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Author: Subject: Senate passes President Trump/GOP Tax Cuts and Reform Bill

Ultimate Peach



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  posted on 12/4/2017 at 09:58 PM
quote:
In 1990, George "Read My Lips" Bush signed an omnibus tax bill that included a 10% luxury tax on boats built here. Within a year, thousands of workers at US boat builders were laid off. The private yacht industry, filled with skilled craftsman making high wages, was destroyed and has never recovered.

Did the wealthy stop buying boats? Of course not. The industry just operates out of Asia and parts of Europe now. See what happens when you let politicians tax producers?


I’d say those yacht companies were being run poorly. And if the net result created booms in many other areas, then it’s a success. .

quote:
I'm sure many of you remember (and maybe were cheering for) Obama's call to slap a similar luxury tax on the private aircraft industry. Playing to his base, he and Congress stoked the class warfare fires with sights of corp execs answering if they had flown in for their testimony on a private jet or not. Fun, wasn't it? But had they taken similar action, the same net result would have befallen a huge industry filled with well-paid middle class workers.


So the taxes didn’t happen under Obama, but did under Bush? Interesting! All kidding aside, you act as if it’s hands down proof that the taxes are the sole reason for the demise. Not so. Surely there’s more to it. My self-employed friend was telling me he can’t afford to go to the bar on weekends anymore because Obamacare spiked his insurance $400/month. I told him he cant go to the bars becsuse he just bought a $600k home rather than $300k, not because of the insurance. Same principle. If a successful business collapses becsuse of a tax hike, they were operating on a house of cards - and thats the root of it all.

quote:
Some of you so love the class battle that you can't seem to see the fallout landing right on your heads. BTW; those hookers in Wolf of Wallstreet made a fortune. So what if Daddy Warbucks builds a 4th mansion, doesn't someone have to build it, supply the parts, and help take care of it afterward?


This isn’t about jealousy. You’re saying that we need the tax breaks because it works, and I’m saying that it’s a quick fix that doesn’t address the root. You only talk about the loss of an industry but what about prosperity for the middle class? It’s highly likely those skilled workers used their skills in a different industry. For your Daddy Warbucks example, you champion the thought of Mr. Warbucks enjoying the prosperity of a 4th mansion, but you don’t give that consideration to the builders, the parts supplier, nor the care takers. The laborers continue as is at the same level and stay satisfied for having the work available, while we help Daddy Warbucks get a tax break for a 4th yacht. This is exactly the point. It’s an attempt to help the wealthy grow while not doing the same for the middle class.


[Edited on 12/5/2017 by BoytonBrother]

 

Maximum Peach



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  posted on 12/5/2017 at 04:12 AM
quote:
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Many corporations have already said that they will pass their savings on taxes to their shareholders. This will not grow the economy. What grows the economy is the middle class have money to spend. This increases demand, which increases production, which creates jobs, which improves the overall economy. Trickle down has never worked and will never work. We are headed towards another recession if this bill is allowed to become law. The best hope right now is that the House will reject the Senate bill. I believe that this is possible since they all face reelection next year and the approval rating among the people of this bill is very low.
Static economic thinking. Fortunately money doesn't work that way.

So what if the money goes to shareholders? Are they gonna take it and hide it under their beds? If not, it becomes funds for investment, whether in the original company or others it might get moved to. Even if placed in the worst place of all - a bank - it will be re-used for mortgages, businesses, loans, ect. You know; things that grow the economy.

And aren't the shareholders also millions and millions of middle class folks with their 401k's? They couldn't possibly put additional wealth to use in the economy.

And then that rusty old boogeyman: trickle down! Since the invention of money, its how the economy works. But since being transmuted into a political bludgeon, its served a new life as tool for economic ignorance. Here's a question: name any period of economic growth where the wealthy didn't prosper? Good luck with that, but it forms the feeble opposition of every attempt to give the producers their money back instead of trusting politicians to use it for their political gain. How anyone can defend the latter is mind-boggling.

And finally; recession? You know those have almost always been driven by currency and regulatory mismanagement by gov't, right? If lower corporate taxes are such a bad idea (they should be zero, but that's another discussion), they why are countries the world over moving to lower corp rates?


http://www.businessinsider.com/trump-gop-tax-plan-gary-cohn-bill-2017-11
So what's the objection? Business owners shouldn't have free will to decide what to do with their own money?

