“It’s the economy, stupid.”
Those were the well-known words of then President Bill Clinton. Clinton was reminding everybody, including and especially his advisors, that the number one issue, the first priority of all Americans was:
That is, money, jobs, credit, borrowing, mortgages and more:
ALL THINGS MONEY
Perhaps the most important pledge to the American people by then candidate for President Donald John Trump was a complete revision of the tax code. That revision, fair to all, would be designed to stimulate the economy, move it forward, create new jobs, and a better life for every American. Since January, when Trump was inaugurated, his Administration and the House of Representatives led by Speaker Ryan have been working on the so-called Republican tax revision bill which they termed:
THE TAX CUTS AND JOBS ACT
In reality, my fellow Americans, there is perhaps no piece of legislation harder to accomplish, complete with compromise then tax code revisions. There is always get and give and those who get support and those who give up fight tooth and nail to preserve the status quo. It is messy business. Democrats fight Republicans. The Trump Administration weighs in, special interests bargain and negotiate, lobbyists work overtime to protect their very own interests and the so-called Washington swamp bubbles with activity. How anything gets done is simply amazing, don’t you think.
Republicans cheered when House Speaker Paul Ryan unveiled the 400 page document. And, of course, the tax cuts act drew quick rebuff and sarcastic criticisms from the Democrats and even some Republicans. Apparently, the Bill was designed to provide for a middle-class tax cut, highly favored by President Trump and House Republicans under Ryan responded. But, in addition to the Middle Class, the House Ways and Means draft is, as the Wall Street Journal stated, a much needed and pro-growth reform of business taxes. The American economy has suffered the loss of certain business interest which have begun to headquarter, and earn and keep monies overseas and in foreign countries. The so-called inversion, the moving of corporate headquarters out of America has been extremely hurtful to the American economy, and its tax base, and of course has taken much needed revenue from congressional coffers, essentially taxed and invested overseas. The new tax act proposal would lower what is one of the highest corporate tax rates in the world from 35% to 20%. In addition, the act indicates that corporate earnings would be taxed in accordance with the rates of the countries in which it is earned and if and when that money is repatriated, that is brought back to America, even more favorable rates would exist. That, say economists, is good for America and fair to the corporations. Those tax moves if enacted would make the United States more competitive across the globe and at a 20% tax rate, moving closer to the world’s lowest corporate tax rate in Ireland of 12.5%. Profits already earned overseas would be invited back at a discount, namely 12% for cash and 5% for illiquid assets. This, Ryan and company hope, will be the incentive for the corporations to make money come home.
In another move which would benefit small business, the tax cuts and jobs creation bill would reduce the top rate on businesses, known as pass-through corporations or Sub S entities from the 39.6% now paid to 25% or, if those businesses can in fact qualify. That would be an enormous tax break, creating large deficits which must be made up by taxing elsewhere.
The House Bill as proposed would also repeal the so-called DEATH TAX, the inheritance tax on certain estates. But that repeal would only occur six years from now so that wealthy benefactors would need to live that long in order to take advantage of this worthy estate provision. Every estate, large and small, has an exclusion of money and assets not taxable at death and that exclusion would double immediately, now $5 million increased to $10 million. But, for six years, the 40% tax for, as the Wall Street Journal states “kicking the bucket” remains as additional and double taxation for all of those monies at death have already been taxed, sometimes more than once.
The changes provoked proposed by the House of Representatives would take place immediately. However, the Bill now comes up for debate in the Senate, and the Senate, assuming it agrees in general, may very well PHASE IN the tax cuts and benefits which would considerably lessen their impact and delay much of the intended benefits of the act. The Washington bargaining and negotiation process now begins in earnest and it will be interesting to see whether or not the Democrats, all of whom seem unified in their opposition to the bill, and those disgruntled Republicans can form a new majority and derail the bill.
There are now seven plateaus, seven different tax percentages which apply to earnings and income. The bill would eliminate three of the seven so that there would be only four tax brackets. They are as follows:
The so-called middle class would benefit by these changes and more income would be taxed in a lower bracket. But there would be no change in taxation for the so-called wealthy, in that the top personal tax rate at 39.6% would remain the same. And of course, do not forget that, thanks to Barack Hussein Obama, there is yet another 3.8% so-called medical tax which is added onto that. In terms of the income tax itself, there is no cut or break for the wealthy. That led the Wall Street Journal to state that maintaining this top rate is a surrender, a cave-in to Democratic CLASS WARRIORS who would have ammunition to attack Trump and the wealthy if that 39.6% rate were lowered. David McIntosh, President of the Club for Growth, a conservative advocacy group praised the bill overall, but criticized the retention of the 39.6% rate saying:
“It effectively punishes success and caves to the Democrats class warfare rhetoric.”
And indeed it does, fair or not. But, said another congressman:
“If you’re going to have tax reform, it needs to be for everybody.”
And that, he says, especially so for the wealthy, those who pay more than 71% of all taxes.
And banks win bigtime. At a 20% corporate tax rate, the five biggest diversified U.S. banks alone might have had tax savings of almost $12 billion in 2016 at the 20% rate. That tax break, those financial possibilities will eventually incur the ire of the Democrats who may do everything possible to eliminate that provision or raise the effective tax rates for corporations.
