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Do You Know What Is In The Tax Bill That Congress Is About To Pass?

A conference committee has been merging the tax bills that were passed by the House of Representatives and the Senate, and even though we could still see some minor changes, it looks like the major parameters of the final bill have now been agreed upon.  The final bill will be known as the Tax Cuts and Jobs Act, and we are being told that it will be one of the largest tax cuts in U.S. history.  Unfortunately, the impact on our tax bills will be relatively minor, but at least it is a step in the right direction.  The following summary of the major provisions in the final bill comes from AOL

  • A less generous corporate rate cut: Republicans may cut the corporate rate to 21% from the current federal rate of 35%, instead of the 20% proposed in both the house and Senate bills. The new rate would start in 2018.
  • A lower top individual tax rate: The top individual bracket would drop to 37% instead of the 38.5% proposed in the Senate bill. It would still be down from the current 39.6%.
  • Keep the estate tax, but raise the threshold to qualify: Instead of phasing out the estate tax over time, like the House bill, the compromise bill would instead simply increase the threshold for an estate to qualify — from $5.6 million to around $11 million. That aligns with the Senate bill.
  • Repeal the corporate alternative minimum tax (AMT): The corporate AMT in the Senate bill was a sore spot for many companies because it would have negated the effects of many popular deductions and credits, like the research and development credit.

The reduction in the corporate tax rate is probably the most important provision in this tax overhaul package.  For decades, the United States has had a much higher corporate tax rate than much of the rest of the world, and this has given large corporations an incentive to locate operations elsewhere.  By making the corporate tax rate more competitive with everyone else around the globe, it is hoped that this will mean more good jobs for American workers.

This bill also reduces individual tax rates, but not by that much.  So you will notice a reduction in your tax bill, but don’t expect anything “game changing” in nature.

In addition, this bill will eliminate the Obamacare individual mandate.  This is something that should have been done back in January, and I am very happy that Congress is finally getting it done.

It is anticipated that both the House and the Senate will vote on the final version of this tax bill next week.

Sadly, it is not a slam dunk that this bill will actually get through the Senate.

Senator Bob Corker voted against the original Senate bill, and he may vote against this version too.

Ron Johnson of Wisconsin and Susan Collins of Maine have also expressed reservations about this bill, and it is unclear how they will vote at this point.

And let us not forget that Senator John McCain’s health is rapidly failing.  Hopefully he would be present for any vote, but there is no guarantee that will happen.

In the end, Republicans can only lose two votes in the Senate, and so this is going to come down to the wire.

But President Trump is quite optimistic that this bill will succeed, and he says that it will “breathe new life into the American economy”

“Our tax cuts will break down — and they’ll break it down fast — all forms of government and all forms of government barriers and breathe new life into the American economy,” Trump said.

“They will unleash the American people, they will tear down the constraints on discovery, innovation and creation, and they will restore the hopes and dreams of the American family. Millions of middle class families will win under our plan.”

Of course even if this bill passes, our tax code will still be a complete and utter nightmare.

The tax code will still be over two million words, and the regulations will still be more than seven million words.  Our system will still greatly favor those that can hire accountants and tax attorneys to find every conceivable loophole possible, and it will still be a tremendous burden on the middle class.

If I am elected to Congress, I am going to fight to completely abolish the IRS and the income tax.  As I travel around Idaho and speak to groups, many are extremely receptive to these proposals, but they wonder how we would fund the government without an income tax.

Well, the truth is that the individual income tax only accounts for about 46 percent of all federal revenue, so we could definitely eliminate the individual income tax but we would also have to dramatically reduce the size of the federal government at the same time.

And we have a historical precedent for what this would look like.

Between 1872 and 1913 there was no federal income tax, and it was the best period of economic growth in U.S. history.

Of course the Democrats are not just going to roll over and allow us to cut the size of the federal government in half, so in the short-term we can focus on some other solutions.  A flat tax or a fair tax would both be far superior to the system that we have today, and there are some very good proposals already out there that just need to be implemented.

I once spent an entire year studying our tax code, and I still shudder when I think about those 12 months.  Our tax code is a complete and utter abomination, and while I applaud Congress for trying to “simplify” it, the truth is that this bill that is about to be passed won’t make that much of a difference.

We need to fundamentally change the way that we fund government in this nation, and that is why I want to completely abolish the income tax.  The system that we have right now is simply not fixable, and we should not pretend that any “tax reform bill” is going to solve our problems.

Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

The Dow Falls By Triple Digits As Anxiety Over The Senate Tax Plan Grows

It is becoming quite clear that even if Congress passes a tax reform bill in 2017 that it won’t actually be that significant.  On Thursday, anxiety about the Senate’s version of the bill pushed the Dow down more than a hundred points, and that was the biggest decline that we have seen in two months.  Could it be possible that the massive stock market bubble that we are currently witnessing is about to burst?  Anticipation of what this tax bill would mean for U.S. companies has been the foundation for so much of the euphoria that was have seen on Wall Street this year, and now reality is starting to set in

The Dow suffered its biggest drop since early September as investors reacted to reports that the Senate’s tax proposal would delay tax cuts for corporations for year, a development that pushes back a key part of the plan Wall Street was betting on to provide a boost to corporate profitability.

Reducing our corporate tax rate is very important, because right now we are not competitive with the rest of the western world.  Almost every other major industrialized nation has a much lower corporate tax rate than us, and that encourages major corporations to locate operations elsewhere.

So if we are able to reduce the corporate tax rate to 20 percent, that is likely going to mean good things for the U.S. economy and more jobs for U.S. workers, but unfortunately the Senate version of the bill would delay that tax cut until 2019

The top corporate rate would drop from 35% to 20% in 2019, a year later than it would in a revised bill approved Thursday by the House Ways and Means Committee. That change, which reduces the overall cost of the tax cut package, delays one of President Trump’s main priorities for overhauling the tax code, but administration officials did not seem concerned during a brief appearance with Hatch on Thursday afternoon.

And then if the Democrats take back control of the White House in 2020, they would probably jack corporate tax rates back up to where they were before, and so in the end the change would not make much of an impact at all.

Other than reducing the corporate tax rate, the Senate version of the “tax reform bill” does not actually accomplish that much.  The following comes from Zero Hege, and it is a good summary of what is contained in the bill…

  • 20% permanent corporate tax cut delayed by 1 year
  • Complies with the $1.5 trillion cost (will cost $1.44 trillion)
  • Preserves 7 tax brackets: top tax bracket is 38.5%, down from 39.6%
  • Doubles standard deduction from $12,700 to $24,000 (married couples)
  • Ends state and local tax (SALT) deduction; keeps business deduction
  • Keeps the mortgage Interest deduction cap at $1 million
  • Preserve the estate tax, doubling the current $5.49 million exemption for individuals
  • Raises the child tax credit to $1,650 from $1,000
  • Sets 10% tax rate for US companies with IP in foreign low-tax jurisdictions
  • Full expensing of capital investments for five years
  • Preserves 401(k)s IRAs,
  • Sets repatriation rate at 12% for liquid assets, 5% for illiquid assets
  • Carried interest loophole unchanged
  • Electric Vehicle tax credit is spared (good news for Elon Musk)

This bill also repeals the alternative minimum tax, and that is a change that has been needed for ages.

But overall, our members of Congress are simply rearranging the deck chairs on the Titanic.

We have the most abominable system of taxation on the entire planet.  I once spent an entire year studying our tax code, and at the end of that year I came to the conclusion that the best thing that we could do would be to throw the entire thing in a shredder and start over.

Today, the tax code is more than two million words long, and the regulations are more than seven million words long.  I used to have to lug these books to class with me, and that was not pleasant.  Our system greatly favors the wealthy, because they can hire lobbyists to influence members of Congress, and they can pay accountants and tax attorneys to find every single loophole possible.  Meanwhile, ordinary people like you and me always end up with the short end of the stick.

The next time you are talking to a politician, ask them to defend our current system of taxation.  None of them will be able to, because it is an abomination.

Ultimately, I would like to abolish the IRS and the income tax completely.  We did not have an income tax between 1872 and 1913, and it was the greatest period of economic growth in U.S. history.

Of course we would need to greatly reduce the size of the federal government in order to do that, and that might take a while.  So in the short-term we could go to a flat tax or a fair tax, both of which would be greatly superior systems to what we have right now.

Simply reducing rates a little bit and tinkering with the regulations is not going to fundamentally change anything.  Real tax reform means getting rid of our current abominable system entirely, and if I am elected to Congress that is precisely what I am going to fight for.

Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

Welcome To The Hunger Games: Trump’s Tax Plan Is Going To Mean A Battle Royal Among D.C. Lobbyists

Are you ready for mass chaos in Washington?  There are lobbyists for just about every cause that you can possibly imagine, and they are always working hard to influence members of Congress on their particular issues.  But when you are talking about a major tax reform bill, that is something that virtually every single lobbyist in the entire city will want to be involved in.  Our tax code is over two million words long, and the regulations are over seven million words long, and any changes to our immensely complex system could have absolutely enormous implications.  There will be winners and there will be losers with any piece of legislation, and lobbyists will zealously fight to defend the turf belonging to their particular clients.  Often lobbyists from different sides will literally be pitted directly against one another, and it won’t be pretty.  In fact, one analyst that works for Cowen Washington Research Group says that we could soon be watching “the corporate hunger games”

Almost every industry, special interest, and consumer group has an interest in the tax code, especially if the package ends up being as ambitious as Trump and Republican leaders want it to be. Chris Krueger, an analyst at Cowen Washington Research Group, told Business Insider that the battle over which loopholes to keep and which to throw out could get nasty.

“Welcome tribunes to the corporate hunger games!” Kruger said in an email. “Only one-sixth of lobbyists were involved with health care (give or take — assuming it is one-sixth of economy). Six-sixths of lobbyists are involved in taxes.”

There is so much at stake, and if the Republicans are able to get something passed it probably won’t look much like the plan that Trump originally proposed.  But it is so important to do something, because today Americans spend more on taxes than they will on food, clothing, and housing combined.  That is morally wrong, and we desperately need tax relief.

Trump’s tax plan would nearly double the standard deduction, and that would be a wonderful thing.  It would provide instant tax relief to working class Americans, and that is something that I would greatly applaud.

Trump’s tax plan would also great reduce the tax rate for corporations.  Our big corporations certainly don’t need the help, but we do want to get our rate more in line with the rest of the planet.  Because our corporate tax rate is one of the highest in the world, it actually encourages companies to set up shop some place else.  Being more competitive with the rest of the world would likely mean more jobs for the American people.

Trump’s tax plan would also reduce the number of tax brackets for individuals.  Instead of seven, now there would just be three tax brackets of 12 percent, 25 percent and 35 percent.  To me, those rates are way too high, but of course I would like to eliminate the individual income tax entirely.

Many are criticizing Trump’s plan for proposing to raise at least a trillion dollars over the next decade by getting rid of the deduction for state and local income taxes.  For those that live in very high tax states such as California, that deduction is a really big deal

High-income Californians, for instance, pay as much as 13.3 per cent of their income to the state in addition to their federal taxes. New Yorkers can pay up to 8.82 per cent.

Just seven U.S. states have no personal income taxes, including Texas, Florida and Nevada.

Hopefully the Republicans can pass some sort of tax reform in the short-term, because the status quo is definitely not acceptable.

When the income tax was first introduced in 1913, the vast majority of taxpayers were being taxed at a rate of just one percent.  The following comes from Politifact

The 1913 law imposed a tax of 1 percent on income up to $20,000, for both individual and joint filers. However, exemptions from the tax — the first $3,000 of income for individuals and the first $4,000 for joint filers — meant “virtually all middle-class Americans” were excused from paying, according to W. Elliot Brownlee’s book, Federal Taxation in America. The law also put in place a graduated surtax on incomes above $20,000; the highest rate paid, 7 percent, applied to Americans making more than $500,000 (about $11.4 million in 2011 dollars).

Today, Americans are being taxed into oblivion.  It has been reported that we spend more than 6 billion hours a year on our taxes, and I once wrote an article detailing 97 different ways that various levels of government extract revenue from all of us.

Every year government just gets bigger and bigger on the federal, state and local levels.  And the bigger government gets, the more oppressive it tends to become.

Personally, I would love to start starving the beast that the left has created, and a great way to do that would be to completely eliminate the federal income tax.

A lot of people could not even imagine a world without a federal income tax.  But the truth is that our country once thrived under such a system.  In fact, the greatest period of economic growth in U.S. history was between 1872 and 1913 when there was no income tax at all.

And we could do it again.  Today, the individual income tax only accounts for about 46 percent of all federal revenue, and if we reduced the federal government to a size that our founders would have wanted, we would be more than okay.

But even if we can’t greatly reduce the size of the federal government in the short-term, we can at least go to a very basic flat tax or a fair tax, and both of those systems would be far superior to what we have today.

If we can’t get a flat tax or a fair tax right now, we should at least try to dramatically reduce tax rates and simplify the tax code as much as humanly possible.

