It is utterly laughable that Amazon has announced that the New York City metropolitan area is among the final potential locations for Amazon’s second headquarters.
New York’s Governor Andrew Cuomo is consistently anti-business, with burdensome regulations that are tort lawyers dream, always in the top three of highest taxes in the country, a Tax Department renown for its invasiveness, and consistently threatening to raise taxes on his most successful constituents.
Mayor Bill de Blasio of NY City is practically a self-proclaimed socialist. He has stated “xxxxxxxxx”. New York City has its own set of Corporation, S Corporation, partnership, LLC, and individual taxes that is added on top of the State level taxes. Many of these taxes were originally intended to be temporary decades ago, but have never been allowed to expire. It is so expensive to operate in NY City, that virtually all viable businesses exist solely to service NYC individuals and entities that are located there. NY City is also consistently ranked as one of the worst states to do business, coupled with the highest tax burden in the nation.
It appears that the only possible reason that Amazon could be interested in NY City is that it has extraordinarily liberal/socialist executives. If that is the case, investors in Amazon may need to watch out!
Governor Cuomo has come out blasting the new tax law, and in particular the substantial reduction in the deduction for State and Local Taxes (“SALT”), as unconstitutional and an “attack only on blue states.”
But everybody who has any knowledge of taxation and its constitutionality knows that Cuomo’s assertion is ludicrous. The SALT deduction – and ALL deductions – are at the complete discretion of Congress. And as long as deductions apply under the same rules to every taxpayer no matter where situated, constitutionality can never be an issue All the Governor’s raving does is show that he and his entire staff are either totally clueless, or they know that their statements are total nonsense, but think so little of voters that they can be fired up with something that is utterly phony.
If Cuomo is concerned about what is devastating to New Yorkers, it is astounding that he is objecting to this law and yet he did not object to other tax issues in the past that clearly targeted his constituents. Despite acknowledging the very bad effects of high taxes on New Yorkers, Where was Cuomo’s concern when:
1) the federal government (Obama) raised taxes on capital gains by almost 60%? 2) the federal government raised the regular rate by 25%?
Furthermore:
1) Cuomo reneged on his campaign promises and kept income tax rates on New York’s high income earners outrageously high, 2) he continues to hide from his constituents that his tax law already denies New Yorkers some or all of their deduction for SALT. 3) he continues to hide that NY tax law also denies middle and high income earners significant parts of the charitable deduction as well, buried so deep that most New Yorkers are not even aware they are being fleeced. 4) as a final point, a New Yorker who dies leaving $10 million to his heirs would now pay no federal estate tax – but he would owe $1.06 million to New York State.
But now Cuomo is bothered by the elimination of the SALT deduction in New York? He was AFFIRMATIVELY IN FAVOR of all of these past provisions, which have been devastating to his constituents for some time. Cuomo’s sudden compassion is complete hypocrisy.
I am very glad the new Tax Cuts and Job Act is now law. With ongoing work reforming and reducing regulations, the tax bill will spur economic growth, and get people to understand the importance of reducing marginal rates. On the corporate side, the huge rate reduction (from 35% to 21%), move to territorial taxation, and expensing of equipment, is a home run. However, on the individual side, Congress allowed politics to get in the way of real reform, and that is inexcusable.
Without any discussion, Congress eliminated the deduction for miscellaneous itemized deductions. This is truly the only legitimate deduction, and it is absolutely necessary to maintain the integrity of the tax code. It gives people the chance to write off expenses incurred to allow them to earn the income they are taxed on. For instance, under current tax law, a person who earns $100K in a venture but had to pay $30K for legal fees to get it, would be able to pay taxes on only the $70K net that was actually made. With the new change now removing the miscellaneous itemized deduction, the person will have to pay taxes on the full $100K!
Another deduction Congress removed summarily is the moving deduction. Similar to the miscellaneous itemized deduction, this is a real and actual expense that is incurred when moving to get a new job (in order to earn the income that will be taxed.) It was removed from the tax code without discussion, and should not have been.
The casualty loss deduction was also eliminated. This enabled you to deduct a loss that was due to a sudden, unexpected event, such as a fire, hurricane, or robbery. Now, if your house burns down, you can no longer write it off. The exception to this change is if your loss is in a federally-declared disaster area. So if your house burns down, you get no deduction. But if it burns down in a large wildfire that was declared a disaster, you can claim the deduction. This is egregious; the effect on the individual — the loss of a house — is absolutely the same. This deduction elimination is unacceptable.
Furthermore, the alimony deduction was thrown out. The alimony deduction is a mechanism that prevents an inequitable tax burden to be created when a married family unit is split into two. It is inequitable and mean-spirited to create a targeted tax burden on people who suffered a family breakup.
While eliminating these important and equitable donations, Congress left in place a number of purely political, social engineering deductions and credits. Congress left in a substantial part of the mortgage deduction, which is really nothing more than a government subsidy to the real estate industry. They left in energy credits, rehabilitation and low income housing credits, and the Alternative Minimum Tax (AMT). It’s disappointing to see Congress talk about simplicity, efficiency, and equitability, and then remove good provisions from the tax code while leaving in parts that are merely political.
