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Here’s the GOP tax plan…and it sucks if you live in New Jersey or California



The GOP has finally unveiled details of the “tax reform” plan coming out of the House Ways and Means Committee. Yay.

I use scare-quotes around “tax reform” because it doesn’t really reform much, but it does monkey with deductions, exemptions, tax credits and brackets. For many Americans on a paycheck it will put more cash into their pockets. But if you live in a high tax state like New Jersey, New York, or California, you might get soaked.

I’ll get to that in a minute…first, some highlights.

The top bracket will remain at 39.6%. They wanted to lower it but Democrats won the day here. As for deductions, the standard deduction nearly doubled from $12,700 (married) to $24,400, along the same lines as the head of household and single deductions. But the personal exemption of $4,050 will disappear. So, the question here is: will the added standard deduction result in a lower tax bill or not?

Democrats are claiming it will increase most Americans’ tax burden. But that’s been debunked. Apparently they only looked at Democrats in high tax states, not, you know, the whole country. The WaPo fact checker gave them the dreaded “four Pinnochios.” For shame.

Democrats are lying about Republican tax plan, says Washington Post fact-checker Washington Post’s fact-checker said Thursday that Democrats aren’t telling the truth when they say the Republican tax plan would raise taxes on most middle-class families. In an early Thursday morning story, fact-checker Glenn Kessler gave Democrats four Pinocchios for making that claim. Kessler noted that the data Democrats used to make their argument actually showed that taxpayers in each of the five income bands used in the analysis would see a tax cut, not a hike, and that the average cut would be $450 for 80 percent of families.

Less itemization

That all depends on if you itemize. With such a high standard deduction, some of the caps proposed to what used to be itemized deductions may cause more people to file a non-itemized return. That’s the “reform” part, I guess. Less work for Uncle Sam looking at the Schedule A and associated documents.

The big deal is a cap of $10,000 for property tax only, and no deduction at all for other state and local taxes. If you live in a high income-tax state, well, ouch. That part of the bill may not survive.

One way for Californians and other meta-socialist dwellers to get their deductions back would be to give more to charity. I know, Democrats would rather pay taxes and let the government give away their money, but charity is still completely deductible. That’s good news for Christians, who give the most.

For high-value home buyers, the interest deduction, currently capped at loans up to $1 million, will cut in half to $500,000. Meh. And the dreaded Alternative Minimum Tax (AMT), will go away. That’s bad for the super rich and their accountants. Again for the rest of us, meh.

No changes will be made to the $18,000 pretax deferral for 401(k) contributions. At least they didn’t monkey with our retirement (as if Social Security isn’t a 10-ton gorilla monkeying with our retirement, but that’s a different story).


Republicans Release Tax Plan, Cutting Corporate and Middle-Class Taxes compromise, as it had been sketched out this week, would preserve the deduction for property taxes, but not for state and local income taxes, and it appeared as if there would be a cap on the deduction. But at first glance, it did not appear as if that was enough to win over all of the New York and New Jersey members.

What the Republican Tax Plan Means for You – WSJ highlights include lower rates for many individual households but not the highest earners; fewer individual tax brackets; a larger standard deduction for households who don’t itemize their tax bills; trimmed-back deductions for state and local taxes; eventual repeal of the estate tax; and much lower rates for corporate profits and profits for individuals on unincorporated business income.


Final thoughts

The real question here: Is the GOP tax plan better than doing nothing? In government, doing nothing is almost always better than doing something, since legislators tend to screw up everything they do. The less they do, the less to screw up. But in this case, the jury is still out for me. Personally, it would likely be a wash. I don’t make enough money to be affected by the high tax bracket and AMT issues. I don’t live in a relatively high-tax state (Georgia isn’t Florida, Texas or New Hampshire, but it’s not New Jersey either). The rest of the changes might put some cash in my pocket–or not.

I think it’s a good start. But the more these things get kicked around, the more they get turned into rotting fly-infested carcasses that don’t resemble the thing they were supposed to be. This is why the jury is out…we may yet find out that doing nothing was the right move.

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1 Comment

1 Comment

  1. Jan

    November 2, 2017 at 9:13 pm

    We will have to do our taxes to tell if this a tax cut or not.

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House passes tax cuts



House passes tax cuts

By a 227 to 205 vote, the House passed the GOP’s tax cut package. That was the easy part. Now they have to try to pass a tax cut in the Senate.

If they can pull it off, it would be the first major piece of legislation Congress has been able to put on President Trump’s desk since he took office. After failures with Obamacare repeal, passing these tax cuts is an absolute must. It doesn’t matter whether it was rushed, sloppy, or directly contrary to many traditional Republican policies. They need a bill signed before heading into the 2018 midterm elections.