Once again - unless they stuff it under their beds or lock bills in a vault, the money will be put somewhere where its working - money never sleeps

Amid all this grumbling about the middle class (who's rates get cut slightly in the current versions of the plan), I've yet to hear anyone suggest a viable strategy for helping them. Just give them cash? Ridiculous. You have to grow business to create jobs that middle and lower class workers can then prosper from. There's no other sustainable way.

 

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Maximum Peach



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  posted on 12/5/2017 at 04:43 AM
quote:
You’re saying that we need the tax breaks because it works, and I’m saying that it’s a quick fix that doesn’t address the root. You only talk about the loss of an industry but what about prosperity for the middle class? It’s highly likely those skilled workers used their skills in a different industry. For your Daddy Warbucks example, you champion the thought of Mr. Warbucks enjoying the prosperity of a 4th mansion, but you don’t give that consideration to the builders, the parts supplier, nor the care takers. The laborers continue as is at the same level and stay satisfied for having the work available, while we help Daddy Warbucks get a tax break for a 4th yacht. This is exactly the point. It’s an attempt to help the wealthy grow while not doing the same for the middle class.
I asked this earlier and no one replied - please tell us about any sustainable economic growth plan that helps just the middle class without the wealthy also prospering? Has there ever been economic expansion where the wealthy didn't also do well?

The middle class problem is competition for labor. Without business growth and the job expansion that goes along with, the supply and demand math tilts against the worker. The prosperity during the middle of the last century for the middle class came from our economic and geopolitical survival following two wars - we were the last manufacturing society relatively untouched, and that spurred decades of economic and military dominance. We squandered our advantages over the last few decades, leading to where we are now. That, and the ever-declining value of the currency (as engineered by central bankers) means the middle class stands little chance of keeping up.

I'm not saying I like it, but I do understand that the only hope is to create an environment for business investment that hopefully creates new jobs. I say hopefully because there are no guarantees. What's the alternative - a planned economy run by politicians? Lets all go to Venezuela and ask them how that's worked out.

Even that will only be a partial measure, as automated manufacturing and robotics is set to wipe out huge swaths of employment. Glad I'm not a kid today.

 

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Ultimate Peach



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  posted on 12/5/2017 at 10:17 AM
quote:
I asked this earlier and no one replied - please tell us about any sustainable economic growth plan that helps just the middle class without the wealthy also prospering? Has there ever been economic expansion where the wealthy didn't also do well?



When the buying power of the middle class is stymied, a few boats bought by a handful of wealthy people isn't going to jump start the economy. And the middle class isn't all manual labor, it's also part of corporate America. Corporate profits are at the will of the people, and when profits thin, which happens when there is a greater tax burden on those typically buying merchandise and food at department stores, it's not the folks who bought new yachts who get laid off. Yes, if large corporations have less of a tax burden, they can hire more and expand - in theory. But you are talking about wealthy peoples' personal capital, which isn't all trickling down, and might not even be spent within this country. No one is arguing that the wealthy shouldn't profit in this capitalist economy, the question is how great can the tax burden be upon those they profit from before they can't sustain the cycle. Money doesn't just trickle down or up, it's cyclical, and if one side of that cycle bloats, the cycle slows down.

 

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Zen Peach



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  posted on 12/5/2017 at 10:34 AM
quote:
So what's the objection? Business owners shouldn't have free will to decide what to do with their own money?


It's not an objection, it's an observation of truth.

The executive pay gap is real and undisputable. If money was as noble and infallible as you constantly claim, then the economic situation for our entire society would be better. After decades of money available to "reinvest and create jobs," that hasn't happened.

Call me a statist, leftist, socialist, communist, whatever. Top earners in America tend to keep their money and stockpile it. Those with less just have to deal with it or try and find and earn their own stockpile.

The "noble cause" sentiment when it comes to tax cuts and job creators is still as silly as it's always been.

 

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Zen Peach



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  posted on 12/5/2017 at 10:53 AM
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I'm not saying I like it, but I do understand that the only hope is to create an environment for business investment that hopefully creates new jobs. I say hopefully because there are no guarantees. What's the alternative - a planned economy run by politicians? Lets all go to Venezuela and ask them how that's worked out.


The great tax cut experiment was tried on the state level here in Kansas.

quote:
Kansas ‘Real Live Experiment’ in Trickle-Down Tax Cuts

A Flashing Warning Sign for Congress
By Alexandra Thornton and Galen Hendricks Posted on November 2, 2017, 9:03 am

“Our new pro-growth tax policy will be like a shot of adrenaline into the heart of the Kansas economy. It will pave the way to the creation of tens of thousands of new jobs…”
—Gov. Sam Brownback (R-KS), July 29, 2012


“This huge tax cut … will be rocket fuel for our economy…The biggest winners from this transformation will be everyday families, from all backgrounds, from all walks of life, and our great companies, which will produce the jobs. They are going to produce jobs like you’ve never seen before.”
—President Donald Trump, October 11, 2017


In 2012, Kansas enacted massive tax cuts that supply-side proponents said would turbocharge the state’s economy and pay for themselves

In a column published in The Wichita Eagle that year, Gov. Sam Brownback (R-KS) claimed that the steep tax cuts, which the Kansas Legislature passed and he signed, would lead to the expansion of the state’s economy, boosting investment, increasing employment, and directly benefiting schools and local governments in the state. “Now is the time to grow our economy,” he said, “not state government, and that’s what our policies will do.”

Kansas’ tax cuts were similar in nature to and based on the same flawed theories as the Trump-McConnell-Ryan tax plan

This should come as no surprise since Stephen Moore, Larry Kudlow and Arthur Laffer—all of whom consulted with Trump on his campaign tax plan—helped to design the 2012 Kansas tax plan.4 And when Brownback was in Congress, Paul Ryan—now the speaker of the House—served as his legislative director.

In addition to the same fairytale claims of economic and job growth, which are illustrated by the quotes above, the actual tax plan passed by the Kansas Legislature looked similar to what Trump and congressional GOP leaders now propose.

1. Regressive collapse of individual tax rates and brackets

The Kansas tax plan collapsed the state’s three individual marginal income tax rates of 3.5, 6.25, and 6.45 percent down to two rates of 3.0 and 4.9 percent.6 In a similar fashion, the Trump-McConnell-Ryan tax plan would collapse the number of individual brackets from seven down to three, with rates of 12, 25, and 35 percent—with a possible fourth bracket between 35 and 39.6 percent.7 These changes both reduce the progressivity of the respective tax codes and give the biggest benefit to those with the highest income.

2. Business income tax loophole

A key feature of the 2012 Kansas tax plan was its elimination of taxes on pass-through business income. Pass-throughs are businesses—such as sole proprietorships, S corporations, partnerships, and limited liability companies (LLCs)—that do not pay the corporate income tax. Their income is passed through to the owners and taxed at their individual tax rates. Together with the lower marginal tax rates also enacted in Kansas that year, this created a 4.6 percent difference between the tax treatment of business income, now taxed at a zero rate, and that of other individual income, taxed at a top rate of 4.9 percent. Recent analysis has shown that this differential overwhelmingly caused tax avoidance rather than economic growth, with many individuals recharacterizing their personal income as business income in order to take advantage of the zero tax rate rather than increasing real business activity.8 Kansas had estimated that about 200,000 pass-through businesses would use the pass-through tax break, but about 330,000 actually used it.

The Trump-McConnell-Ryan plan would also create a differential between the top tax rates on personal and business income—only with a much larger difference of 10 percent. Just as analysts predicted for the Kansas pass-through tax cuts, the Tax Policy Center predicts that under the “Unified Framework for Fixing Our Broken Tax Code,” individuals will recharacterize wage income in order to qualify for the lower pass-through rate. The center estimates that the pass-through tax cut alone will cost nearly $770 billion.10 And if the differential in the final legislation is larger, the behavioral effect—the shifting of income into pass-through businesses—and the associated revenue loss will likely be even greater.

3. A mixed bag for low- and middle-income people

The Kansas plan included selected tax cuts for low- and middle-income families, such as an increased standard deduction, that nevertheless were estimated to leave many of those families with tax increases.11 In a very similar manner, the Unified Framework would increase the standard deduction and possibly the child tax credit but would take away personal and dependent exemptions as well as other tax benefits, leaving many low- and middle-income families with a tax increase.

4. Warnings of large revenue losses

At the time, conventional estimates showed that the Kansas tax cuts would be harmful. However, GOP leaders relied on rainbow scenarios to predict outsized economic growth. Referring to this scenario, Sen. Dinah Sykes (R-KS) recently said, “Today, we know which forecasts were correct.”

Estimates for the Trump-McConnell-Ryan plan follow a similar pattern. The Tax Policy Center’s preliminary estimates found that in the first 10 years, the plan would lead to a net revenue loss of $2.4 trillion.14 Yet President Trump and congressional leaders have continuously proclaimed that economic growth will outpace any losses, resulting in greatly enhanced revenues—even though no serious economist believes tax cuts pay for themselves.

