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:

IRS Enrolled Agent Exam Study Guide 2015-2016
Politics from A to Z
Taxes Made Simple: Income Taxes Explained in 100 Pages or Less
The Instant Economist: Everything You Need to Know About How the Economy Works
Understanding Trump

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Schiff’s False Premise

Some things sound so good and right, as if they a nuggets of revealed truth. And yet, sometimes these same things are dangerously wrong because, while right sounding on their face, they are based upon a false premise.

If you want irresponsible politicians to spend less, you must give them less to spend.

— Irwin Schiff

The quote above, attributed to semi-famous tax protester Irwin Schiff, is an example of such a dangerously seductive false statement.

Politicians, irresponsible or not, are not given money to spend. They take it by fiat and force of arms. This is something that Mr. Schiff and his adherents learned the hard way.

Related Reading:

Federal Mafia: How It Illegally Imposes and Unlawfully Collects Income Taxes
Grand Theft Auto V Signature Series Strategy Guide: Updated and Expanded (Bradygames Signature Series)
America's First Daughter: A Novel
The Theft of Memory: Losing My Father, One Day at a Time
Tyranny of the Urgent!

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Bruenig: Ban Taxpayers

Worthless, Leftist, anti-American hater and valid targetNothing says, “Fuck the Constitution,” quite the demand for censorship and the banning of certain words and/or phrases in an effort to enact some agenda-driven social engineering experiment. Hence, it’s not in least surprising that a Liberal, Elizabeth Bruenig, wants to do exact that. Specifically she wants to ban the use of the word taxpayer(s)” from political discourse and punditry because she feels it’s too divisive.

After lambasting and deriding the Congressional Republicans’ budget for the 2016 fiscal year – for all the reasons one would expect a Leftist to do so – the bint went on to say:

But the plan is also an ideological document meant to advance a particular set of beliefs about how government should function, and toward what end. Its composition and slick rollout (including an upbeat YouTube presentation, a BuzzFeed-esque gif set, and a highly navigable website complete with rolling documentation of news coverage) are meant not only to advance certain policy measures, but persuade voters to adopt its ideological point of view.

Which is why its use of the term “taxpayer”—though hardly atypical of political documents—is notable. In the 43-page budget, the word “taxpayer” and its permutations appear 24 times, as often as the word “people.” It’s worthwhile to compare these usages, because the terms are, in a sense, rival ideas. While “people” designates the broadest possible public as the subject of a political project, “taxpayer” advances a considerably narrower vision—and that’s why we should eliminate it from political rhetoric and punditry.

Though addressing people as “taxpayers” is common enough to appear politically neutral, it tends to carry more argumentative weight than it’s typically credited with. The House budget is full of examples of seemingly straightforward deployments of the term which are, upon closer inspection, clearly furthering a particular ideology. “There are too many scenarios these days in which Washington forgets that its power is derived from the ‘consent of the governed,’” the plan reads in one instance of the term’s use. “It forgets that its financial resources come from hard-working American taxpayers who wake up every day, go to work, actively grow our economy and create real opportunity.” In other words, Americans’ taxes are parallel with taxpayers’ consent, suggesting that expenditures that do not correspond to an individual’s will are some kind of affront. The report goes on to argue that

food stamps, public housing assistance, and development grants are judged not on whether they achieve improved health and economic outcomes for the recipients or build a stronger community, but on the size of their budgets. It is time these programs focus on core functions and responsibilities, not just on financial resources. In so doing this budget respects hard-working taxpayers who want to ensure their tax dollars are spent wisely.

Put simply, taxpayers should get what they pay for when it comes to welfare programs, and not be overcharged. But, as the Republican authors of this budget know well, the beneficiaries of welfare programs tend to receive more in benefits than they pay in taxes, because they are in most cases low-income. The “taxpayers” this passage has in mind, therefore, don’t seem to be the recipients of these welfare programs, but rather those who imagine that they personally fund them. By this logic, the public is divided neatly into makers and takers, to borrow the parlance of last election’s Republicans.

Yes, that’s right. Bruenig doesn’t want “Taxpayer” to be used because it inherently differentiates the 53% of the American population with “skin in the game” from the 47% who do not contribute to- but take full advantage of the largess of the federal government. She also has a big issue with the idea that those taxes are monies taken from private individuals and corporations since she doesn’t believe that those people ever owned that money in the first place. Of course, her being a “Christian” Socialist and not believing in private property in the first place, her anti-American attitude is to be fully expected.

Property, rightly construed, can have a salutary social function. But this is only when ownership is premised upon the prior meeting of everyone’s needs. It is also only feasible when property itself, as an institution, is viewed as a means to justice and a tool for serving humankind.

— Elizabeth S. Bruenig

So, as can easily be seen, this cancer of democracy, is one of the ever-present motivating forces, however weak, that seek to advance America through the fatal sequence of the Tytler Cycle. And, if censorship is needed to do that, she’s the sort who will be perfectly OK with that. After all, I doubt that she believes that Americans own their voices either.

To put the worth of her opinion in perspective, however, one must realize that Bruenig also believes  that the problem with modern sex, especially non-normative, outre, or just plain perverted sex, is that it’s not political, and that the biggest flaw of the oft and rightfully lambasted book and movies, 50 Shades of Grey is that it’s pro-capitalism.

 

Related Reading:

Gregory, the Terrible Eater
D.W. the Picky Eater (D. W. Series)
America's Entitlement Society [Champions of Freedom: The Ludwig von Mises Lecture Series - Volume 35]
THE TROPHY TAKER (DC Charlotte Stafford Series)
This Census-Taker

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