Watch Speaker of the House Paul Ryan make his plea before Congress:

Further Reading

BREAKING: Voting Results Are In From Tax Reform Bill Vote House of Representatives passed a massive tax reform bill on Thursday aimed at cutting taxes for businesses and individuals, which is a major step in the Trump administration’s effort to overhaul the tax system.

The bill, which passed with “227 votes in favor and 205 against,” had to survive opposition from several House Republicans as 13 of its members ultimately voted against the plan.

House Passes Tax Bill ago, the House passed its version of tax reform, which expands the standard deduction, shrinks the amount of individual tax brackets from seven to four, and cuts the corporate tax rate from 35 percent to 20 percent. The vote was 227–205, with 13 Republicans voting against the bill and no Democrats voting for it.

All but one of the Republicans who voted against the bill represent California, New York, or New Jersey, states with high income-tax rates whose residents could be affected by the elimination of the state-and-local-tax deduction. The onus now falls on the Senate to pass its version of tax reform, and on Republicans to negotiate the differences between the two bills.

House easily passes $1.4 trillion tax cut Democrats backed the bill.

“This is the most irresponsible bill I will have been confronted with in 37 years,” said Rep. Steny H. Hoyer, a Maryland Democrat who said the massive deficits — as much as $2 trillion, when interest costs and other extensions are included — are a betrayed of what Republicans have long argued for

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Ron Johnson opposes tax plan, says it favors corporations over other businesses



Ron Johnson opposes tax plan says it favors corporations over other businesses

Senator Ron Johnson has a point. He’s the first Republican to officially declare his opposition to the Senate’s tax plan, citing evidence the plan greatly favors corporations while continuing with oppressive taxes on sole proprietorships, limited liability companies, S corporations, and partnerships whose owners pay taxes based on individual income tax rates for the owners rather than the corporate rates.

In an interview with WSJ, Senator Johnson was clear with his opposition to the plan:

Republican Sen. Ron Johnson Opposes GOP Senate Tax Package“If they can pass it without me, let them,” Mr. Johnson said in an interview Wednesday, adding that the plan unfairly benefits corporations more than other types of businesses. “I’m not going to vote for this tax package.”

In addition to his concern about the details of the Republican proposal, he also complained about a process that he said has been closed to his input and also misleads the public about the nature of the tax overhaul.

“I don’t like that process,” Mr. Johnson said. “I find it pretty offensive, personally.”

The Senator from Wisconsin is correct in his assessment. This makes one wonder why GOP leadership didn’t take this into account before they started promoting it as a pro-growth plan. The majority of businesses in America will not qualify as true corporations and therefore will not receive the big tax breaks promised by its champions. In fact, many businesses will end up paying more under this plan.

Could it be that the GOP simply hoped nobody would call them out on this little detail? Yes. Though the number of businesses that qualify is lower than the number that don’t, the corporations that do qualify employ more total Americans. This means that when viewed through a lens of overall economic growth, it’s still a beneficial plan for most Americans in that it will increase the number of jobs available and make room for increased wages. Nevertheless, the millions of Americans who will be hurt by this are not an insignificant minority.

Can it be fixed? Probably not. To do so would mean reworking a huge chunk of the overall bill in order to keep it from being so massive of an overall revenue cut that the government would run into shortfalls. Of course, they could always cut expenses rather than passing a massive budget, but that doesn’t seem to be on the GOP’s agenda anymore. Perhaps it never was.

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Progressives’ new ‘state bank’ as the rocky road to serfdom



Why does a bank robber rob banks?

“Because that’s where the money is.”

Or so goes the legendary response by the infamous bank robber Willie Sutton (who later denied ever saying it).

So why is the new progressive Governor-Elect of New Jersey (a former Obama Administration Ambassador to Germany and Goldman Sachs executive named Phil Murphy) proposing a “state bank”?

Why, maybe that’s because taxpayers are where the money is?

Can Gov.-Elect Murphy Make a Go of His Public Bank? – NJ Spotlight Phil Murphy often told a story on the campaign trail about how, as a relative newcomer to statewide politics, few people in New Jersey had even heard of him before he jumped into this year’s governor’s race. After his victory last week, the same could be said about one of Murphy’s core fiscal-policy proposals — a plan to launch a state-run public bank in New Jersey. The type of financial institution envisioned by Murphy would take state-government funds now deposited in accounts with large commercial banks, including those based overseas, and use them to back low-interest loans that would serve the public’s interest in New Jersey, including student debt, infrastructure investments, and small-business lending.

