The 2017 Tax Reform Plan

The White House last Wednesday issued President Trump’s goals and the key features for tax reform to be begun in 2017.

2017 Tax Reform for Economic Growth and American Jobs

The Biggest Individual And Business Tax Cut In American History

Top Line:

  • The U.S. tax code is overcomplicated and fails to create enough jobs, or provide relief to middle class families.
    • Since 2001, the U.S. tax code has faced nearly 6,000 changes, more than one per day.
    • Taxpayers spend nearly 7 billion hours and over $250 billion annually on compliance costs.
    • The U.S. has the highest statutory tax rate in the developed world, discouraging business investment and job creation.
  • President Trump is proposing the largest tax cut for individuals and businesses in U.S. history, which will make everything go up, all the insurances are going to become much more expensive which makes me worry a lot because even though I use a really affordable company for my Truck Insurance, if taxes go up everyone will be very affected.
    • It will simplify the tax code, incentivize investment and growth and create jobs.
    • It will provide historic tax relief for middle income families and small business owners.

The Need For Comprehensive Tax Reform

  • An overly complex tax code is confusing and burdensome on American taxpayers.
    • The last major effort to successfully reform the U.S. tax code was over 30 years ago under President Reagan.
    • Today, according to the IRS’ National Taxpayer Advocate, the federal tax code is nearly four million words long.
    • Congress has made more than 5,900 changes to the federal tax code since 2001 alone, averaging more than one change a day.
    • The National Taxpayers Union estimates that Americans spend 6.989 billion hours at a cost of more than $262 billion on compliance and record keeping costs.
    • Instead of a single tax form, the IRS now 199 individual income tax forms and 235 business tax return forms.
    • Approximately 90% of taxpayers need help doing their taxes
  • Today, with a corporate tax rate of 35%, U.S. businesses face the highest statutory tax rate in the developed world, and fourth highest effective tax rate, which discourages job creation or investment.
    • The U.S. is out of step with its competitors, having the highest corporate income tax rate
      among the 35 OECD nations and being the only nation that has increased its rate since
      1988.
    • A lower business tax rate will discourage corporate inversions and companies from moving jobs overseas.
    • The high corporate tax rate keeps trillions of business assets overseas rather than being reinvested back home.
    • Even President Obama proposed lowering the business tax rate to 28 percent to help spur economic activity.

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.
      • Working with the House and Senate, the Administration will develop the details of a tax plan that provides massive tax relief, creates jobs, and makes America more competitive – and can pass both chambers

Breaking It Down

So, for individuals, President Trump wants replace the current seven tiers of marginal rates (10%, 15%, 25%, 28%, 33%, 35%, and 39.6% respectively) with just three: 10%, 25%, and 35%. The President also stayed strong on his call to repeal of the 3.8% Net Investment Income Tax (NIIT) imposed under the auspices of Obamacare upon certain net investment income of individuals, estates and trusts that have income above the statutory threshold amounts.

The President also wants to double the standard deduction while, at the same time limiting itemized deductions to mortgage interest and charitable contributions. He also wants to eliminate the Alternative Minimum Tax and estate taxes aka “The Death Tax.”

Finally, this outline also prescribes “tax relief for families with child and dependent care expenses” and for ending “tax breaks that mainly benefit the wealthiest taxpayers,” but, given the vagueness of these points, I’m writing those off as low-priority talking points that are expected to be ground-up by the Congressional “Sausage Making Process.”

For businesses, The President’s plan is to reduce to maximum statutory corporate tax rate from 35% to 15% and to enact a territorial system of corporate taxation, which generally would exclude foreign earned income from taxation. At the same time, however, the President desires there to be a “one-time tax” on corporate earnings realized and held overseas and upon which tax is being deferred due to those monies not having been “repatriated,” i.e., transferred to the US.

My Informed But Inexpert Analysis

On this document itself – Despite that it’s generally being called a tax plan and despite the lamestream enemedia’s attacks upon as being such, this is not a plan. It is, vastly unsurprisingly, a CEO’s bulleted guidance to his senior executives on the subject of US federal income tax changes and reforms. It needs to be considered and critiqued on those terms and solely within that context.

On personal income tax reforms – It would be indeed a great simplification of people’s taxes. It would also be a small reduction of the tax burden of the upper financial echelons but a much larger reduction to the tax burdens of those in middle to middle-lower tiers, especially single income couples and families.

On corporate income tax reforms – If implemented something close to as envisioned, this reform would represent a 57% reduction to the maximum statutory taxation of American companies’ income by the federal government. This, combined with the proposed one-time tax on unrepatriated funds, could easily encourage more companies to either stop “partnering” with foreign firms to avoid the US’ currently punitive tax levels or, at least, repatriate more of their overseas profits, thereby actually adding those monies to the American economy. At the same time, the switch to territorial taxation – not taxing corporation’s foreign income at all – may well encourage more international partnerships but with a reversed controlling interest dynamic.

Frankly, in my opinion, this is a solid and solidly pragmatic approach for addressing a long-running problem, that of American corporations being taxed away or, at least, using – and sometimes creating through their lobbyists – loopholes to stay in business despite the crushing burden of a %39 corporate income tax.

Less thought of but possibly of greater import is that such a dramatic reduction of federal corporate income tax stands a very good chance of creating more C-Corporations (C-Corps). This would reduce, possibly begin to reverse, the 30+ year trend of C-Corporations declining in favor of S-Corporations (S-Corps) [Note: LLCs are S-Corps for federal tax purposes].

I’m not going to dive into details but suffice it to say that there would be many benefits from switching back to having many C-Corps vs. many S-Corps any these benefits would accrue to the nation as a whole, the government, and the companies’ employees as much or more so than they’d accrue to the owners and shareholders.

Related Reading:

The Vanishing Middle Class: Prejudice and Power in a Dual Economy (MIT Press)
The Three Languages of Politics: Talking Across the Political Divides
Corporations Are Not People: Reclaiming Democracy from Big Money and Global Corporations
The Politics Book (Big Ideas Simply Explained)

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Burwell v. Hobby Lobby

Judge's Gavel on American FlagThe US Supreme Court finally rendered its ruling upon the very high profile Burwell v. Hobby Lobby yesterday, June 30, 2014. It was a 5-4 decision in favor of Hobby Lobby’s owners’ religious freedom and will prevent them from being forced by ObamaCare’s mandates to pay for health insurance coverage for four varieties of “morning after” contraceptives and IUDs which can cause miscarriages aka spontaneous abortions.

As expected, the Court’s Burwell v. Hobby Lobby ruling has generated a lot of response throughout the nation. Many American’s are crowing about how this is a victory for our 1st Amendment religious freedoms and the vast majority of Liberals and Progressives are ranting about it violating the Establishment Clause of the 1st Amendment, about how corporations aren’t people, and that it violates the rights of women.

What is equally humorous and sad is that Americans’ shouldn’t be celebrating this ruling overmuch, nor should Liberals and Progressives be bemoaning to any great extent. The SCOTUS rendered no constitutional ruling, nor did they overturn or set aside any laws. All that the Court did was apply long-existing US laws to the case of Burwell v. Hobby Lobby. The two laws in question being the Restoration of Religious Freedom Act (RFRA) of 1993 and the Dictionary Act of 1947.

U.S. Code: Title 42, Chapter 21B — Religious Freedom Restoration

§ 2000bb–1 – Free exercise of religion protected

(a) In general

Government shall not substantially burden a person’s exercise of religion even if the burden results from a rule of general applicability, except as provided in subsection (b) of this section.

(b) Exception

Government may substantially burden a person’s exercise of religion only if it demonstrates that application of the burden to the person—

  1. is in furtherance of a compelling governmental interest; and
  2. is the least restrictive means of furthering that compelling governmental interest.

(c) Judicial relief

A person whose religious exercise has been burdened in violation of this section may assert that violation as a claim or defense in a judicial proceeding and obtain appropriate relief against a government. Standing to assert a claim or defense under this section shall be governed by the general rules of standing under article III of the Constitution.

The Court did, in fact rule that ObamaCare’s contraception mandate met the first criteria under the RFRA.

We will assume that the interest in guaranteeing cost-free access to the four challenged contraceptive methods is compelling within the meaning of RFRA

However, the Court found that it did not meet the second test, that of it being the least restrictive means of furthering that compelling governmental interest in guaranteeing cost-free access to the four challenged contraceptive methods. They went so far as point out examples of such less restrictive means.

The most straightforward way of doing this would be for the Government to assume the cost of providing the four contraceptives at issue to any women who are unable to obtain them under their health-insurance policies due to their employers’ religious objections.

The SCOTUS’s ruling in Burwell v. Hobby Lobby broke no new ground, re-harrowed no old ground, no made any significant changes in US law or the interpretation thereof. It was nothing more or less than the application of the existing RFRA to a case in which it was pertinent. That the Court applied the law should be no grounds for complaint and that it was the SCOTUS which had to do abrogates and cause for celebration.

As for the various strident complaints about “corporate personhood,” there is little to be said about those particular Left-wing rants other than that they based upon the all-too-commonplace ignorance of the law in America.

U.S. Code Title 1, Chapter 1 – Rules Of Construction

§ 1 – Words denoting number, gender, and so forth (Excerpt)

The words “person” and “whoever” include corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals;

The Rules Of Construction aka the 1947 Dictionary Act are part of the General Provisions of US law and serve to legally define common words and phrases used in Acts of Congress. Hence, the RFRA applicability to “persons” include corporation, irregardless of their profit status, just as does every other Act that uses the word “person” unless otherwise contextualized or excepted.

Honestly people, the only thing of great interest in the Courts ruling on Burwell v. Hobby Lobby was the painstaking effort the Court took to address each argument and to craft an opinion that was extremely narrow and extremely difficult for the Appellate Court to later (mis)use in a broader context such as they did with Citizens United v. Federal Election Commission.

Related Reading:

Run Your Own Corporation: How to Legally Operate and Properly Maintain Your Company Into the Future (None)
The Politics Book (Big Ideas Simply Explained)
Mean Dads for a Better America: The Generous Rewards of an Old-Fashioned Childhood
Supreme Court Review 2016
So Much for Democracy: Citizens United v. Federal Election Commission

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Ginsburg’s Dissension

Ginsburg - Not a happy female at allThe US Supreme Court finally rendered its ruling upon Burwell v. Hobby Lobby yesterday, June 30, 2014. It was a 5-4 decision in favor of Hobby Lobby’s owners’ religious freedom.

Justice Ruth Ginsburg, one of the extreme Leftist judges in the SCOTUS penned the dissenting opinion which her three fellow leftist judges concurred with.

As this case dealt with the intersection of for-profit corporations, religious freedom, and management-labor power dynamics, it is neither surprising nor of material interest that the Liberal minority within the SCOTUS dissented from the majority opinion. That is to be expected as those four judges are antipathetic to corporations and religious freedom, at least when the religion in question is Christianity.

What is of interest is the nature and content of Ginsburg’s dissension. Ginsburg’s 35-page scathing screed contained little or no basis in law except in the singular part where she agreed with the Court, was more emotive, irrational fear-mongering than a logical exercise, and utterly ignored almost every salient point of the Court’s decision.

This is, and long has been, Ginsburg’s modus operandi and is why I loath her more than any other SCOTUS judge since Justice Warren. Whenever she pens the majority opinion she makes sure to cover it in the law and by legal precedence, but her dissenting opinions rarely stem from interpretative differences in America’s law. Instead they are emotive pleas and and angry hand-wringing over what the effects of the law might be.

Related Reading:

How to Debate Leftists and Destroy Them: 11 Rules for Winning the Argument
American Religious Liberty and Catholicism
Religion for Atheists: A Non-believer's Guide to the Uses of Religion
Law School Confidential: A Complete Guide to the Law School Experience: By Students, for Students
The Law of Moses

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