Profits just a little bit sweeter

By: 
Ethan Stoetzer

Newsplaining Column: Normally, it’s redundant and excessive to talk about something that seems like its over and done with, but as this 2017 session of U.S. legislating has shown, just because something seems to be hazardous to a majority of the population, or just plain over and done with for that matter (in reference to the several rounds of senate healthcare bills that did not have enough votes before they went to the senate floor but were presented for a vote anyway), doesn’t mean it can’t still become a reality.
Last week, at a rally in Indiana, the Trump Administration reaffirmed his and the GOP’s commitment to tax reform with a vague verbal unveiling of an itemized list of reforms rather than an example of in-depth legislation, as would most likely be warranted, considering the complexity of the American tax code.
Since that time, think tanks, journalists and budget calculators have estimated that the “reforms” would inevitably lead to adding approximately $5.6 trillion over the next 20 years to the national debt (for perspective, according to Reuters, the Iraq War of the 2000s cost roughly $2 trillion, plus $490 billion in benefits to veterans). Already, it seems that Kentucky GOP Senator Rand Paul is against the proposal, making comments to media that the plan raises taxes for too many of his constituents, while Tennessee GOP Senator Bob Corker has said that he will not vote for a plan that “adds one cent to the deficit.” With the GOP still without a 60 seat majority in the senate, it cannot afford dissenters to the legislation this early in the process. Normally, this could be considered as good as dead, but as the American people have seen with a heated summer over healthcare tensions, just because senators dissent against legislation doesn’t mean the GOP will back down from a bad or failed bill. So this week, I’d like to elaborate a little on what’s included in the reform package, in case this gets further than it should in the legislative process.
First and foremost, the tax reforms cut the corporate tax rate from 35 percent to 20 percent, while capping the pass-through corporate tax rate at 25 percent (down from the average rate of 39.6). What this leads to is a tax cut to households in the U.S. making at least $732,800 (a cut of approximately $129,030). For the 0.1 percent of Americans who make over $3.4 trillion pay year, the tax break is equivalent to approximately $722,000 — all according to the non-partisan Tax Policy Center.
For middle class families and low income individuals, the results are the exact opposite.
Middle class households, (earning $48,600 to $86,100 a year) would get a tax cut of $660, equivalent to a 1.2 percent income boost. For the poorest fifth of Americans, who earn $25,000 or less, the tax cut it only approximately $60. For households with an elevated income beyond middle class classifications ($216,800 and $307,900) a tax increase would occur by approximately $3,000, thanks to the plans elimination of most itemized deductions for state and local taxes.
Besides those large figures, the tax policy boils down to the following principles.
Those who earn the least in the country would go from paying a 10 percent rate to paying a 12 percent rate, which is part of decreasing the seven tax brackets to just three brackets (12, 25 and 35 percent) for individuals.
Deductions for individuals would double to $12,000 for individuals and $24,000 to married couples, as an effort to have low income Americans end up with a 0 percent tax on income. There would also be an increase in the child tax credit of approximately $500, as well as a tax credit for those taking care of others who would not be classified as dependents.
Next to the lowering of the corporate tax is the removal of the estate tax (the tax on estates passed from the deceased to a living relative), as well as the removal of the alternative minimum tax.
For the first five years of the plan, companies would be able to right off investments the exact year they are built, rather than over a larger period of time at a lower rate.
Now, these aren’t the details of the entire plan, though for an administration that campaigned on rewriting the tax code, we could have expected some more in-depth numbers and formulas, as well as compensating spending plans to balance out the figures.
First and foremost, according to the Pew Research Center, only 24 percent of Americans, Democrats and Republicans, think that a corporate tax cut is needed. Now, I’d be willing to negotiate a corporate tax cut if cutting the pass-through loophole was removed. Currently, corporations like Donald Trump’s corporate empire are built like a pass-through business, when it was originally only meant for mom and pop shops and small businesses, to avoid paying higher taxes on less income. The tax code currently allows large corporations to file as Limited Liability Companies (LLCs), completely bypassing that 35 percent corporate rate and paying just one flat rate of approximately 39 percent. If the loophole was cut, then a decrease in the tax to 20 percent would be negotiable, considering the corporation would be taxed, coupled with an individual tax. But since the loophole is not closed, the country can’t possibly allow for the small amount of corporations that actually do pay the corporate tax to pay less.
This is the same party that shut down the federal government in 2008 because the national debt was growing too high. Yet, here the GOP is saying that $5.6 trillion over 20 years is worth it for the harsh penalties wealth Americans have had to pay for the last 15 years.
A quick look at the NYSE or NASDAQ will show that the economy is doing as well as it’s ever been. Corporate profits are at an all time high since the Great Recession. Why then, is a tax cut needed? Maybe to make those profits taste a little bit sweeter?

Hampton Chronicle

9 Second Street NW
Hampton, IA 50441
Phone: 641-456-2585
Fax: 1-800-340-0805
Email: news@midamericapub.com

Mid-America Publishing

This newspaper is part of the Mid-America Publishing Family. Please visit www.midampublishing.com for more information.