New Jersey already has the third-highest state and local taxes in the nation (behind only its neighbor New York and nearby Connecticut), thanks to a double whammy in an income tax and high property taxes generally credited with supporting the largesse of generous salaries and benefits for legions of public-sector employees.

One problem is where that state bank will get its money. The progressive Governor-Elect Murphy declares, “That’s our money!” Yet there is no thought to returning it to overtaxed taxpayers — not when there’s votes to buy and a money pot whose bottom is not yet visible. Because when Murphy and his progressive do-gooder allies use the first-person plural pronoun, they are referring to the government and not the people.

As politicians in the bluest of the blue states learn that promising endless “free” stuff, particularly when it’s paid for by political opponents and disfavored constituencies, is a recipe for getting elected, perhaps attacking liberals and progressives for wanting to raise taxes will no longer be a winning campaign argument. Not when many voters are net recipients of government monies, meaning, they simply don’t pay taxes. However, a “state bank” could cause numerous undesirable effects beyond taxes to infinity, beyond encouraging inflation.

Consider how banks work, and then consider the very premise of Murphy’s “state bank” is that it would step in where greedy conventional for-profit banks supposedly fail “to serve the community.” The suspicion here is that the state bank will be giving “low-interest” loans to people or businesses which otherwise are not getting loans on the terms they want, or at all.

When you seize the money earned and saved by the homeowner with an 800 FICO score, to underwrite a loan for his deadbeat neighbor in foreclosure who’s got a 520 FICO score, you aren’t being generous or compassionate. You are creating a moral hazard, and an immoral condition.

The second problem arises from a fundamental misunderstanding of — no, it is a fundamental disregard for — how a conventional bank works. A bank makes loans, because it makes money off the interest. It must put the capital to use. However, there’s the risk of nonpayment, of borrower defaults. Banks “fail” when they suffer too many nonperforming loans. No one wants to talk about this, because it involves acknowledging that the collateral is bad, that the bank made a mistake, that it issued a mortgage worth more than the underlying collateral to a bad credit risk on even worse terms (like the infamous no-income-no-assets-no-problem mortgages).

The lesson of the last decade’s housing bubble and nonperforming mortgages (of which many still are on the books of the largest lenders) apparently is going to be ignored for as long as there is a large supply of “marks” available to shoulder the eventual burden. So we can expect that the New Jersey state bank — and its copycats in other states, of that you can be certain — will soon start making bad lending decisions to borrowers of either questionable credit risk or otherwise connected to various “social justice” initiatives.

Then, when the loans start to “go bad” and go into default, you can expect the state bank to start playing “winners and losers” when deciding whose collateral to go after. Your car dealership may be seized, while the marijuana farm may be allowed forbearance on its defaulted loan. And just think what mischief can be made by politically-connected local prosecutors who can use their “discretion” to choose whom to investigate and prosecute, all to serve a progressive political agenda whose singular goal is to transform the society.

Taxpayers across America should shudder at the thought of government-run banks. Because those banks would be deploying our capital, raised from taxes and from government debt, often sold to foreign bond buyers like the Russians and Chinese. But without the nasty profit motive — which in plain English also amounts to old-fashioned accountability to savings account depositors like you and me — to ensure loan officers only make loans most likely to be repaid, the state bank is likely to accomplish only three things.

A new set of winners: tomorrow’s sellers of assets at inflated prices due to the availability of new credit for car loans, home loans, college loans and small business loans, often with no regard for the terms or creditworthiness of the borrower (and perhaps little to no expectation of repayment).

A new set of losers: Since the premise of a state bank is, we are told, to serve the poor and often first-generation immigrants or members of traditionally-underserved “minority” communities, we can expect the debt and wrecked credit scores from defaulting loans to be shouldered by these same groups. Tomorrow’s college students may be in greater debt than the current generation’s. More people may end up renting, as bad credit is no guarantee of affordability against inflated and rising home prices.

The result? Another generation headed for practical indentured servitude. The difference? This time, the lender will be the government.

A second set of repeat losers: These will be the owners of anything which can be indirectly collateralized to cover those loans. We’re talking property owners and the middle-class income producers. Future tax streams can — and in all likelihood must — be “securitized” to cover delinquent loans.

Again, the party able to place liens on stressed property owners for unpaid taxes? The government.

The rich white guy ex-Goldman Sachs may be able to escape checking his privilege while playing Robin Hood. The reality is that he’s playing the Pied Piper, but only as long as he plays the tune called by his decidely unmerry band of progressive, envious knaves, rejects and scalawags who now threaten to turn New Jersey today — and your state tomorrow — into a land of serfs beholden to the do-gooder lords of the manor.

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