Monday, January 9, 2017

Trump's Corporate Tax Cut Scam

Donald Trump's coming corporate tax cut will be a scam. It will be just moving pieces on a chess board. Tax cuts will be initiated for parts of the income statement but hikes will be made on other parts.

Trump will not tweet about the hikes.

It appears that a big part of Trump's plan though  is going to be the elimination of income tax deductions to foreign suppliers. This is going to really hurt the retail sector and thus consumers directly. Also apparently in the works is the reversal of the tax deduction on certain interest rate payments by businesses.

We can even look to the crazed hyper-interventionist and former Treasury Secretary Larry Summers for insight into what appears to be coming down the legislative pipeline: 
[I]nterest payments to bondholders or banks that finance inventory, or to other creditors, would no longer be tax deductible.
[F]irms would be permitted to exclude receipts from exports in calculating their taxable income and would not be permitted to deduct from their income payments to foreign suppliers or affiliates...
[T]the tax change would capriciously redistribute income, increase uncertainty and place punitive burdens on some sectors. Think of a retailer who imports goods from abroad for 60 cents, incurs 30 cents in labor and interest costs and then earns a 5-cent margin. With a 20 percent tax, and no deductibility of import or interest costs, the taxes will substantially exceed 100 percent of profits, even if there is some offset from a stronger dollar.
Wenzel's Tax Law: Never trust any tax "reform," Taxes should be cut from the current structure without focus on changing the structure. Restructuring is a scam,


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