"The greatest good for the greatest number."
The Trump administration's new tax system revamping has been unveiled. Although lacking in critical details ... probably on purpose ... it nonetheless is causing considerable dyspepsia. In particular the proposed removal of state/local tax deductions and the reduction in the highest rate are the center of most complaints ... see: NY Times Article
Trump's financial guru Gary Cohn was explaining this administration's new tax reform proposal to the media recently and I was struck by one of his comments. The press asked him its standing question, "Can you guarantee that under this new plan no middle class American will end up paying more taxes?" Cohn, to his credit, said no ... there were no such guarantees. Some bizarre set of financial circumstances might cause someone to pay more, but the vast majority of middle-income Americans will end up with more money in ther pockets. And the top 1% would likely be paying more.
However, color me skeptical. Somehow it is difficult to imagine that two Goldman Sachs alums (Cohn and Mnuchin) would so help out middle America without cutting generous vig for their old bosses ... perhaps by the killing of the Alternative Minimum Tax (AMT). Actually, I have in the past suggested a variant of an AMT in which all deductions could only reduce the effective tax rate by a few percentage points. This way Congress would not have to pick winners and losers among the current litany of popular deductions.
For me, the acid test of this new tax reform will be if it scuttles the unfair "carried interest" tax rate that has made so many hedge fund managers multi-billionaires. If it stays, then Wall Street Titans are once again pretending to be altruistic while buying their many Hamptons' mansions.
5 comments:
Here is another vote for eliminating carried interest.
Show us your damn taxes!
Ask Lois Lerner ...
In the 1950's a third of federal tax revenue came from Corporations. In 2014, despite record profits, Corps account for 9% of total revenue. Further cutting their share is not tax reform.
Corporations with overseas operations transfer costs to domestic operations and profits overseas. This means that many large multinationals have low or zero tax rates. The ones getting screwed are non-multinationals (mostly small to medium companies). Lower corporate tax rates will benefit the latter companies ... the job creators ... and may encourage large multinationals to recognize more profits domestically. So there is a reason to create a more favorable corporate rate overall. The number should grow much higher than 9%"
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