Tax reform, rebate, or waste?

It is all of the above in specific areas including one huge area of fiscal mismanagement that is causing huge deficits to add to the US debt.

1) Reform. Well, yes anything that is a change could be considered reform. Simpler? No!

Fewer brackets, slightly fewer deductions allowed, and a larger increase in the standard deduction will not mean it is simpler. Why? You either have a lot of deductions or you don’t. If you don’t nothing changes and it is the same complexity, just a larger standard deduction. If you do have deductions you still need to determine whether you itemize or use the standard deduction, so no change there either!

The fewer brackets do not equate to easier to file, just a different tax rate, which leads to the next section this change will cause…

2) Rebate. This tax change is a rebate to wealthy people and big businesses because it drops all their tax rates down to 15%.

The largest reform is for businesses not individuals, because there have always been plenty of loopholes for rich individuals to reduce their rate, but this will not be simpler either, just massively more profitable, except for the government and that whole deficit and debt thing Republicans long ago were worried about.

The proposed tax rate for businesses will be brought down from about 35% to 15%. So, if you are a CEO, hedge fund manager, etc who has $millions of incentive bonus at the end of every year then this 20% tax reduction will guarantee those bonuses in the first year for all except the most incompetent. The tax reduction leads straight to bottom line profit increases. This is even more exacerbated by large, multinational companies because they have hoards of cash off-shore that was taxed at rates lower than the US rate. Taxes are more important the more money you make because of the fact that any reduction goes to profit. If you make $50,000/year a the 35% tax bill is $17,500 compared to the proposed rebate rate of 15% the bill is $7,500. The $10,000 profit rebate to the business is nothing to sneeze at, but probably not worth setting up your headquarters in Ireland over! Scale that profit up 10,000 times to $5B/year profit and that tax rate difference and its affect on your bottom line and performance bonuses becomes substantial enough to justify a headquarters in Ireland at the lower tax rate.

The problem then is that profit can not be used in the US because no US taxes have been paid on it only to Ireland at the lower tax rate. Companies have taken out bonds (loans) to pay dividends to investors against these cash hoards! Investors want their share of this cash and the difference in tax rates is blocking them from it. This is where the rebate come in, to allow large US multinational companies to bring this cash back to US investors at the same rate as Ireland’s corporate tax rate.

This incentive is the reason the stock markets are at record highs and in spite of Russia colluding with Trump (recall Trump repeatedly asked Russian intel to find all of the email sent/received for Clinton when she used a public email server as Secretary of State — so, this is just taking Trump at his own actions), geopolitical unrest from ISIS/Syria to N. Korea, to Qatar to…

The Republicans are hiding behind the vision that this corporate profit will grow the economy, but it won’t. Jobs and better wages for those jobs grow the economy and this would mostly do the opposite because just like this administration’s love of coal is backwards economically for today and tomorrow. The corporate tax windfalls will go to bonuses and investors, stock buy backs, M&A, and investment. Most of the investment will go to automation because that is the future, but some will go to jobs and wages. How does this corporate tax rebate become revenue neutral…

3) Waste. The >$1trillion/year in lost revenue coming from the tax changes is paid for largely by the cuts in Medicare, education, etc., cuts to regulations that restrict polluting air, land, and water; energy efficiency in cars and machinery; and banking rules. Further there are growth projections for our economy not seen in decades that are as realistic as people suddenly embracing coal, even though it costs 400% more than competing forms of energy!

Plus we are adding $65B to defense spending! This increase is what Russia spends on defense in total! That is because the rest of the world realizes we are not actively involved in major war requiring many planes, ships, armored vehicles, and troops! We need to reduce our defense spending in these areas and focus more, obviously, in cyber defense, recon, and intel. We can scale up as we have done in the past, if and when we need to. We do not need to keep hemorrhaging money exploding our deficits and debt for defense when we are not actively at war.

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