"The prediction I gave my wife is a simple one. I think when the tax bill (for what it is) is released, it will be a goner. DOA. That day rather than massive celebrations, the release day will look more like the day of the dead."
I am sorry - did you think I was talking about Halloween? I am not. I am talking about something which might be a whole lot scarier. What? This "once in a generation" tax reform bill, which is looking more like taking a dilapidated old car in for an oil change rather than buying a much better, and much needed new car. Yes, based on what is being leaked out of Washington, this POS stands a good chance to be the clunker of the decade.
Taking the boy back home yesterday afternoon, I was trying to listen to a business show on the radio. A long time financial expert was on. He was trying to explain how this "once in a generation" opportunity got so mucked up. His words - "Rather than a huge step forward, it became a half step, then a quarter step, and when the dust settles if might just be a tenth of a step or less". Wow - that did not sound good.
The latest "leak" is that the reduction of corporate taxes from the mid 30's down to 20 percent might need to be phased in over five years. Why? To get it passed. Even though of all the elements in this new tax bill, reducing the corporate tax is the biggest no brainer, enough might vote against it to scuttle the entire bill. If that is the case, get ready for a moderate to large size correction on the street. Many of the recent gains in the stock market were in anticipation of this long overdue corporate tax fix.
Here is what I told my wife after the business show was over. My take on why this tax issue is so hard under Trump and was not so hard under Reagan. Today we have no money. To come up with a new tax system which both un-complicates the current tax code as well as gives the middle class a break (and without exploding the debt), is like threading a needle with a blindfold on.
The old fiscal hawk which still lives inside of me is thinking something almost treasonous to the cause. The tax fix might need to be only two things. First, scrap the current tax code and make it very, very simple. Leave in the cornerstone deductions like the mortgage and state tax, leave the standard deduction alone, and leave the current rates alone. Second, do the corporate fix in one year and not five. That is it.
Why do I think our tax rates need to stay the same? We really, really need the money right now. I know, I know - the Laffer Curve. With all due respect to Dr. Laffer, I think with the amount of money we need to upgrade the military, to pay for the recent very damaging hurricanes and fires, to fix infrastructure, to pour into our entitlements (including the failing Obamacare) to keep them afloat, we just flat out need money - and lots of it. If we act fat, dumb and happy like none of these things matter, we will start adding on to the debt faster than Obama did.
The prediction I gave my wife is a simple one. I think when the tax bill (for what it is) is released, it will be a goner. DOA. That release day, rather than massive celebrations, will look more like the day of the dead. I may be wrong, but that is my prediction and I am sticking with it.
Release of the House version on Wednesday will just be the beginning of several weeks of wrangling. No portion of this boondoggle will be acceptable to many except for the end of the estate tax. 5.49 million excempt is not enough for the GOP.
ReplyDeleteCorporate tax reduction spread over 5 years to 20% may be OK with most.
SALT deduction removal is unnacceptable.
Child Tax Credit increase doesn't make any sense to me, but Ivanka wants it so, who knows.
Pass Through will have thousands of companies changing to LLC's to take advantage of this one, so the GOP will like it.
401K reductions will stay as it creates a ton of revenue and who has enough money to take advantage of the maximum anyway.
Tax Bracket reductions to 3 is a mis-direction move that doesn't mean a thing to most folks. And may hit the middle class with higher tax bills so will be endorsed by GOP.
Double Standard Deduction to 24K will not happen as it is too difficult to pay for, so I will get nothing out of this tax plan.
Happy Halloween
Dave Gjerdingen
The only thing that will help here is a massive simplification of the tax code. Making it more "fair" by making it more complicated is, shall we say "contraindicated." A simple Flat or FAIR tax with a large family deduction would be seen as fair, would save us hundreds of billions of dollars in compliance costs, and end the "social engineering" in the current tax code. Unfortunately, since our no-brain Congress cannot pass a no-brainer like Obamacare repeal, I have little hope for them being able to do something sensible on taxes. It's like some sort of allergy to common sense.
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