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GOP Tax “Reform”

 

The Tax Cuts and Jobs Act (2017) has moved thru Congress strictly along partisan lines.

Based on scant reporting, I’m a NAY. [Dec 20, 2017]

PROsCONs
  •   Repeal of ACA’s Individual Mandate  –  BIG pro
  •   Estate Taxes exemption increased  -  medium pro
  •   Standard Deduction doubled  –  small pro
  •   Federal deficit/debt will increase  **
  •   Corporate Income Tax reductions... with unintended outcome
  •   State and Local Taxes deduction retained
  •   Child Tax Credit doubled
  • ** The Real Scandal

    With less taxes collected, there will be a larger annual deficit. And the massive federal debt grows, only faster.

    The short term “gain” is more money in taxpayers' pockets. However, that advance is paid via additional federal debt.

    IMHO, prosperity cannot rise from increased debt.

    Real Tax Reform should occur when the massive federal debt is reduced to less than $ 10,000,000,000,000. Any earlier, it's irresponsible.

     

    Corporate Income Taxes (CIT)

    Is a 40% reduction of corporate taxes a “good” thing?

    The immediate impact is $ 146,000,000,000 LESS federal receipts. With a bigger annual deficit… the out-of-control federal spending is NOT addressed, and the federal debt is further aggravated.

    Will this tax cut invigorate US businesses? How will US businesses spend this $ 146,000,000,000 “gain”? Will there be more jobs, more capital equipment purchases, more executive bonuses, or more cash reserves? And, $ 695,000,000,000 additional corporate profits will be necessary to reach pre-TCJA CIT (see chart below).

    IMHO, because of continuing uncertainty… money will be held and execs will become richer. This means middle and lower wage workers will NOT profit; the opposite effect expressed in GOP rhetoric.

    Pros

    Repeal of the ACA Individual Mandate is a yuge good for citizens. A compelled action, enforced by the IRS, has been taken way. The demise of ACA may be accelerated – “participation” via coercion will end (in 2019). This is a BIG victory for individual choice.

    Reducing the Estate Tax1 (a.k.a. Death Tax) will reduce double-taxing - as income (when earned) and at death. Some additional surviving beneficiaries will NOT have a tax burden amidst their loss.

    Doubling the Standard Deduction1 will reduce taxes for most taxpayers. It may also simplify tax preparation; more middle income citizens will cease itemizing deductions.

    1  Keep in mind, less tax receipts will increase an annual deficit and aggravate an already massive federal debt.

    Cons

    Beyond aggravating a massive federal debt …

    Deduction of state and local taxes will continue to subsidized state budgets. The money extorted by states does NOT go to the federal gov’t. These lost federal receipts directly enrich high-tax states; the higher the state tax, the greater the benefit to the state… a de facto federal subsidy.

    Increased Child Credits reduce federal receipts and favor parents (a winner) with young children. All other taxpayers do NOT receive a benefit (the losers). Is this a tax policy nudge to have children?

    Gov’t should NEVER pick winners and losers.

    Miscellaneous Provisions

    Exceptions are always a problem. Somebody receives special treatment – again, gov’t should NOT pick winners and losers. Pork-barrel provisions and special treatment have to end now. Period.

     

    CIT & LOST Receipts

    Details for the CIT assertions above:

    ItemCorp Profits
    $$
    CIT Rate
    %
    CIT to Federal Gov't
    $
    NotesCalculation
    A$ 1,042.85735%$ 365.000CIT - Pre-TCJAA$$ times A%
    B21%219.000CIT - Post-TCJAA$$ times B%
    C146.000LOST CIT, an addition to the federal deficitA$ minus B$
    D695.238Additional profits to recoup LOST CITC$ divided by B%
    E66.7%Additional profits – percent of annual profitsD$$ divided by A$$

    Amounts is $ BillionTCJA is the Tax Cut and Jobs ActCIT = Corporate Income Tax

     

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