tax cut

Senate Release Its Own Tax Plan; Wants to Delay Corporate Tax Cuts

The GOP Senate released its own version of a tax reform plan with a few differences from the House version. The most notable example is a one-year delay on cutting the corporate tax rate from 35% to 20% — meaning that the tax change would not take affect until 2019.

Their rationale is that the cost of the marginal cut would save $100 billion in costs. One drawback, however, is that companies would likely just sit and wait to make major changes and business decisions. This would certainly delay economic recovery.

In another departure from the House, the Senate bill would eliminate the deduction for state and local taxes (SALT), a move that is positive, yet affects states with high taxes. This was originally in the House bill, but after pushback from places such as New York, California, and other high-tax states, the House modified the deduction to allow a cap of $10,000. This full elimination is really what needs to happen; it puts all taxpayers around the country on a level playing field, especially if it helps to reduce federal tax rates across the board.

The House and Senate also differ in the estate tax. While the House has a plan to repeal the estate tax entirely by 2024, the Senate plan does not. Instead, it will only target a select few taxpayers, by doubling the size of estates that are exempt from being taxed. The estate tax is a punitive tax and really should be eliminated; the House form is much better.

Finally, the Senate bill would lower the top marginal rate by 1%, to 38.5%. While a slight reduction is better than none, neither bill version goes far enough. The final tax reform plan must include a return to at least the Bush tax cut rates (35%) if Congress is serious about really jump-starting the economy.

It will be interesting to see what the final form takes. A true tax reform bill, like the IRC code reforms of 1986, are long overdue. The taxpayer deserves a cleaner, more streamlined tax code.

The Payroll Tax Cut, er, Increase

by | ECONOMY, HYPOCRISY, TAXES

Other pundits are writing about tax cuts and wondering how aloud how the Republicans vote against a tax cut. The answer is simple: the temporary payroll Social Security tax reduction is not, never was, and never will be a tax cut.

There are many ways to look at the 2% reduction in the Social Security tax that is being collected. But effectively, it is no more than a spending increase all dressed up to look like a tax cut. The cost to taxpayers was $120 billion dollars. Congress simply decided to put more money into the hands of the lower and middle class. Rather than write a check, they made the 2% payroll decrease on the Social Security tax collection rate so workers could see a tangible benefit in their paychecks. But because it is temporary, and because it is limited, it has none of the effects of a true tax cut. As it’s been shown in history, most recently with the Making Work Pay tax credit for example, such temporary items have none of the stimulative effects on the economy. It served no purpose other than to create political turmoil among voters, party lines, and taxpayers.

What’s worse, no one is talking about the fact that the Democrats plan to pay for this holiday and its proposed extension ($265 billion), by levying a surtax on successful Americans earning over $1 million. This is legal plunder. It is redistribution of wealth at its core. Our government borrowed money directly intended for the Social Security Fund, and now wants someone else to pay for it. The so-called tax cut is really a net tax increase on the very Americans who are most responsible for job creation in this country. Just the effect of debating this nonsense in Washington continues to stifle businesses and harm our economy.