In order to get back more tax income and make up for the deficits created, the bill would eliminate the deduction of state and local taxes. Virtually every tax payer who itemizes a return has deductions for these sometimes considerable amounts. That would include the elimination of deductions for property taxes which could be very hurtful to homeowners. But, the bill does carve out an exception for property taxes but then caps any deduction for those property taxes at a maximum of $10,000. You can be certain that high tax states like California, New York and New Jersey will protest vigorously.
And, in another move, the bill places a $500,000 cap on mortgage interest for new homes whereas now, the deduction is unlimited. And, says the new law, there will be no more tax breaks for second residences. If both provisions are passed, the REALTORS will go, as the Wall Street Journal says, thermonuclear for those provisions may in fact be a deterrent to their business.
The bill as proposed also effects education. But provision provides for the repeal of deduction for student loan interest. That indeed is a significant reduction, a very important provision for students and families, and will undoubtedly result in higher education lining up against the plan. And of course, the very same for the housing industry and their advocates who will lose some very favorable deduction possibilities for their business. People living in more expensive areas will in fact be paying more for their homes.
The bill also puts “on the chopping block” renewable energy credits. You can be certain that the GREEN INDUSTRY will as well go thermonuclear and lineup aggressively in opposition to the bill. The American Wind Energy Association has already denounced the proposal and plans to fight it tooth and nail.
It seems most interesting, even disappointing that the Republican tax plan cuts incentives to homeowners. Builders, lenders and brokers say that it will harm their businesses and as well, cause harm to the middle class. Many of the provisions in the new tax bill would reduce or eliminate virtually all of the tax incentives of home ownership, reshaping an industry that accounts for nearly one-sixth (17%) of the United States economy and drives the biggest financial transaction most Americans make in their lifetimes. On the face of it, that seems un-Republican, does it not?
Again, the bill would cut in half the size of loans that qualify for deductions of mortgage interest from $1 million now, to $500,000 in the future. The bill would also eliminate the mortgage interest deduction for second or more homes owned by homeowners. And, there would be further limits for top earners on capital gains from real estate sales, a real blow to the wealthy.Of the bill and its effect upon homeowners, Jerry Howard, Chief Executive of the National Association of Homebuilders stated the following:
“The corporations are getting a major tax cut and it’s getting paid for by the equity in American homes.”
And perhaps it is if these provisions stand as-is. So the battles continue. The Republicans are concerned, as they should be, regarding the possibility of adding to our country’s already enormous deficits. In fact, they can not do so, for there is in effect the so called Byrd Rule which says that any legislation can not add to the deficit after ten years. As a result, the Republicans have had to water down and compromise with respect to reform in order to comply with the provisions of this rule. But if the new legislation passes in a form reasonably close to what is proposed, it will face aggressive and angry opposition from so many sides of our economy. And, of course, the Congress can never be certain what President Trump will do, how he will react to the final version of the bill as it passes in compromised form.
So, now this bill goes to the Senate which will begin debate. We the people can be certain that the Senate will by no means accept the bill in its present form. There will be changes made, and some significant. Democratic Senators are lined up against the bill almost virtually unanimously. And, in fact, they are joined by certain disgruntled Republican senators who are demanding some significant changes. At the bottom line, that may be enough opposition to delay, modify or even kill the bill at this point in time. When it comes to the economy, there is no more divisive issue than:
There really is not a person or business entity that does not want more. Everyone wants their share of the American Dream and they will fight to keep as much of their earnings as possible. The amount of taxation and the taxing power of federal, state and local agencies is absolutely enormous. State taxes, including income taxes can be brutal, especially in states like California and New York. If state and local taxation can no longer be deducted, as the bill proposes, there can be enormous consequences to business entities and individuals. That would further the migration from high income and taxing generally states like Connecticut, New Jersey, New York, California and others to pro-business states like Texas and Florida where there are no income taxes, none. It is indeed, as Bill Clinton so wisely stated, the economy as a first priority and anybody who thinks otherwise is, as President Clinton stated:
This bill is critical for the Republicans. Tax reform, whatever shape it takes, must be accomplished by these Republicans who control Senate, House and Presidency. The Republicans have already failed to enact reform with respect to healthcare and ObamaCare, awful legislation that it is in so many ways, continues as the essential law of the land to the chagrin of so many Americans. The Republicans continue to work on reform but it may never be the compromise and fundamental reform that the medical world really needs. If the same boondoggle, the same frustrations, delays, compromises and watering down occur in the effort for TAX REFORM, and the tax cuts and jobs creation bill is itself cut apart, the Republicans, as the Wall Street Journal has well stated, may very well suffer the negative reactions and frustrations of the American voter in Elections 2018.
Watch closely what happens, my fellow Americans. Watch the debates, listen to the argumentation, follow party lines, and special interests and lobbyists so that you can understand the effect on you and your family of any ultimate legislation and watch indeed for those fundamental changes which can and will in fact affect the business entity for which you work. When this tax reform bill finally passes, if in fact it does, you can be certain that, in your life and your lifestyle, you will indeed experience the give and the take and your life will surely be affected one way or another. This now is a golden opportunity for you to become politically active, in touch with your representatives and your senators, understanding their positions and how they will vote as they may affect you. It is your economy, your money, your lifestyle, your financial opportunities which are very much at stake. This in a real way is your economy and when it comes to the decisions to be made which will affect you, don’t let them, the decision makers be: