Author: Jay R. VanOrman
First off, let’s make sure we are talking about apples and not disguised bananas. I’ll be using numbers from these documents to make my points, and refer you to them for further understanding. What I’m looking to do here in this article is to make my arguments for tax reform, and why it is a difficult thing to get through the swamp of Washington DC.
To me the originators of this tax reform plan put for by president Trump; Steve Forbes, Larry Kudlow, Steven Moore, Art Laffer, are all my economic heroes. I believe what they say, as they speak the truth, and have been right every time since the late 80s when I first saw Mr. Kudlow on CNBC TV. They created this plan with growth being a fundamental part of the process. If any of you haven’t noticed, America’s population continues to grow larger, and if growth is not part of any tax plan, we will keep seeing more and more people left behind, living on the streets because there are not enough jobs to keep everybody working on their own American Dream. Zero Growth policies mean that anyone that turns 18 needs to move away, because there will be nothing for you where you grew up. You’ll need to wait for someone to die to start your life.
What we have had thrust upon us since the beginning of the Great Recession are policies that limit growth in the most egregious manner. In the name of efficiency we have had Too Big to Fail, Targeted Asset Relief Program, which kept broken banks afloat, who then turned around and made themselves even larger. Small businesses had a hard time making payroll, as the only banks with money, had money because of the government throwing billions of dollars at them. But instead of helping stimulate the economy, these too big banks bought up other banks, so the money went to shareholders, not small businesses that needed lines of credit to help when accounts receivable are not quite keeping up with accounts payable. Wall Street did fabulously well, while Main Street was dying on the vine. So stock markets look great, but you drive down any small town’s main drag and you saw so many empty store fronts. Zero Growth and high tax/high regulation policies in liberal/Democrat controlled cities exacerbated these problems.
What we saw as a result were homeless people who had lost jobs, then lost hope, because there was nothing available that could make up for the losses incurred. Obama phones sound like a nice idea, until you have to either make a smart phone plan payment or eat. Too many people lost out on jobs because of the poor choices they were left with. Eight years of Obama’s failed policies left US with a population growing faster than 2%, but economic growth barely able to meet 2% growth on any consistent basis. We may not have been in a recession technically, but we were not doing enough to get people back to work in any meaningful manner.
While this economic malaise was eating away at America’s vitality, record tax receipts by the government kept congress from having to do any heavy lifting of reforming the damaged system of taxation. Yet, deficits continued to outpace tax receipts. This by definition is the picture of unsustainability. Many people have argued with me that all we needed to do was either print more money or sell more government treasury bonds. I always asked them, what keeps those outside entities buying these securities? What will happen when they decide they have had enough US government bonds? I never got an answer. They were assuming that there would always be a buyer. I try not to make assumptions like that.
Congress being what they are, it took this long before president Trump could even begin to put forth his plan to congress. Until the 1st day of this month of October, 2017, this has been a federal budget signed by president Obama. We have had a continuing resolution keeping government open to now.
A large sticking point with some members of congress on the Republican side arises from eliminating the deduction of state and local taxes from the federal tax. If you refer now to the two linked provided in this article, you can simply multiply the standard deduction on the second page of the Form 1040 pdf by two. If you only earn money like me, and not like a person in the 1%, this new doubled standard deduction will more than offset this loss of a past deduction. My mortgage is nearing the point where the interest payments and any other items that I could deduct, were nearing any possibility of me being able to write them off. So my future refunds would be likely greatly diminished. My only hope to reduce my current tax burden by throwing as much money allowed under current rules into any tax deferred retirement account. I honestly don’t know if I could do that, and still pay my current bills, all while being forced to maintain a Zero Deductions on my I-9 form; where the government takes the maximum amount from my paycheck.
If you live in a state like I do, that has an income tax, and you are currently able to deduct that, please use the links provided and see where your tax situation falls, if doubling the standard deduction will allow you to keep more of your money.
House chair of the Ways and Means committee Kevin Brady, seems to want to end that tax deferred status. While I now have any retirement money going into retirement accounts on a post-tax basis, I do not think that this should be taken from everyone. Some people are better able to take advantage of these tax rates than I am. I cannot add more monies to the retirement accounts to reduce my taxable income to a lesser bracket now, and after retirement I want to have to pay as little tax as possible. But that’s me; you choose what’s best for you. I just don’t think your choices should be eliminated.
Before I finish writing this, I would like to touch upon the repatriation of capital by US corporations in overseas accounts. You should know by now, that many American companies leave their foreign profits outside the US for tax purposes. I would not want to repatriate any profits I made overseas, after paying foreign taxes only to have Uncle Sam take another 39.6% away. That just seems to be the prudent fiduciary responsibility of a company to its shareholders. But president Trump’s tax reform plan seeks to repatriate these monies to the US under more favorable conditions that now exist. This will make it easier for companies to invest in new plants and employees inside the US than current federal policy allows.
I would be in favor of taking the repatriation tax, and putting it all into domestic infrastructure development. We are going to need better roads and bridges in the future as growth demands more out of existing infrastructure. I think this would be an easier sell than making the gas tax higher. I fear any increase in the gas tax will be absorbed by bicycle lanes and other feel good spending, and not help our weakened roads and bridges one whit.
One last thing; once you have determined what will be your tax situation let your congressman know about how tax reform will impact you. I think they have their ears open to this subject right now.
Author: Jay R. VanOrman
I earned a bachelor’s degree in English shortly before my 50th birthday. I have enough science credits, that if they gave them, I could have had a BS in English. I try to play well with others, but I aim to be a good man, not a nice man. I normally think outside the box. I’m a Navy veteran, and I do for a living what they once trained me to do.