New Tax Plan

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New Tax Plan

Postby Doodle Dee. Snickers » Mon Sep 25, 2017 10:29 pm

Let's get fun with the totally awesome topic of tax rates. So the Republicans have been leaking the beginnings of a possible tax plan negotiated with the WH, and surprise! It's exactly what you think it is.

So far, rumors are of a 20% corporate tax rate (and while I do support dropping corporate taxes some, not that far). There has been a 25% (what I'd actually support dropping it to) rate for certain businesses, but I'm not entirely sure which kind it's referring to. Trump's been wanting 15% for this, which is just a pipe dream.

The tax rate on the wealthy would, of course, be cut by nearly five percent.

There's been no word yet on the cuts to the individual tax rate apart from the highest earners, but apparently Trump and the Republicans are set to switch to taxes really soon after this repeal hopefully doesn't happen.

https://www.cnbc.com/2017/09/25/trump-tax-plan-what-we-know-about-republican-tax-reform-proposal.html
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Re: New Tax Plan

Postby Cpt._Funkotron » Tue Sep 26, 2017 1:13 am

I'm not a tax lawyer, and there may very well be a simple explanation for this, but I've always wondered why, if large companies can simply creatively account their profit margins to nearly nil to avoid corporate tax in the first place, we don't just also have a very small tax on gross income, say %3 or something, rather than a large tax on net income, which can be very easily weaseled out of. With the exception of a few tax credits, an ordinary person doesn't get to only pay taxes on what they have after their operating expenses, why should a business?
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Re: New Tax Plan

Postby JamishT » Tue Sep 26, 2017 2:43 am

They can't even get healthcare reformation passed, I'm betting that if they get a tax plan passed, it will look super different than it's current form.
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Re: New Tax Plan

Postby Doodle Dee. Snickers » Tue Sep 26, 2017 12:01 pm

JamishT wrote:They can't even get healthcare reformation passed, I'm betting that if they get a tax plan passed, it will look super different than it's current form.


I suspect that if they cannot pass healthcare, a tax plan will be easier because they will be so desperate to pass anything.

I briefly entertained the thought that this might finally convince many Trump voters that he is full of shit about helping the people, but then I laughed the thought away.
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Re: New Tax Plan

Postby Marcuse » Tue Sep 26, 2017 1:24 pm

I was surprised when I realised that the US corporation tax rate is higher than the UK one. Currently it's 20% here, but the government has successively brought forward 1% decreases in rate for the next few years, so in 2020 it's going to be 17% main rate.

I don't think Trump will have an easier time on this bill than he did with healthcare. Like healthcare, there'll be a small group of intransigent Republicans who want to go further, and a group of moderates that won't support it if it does go further. Until that deadlock is broken I can't see how it's possible for Trump to pass anything meaningful. I suppose the solution is to court Democrats to see if they'll break that, but the price they'll extract for that would probably be ruinous, especially to Trump who will lose whatever shaky sway he had over the Republican party if he does actually go work with the Dems.

I don't think it's possible for some people on the ground to lose faith in Trump, they'll just make whatever excuses they have to. Like the special election in Alabama, where Trump is backing Luther Strange, the supporters of Judge Moore are claiming he's only supporting Strange because he's been deceived by advisors in Washington. It's ridiculous.
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Re: New Tax Plan

Postby gisambards » Tue Sep 26, 2017 2:26 pm

Marcuse wrote:I don't think it's possible for some people on the ground to lose faith in Trump, they'll just make whatever excuses they have to. Like the special election in Alabama, where Trump is backing Luther Strange, the supporters of Judge Moore are claiming he's only supporting Strange because he's been deceived by advisors in Washington. It's ridiculous.

