.

Trump’s proposals are for an extremely progressive income tax system. It is truly a shame that the Democrats, including the media, are so intent on punishing those they have defined as rich that they don’t mind taking away important economic opportunities from the poor and middle class in the process.

Let’s give everyone a chance to move up the economic ladder. Trump’s simplification proposals certainly appear to enhance everyone’s opportunities.

Hellner is a CPA with more than forty years' experience on tax matters.

http://www.americanthinker.com..._great_tax_plan.html

Peter Schiff almost always sees stormy seas ahead... but is he right? Without corresponding cuts in expenditures, will 'the biggest tax cut in U.S. History' do more harm than good?

Peter Schiff: Damn The Deficits, Huge Tax Cuts Ahead!

Authored by Peter Schiff via Euro Pacific Capital,

Donald Trump has made good on one of his most audacious campaign promises by submitting what he describes as the biggest tax cut in U.S. History. For once, at least, this does not appear to be Trumpian braggadocio. It really may be the mother of all tax cuts. But if passed, what may this bunker buster do to the economy? While I have rarely met a tax cut I didn’t like, this one just may be more likely to send the economy into a downward spiral than it is to send up to orbit.

As I mentioned in my January commentary, Donald Trump’s big-spending, tax-cutting campaign rhetoric threatened to make him the biggest borrower in presidential history. He comes to office at a particularly vulnerable time for budget dynamics. After contracting by nearly two thirds from 2010 to 2015 (from the mind-bending $1.3 trillion to the merely enormous $438 billion), the Federal deficit started expanding again in 2016, moving up to $587 billion (Govt. Publishing Office, Office of Management & Budget (OMB). Current projections have it going up nearly every year over the next two decades. The Congressional Budget Office expects it to permanently surpass $1 trillion annually by 2021 or 2022. But these ominous forecasts were made well before anyone thought Trump had a snowball’s chance of ever becoming president. Now that he is in the office, those projections will be the floor. The ceiling is anyone’s guess.

The forecasts assume that the taxing and spending laws in place during the Obama Administration won’t change. The steep increase in projected deficits towards the end of this decade and into the next is largely driven by the retirement of the Baby Boom generation, which will lead to simultaneous increases in entitlement spending and decreases in tax revenue. This brick wall has been hiding in plain sight for decades but the can-kickers in Washington have serially failed to do anything to avert the inevitable collision.

(These forecasts also optimistically assume that the economy never again enters recession, inflation never again rears its ugly head, and that our creditors never get concerned enough about our growing debt to demand a premium for the risk of financing it.)

But now that Trump occupies the Oval office, this date with destiny may come much sooner…and she will definitely be ordering the lobster.

Before I go negative, let me give credit to Trump for picking the right taxes to cut. He kills the estate tax, an ugly beast that should have been euthanized years ago. Some may see this simply as a gift to the very rich. But legal wizards have long since devised strategies that offer almost complete protection from the death tax. None of these structures offer any real benefit to the businesses these millionaires typically own, or to the economy in general. Killing the tax will cost the government almost nothing, but it will remove tremendous impediments that have prevented family-run companies from growing over generations. He also kills the Alternative Minimum Tax, a complex parallel system of taxation that few understand but somehow manages to ensnare more and more taxpayers every year.

Most importantly, he brings down the corporate tax rate from the globally non-competitive rate of 35% to the much more manageable 15%. Taxing corporations has always been a bad way to raise revenue. Corporations, after all, don’t pay taxes, which are simply treated as a cost of doing business. The real costs are borne by customers, who must pay higher prices, and employees, who must suffer with lower wages. But high domestic corporate taxes have hamstrung U.S. corporations and greatly contributed to the decline of American manufacturing. A more competitive corporate sector will shower benefits on all manner of consumers and employees.

On the individual tax side, his decisions are much more problematic. Although Trump makes the sensible decision of compressing the seven individual tax brackets into just three (10%, 25%, and 35%), and doubles the standard personal deductions (thereby saving many people from the hassles of itemization), the headline-grabbing component of the proposals has to do with the lowering of the “pass-through” tax rate to the same 15% level that applies to corporations. This means that wealthy business owners, highly paid freelancers, and partners at law firms, medical groups, and management consultancies, will qualify for the 15% rate. This will be a huge windfall to some of the richest people in the country, who typically pay the highest marginal tax rate (currently 39%). And since the top one percent account for nearly 50% of tax revenue, this one provision promises to cost Uncle Sam plenty and to dramatically shake up the corporate landscape.

Small business owners and independent contractors will in fact receive the benefit of the 15% pass through rate. But “Mom and Pop” entrepreneurs rarely have income that is high enough to be taxed at the higher rates. These smaller earners will likely be be trading a 15% tax for a 15% tax. All the big benefits will go to the really big fish. Whereas the vast majority of Tom Cruise’s income would have been taxed at the 39% rate, it will now be taxed at just 15%. His taxes will be reduced by nearly 60% from current law. The same holds true, in lesser degree, to lawyers, doctors, and consultants making more than a few hundreds of thousands of dollars annually.

