[Discussion] The tax tax tax thread

The state of US tax code and upcoming proposed changes.

LGF pulls no punches.

In reality, it's a massive handout to corporations and the super-wealthy (especially Donald Trump and his wretched family of crooks) at the expense of the middle class and the poor. It will add $1.4 trillion to the US debt over 10 years, and trigger huge cuts to Social Security and Medicare. It's a half-baked, fully evil rehash of every bad and debunked Republican idea about the economy from the last 100 years, and unless it can be reversed somehow it's going to be a disaster on scale we've never seen before.

It's the biggest right wing scam ever pulled on the American public, and the GOP went ahead with it even though a majority of their own constituents were opposed to it. This was a sort of coup, staged in the dead of night by gloating villains with open contempt for the democratic process they claim to revere.

Mixolyde wrote:

LGF pulls no punches.

In reality, it's a massive handout to corporations and the super-wealthy (especially Donald Trump and his wretched family of crooks) at the expense of the middle class and the poor. It will add $1.4 trillion to the US debt over 10 years, and trigger huge cuts to Social Security and Medicare. It's a half-baked, fully evil rehash of every bad and debunked Republican idea about the economy from the last 100 years, and unless it can be reversed somehow it's going to be a disaster on scale we've never seen before.

It's the biggest right wing scam ever pulled on the American public, and the GOP went ahead with it even though a majority of their own constituents were opposed to it. This was a sort of coup, staged in the dead of night by gloating villains with open contempt for the democratic process they claim to revere.

The face attached to that article is the best worst part.

There's a certain fraction of Americans that consider their tax bill to be their greatest problem in life, and this is designed to appeal to them. I don't think these are "taxation is theft" anarchists- they're just convinced that the government is a) wasting tremendous piles of money and b) probably on those people.

My father is retired after a career in middle management with a dozen or so years as an entepreneur (running a computer store in the 80s, before they became commoditized). When I told him that a friend was moving from the US to Denmark, his immediate response was "The taxes are really high there." That's the sort of obsession I'm thinking about.

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I'd just like someone who actually favors this blivet to tell me what companies and "job creators" are going to do now with all this new money that they weren't doing before with credit close to free right now. I can't understand how all these professed believers in invisible hands and supply-and-demand have convinced themselves that pent-up demand for widgets exists yet someone nobody has had the means to open a widget factory until this tax cut.

It is an idealogy and fanaticism driven by hate and fear. There is no logic. My parents snear and gloat that finally they don't have to pay for "freeloaders". People without insurance should "get a job". "I was never handed anything". All rich people are somehow "self made" and deserve more of the cuts. Obama is a "communist Muslim" who did horrible things to our country. Trump is a "loudmouth" but really "cares about America". Back in the 70s "n*ggers stole my things and threatened me in college", so you would never understand.

That was my Christmas Eve with the parents. Only 5 more days to go before I fly home.

Yeah I'm skipping out on the big dinner today. Excuse is to go see my wife's family, which is true. But even if it wasn't I don't want to have to tell 2/3 of my of family off at dinner tonight.

Saw a post on Twitter that essentially said that the people who say Communism can't work because people are greedy are the same people saying if we give more money to the rich they will pay their employees better.

Mixolyde wrote:

Saw a post on Twitter that essentially said that the people who say Communism can't work because people are greedy are the same people saying if we give more money to the rich they will pay their employees better.

They're not lying if you consider those people saying that are probably employed by the rich for the purpose of saying that convincingly.

Mixolyde wrote:

Saw a post on Twitter that essentially said that the people who say Communism can't work because people are greedy are the same people saying if we give more money to the rich they will pay their employees better.

If you think about it pretty much every system of govt will eventually be corrupted by people that want money.

karmajay wrote:
Mixolyde wrote:

Saw a post on Twitter that essentially said that the people who say Communism can't work because people are greedy are the same people saying if we give more money to the rich they will pay their employees better.

If you think about it pretty much every system of govt will eventually be corrupted by people that want money.

As the Bene Gesserit teach, it's not that power corrupts, but that power attracts the corruptible.

Demosthenes wrote:
karmajay wrote:
Mixolyde wrote:

Saw a post on Twitter that essentially said that the people who say Communism can't work because people are greedy are the same people saying if we give more money to the rich they will pay their employees better.

If you think about it pretty much every system of govt will eventually be corrupted by people that want money.

As the Bene Gesserit teach, it's not that power corrupts, but that power attracts the corruptible.

"Why does this one profession only for men whose duties include not having sex with women and spending a lot of time with children have such a high prevalence of men who are attracted to young boys. It's an unsolvable mystery!!"

"It's so weird this job that gives people the potential power to rewrite society's rules for their own gain always seem to be filled by people who want to rewrite society's rules for their own gain. Its a complete mystery!!"

karmajay wrote:
Mixolyde wrote:

Saw a post on Twitter that essentially said that the people who say Communism can't work because people are greedy are the same people saying if we give more money to the rich they will pay their employees better.

If you think about it pretty much every system of govt will eventually be corrupted by people that want money.

Saying XYZ will always happen is a mental trap. It's an excuse to do nothing and "allow the inevitable" to happen, which is how evil wins.

People breaking the law will happen, people abusing the system will happen, people who only want the job for the power will happen, like any other job. But, we don't stop seeing Doctors because some sell drug prescriptions on the side.
As a society, we can stop abuse and root out corruption with vigilance, effort, and will. It will never be perfect, but it can be good for most people most of the time, if we work for it.

CNN (via MSN): Tax overhaul expected to cost Goldman Sachs $5 billion

Goldman said the majority of the $5 billion hit will come from a "repatriation tax," which is the cost of moving money between the U.S. and foreign countries.

It will also have to write down the value of tax credits it had been saving up from past losses. Goldman plans to use the credits in the future to lower its tax bill, but they'll be worth much less when the new rules take effect next year.

21% tax rate should still be pretty good for them in the long-term, though.

Yup. $5 billion is a little over two quarters of profitability for Goldman Sachs. That's a small price to pay for permanently paying a much lower tax rate.

Dems look for creative ways to tackle tax law changes

Some interesting ideas on how states will exploit loopholes in tax law in ways that seem to be very corporate.

I guess the only good to come is in the next 5 years we might maybe kinda not really get a real tax reform. But not holding out hope yet.

I guess that by jamming a giant wrench into the workings of a machine, you are technically "reforming" it, right?

Hobear wrote:

Dems look for creative ways to tackle tax law changes

Some interesting ideas on how states will exploit loopholes in tax law in ways that seem to be very corporate.

I guess the only good to come is in the next 5 years we might maybe kinda not really get a real tax reform. But not holding out hope yet.

I assume only states that haven't been gerrymandered to completely misrepresent their population.

Excuse my ignorance. How locked are we into this tax law? If by some miracle the majority party switches and wants to undo the damage, can it be done?

Delbin wrote:

Excuse my ignorance. How locked are we into this tax law? If by some miracle the majority party switches and wants to undo the damage, can it be done?

It was passed via reconciliation, so a simple majority in both houses of Congress can overturn it. If you want to even have a chance of this happening, we all need to vote like we've never voted before this year.

Chairman_Mao wrote:
Delbin wrote:

Excuse my ignorance. How locked are we into this tax law? If by some miracle the majority party switches and wants to undo the damage, can it be done?

It was passed via reconciliation, so a simple majority in both houses of Congress can overturn it. If you want to even have a chance of this happening, we all need to vote like we've never voted before this year.

Sadly until the next presidential election, it would be difficult to override a veto even if the numbers were there to pass it through reconciliation.

Chairman_Mao wrote:
Delbin wrote:

Excuse my ignorance. How locked are we into this tax law? If by some miracle the majority party switches and wants to undo the damage, can it be done?

It was passed via reconciliation, so a simple majority in both houses of Congress can overturn it. If you want to even have a chance of this happening, we all need to vote like we've never voted before this year.

This is the thing. I haven't figured out who to work with yet, but I plan on going door to door this election. I plan on donating significant amounts of money to out-of-state elections. And I'd like to find someone working to register voters and help them. 2018 feels very do or die.

Rahmen wrote:
Chairman_Mao wrote:
Delbin wrote:

Excuse my ignorance. How locked are we into this tax law? If by some miracle the majority party switches and wants to undo the damage, can it be done?

It was passed via reconciliation, so a simple majority in both houses of Congress can overturn it. If you want to even have a chance of this happening, we all need to vote like we've never voted before this year.

Sadly until the next presidential election, it would be difficult to override a veto even if the numbers were there to pass it through reconciliation.

ah, good point.

On the (incredibly tiny) bright side, next time theres a D trifecta simply repealing this tax bill gives the Democrats 1.5 trillion dollars to play around with in reconciliation.

Zona wrote:

On the (incredibly tiny) bright side, next time theres a D trifecta simply repealing this tax bill gives the Democrats 1.5 trillion dollars to play around with in reconciliation.

And if we wanted to increase the deficit we could go all the way up to 3 trillion!

Yonder wrote:
Zona wrote:

On the (incredibly tiny) bright side, next time theres a D trifecta simply repealing this tax bill gives the Democrats 1.5 trillion dollars to play around with in reconciliation.

And if we wanted to increase the deficit we could go all the way up to 3 trillion!

Well, this does bring up the question if deficits even matter, which is an argument I’ve seen bandied around by some of my acquaintances in finance and various economists. I’m not supporting the tax breaks of course, but maybe they have a point that it’s virtually impossible for the US to go bankrupt.

jdzappa wrote:
Yonder wrote:
Zona wrote:

On the (incredibly tiny) bright side, next time theres a D trifecta simply repealing this tax bill gives the Democrats 1.5 trillion dollars to play around with in reconciliation.

And if we wanted to increase the deficit we could go all the way up to 3 trillion!

Well, this does bring up the question if deficits even matter, which is an argument I’ve seen bandied around by some of my acquaintances in finance and various economists. I’m not supporting the tax breaks of course, but maybe they have a point that it’s virtually impossible for the US to go bankrupt.

While I agree with the general idea that we could borrow forever, we're already spending 200 billion a year to simply maintain what we already have. As that goes exponentially higher, were looking at the real risk of runaway inflation and currency devaluation.

They don't matter as long as you don't mind the companies or countries that own the debt having influence over the government.

jdzappa wrote:
Yonder wrote:
Zona wrote:

On the (incredibly tiny) bright side, next time theres a D trifecta simply repealing this tax bill gives the Democrats 1.5 trillion dollars to play around with in reconciliation.

And if we wanted to increase the deficit we could go all the way up to 3 trillion!

Well, this does bring up the question if deficits even matter, which is an argument I’ve seen bandied around by some of my acquaintances in finance and various economists. I’m not supporting the tax breaks of course, but maybe they have a point that it’s virtually impossible for the US to go bankrupt.

TLDR the debt matters very little to the US right now, but that is because of specific factors that can change, and treating the debt as something that can be increased hugely and meaninglessly is absolutely something that will help lead to those factors changing. Also, while the cost of our debt is still trivial, it still exists, so increases to it still need to be used on things that are good enough to cover at least that small cost.

We hear a lot about the "Debt to GDP" ratio, and while that is a far better thing to look at than just Debt, it's still not exactly what matters. What you really care about is "Debt Payments to GDP"(1). As an example, if your mortgage rate was 1% you could afford a much, much, much larger mortgage than if your mortgage rate was 11%.

For example, The US has a current (2016) Debt to GDP ratio of 1.06, while Italy(2) has a ratio of 1.32 (2016). However while Italy spent 4.2% of their GDP (and hence around 12% of their total government spending) on servicing their debt, the US only spent 2.3% of their GDP (7% of their spending).

As another example, Japan has a very, very high Debt to GDP ratio of 2.5. In 2011 they spent 9.5% of their GDP (23.3% of their national spending) on paying down their debt.

So we can see that the US has much lower interest rates than these other countries, and hence their debt is much "cheaper". Italy is paying 2.3 times as much on interest payments as it would with US interest rates, and Japan is paying 9.7 times more!

Another important benchmark of an interest rate is its comparison to inflation rates. And it is this comparison that leads people to say, with real justification, that US debt is (currently(!)) "free". If your debt is growing slower than inflation, then its value is literally shrinking. You will pay off the amount with items that are less valuable than what you were originally given. This is the value of the US being a bedrock financial institution. People don't loan the US money to make money, they loan the US money because it is a less unprofitable way too safely store money they don't want to risk on "actual" investments.

Daily bond yields are a good measure of the interest rates that governments are spending for the debt they are acquiring that day. (It's not perfect because there are other ways that governments can get their loans). Today the spread for the US was between 1.29% (3 month) and 2.78% (30 years). If inflation for the next few years was a constant 2% all of those bonds up to the 3 year mark would be "free". If the inflation for the next 30 years averaged 2.8% every single one of those bonds would be free.

Now these are changing conditions. Interest rates can and will rise, for example as the Debt to GDP rate increases we'll look a little less rock solid, eventually those numbers would go up. Immoral/Idiotic f*ckwit deficit hawks sh*tting their incompetence over debt ceiling battles are an obvious way that our interest rates could rise quickly and dramatically, for example. However, countries don't operate with variable rate mortgages (3). If our interest rates jumped to 15% tomorrow all of our existing trillions of dollars of debt would be unaffected, but going forward our debt would be at that higher rate. That's why the (low) US debt payments are higher than you would expect from those small bond numbers, we are still paying off higher interest debts from decades ago. That gives all countries a buffer against changing interest rates, and is why a country falling into a debt spiral is actually really rare, and when it does happen is usually hugely influenced by debt in a non-native currency.

Absent those effects, falling into a debt spiral requires some combination of "your economy is so dependent on your government deficits that you can't lower spending without hurting your revenue more than you help your debt" and "You can't actually increase your revenue", (almost always largely due to tax evasion, but depending on your economy you can have issues with industries going to other areas). Tax evasion was an enormous part of Italy's flirtation with the fiscal cliff, btw, their shadow economy is super large.

Today, neither of those current issues are large risks for the US. Our government spending is in the ballpark of other governments, and overall the economy has issues, but in comparison to the economies of countries actually close to such events (like Italy 6-8 years ago) the economy is fantastic. Our tax evasion rates are currently very low, and while that's something that could change quite quickly (we've been starving the IRS of funding for a long, long time, and are continuing to do so) we could also (hopefully) reverse that problem if it came up almost as quickly (by stopping the neglect of the IRS).

(1): Some people would argue that you actually want "Debt Payments to Government Revenue", but I think using the GDP is a better way to capture the reality different countries tax at different rates, and countries with low relative revenues could increase taxation if their debt became a problem, while countries already getting an above average amount of revenue from their national economies can probably not do so. Obviously the amount of corruption and tax evasion in a country changes the amount that they can reliably increase their revenue.

(2): Italy is a developed country which is probably not in imminent danger anymore, but absolutely not in a scenario where their debt "doesn't matter". It should be noted that Italy, like most countries, is far more vulnerable to many debt related things than the US, because the US has all of its debt in US dollars, and the US controls the monetary policy for US dollars, whose value also naturally rises and falls naturally depending on the strength of the US government and economy. Because of that the US could actually have debt payments more on the line of Italy's with much less concern that it was actually standing on the precipice of not being able to support that debt.

(3): Although, as mentioned in (2), having debt in a currency that is not 100% your own can have some similar effects, but that almost entirely doesn't apply to the US.

A note on foreign powers having debt. They don't actually have influence over the government at this point. Your creditor only has influence on you (with a professional contract with constant terms, when you have a legal team to defend that contract) if you are having trouble paying your debt. If you can pay your debt you just do, and that's the end of the arrangement. It's when you start having trouble paying your debts that the potential problem comes up, when the creditor starts floating alternative methods of payment. The US is nowhere near that point.

The real downside from foreign investors is tax revenue. When your creditors are domestic then the national government gets to tax their profits, this is yet another discount for a government's debt.

Good read there Yonder. Thanks.

Yes great read Yonder. I’m glad you mentioned Japan as I have lots of friends over there who send me horror stories. That being said, it still seems Japan has better safety nets and less abject poverty than the US.

We now get to find out if all those sermons I heard growing up about how Americans were uniquely charitable because they were Christians hold any water:

Politico: GOP tax law a one-two punch to charities — and American giving

Back in 2011, when Republicans still talked about deficits, a bipartisan budget commission proposed to save tens of billions a year by revamping the charitable deduction for federal income taxes.

The plan was to substitute a 12 percent tax credit available only to those who gave more than 2 percent of their adjusted gross income. The precise numbers were subject to fine-tuning, but the framework set three goals: lower the deficit, put middle-class donors on more equal footing with the wealthy and establish some minimum standard for generosity to qualify for a tax benefit.

This being Washington, the idea went nowhere. But what’s surprising now is how far Republicans are taking the country in the very opposite direction.

For the first time in their lives, millions of middle-class donors will be effectively shut out from claiming any charitable deduction under the GOP’s new tax law. At the same time, the wealthy will get a still larger share of the tax benefit, even when sacrificing a smaller share of their income.

All those small government people who taught me that charitable works should be personal and not come from the state and taxes now get to put their money where their mouth is.