Wednesday, April 26, 2017

The Trump Tax Reform Scam is On: All Deductions Beyond Mtg Interest and Charitable Contributions Will Be Eliminated

Treasury Secretay Steve Mnuchin
Treasury Secretay Steve Mnuchin and  Director of the National Economic Council Gary Cohn have just announced the new proposed Trump tax reform.

Based on the outline by the two men, the proposal calls for a corporate tax that would be lowered to 15% from 35% and a lowering of the capital gains tax to 20%. It also calls for the elimination of the estate tax and a 35% top tax rate for individuals, down from today’s 39.6% rate. Lower brackets would be set at 10% and 25%,

The proposal includes roughly a doubling of the standard deduction that Americans can use to reduce their taxable income. The deduction for married couples would move from $12,600 to $24,000.

However, the proposal also calls for revenue generators. All individual deductions on personal taxes outside of the mortgage interest deductions and the charitable deduction expenses will be eliminated.

Most significant, the proposal calls for the elimination of deductions for state and local taxes from reportable income for individuals.  

This will especially hurt residents of high-tax states such as New York, New Jersey and California.

.Eliminating the state deduction could raise more than $1 trillion over a decade, reports The Wall Street Journal. This is one way Trump will sneak in shady tax increases.

The devil will be in these type of details. Without any net decrease in government spending under Trump, tax cuts will have to be funded by different tax increases, such as the elimination of tax deductions, and an expanding government budget deficit. Mnuchin and Cohn were noticeably vague on the details of the tax proposal. Always focus on where the scammers don't want to focus to understand what the deal is really all about.

Bottom line:  The tax reform scam is on. Expect more hidden taxes. a lot via border taxes, and the crowding out of private sector borrowing.

Trump's "reform" will do a lot to suffocate the economy.

-RW 


13 comments:

  1. If this tax cut is so "bad" (accoding to Wenzel) then why are they claiming that revenue will be made up with "economic growth" and not tax increases elsewhere?

    Dr Block is right, you are a "negative fanboy". :D

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    1. Do you know what economic growth is to these guys? Deficits that result in more inflation.

      Rothbard destroyed this Laffer scam many times.

      You are a Trump boy sucker.

      Delete
    2. Wenzel asked Block on what position should they align with Trump and Block couldn't come up with any.

      Trump is a false prophet.

      Delete
  2. Even assuming that rates will be lowered, they can (and will) be easily raised again but the old deductions won't be coming back. Why doesn't the rabble demand that credit card interest be deductible again?

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  3. Lower rates and a structure closer to a flat tax is in the direction of liberty.

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    1. This proposal is not that, but it does move in the direction of a simpler code. I am not a trumpista but I could imagine this much worse and I bet it will get there when the other side makes their demands.

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  4. This would likely eliminate the deduction for interest on leverage loans and would have a pretty huge impact on corporate borrowing

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  5. I for one am ecstatic, 15% rate for self employed business income instead of individual rate. A huge break for me. Halves my tax liability. Worth losing the state income tax deduction. Adding all my taxes together I pay 60% ATM.

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    1. I think you are confused. This is not in the plan.

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    2. read a more detailed report of the plan, pass through income presently taxed as individual rates , (business income), is certainly in the plan. RW did not point this out in his article. Also removal of the AMT and estate taxes (http://www.marketwatch.com/story/trump-aims-to-rip-up-tax-code-with-big-cut-for-businesses-lower-individual-rate-2017-04-26)

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    3. I did not report it because it is not part of the written statement issued.

      Mnuchin did say the 15% rate would apply to pass throughs but my contacts on the Hill and at Treasury tell me there is no chance this will be in any final tax reform package.

      It is Team Trump throwing something out there that the left can object to and will be cut.

      Not going to happen. Dreamland.

      Delete
  6. IF the tax reform is "revenue neutral", but results in disincentivizing high state taxes, it would be a net win. However, even this meager win may be a mirage for reasons mentioned already:

    1. Rates can be changed back more easily than structural changes like deductions.

    2. Horton's Law: Good parts will be negotiated away, bad parts will be kept. Can't get excited until the final language of the bill.

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    1. Number one is exactly the way I see it. Even if rates are cut, this is likely temporary. If deductions are removed, this is probably permanent. When the income doesn't meet their preposterous projections, they will raise rates again but since they can never keep a budget and are always complaining about being under funded, the deductions will probably never return except for the ones for the politically connected.

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