The blaming of some nebulous group of 'advisors' rather than the leader themselves is usually a symptom of a personality cult - particularly if they can't name specific names. This was seen extremely prominently in Mao's China, where even when things were at their worst, people who had completely lost faith in the Communist Party would still insist Mao would sort things out if he wasn't held back by bad advisors.
It's also a recurring theme in medieval peasants' revolts, very few of which were anti-monarchy, but rather insisting that they wanted a removal of the monarch's advisors, believing that the monarch would do the right thing if allowed to make their own decisions. A slogan of Wat Tyler's Revolt in 1381 was "With King Richard and the true commons of England", because they genuinely believed that the king was really on their side, despite all evidence to the contrary.
While these are both much more extreme examples, I think it's definitely true on a much smaller scale with die-hard Trump supporters. But actually I've been heartened by the fact that it does seem to be a distinct minority of Trump supporters who are like this. In the two examples I mentioned, it was the majority of people who were thinking like this - even people who were really opposed to everything Mao or the monarchy represented still found themselves unable to blame them. Whereas with Trump, it's only a selection of die-hard supporters that are still acting that way.
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Re: New Tax Plan

Postby Askias » Tue Sep 26, 2017 3:21 pm

Cpt._Funkotron wrote:I'm not a tax lawyer, and there may very well be a simple explanation for this, but I've always wondered why, if large companies can simply creatively account their profit margins to nearly nil to avoid corporate tax in the first place, we don't just also have a very small tax on gross income, say %3 or something, rather than a large tax on net income, which can be very easily weaseled out of. With the exception of a few tax credits, an ordinary person doesn't get to only pay taxes on what they have after their operating expenses, why should a business?

I'd say because gross income for businesses isn't more than a bookkeeping curiousity with very little meaning. It flat-out ignores real expenses normal businesses routinely make. While such a tax would be a sledgehammer solution to base erosion practises, which often rely on things like royalties to shift away profits, it wouldn't target the root cause (because you still have a tax on net income) and the more effectice it would be (ie: the bigger share of corporate tax was on gross income rather than net income), the more it would screw over business branches that have big selling expenses (electronics), or big research expenses (medical industry), or routinely pay large royalty fees (franchises). (It would only target base erosion, this does nothing to a hybrid mismatch setup or any other tax dodge I'm familiar with)

Your last line confuses me a bit since they should be similar. Most European tax codes have a system where the corporate tax base is determined by the rules of the Income Tax or vice-versa. The Dutch Tax Code, for instance, refers to the Income Tax 2001, and as such any expense a business entity can deduct, a personal business can also deduct, with select exceptions. I know Germany and France have similar systems, but I am not familiar with the US Tax Code.
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Re: New Tax Plan

Postby Absentia » Tue Sep 26, 2017 4:44 pm

I wouldn't be opposed to deep cuts in the corporate tax if it were offset by increasing the marginal income tax on the wealthy. Corporate taxes create bad incentives.
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Re: New Tax Plan

Postby Doodle Dee. Snickers » Wed Sep 27, 2017 1:07 am

Absentia wrote:I wouldn't be opposed to deep cuts in the corporate tax if it were offset by increasing the marginal income tax on the wealthy. Corporate taxes create bad incentives.


That's actually where I'm at too. I thought cutting the corporate rate 10% but raising rates on top earners by 5% would've been the smart way to go. It's pro-business, but also helps put a check on inequality.
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Re: New Tax Plan

Postby Crimson847 » Wed Sep 27, 2017 1:22 pm

Cpt._Funkotron wrote:I'm not a tax lawyer, and there may very well be a simple explanation for this, but I've always wondered why, if large companies can simply creatively account their profit margins to nearly nil to avoid corporate tax in the first place, we don't just also have a very small tax on gross income, say %3 or something, rather than a large tax on net income, which can be very easily weaseled out of. With the exception of a few tax credits, an ordinary person doesn't get to only pay taxes on what they have after their operating expenses, why should a business?


Ordinary people do get to only pay taxes on what they have after their basic operating expenses, at least in the US. Living expenses, medical expenses, and work expenses can be deducted from one's taxes, which is why an estimated 45% of households pay no federal income tax.

Of course, people still have to pay other taxes, such as Social Security payroll taxes, sales taxes, or property taxes if you own property. The same is true of corporations, which also pay sales taxes, the other half of employees' payroll taxes, and property taxes for corporate property.


