Trump's Tax Plan

TGHusker said:
Interesting - he calls the congress's effort as "Keystone Cops" type of an effort.  Poorly designed and conceived of and rushed.   Some points I got from it while listening:

1.  They state there is no need for a re-gressive tax policy now to 'stimulate' the economy when the employment rate is high, unemployment very low, and stock market at an all time high.  My concern is actually over stimulation and the growth of inflationary pressures.  Inflation will 'steal away' any small tax benefit that the middle class will get. Inflation is the 'hidden tax' that needs to be worked on IMHO.  Work on reducing deficits & the overall national debt. 

5. For regular citizens - there is a tax cut for most people - smallest for lower income .03% - Top earners 2.6% tax cut - mainly through 'pass through' business income adjustments.

9.  Over time "change CPI" increases will take away the tax benefit for the middle class through bracket creep. 

11. Home mortgage deduction is affected negatively while standard deductions go up. Eliminated many deductions - thus itemization on tax forms may fall to 3% and most will take the standard deduction.
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Great post, thanks for taking the time on this one. I wanted to talk about a few of your points.

1. Inflation is a bogeyman from the 1970's. While it's possible we will experience large inflation again, it's looking like the global economies have become almost inflation-proof (and perhaps even headed for long-term deflation like Japan). The best way to see this is the economic stimulus, which poured about $15 trillion (that's trillion with a T) into the global economies (mostly the US and the EU), and there's no inflation to be seen, even almost a decade later.

5 and 9 go together. While 5 notes that most people will get some amount of tax cut, 9 shows that it's temporary. Even worse is that while the corporate tax cuts are permanent, the individual tax cuts are only for 8 years, so it's likely that we'll actually be paying even more in taxes due to the change (I thought it was "chained"?) CPI and the tax cuts going away.

11. The home mortgage deduction is actually a somewhat progressive tax as it's capped (at $500k, I think?), so it mostly benefits the middle class and lower. However, as TG notes, this is all smoke and mirrors as the standard deduction has gone up and basically eliminates the mortgage deduction for everyone but the rich. So don't buy into the idea that they've put a progressive tax in this thing because they've managed to make it not matter. However, raising the standard deduction is somewhat progressive itself since it helps the middle class more than the rich (but it doesn't really help the poor so not entirely progressive).

 
Red - you may be right on the 'chained' CPI - I thought I heard 'changed' but my ears aren't what they use to be. 

I agree on the inflation - it is still a bogeyman that haunts me since I lived through the Carter years and it became a bigger bogeyman when republicans in general and radio talk hosts in particular mentioned it in light of the Obama stimulus (How many radio talk hosts were hustling 'buy gold' to combat the run away inflation that surely come?).  However, I do think inflation is under reported.  I believe food and fuel was removed from inflationary numbers during GWB later term or early in Obama's term.  For the middle class those 2 items are huge inflationary pressure points.  My wife and I feel that the groceries cost much more now than they did when we had two hungry boys in the house (but then again, by looks of the growth of my girth - I may have taken on their share also!)

 
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TGHusker said:
Red - you may be right on the 'chained' CPI - I thought I heard 'changed' but my ears aren't what they use to be. 

I agree on the inflation - it is still a bogeyman that haunts me since I lived through the Carter years and it became a bigger bogeyman when republicans in general and radio talk hosts in particular mentioned it in light of the Obama stimulus (How many radio talk hosts were hustling 'buy gold' to combat the run away inflation that surely come?).  However, I do think inflation is under reported.  I believe food and fuel was removed from inflationary numbers during GWB later term or early in Obama's term.  For the middle class those 2 items are huge inflationary pressure points.  My wife and I feel that the groceries cost much more now than they did when we had two hungry boys in the house (but then again, by looks of the growth of my girth - I may have taken on their share also!)
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Inflation still exists, but it isn't as volatile or as high as it once was.

 
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TGHusker said:
Stagnation to Stagflation says Greenspan in this video.  He says Trump did things backwards - should have addressed the debt and deficits before addressing taxes.

He thinks we'll slow down to 2% growth.

very short video

https://www.yahoo.com/finance/video/alan-greenspan-were-stagnation-sta-150300893.html

and this OPED the author believes a VAT - Value added Tax will be coming to us with the next downturn -

https://finance.yahoo.com/news/national-sales-tax-coming-161144285.html
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I'm no economist so someone can correct me if I'm wrong - but doesn't mainstream economic theory dictate reducing the deficit during good times and juicing spending during recessions? This is certainly a tenet of the Keynesian economic theory Obama was fond of.

Trump is doing the opposite - this bill will wildly accelerate the deficit unless it is offset by spending cuts elsewhere, which aren't immediately written into the bill.

This seems to be a problem caused by governing by rhetoric rather than smart, sound policy. They've prayed at the alter of the almighty tax cut for years. The problem is they're buying their own rhetoric about how great tax cuts are for the economy, point blank, that they're going to do it as much as possible - instead of looking around at Kansas or North Carolina or any other real world trial balloons that don't back up their claims.

Whatever. As long as the donors get a tax cut, right?

 
These "most moderate" Republicans are not necessarily economics illiterate. Not all of them, not across the board. What they are across the board is highly motivated -- either to lie, or to buy in, blissfully unaware. 

We keep them in power because we suck. It is a galling failure of representative democracy when the public can't wake up enough to stop pointing the shotgun at our faces and inching our finger towards the trigger.

Literally one of the arguments deployed -- by politicians and by the apparatus of the American Right -- for this tax bill is: wasn't Brownback's Kansas experiment a smashing success? Or at least I mean, who's to say?  :bang :bang :bang  

 
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You mean the GOP is their haste fudged up the very thing they were giving away... :facepalm:

https://www.vox.com/policy-and-politics/2017/12/7/16742046/senate-tax-bill-corporate-amt

But if the AMT remains instead of being repealed, then businesses largely wouldn’t get their effective tax rate any lower than that. The AMT rate is usually substantially lower than the regular rate. But under the Senate bill, the AMT and the new corporate rate would be about the same: 20 percent. Companies would no longer be able to take advantage of tax breaks for research and development and the like. The whole point of the AMT is to eliminate deductions.

“Basically everyone would pay it,” one lobbyist tracking the tax bill told me, adding for emphasis that fixing it would be the No. 1 and No. 2 priority for Republicans now.
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