There are other similarities between the 2012 Kansas tax cuts and the Trump-McConnell-Ryan plan. Kansas legislators failed to follow the normal deliberative process and the plan was rushed through at the end.15 Meanwhile, President Trump and congressional GOP leaders are determined to pass their tax cuts before the end of the year. The chance that they will do so, and without meaningful input from their Democratic colleagues, is all but assured under the budget reconciliation process they have chosen for passing the tax cut bill—a process that will enable them to pass the tax cuts with a simple majority of only 51 votes.

Economic growth and jobs promises never happened
What has been described as “one of the cleanest experiments for measuring the effects of tax cuts on economic growth in the U.S.” was a resounding failure in almost every way.

After the Brownback tax cuts, instead of a booming economy, Kansas residents witnessed a sharp decline in state revenues, sluggish growth, and brutal cuts to government programs.18 Indeed, between 2013 and 2016, Kansas’ real gross domestic product only grew by 3.8 percent, while national GDP growth was nearly double that at 7 percent.

Employment growth in Kansas has also lagged far behind the rest of the nation. Since the tax cuts took effect in 2013, total employment rose just 2.6 percent, compared with the 6.5 percent average increase experienced by the rest of the nation. And the story for private sector employment was similar, with Kansas’ 3.5 percent growth falling far behind the national growth rate of 7.6 percent.



Dynamic revenue never materialized; Kansas’ budget was thrown into crisis; and law makers were forced to slash basic services
“In the following five years,” Dinah Sykes explained in a message to the U.S. Congress, “Kansas experienced nine rounds of budget cuts, stress on state agencies and the inability to effectively provide the core functions of government for our citizens.”

As a result of the 2012 tax cuts, revenues plummeted and the state general fund debt load more than doubled from its 2010 level, leading both Moody’s Investors Service and Standard & Poor’s 500 Index to downgrade the state’s credit rating twice. After several years of draining the state reserves of cash, diverting funds from roads, delaying payments from pension funds, and reducing spending on critical programs such as Medicaid, housing, public safety, and education, the state government still began 2017 with a $350 million deficit.

Kansas citizens continue to pay the price. College tuition in the state has increased by 21 percent.24 In May of this year, block granting of funds to local school districts was struck down by the state supreme court, which ruled it inadequate and found one-quarter of the state’s students to be underserved in violation of the state’s constitution.25 Even increases in sales and property taxes—regressive taxes that place a heavier burden on low-income taxpayers—have failed to fix the budget shortfall.

https://www.americanprogress.org/issues/economy/reports/2017/11/02/441822/k ansas-real-live-experiment-trickle-tax-cuts/




That article is explicitly sourced at the link. I can say as a Kansas resident everything above is true.

It's against state law for the Kansas Legislature to end a session without passing a budget, so for five years every spring, Kansans watched Topeka to see what would get cut next. First it was education, then public services, one good one two years ago was telling rural farm communities that basic road repair projects would be delayed anywhere from five to twenty years.

Kansas is a deeply red state. For over a decade the legislature scores like this on average:

Senate
Republicans - 31
Democrats - 9

House
Republicans - 85
Democrats - 40

This tax plan was championed by Governor Sam Brownback. Since his taking office in 2011, not one Democrat holds a significant position of political power in Kansas. For me, starting at city council, I am not represented by a Democrat at any level up to the President. There are no Democrats from Kansas in Congress.

After five years, Republicans in Kansas restored the prior tax code and reinstated business taxes.

Forgive my skepticism, but the Great Tax Cut Theory failed right in front of my eyes.

 

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Ultimate Peach



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  posted on 12/5/2017 at 12:08 PM
Fijirich, it’s a theory that has a ton of ifs and even more risk. As a Bhawk said, why has the wealth inequality expanded decade after decade? Why hasn’t it worked? And if you believe Trump’s plan will work, what’s the deadline for us to see the needle move in the right direction? And if the needle doesn’t move, then what’s Plan B in your opinion?
 

Ultimate Peach



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  posted on 12/5/2017 at 04:12 PM
quote:
why has the wealth inequality expanded decade after decade? Why hasn’t it worked?


Example: has Donald Trump redirected more money from his corporation to the small businesses that he has contracted or the communities he has developed in, or to his children?

 

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