But if we do get a short-term victory, the battle is definitely not over.  In the long-term, we need to be very clear that our goal should be to abolish the income tax, the IRS and the Federal Reserve entirely.  Anything short of that is not good enough.

Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

The 9-9-9 Plan: Is The Herman Cain Tax Plan A Good Idea?

As he continues to heavily tout his “9-9-9 plan”, Herman Cain has seen his popularity soar.  But is the Herman Cain tax plan a good idea for America?  Without a doubt, the “9-9-9 plan” is simple and it is easy to remember.  To most Americans, it sounds like a low tax plan.  But is that the truth?  As you will see below, Herman Cain’s 9-9-9 plan will actually raise federal taxes on some middle income Americans to as high as 37 percent.  If the other Republican candidates understood this, they would be jumping all over Cain.  But instead the best that most of them seem to be able to do is to make jokes about it.  For example, Jon Huntsman said that he thought that the 9-9-9 plan “was the price of a pizza when I first heard about it.”  That is a funny line, but the reality is that the future of our tax system is very serious business.  Our economy is dying and our nation is drowning in debt.  We need some very real solutions to our very real problems.  So let’s take a closer look at the 9-9-9 plan that Herman Cain is proposing….

The one great thing about the 9-9-9 plan is that it would completely eliminate the current tax code.  That should be the starting point for any proposal for reforming our current system of taxation.

Under Herman Cain’s plan, all current federal taxes would be eliminated.  Social Security taxes would be eliminated, estate taxes would be eliminated and capital gains taxes would be eliminated.

All current tax deductions and loopholes would be eliminated as well.

So far so good.

Under the 9-9-9 plan, the current tax system would be replaced with a 9 percent personal income tax, a 9 percent business income tax and a 9 percent national sales tax.

Uh oh.

9 sounds like a low number, but when you add tax on top of tax on top of tax they can add up very quickly.  The truth is that some Americans would end up paying significantly more taxes under the Herman Cain tax plan.

Even Herman Cain is admitting this.  The following is what Cain said about his plan the other day on NBC’s Meet The Press….

“Some people will pay more”

So who will be paying more?

Will it be the those at the top of the food chain?

No, the reality is that the Herman Cain tax plan would represent a substantial tax hike for millions of middle income families.

According to ABC News, an average family of four with a yearly income of just under $50,000 (i.e. the median household income), would pay approximately $2,725 more to the federal government in taxes under the 9-9-9 plan.

Well, that doesn’t sound good.

That doesn’t sound like a recipe for economic recovery.

But if you are a middle income small business owner, the news is much worse than that.

Under Herman Cain’s tax plan, some small business owners could end up paying up to 37 percent of their incomes in taxes to the federal government.

Here is how that breaks down….

#1) First they would pay the 9 percent personal income tax.

#2) Secondly, they would pay 9 percent on all business income.  There would not even be a deduction for wages paid out.  This would hit some small businesses incredibly hard.  In fact, small businesses that have a very tight profit margin could be totally wiped out by this.

A lot of people have assumed that the 9 percent tax on businesses is only on corporations.  But that simply is not the case.

In a recent article, Paul Krugman of the New York Times explained what the 9-9-9 plan really says….

From comments I see that some readers believe that Cain’s second “9″ is a profits tax, which I’ve argued in the past probably falls on capital owners. But it isn’t: it’s a tax on all business income, defined as sales minus purchased inputs and dividends — but with no deduction for wages.

Ouch.

Okay, so now we are up to 18 percent for small business owners.

#3) The 9-9-9 plan also calls for a 9 percent national sales tax.  Of course the truth is that very few people will spend all of their money on things that the national sales tax is imposed upon, but theoretically this could add another 9 percent to an individual’s tax burden.

So now we are up to a potential total of 27 percent for small business owners.

The 9-9-9 plan would also make sales taxes absolutely crushing in some areas of the United States.  For example, it has been projected that once you throw in state and local sales taxes, some areas of the country could be facing a combined sales tax as high as 17 percent once the 9-9-9 plan is implemented.

Cain’s plan would also set the stage for a VAT tax to be implemented.  Many countries in Europe have already implemented a VAT tax, and quite a few liberal politicians in the U.S. have been eager to institute one here.

The potential dangers of a VAT tax were described in a recent article by Dean Clancy….