Everyone talks about how true reform of our tax laws should have three goals: 1) equitable; 2) efficient; and 3) simpler. In doing that, many have argued for removing the individual mandate, but at the same time have left in things like charitable deductions, SALT, and the mortgage deduction. This is ludicrous. With those three concepts above, the other provisions need to be addresses, as they are not equitable, efficient, or simpler — they are political. To leave them in, while removing the individual mandate, is illogical.
Richard Rubin makes some major errors in his summation of burgeoning tax bill. He uses a scenario of five people and goes through how they would be affected by the current proposed legislation. However, he does not get his calculations correct. He’s comparing apples and oranges. He’s also not looking at the reasons for the tax law changes and if the changes make the tax law fairer. He’s only looking blindly at how the tax law changes affect the current tax burden of the people. Rubin should have run his article by a real tax accountant before he published his account. From the article, under the GOP plan: “The executive would pay $868,000 in taxes. The manufacturer pays $704,400, but might be able to argue her way into a lower bill. The passive business owner pays $576,000. The dividend-earning investor pays $476,000. The heir to the estate pays nothing. The manufacturer, the estate and the passive owner all get big tax cuts from the GOP plan. The investor and the wage earner generally don’t.”
Now, in this scenario, Rubin doesn’t explain that the the first person — the executive — would remain unchanged; His tax rate is 43.4%, which is a 39.6% rate + 3.8% medicare tax. The manufacturer’s lower tax bill has to do with how flow-through businesses do things, because they are not a corporation. The passive business owner is changed because he pays a new 25% tax rate + the 3.8% medicare tax. The dividend investor pay the $476,000 because he pays 23.8%. It’s a dividend tax. However, what Rubin does not explain is that the dividend investor already paid another tax, a corporate tax, before the dividend was issued. That part of the tax law remains unchanged, and the investor remains unchanged.
The heir to the estate doesn’t pay any taxes because it is not income. Never has an heir paid an estate tax, because it has already been paid.
Rubin is essentially trying to be provocative here by using a $2 million base figure as a means to show a great difference in numbers, when really, this random list of five people makes no sense. The comparisons don’t really compare, such as including some things that are not income items. Rubin needs to be more careful with his writing.
While we’re on the subject of tax reform, one particular item that could be included in the package is the elimination of the individual mandate. Since SCOTUS classified the penalty as a tax, it is one that can be repealed as part of the reform, and would produce an estimated savings of $338 billion over 10 years, according to current CBO figures.
Eliminating the individual mandate would not affect Medicaid or pre-existing conditions; it would simply allow taxpayers to have the freedom to decide if he or she wants to forego insurance without being penalized (taxed) for their choice. According to the Wall Street Journal and IRS data, more than 90% of households who paid the “individual shared responsibility payment” (tax) earned less than $75,000. The tax is essentially a tax on the poor.
Republicans would be wise to repeal the mandate, ease the tax burden on taxpayers, and use the savings gained within the rest of the tax package to strengthen other parts of the reform proposals and provide meaningful relief for all taxpayers.
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 Wall Street Journal has done a nice roundup of the October Jobs Report released a few days ago. U.S. employers hired at strong rate in October, reflecting a sharp bounce back from September, when payroll growth slowed in the wake of hurricanes striking the southern U.S. Meanwhile, the unemployment rate fell to a new low for this expansion. Here are some of the key figures from Friday’s Labor Department report.
UNEMPLOYMENT RATE
The jobless rate last month edged down to 4.1%, the lowest reading since December 2000. That low rate, however, reflects that fewer Americans were working or seeking work during the month. The labor-force participation rate slipped to 62.7% from 63.1% in September. The prior month’s reading was the highest in years—and the participation rate slipped in October back to a level recorded this spring.
JOBS
U.S. employers added 261,000 jobs to payrolls in September—the best pace of monthly pace of hiring in more than a year. Employment rose sharply in food services and drinking places, mostly offsetting a decline in September that largely reflected the impact of hurricanes Irma and Harvey, the Labor Department said. Hiring last month also improved in business services, manufacturing and health care.
WAGES
Average hourly earnings slipped by a penny to $26.53 in October. It was disappointing showing for wages, which had appeared to break out the prior month. From a year earlier, hourly pay rose a lackluster 2.4% in October. Many economists are waiting to see wages rise at a faster pace given the historically low unemployment rate.
UPWARD REVISIONS
Payroll growth was significantly stronger than previously estimated in recent months. Upward revisions showed 90,000 more jobs were added to payrolls in August and September than previously reported. September hiring was revised to a gain of 18,000 from an initial estimate of down 33,000. That keeps intact the longest stretch of consistent job creation on Labor Department record.
UNDEREMPLOYMENT
A broad measure of unemployment and underemployment known as the U-6, which includes people stuck in part-time jobs and others, was 7.9% in October. That was the lowest monthly reading since 2006.The rate has been declining this year in concert with the narrower unemployment rate, known to government statisticians as the U-3.