The primary difference is based on the fact that you're only allowed to deduct "necessary" expenses. Corporations can typically afford better tax lawyers than most individuals can, and their higher tax bills make it easier to justify that expense, whereas many individuals would pay more for the lawyer than they'd save through the lawyer's efforts. Since better lawyers can more effectively convince the IRS that questionable expense X is necessary to the filer's existence, this gives corporations an edge in wheedling deductions for "necessary expenses" out of the IRS.
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Re: New Tax Plan

Postby Doodle Dee. Snickers » Wed Sep 27, 2017 4:59 pm

The release of the plan was about what was already discussed, but with another twist: they're also trying to get rid of the Estate Tax. Might as well make official our unofficial aristocracy.
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Re: New Tax Plan

Postby Lindvaettr » Wed Sep 27, 2017 8:36 pm

Doodle Dee. Snickers wrote:The release of the plan was about what was already discussed, but with another twist: they're also trying to get rid of the Estate Tax. Might as well make official our unofficial aristocracy.


As indicated by this article (Washington Post), the estate tax issue is a bit hairy. The article itself tries pretty hard to sell the idea that a small farm selling only part of their land doesn't count (they're pretty dismissive of the argument that farmers only need to sell part of their land), but growing up in exactly the type of rural South Dakota area that this article talks about, small farmers slowly losing a little bit of land every generation is a pretty big deal.

Land prices (and thus taxes) go up a lot every year, but crop prices often don't, or don't go up enough to match. Combine this with slow economies and estate taxes, and there is a tremendous number of farms that have slowly sold off bits of land here and there. This issue compounds itself, because most farmers can't earn a living on small farms, so they end up selling the land and then renting it from the new owners at a higher cost, which cuts into their profits and they eventually need to sell off more land. When my stepdad was a kid in the 60s, every farm around was a little family operation. Nowadays, most of the land is owned by a few large farms and landowners, and the few remaining small farmers rent a lot of their land.

I'm all for the estate tax when it applies to super rich people who have a ton, but the reality is that a lot more small farmers are affected by it than this article (and others) either admit or want to admit. Just because you have a lot of money in assets doesn't mean you have a lot of money.
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Re: New Tax Plan

Postby cmsellers » Wed Sep 27, 2017 10:42 pm

I would personally support abolishing the corporate tax entirely, something economists have often suggested, if combined with changes that at a minimum added new tax brackets at higher levels and taxed capital gains as ordinary income. Unfortunately, I can't see Republicans agreeing to either of those latter points.
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Re: New Tax Plan

Postby Doodle Dee. Snickers » Thu Sep 28, 2017 1:17 am

Lindvaettr wrote:
Doodle Dee. Snickers wrote:The release of the plan was about what was already discussed, but with another twist: they're also trying to get rid of the Estate Tax. Might as well make official our unofficial aristocracy.


As indicated by this article (Washington Post), the estate tax issue is a bit hairy. The article itself tries pretty hard to sell the idea that a small farm selling only part of their land doesn't count (they're pretty dismissive of the argument that farmers only need to sell part of their land), but growing up in exactly the type of rural South Dakota area that this article talks about, small farmers slowly losing a little bit of land every generation is a pretty big deal.

Land prices (and thus taxes) go up a lot every year, but crop prices often don't, or don't go up enough to match. Combine this with slow economies and estate taxes, and there is a tremendous number of farms that have slowly sold off bits of land here and there. This issue compounds itself, because most farmers can't earn a living on small farms, so they end up selling the land and then renting it from the new owners at a higher cost, which cuts into their profits and they eventually need to sell off more land. When my stepdad was a kid in the 60s, every farm around was a little family operation. Nowadays, most of the land is owned by a few large farms and landowners, and the few remaining small farmers rent a lot of their land.

I'm all for the estate tax when it applies to super rich people who have a ton, but the reality is that a lot more small farmers are affected by it than this article (and others) either admit or want to admit. Just because you have a lot of money in assets doesn't mean you have a lot of money.


That article says .6% of farmers have to pay estate taxes, and an Agriculture Department estimate I saw in an AP article said 1.7%. So while it'd be dope for that less than two percent of farmers, I suspect Republicans aren't doing this to ease the burdens of a vast majority of the farming community.
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Re: New Tax Plan

Postby tinyrick » Thu Sep 28, 2017 11:44 am

Farmers live in this weird area in the tax world where they're technically millionaires, but don't have the cash or lifestyle to back it up because their property is really valuable, but their profit margins are pretty thin. Farmers aren't exactly making it rain in strip clubs across America. That's why there's already exceptions in the tax code for estate taxes on farm-related properties. Not that the average hillbilly that, ironically, lives next to a farm, can understand that.
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