A VAT is a form of national sales tax that is collected at every stage of the process from the initial sale of raw materials to a manufacturer to the final sale of a finished product to an end-consumer. It’s the most insidious of all taxes, because it is built into the price of everything and consumers can’t see how much of the price is due to the tax. When taxes rise, prices rise, but consumers mistakenly assume that’s just market forces at work. Politicians love a VAT: it lets them take a lot more money out of our wallets. And VATs usually exist side by side with income taxes, not in lieu of them. Taxpayers should hate VATs for the same reasons politicians love them.

Politicians love “new revenue streams”, and once they get opened up they rarely ever get closed.

#4) Anyway, getting back to the main issue, so how do we get up to 37 percent for small business owners under the 9-9-9 plan?

Well, Herman Cain has also been heavily touting “the Chilean model” as a replacement for Social Security.

Under the Chilean model, all citizens are absolutely required to contribute 10 percent of all income to private pension plans.  Workers in Chile do not have the option to opt out of the system.

So if “the Chilean model” is adopted to replace the current Social Security system, that would mean that an extra 10 percent mandatory “tax” would be added on top of the 9-9-9 plan.

That would mean that many middle income small business owners could end up paying up to 37 percent of all of their income in taxes.

Is that something that you could afford to do?

When you add in state taxes, local taxes, property taxes and the dozens of other taxes that Americans pay each year, many middle income Americans would end up paying out over 50 percent of their incomes in taxes.

So much for a low tax plan.

So where in the world did Herman Cain get the idea for the 9-9-9 plan?

Well, there are some that are now claiming that he got the 9-9-9 plan from a video game.

Yes, seriously.

The following is an excerpt from a recent article in  The Daily Mail about the 9-9-9 plan….

Though he claims to have received the idea from a bank employee named Richard Lowrie Jr. in Ohio, observers are now questioning if the true inspiration is the tax code used on the SimCity video game.

The game, originally invented in 1989 allows players to plan and run virtual cities. The fourth version of the game, which came out in 2003, taxes players nine per cent for industrial taxes, nine per cent for residential taxes and nine per cent for commercial taxes.

Does that sound familiar?

Let us hope that this is not true.  Let us hope that Herman Cain did not get his tax plan from a video game.

But in any event, perhaps it is time to take a closer look at Herman Cain.

For example, did you know that he was once the chairman of the Kansas City Federal Reserve Board?

That is not a good sign.

As I have written about so many times, the Federal Reserve is at the very heart of our economic problems.

But Herman Cain does not intend to abolish the Federal Reserve.  In fact, he is very fond of the Federal Reserve.  He is on record as saying that a comprehensive audit of the Federal Reserve is not even needed.

The following is what Herman Cain once had to say about the need for an audit of the Federal Reserve….

Some people say that we ought to audit the Fed. Here’s what I do know. The Federal Reserve already has so many internal audits it’s ridiculous. I don’t know why people think we’re gonna learn this great amount of information by auditing the Federal Reserve.

I think a lot of people are calling for this audit of the Federal Reserve because they don’t know enough about it. There’s no hidden secrets going on in the Federal Reserve to my knowledge.

That is so sad.  There is a lot to like about Herman Cain.  But obviously his 9-9-9 plan is not well thought out, and he is a big time apologist for the Federal Reserve.

During the financial crisis, the Federal Reserve made $16 trillion in secret loans to the big Wall Street banks and to their friends.

That dollar figure is larger than the total value of all goods and services produced in the United States for an entire year.

If Congress had not passed a one time limited audit of the Federal Reserve we would have never learned about those loans.

So how in the world can Herman Cain claim that there is no need to audit the Fed?

Once again, there are definitely some things to like about Herman Cain, but when it comes to economics, taxation and the Federal Reserve, he is way out of his league.

So what is the alternative to the 9-9-9 plan?

The alternative should not be to go back to our current system of taxation.  It is broken beyond repair and needs to be abolished.

If we are going to tax income, we need a system that will be fair and not full of loopholes, that will not overly burden the poor, that will encourage businesses to stay in the United States, that will limit the size of the federal government and that will be easy to understand and implement.

But the truth is that until the federal government completely shuts down the Federal Reserve and the IRS we are going to be enslaved to debt and we are going to be paying much higher taxes than we should be.  We are operating in a debt-based monetary system which is designed to transfer wealth away from the American people.  We desperately need to change this.

It is entirely possible that we could have a system that did not tax income at all.  For much of U.S. history, that was the case in this nation.  It would certainly be possible to do it again.

So right now is definitely a time for some bold new ideas.

Unfortunately, the 9-9-9 plan is not going to be the solution to much of anything.

 

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