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October 30, 2017

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one approach looks, to me, like investment. one looks, to me, like magical thinking.

Just as a wild guess, I'd say that the magical thinking was being practiced by those who most strongly support banning books which include magic from school (and even public) libraries. Maybe the don't want people to become too familiar with magic, lest they see the flaws in how it's being practiced...?

What I see:

For people like me, not me because I am not helped by thus partucularly, it is what was promised.

Simple tax preparation with lower rates.

I lived in MA in a house for 25 years or so and never had a mortgage near 500k. I'm sure lots of upper middle class folks won't like that cap, in a few states.

Mostly though I think it is a stretch to deny that this is a tax cut that is good for a large majority of those people who are considered Trump voters.

And it addresses some corporate tax issues that needed to be addressed.

And rich people's families get to keep their money when someone dies. We all should hate that for some reason that is completely beyond me.

The justification is that it will keep the economy growing at just over 3%, which makes up the 1.5 trillion. That's not that big a stretch.

Pretty well constructed, a few exceptions to avoid really hurting the people who it effected negatively, not bad for Washington.

And rich people's families get to keep their money when someone dies. We all should hate that for some reason that is completely beyond me.

Rich people get to receive the dead person's money, not "keep." I think given the corrosive effect of billionaires on our politics over the past few years - the Kochs, Mercers, DeVos, Thiels, Soros (though wildly overstated) - is good reason to be wary of concentration of wealth and to do something moderate about it.

the tax cut for "typical" family the GOP and Ryan keep citing is $1142 (for now). The increase in the estate tax exemption is...$5.6 million per person (so twice that with a spouse), saving $2.24 million in taxes for the estate of the dead at the 40% rate.

They "typical" family would thus need to receive their $1,142 in tax breaks per year for 1961 years before they saved as much in taxes as the estate tax saves multimillionaire estates. And that tax break will go down in 5 years while the estate tax goes away completely....


Ugh,

That logic is simply flawed. Yes, really?, tax cuts for people making 50k are much lower?

But that $1,142 means a lot to them, an argument that is made all the time when discussing potentially charging those people for something. In fact it was the argument for not doing across the board tax increases.

And, heirs get to keep or receive the family money is word games. Either they get it or it is confiscated simply because someone died. The closest thing to theft in our tax system.

More on overseas cash repatriation:

https://finance.yahoo.com/news/why-tax-plan-might-not-040708718.html

The closest thing to theft in our tax system.

In general, the US derives revenue by taxing the transfer of money from one party to another.

Income tax, unearned income taxes of all kinds, gift tax, windfalls like winning at the track or the lottery.

Inheritance tax is just another one of those. You die, you leave money to your kids, it's income to them, they get taxed on it. It's not like there aren't a gazillion ways to shelter that if you want to, and it's not like there isn't an army of accountants and financial planners who will help you set that up if you happen to be in the position of being subject to inheritance tax in the first place.

Also in general, the US follows a progressive model for assessing taxes. Adam Smith makes the best case I am aware of for this, IMO it's a sensible regime.

The inheritance tax (gift tax, too, I think) currently kicks in at about $5.5M per person. About $11M for a couple.

Should you leave an estate in excess of that to your heirs, the amount above that limit will be taxed at 40%.

So, first $5.5M tax free, everything beyond that at 40%. Which is within a percentage point of the top income tax rate.

So, WTF is anybody bitching about.

This is a hand-out to wealthy people. I doubt it will make much difference to the overall revenue stream either way, it's just the (R)'s throwing a bone to the wealthy.

Simple tax preparation with lower rates.

how is it simpler?

Once upon time, the rich took it with them when they died: kings and chieftains were buried with their gold and jewels and weapons and so on.

If the Koch brothers convert their $50B apiece into cash and, when the time comes, take it into the grave with them, I would not tax it.

--TP

Get rid of the inheritance tax.

The year the money is received by the beneficiaries, it must be declared as income, which is what it is, and taxed as income tax according to whatever marginal rate applies.

Make some amount tax free, as now. Also permit the wealth to be distributed in increments from over some number of years.

Then conservatives go can go back to calling ALL taxes theft.

Or they can shut the f*ck up about the sacred nature of work, which they don't believe anyhoo given the poor remuneration they bestow on workers, because work is one thing most heirs do not do for the the inheritance gifts they receive.

Another feature of the GOP bill is getting rid of the deductions for adopting children.

I guess that means, given conservative bullshit theories regarding tax incentives and disincentives, that there will be fewer adopted heirs in the future.

Maybe orphans can be considered capital equipment and thus slip through.

More orphans and more abortions.

The sanctity of life, another GOP shibboleth.

"I doubt it will make much difference to the overall revenue stream either way, it's just the (R)'s throwing a bone to the wealthy."

I don't disagree with this, at all. The top tax bracket at 1M is kind of the opposite, it wont make much difference to the revenue stream but is a way to throw a bone to the folks who don't want a tax cut for the rich.

how is it simpler

I have itemized every year for a long time, the standard deduction increase means I probably won't. That's a lot simpler for what I figure is going to be a lot of people. Picking winners and losers, HR Block will certainly be against this bill.

we've itemized forever, because we've always had an accountant handle our taxes (multiple businesses and lots of donations, etc. - easier to let him sort everything out). this is going to be the first year we're going to try to do it on our own.

but, if you're set on paying the least amount in taxes, don't you have to itemize first, figure out what that works out to, and then compare it to what the standard deduction would get you ?

is a way to throw a bone to the folks who don't want a tax cut for the rich.

Everybody making more than about $420K and less than $1M gets a tax cut.

Some folks who call people with earned income in that range "rich".

Everything is relative.

In general I agree that doubling the itemized deduction is going to be somewhere between nice and really nice for a wide swath of working people.

It may or may not result in an actual tax savings, that depends on what folks have been writing off.

It'll just be simpler. Which is not a bad thing, on its own terms. And maybe save them some money, although in at least some cases they'll have to run the numbers anyway to figure that out.

And rich people's families get to keep their money when someone dies. We all should hate that for some reason that is completely beyond me.


Well, revenue has to come from somewhere. Every penny that doesn't come out of Ivanka Trump's inheritance comes from you and me.

Plus, I'd rather not have a permanent hereditary aristocracy.

Plus, much of the money -capital gains - is never taxed.

Plus, rich people's kids enjoy enormous untaxed advantages growing up and beginning their careers. How much do they want?

On the one hand we have "tax cuts encourage productive work." But the same people making that argument are glad to have a class of worthless trust funders, as long as the TF'ers can be counted on for political support.

Plus rich people - the super rich who are the only ones affected - have an outsized influence on American politics. That's not a good idea, since it will only increase their wealth and power.

Finally, it is, as Daniel Davies as famously pointed out, a strong clue that a proposal is unwise if it sold using a lot of lies. That's what happens here with all the crocodile tears over family farms and businesses.

You know what I'd like to see? An inheritance tax like what the Count suggests. 50% on all inheritances with say, a $1M exemption. Want to leave a friend or someone who worked for you, or a good teacher, a few hundred grand. Fine. No tax. But leave your kid $100M and $49.5M goes to Uncle Sam.

On the one hand we have "tax cuts encourage productive work."

Getting freaking paid encourages productive work.

The justification is that it will keep the economy growing at just over 3%, which makes up the 1.5 trillion. That's not that big a stretch.

Are you saying the $1.5T in lost revenue is equal to the resultant economic growth, or are you saying the resultant economic growth will result in an offsetting increase in revenue of $1.5T, making the tax cuts "pay for themselves"?

(Certainly, that $1.5T dollar loss to the federal government will be in someone else's hands, some of it with state and local governments, most of it somewhere in the private section - not necessarily in the United States - to be saved, spent, or invested.)

IIRC, the federal government taxes estates (what remains legally of the deceased), but the states tax inheritances (what living heirs receive).

My suggestion would be for states hit hard by the federal deductions eliminated or capped to take advantage of the larger inheritances resulting from untaxed estates.

section = sector in my 11:36.

it will keep the economy growing at just over 3%

it's been growing at 3.2%, on average, since 1947 - without the TrumpRyan tax cuts.

The justification is that it will keep the economy growing at just over 3%, which makes up the 1.5 trillion. That's not that big a stretch.

The real question is whether the CBO will score it that way. The Republicans are doing this under reconciliation rules to avoid the Senate filibuster, and those rules require the CBO to score the final bill that the Senate votes on.

Duncan Black on the estate tax.

Russell,

Getting freaking paid encourages productive work.

I agree with you 100% - not surprising.

I was citing arguments in support of tax cuts on high earners, not endorsing them. I don't think cutting Dustin Pedroia's taxes is going to get him to play 200 games instead of 162.

To the extent they do encourage work, I'd say the effect is greater at low to middle wage levels. I suspect a plumber or electrician is going to be more willing to put in some overtime if the after-tax wage goes up than the CEO is to put in a weekend of of work.

For high-income workers who have a fair amount of control of how much they work the increased after-tax wage may well have the effect of reducing hours worked in favor of taking more leisure.

Google "labor-leisure effect" for an endless supply of explanations.

Pedroia would play 365 games a year if he could.

And raising his top marginal tax rate to 90% wouldn't cause him to give up the game and become a plumber.

The plumber, if he had the talent, would be happy to replace Pedroia at second base.

Pedroia would play 365 games a year if he could.

Because he's gritty, and plays the game the right way, and isn't in it for the money.

Yeah. I live in Boston and know all that.

The justification is that it will keep the economy growing at just over 3%, which makes up the 1.5 trillion. That's not that big a stretch.

I don't think that's a good argument. First of all, you would have to show that the tax cut will in fact improve economic growth. That's far from known. Very far.

Second, you have to show how much it will help growth. Let's say the economy grows at 3% from now on. You can't say it was all due to the tax cut. Mostly it isn't. So no taking credit for everything anyone does.

Finally, claims of self-financing tax cuts have always been nonsense, and proven to be so by actual analysis. So history is not on your side.

I think they want to get rid of the estate tax because wealth is insufficiently concentrated nowadays. That seems to be causing a lot of problems.

I was citing arguments in support of tax cuts on high earners, not endorsing them

No worries Bernie, my comment was not really in response to the substance of what you were saying.

It was just kind of a general comment.

I agree with your points here.

Well byomtov, factual analysis that I have reviewed simply doesnt prove that, and if we achieve steady state greater than 3% I'm fine with the fact that lots of other factors come into play also. I am also sure that if we don't lots of other factors will have come into play.

On my point about the estate tax and a family earning the median income's tax cut of $1142. One of the talking points from the GOP is in the form of "charge and response":

Charge: “Repealing the [Estate] Tax is just a massive giveaway for the wealthiest Americans.”

Response "Not so. The [Estate] Tax impacts small businesses and farms throughout the nation owned by people who have worked their entire life to build a successful company and create jobs."

If you're small business is worth so much that you can sell it outright for $5.6 million (or double that if you're married) at your death you are, beyond a doubt, wealthy.

By extension they are saying "won't anyone think of the poor small business owner, we need to save him this tax of $2.24 million when he dies", and also saying "$1,142 is a lot of money!"

They are fucking liars.

Moreover, the 10 year revenue effect of increasing the estate tax exemption and then repealing it is a loss of $171 billion. How much bigger would that very important $1,142 be if we kept the estate tax as is and used the $171 billion to provide additional cuts to those getting the $1,142 (which again, will be smaller 5 years hence)?

US GDP was $18.57T in 2016, over 10 years that's $185.70T (assuming no growth or decline, and the former is much more likely). GOP's tax cut is $1.5T over those same 10 years, or 0.8% of the total GDP over those 10 years.

And yet we're to believe that that amount of tax cuts is going to result in an extra, what, 0.5 to 1% GDP growth *each year* than without the tax cut?

Seems doubtful.

Its about 171 dollars a year averaged across 100m households.

It is expected that that amount of tax cuts targeted at particular parts of the GDP, corporate and middle class, will support .05% additional growth.

Very reasonable.

Correct me if I am wrong, but Marty is essentially arguing that the tax cut will have a multiplier effect on GDP of about 1.6 over the next ten years.

This is not reasonable.

Otherwise, what byomtov and Ugh said.

Also, this.

Its about 171 dollars a year averaged across 100m households.

171 bucks a year, per household, is going to stimulate the economy by 3%?

That's $3.29 a week. Per household, natch. But that's not even a Big Mac.

Maybe I am misunderstanding your point.

The [Estate] Tax impacts small businesses and farms throughout the nation owned by people who have worked their entire life to build a successful company and create jobs."

See. This is a lie. Period. it doesn't impact them at all. If it did where are all the stories of people forced to sell, etc. I just wish that this was more widely known. That the GOP advances this claim at all ought to make all decent people shun it and its works.

Businesses worth the kind of money being talked about do not typically have a single owner. They are generally incorporated, or operate as partnerships, and have multiple owners. The estate tax, if there is one, is only on the decedent's share, obviously.

Your neighborhood hardware store is just not worth enough to trigger an estate tax. Not near enough. And if it doesn't have outside investors, it is likely owned by a married couple, with maybe their kids having a piece as well.

You might also check Section 6166 of the Internal Revenue Code which provides a very generous way to pay the tax, if there is any, over 14 years at a low interest rate.

So these people are just lying, and I refuse to take any claims they make seriously.

The 171 was the answer to how much more we could give everybody else if we didn't do way with the estate tax. That's all.

So these people are just lying, and I refuse to take any claims they make seriously.

If anyone caught the CNN debate between Bernie Sanders and Ted Cruz a couple weeks ago, the estate tax was a major topic. (The debate was specifically on tax reform.)

Cruz did his fake, folksy story-telling about family farms and such, after which Sanders cited, you know, actual data demonstrating that it was a bunch of horsesh1t.

It probably didn’t matter, though.

The 171 was the answer to how much more we could give everybody else if we didn't do way with the estate tax. That's all.

No, this one tax, by itself, isn’t going to make a huge difference, but there are lots of them and they all add up. So the question is over which ones should be at the top of the list for reform of some sort. The estate tax has been reduced already by exempting larger amounts. Because of that, eliminating will make less of a difference than it otherwise would without those reduction. Imagine that.

https://en.m.wikipedia.org/wiki/Estate_tax_in_the_United_States#/media/File%3AEstate_Tax_Returns_as_a_Percentage_of_Adult_Deaths%2C_1982_-_2010.gif

This table is probably more illustrative than the graph at the link in my last.

https://en.m.wikipedia.org/wiki/Estate_tax_in_the_United_States#Exemptions_and_tax_rates

"Maybe I'm misunderstanding your point." *

His point is that at $3.99 per Big Mac, the average household could afford an extra Big Mac every 9 days. That's 40.555 more Big Macs per year.

And THAT doesn't include Fetuses Eat Free Fridays.

from Politico via Charles Pierce:

"The legislation includes language that would open up tax-advantaged college savings accounts known as 529s to what the legislation calls "unborn children" as designated beneficiaries. And a bill summary specifically defines that as “a child in utero. A child in utero means a member of the species homo sapiens, at any stage of development, who is carried in the womb.”

In-utero orthodontics would be the only medical expense that would retain its status as a deductible item, as a sop to the cousins of elegists in hillbilly country.

In order to "pay" for that feature of the bill, Grandma won't make it to McDonald's, as she can no longer deduct a cent for her medical expenses over the year, so she's heading over to the Burger King's new capital intensive franchise, The Hemlock Shack.

Fetuses conceived during immaculate conceptions, meaning any fetus that resulted from a night out with Mike Pence, would qualify for a double exemption, having pulled off being pre-born and born again simultaneously.

In-utero firing ranges could be expensed as a capital improvement.

*Dang it, Marty, respond faster, or slower, so you don't step on the punchlines.

I'm having a hard time following some of the arithmetic here. Let's see. The tax cut will ostensibly reduce revenue by $1.5T over ten years.

So for that to be made up by increased economic growth means that, assuming the federal government gets 18% of GDP in taxes (slightly generous here), the economy needs to be $8.33T larger over that period than without the cut. So $833B/year.

That's about 4.5% of the $18.5T/yr we now have.

Did I make a mistake?

Your neighborhood hardware store is just not worth enough to trigger an estate tax.

Yep. If your neighbor through luck and pluck built up an estate of $10m or more, it most likely would have been accomplished via real estate investing/acquisition....an economic activity that is, for all intents and purposes, one that is (a.)highly artificial; (b.) riddled with an incredible array of special tax jiggeries, and (c.) driven by squatter ethics in many instances.*

Taxing the hell out of such a pile is a social necessity.

*buy your shy 5 acre plot on the outskirts to "enjoy the woods" and "a rural way of life"; occupy the place for 30 years while you commute to your job in town on roads funded by city taxpayers; vociferously oppose any and/or all reasonable growth management policies because "freedom"; retire, subdivide the property, cash out, and move to Florida. To make things worse, they pat themselves on the back for "creating wealth". Jaysus 'effing christ.

Even without the jiggery pokery bobbyp describes, the fact is that anyone who has attained a multimillion-dollar estate did so within the context of an ordered society, relying on infrastructure and institutions they did not create. But let’s keep concentrating more and more of the nation’s wealth in fewer and fewer hands. It’s certain to end well.

The 171 was the answer to how much more we could give everybody else if we didn't do way with the estate tax. That's all.

given the choice of forty-and-a-half big macs per year, or making the world safe for some rich guy's kids to not have to pay 40% on inherited money in amounts greater than five-and-a-half million, i'll take the big macs.

YMMV

The rich guy’s kid isn’t getting Big Macs, too, is he?

The 171 was the answer to how much more we could give everybody else if we didn't do way with the estate tax. That's all.

You know, if we swung all the paragons of wealth from lamp posts and distributed their wealth evenly, the amount per person would not be all that much.

But that's not the point.

Almost any tax cut or spending increase which increases the budget deficit will generate some additional growth, provided that the total debt is not too scary. But the least effective deficit increase is tax cuts for the rich.

Is it a good idea currently to increase the deficit? No it isn't. How much power over the US economy do you want to give to overseas bondholders, China in particular?

we're already growing at 3%.
we're already near full employment.

why do we need a larger deficit?

https://www.marketwatch.com/story/republican-tax-reform-is-simply-red-states-stealing-from-blue-states-2017-11-03

Hannah Lassette Ahlers

why do we need a larger deficit?

to pay for the tax cuts.

government is at best a necessary evil, any resources it is given are likely to be wasted through inefficiency, folly, or outright fraud. the people who work in government are self-seeking bureaucratic busybodies, with no understanding of the real-world ground truths of the things they are responsible for managing or overseeing.

tax cuts are inherently virtuous. it's your money, you know how best to make use of it, you should be able to keep as much of it as is possible, to do with as you wish.

Ah-ha! Truth through sarcasm! :)

LOL

I thought you might get a laugh out of it, Charles.

:)

from the count's link:

Who would pay more under the GOP tax plan? The Northeast and West Coast, by design

SSDD

OT - can somebody explain to me how kneeling NFL players result in a decline in Papa John's pizza sales?

I can usually follow a convoluted chain of causes and events fairly well, but I must admit this one is several steps too many for me.

I can usually follow a convoluted chain of causes and events fairly well, but I must admit this one is several steps too many for me.

Seems straightforward... fewer eyeballs, fewer sales. Viewership seems to be off somewhat this season and the players kneeling is being blamed. I'm dismayed by the number of people I've known who choose their take-out pizza based on the last ad they saw. LGM had a huge comment thread the other day about which of the chains is worst. It seemed to be a multi-way tie.

Same reason Colonel Sanders endorsed George Wallace in 1968.

Leaving Pennsauken...no time to talk.

Here's an alternative connection. The folks who are watching NFL these days are not Trump fans. (Witness that they are OK with what the players are doing.) But the guy who owns Papa John's is a Trump fan -- a vocal and public one. And some people will boycott companies for political reasons.

So his ads aren't generating sales, because his target demographic has changed. Not so much fewer eyeballs as different eyeballs.

so, the connection is that Papa John's advertises on NFL games?

I'm not in tune with the zeitgeist.

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