Is there any reason that could justify why a hedge fund manager making a million dollars per year should pay 15%, but a full time CEO at a corporation making half that would be subject to the highest marginal rate of 35%? It’s absurd. Now I’m not a big fan of the “progressive” tax system, whereby the tax rate goes up with income. I think a “flat” tax system, in which everyone paid the same rate, would be better. (Ideally I would like to see income taxes replaced by far less onerous and intrusive consumption taxes). But I certainly don’t believe in a “regressive” tax system in which lower-earning citizens pay higher rates than those at the top. But that’s exactly what Trump is trying to do.

Given this wide disparity in tax rates, we can assume that the employment landscape will adjust dramatically. We should expect that legions of highly-paid full-time employees will start to form Limited Liability Corporations (LLCs) to work freelance rather than as employees. There are few barriers that would prevent such a shift, and the growth of internet-based work scenarios will continue to break down the traditional barrier between employee and freelancer. Yes, there are some labor rules that seek to separate employees from freelancers, but those rules may be easily circumvented, especially when the reward is so great. Rather than envy the lawyer earning more and paying less, the CEOs of the country will likely incorporate and sell their services freelance to their former employers.

This shift will mean that a great many of the country’s highest earners will be paying taxes at the lowest rate. As a result, the reductions in tax revenue would likely be far greater than what is predicted in the standard modeling.

But unlike most prior tax cuts, the Trump version does not even make any attempt to balance the cuts with corresponding cuts in government spending. If Trump’s tax cuts don’t immediately generate sustained 4% growth or more, we may be staring down the barrel of $2 to $3 trillion in annual deficits. Is this an experiment that we really want to try?

But even if the reforms can kick the economy into higher gear, thereby creating higher revenues with lower rates (The Laffer Curve), our current low interest rate environment provides significant obstacles to permit that growth to be sustained. If growth kicks up to the 4% range, the Federal Reserve will have to accelerate its rate increase schedule. Allowing rates to remain two to three percent below the growth rate could risk an overheated economy with inflation spiraling out of control. These higher rates will act as a stiff headwind to an economy that has grown increasingly dependent on ultra low rates.

But increases in rates would also cost the economy in another way. Our current bonded national debt is ready to surge past the $20 trillion mark. The Trump tax cuts will push it beyond that very quickly. If the Fed raises rates to keep pace with higher growth, then the Government will have to pay much more to finance the outstanding debt. At $20 trillion, every point of increase in interest rates will cost the government $200 billion annually. At that level, if interest rates were at 3.75%, instead of the current .75%, then the Federal Government would have to come up with about another $600 billion per year in interest payments. (That number will be much higher when the debt grows past $20 Trillion).

But it's not just Uncle Sam that is over-loaded with debt. Corporations and households would see their interest costs surge as well with rising interest rates. So what lower taxes giveth, higher interest rates will taketh away.

Consider the housing market. Not only will higher interest rates substantially increase the cost of home ownership (through higher mortgage rates), but Trump’s tax proposals will dramatically increase the cost of ownership for those living in high tax states. Under the proposal, homeowners will no longer be able to deduct property taxes, and a doubling of the standard deduction means a much larger percentage of homeowners will not be able to deduct mortgage interest from their federal income tax. Plus, with the top tax rate reduced from 39.6% to 15%, the mortgage interest deduction will be far less valuable to those higher earners who can still take advantage of it. Higher mortgage rates and lower tax subsidies will increase the cost and decrease the appeal of home ownership. This could lead to a crash in real estate prices, especially in the high end of the market. Falling prices could wipe out what little home equity many Americas have left, and lead to another wave of foreclosures. The losses to Fannie Mae and Freddie Mac could be significant, with the costs falling directly on the Federal government, further driving up annual deficits.

The reality is that years of massive deficits, runaway government spending, artificially low interest rates, and three rounds of quantitative easing, have left the economy so sick that any tax cut large enough to revive it may actually kill it instead. The only silver lining to this cloud may be that the coming fiscal train wreck leaves lawmakers no choice but to slash government spending. If the real Republican agenda is to starve the beast, its success is assured.

http://www.zerohedge.com/news/...-huge-tax-cuts-ahead

I favor a "flat tax" of whatever percentage it takes. I understand that my taxes MIGHT increase but we have to start this journey somewhere. I do not favor a "consumption tax", as I believe this tax is regressive and unfairly targets the poor. To say nothing of cheating. I know something about Florida Sales and Use Tax, and it is rife with special exemptions, cut out by the legislature. Congress will do the same; they already do. Merchants will cheat.