Paul Ryan wants to talk about how his tax bill is going to help this mythical Cindy person. She was invented by the House Ways and Means Committee in a discussion of how awesome their tax bill will be for everyone.
What if Cindy’s employer offers tuition reimbursement? Completing her degree is part of pursuing “her own professional aspirations”. Bummer! Tuition reimbursement is now taxed — so the 5250$ she is given to pay for University is now taxed, so the 711$ savings is now 186$ in tax savings. Still a savings, but not as impressive as the initial story. The budget also cuts moneys to local schools. Does the county reallocate funds from road repair to update text books? Cindy blows out a tire in an unrepaired pothole and that’s where her 186$ in savings goes. Maybe the school cut services instead. Great, she saves 186$ but at the expense of her kids education. Does the state just raise their income taxes? Does the county raise property taxes? Cindy doesn’t own her own home, but rent has to cover property tax expenses. Does her landlord lose money or does the landlord raise Cindy’s rent to cover the new local taxes? Cindy’s public library was going to build out a maker space where her kids could gain familiarity with 3D printing and robotics. Does the county raise taxes to fund the library, or do her kids miss out on this opportunity? Maybe she ends up saving a few hundred dollars a year in taxes, but losing beneficial services. Or maybe she ends up paying 300$ more in rent and is behind a hundred bucks a year.
The committee’s cherry picked scenarios aren’t exactly alternative facts, they’re real facts. But they conveniently omit the larger picture that is an individual’s budget. Not to mention hundreds of other real scenarios where an individual or business ends up paying more in federal taxes under this tax plan. Or, in Cindy’s case, saving money on federal taxes until the extra child tax credit expires and then paying more under the plan.
And none of their scenarios address the likelihood that Cindy will be working for many more years because this debt increasing fiasco of a tax plan will create a situation where we have to save money by enacting something like Ryan’s path to prosperity plan. Which ups the Medicare eligibility age, so individuals who could have retired under the current scheme now need to work just to retain medical benefits.
The most nonsensical bit about the trickle down sales pitch is that few trot out GE as an example of a company being helped by corporate tax cuts. These cuts are going to help all sorts of small businesses, farms, etc. The corporate tax rate is not a flat 35% unless your business makes over 18,333,333$! On the low end, the rate is 15% of taxable income <=50,000$. 50k may not seem like a lot of money for a business, but small/medium c-corp entities don’t pay taxes on their receipts. They pay tax on their *profits*.
This is the problem I had with not-a-Joe the not-a-plumber’s question to Obama years ago. Buy a plumbing company that runs two million dollars in receipts a year. You’ve got 20 people working for 50k a year and that’s a mil deducted right there. Petrol for your trucks, vehicle maintenance, office supplies, advertising. Bring an accountant on staff (their salary is deductible too) and you can get into the whole amortization/depreciation adventure when you expand your building or buy new vehicles. You’re not paying taxes on two million dollars @ 35 (or whatever) %. You’re paying whatever personal income rate on the money you pay yourself and the business is probably paying about 20k on 100k in profits. 20k is a lot of money too, but it’s 20% of the 100k in profits. And if you want to pay less in corporate taxes, you know an easy way to do that that also benefits your company? Hire another dude, invest in some energy efficient building enhancements … turn that profit into deductible expenses.
Sean Spicer, at his non-televised press briefing yesterday, seems to ignore the same basic fundamental of corporate tax calculations: “I’ve talked to several CEOs and business leaders in the past couple of weeks about tax reform, and it’s amazing how many of them tell you that they pay the 35 percent rate. And you say to them, what will you do if that rate drops? And the number-one thing they talk about is they’re going to invest and build more in their company. And I think that’s what we need to do.”
This tells me exactly what the current administration wants from corporate tax reform — not something that would help small businesses. They want to help enormous corporations that actually benefit from lowering the top level US corporate tax rate. Companies sheltering money overseas or investing overseas.
When government services are privatized, why are the functions not turned over to a not-for-profit company? The government provides services that shouldn’t be run for profit. Services that create a conflict of interest when profit is involved (the major component of my argument for single payer health care). The ideal scenario for the prison system is no “customers” — no one is breaking the law. That’s terrible for a company’s bottom line. To sustain profits, prisons need more prisoners … and retention, they need those prisoners to stay longer. There’s a civic disinterest in the conditions that lead to increased profits.
Hell, cut taxes in half and spin half the government into non-profits charities. Private contributions are tax deductible, and you just saved 5k on taxes … donate some of that to NASA, NEA, etc.
I’ve just about got our taxes completed for the year – we expect a huge refund because we have a tax credit that is 30% of the geothermal installation cost (the credit that made our geothermal system cost almost exactly as much as a far less efficient air exchange heat pump). What I didn’t expect was to receive a federal tax refund that exceeds our federal tax payments.
But the child tax credit is refundable – so we have a carry over for next year from the geothermal system and get a thousand bucks for having a kid. At which point, it occurred to me what Trump may be hiding in his tax returns. Not that he pays 0$ in federal taxes (yeah, I paid a whole heap of money to the state, medicare, social security, sales tax, and property tax too … doesn’t change the fact the federal government is literally giving me more money that I paid them this year) but that he finagles his adjusted income to be sufficiently low to qualify for refundable tax credits.
People get outraged when wealthy people pay a lower tax rate than the poor. Even more so when wealthy people literally pay less in taxes. But to have the federal government giving a fairly affluent individual a couple of grand extra … that would be shockingly egregious.
Personally … I didn’t try to get the money beyond including the energy efficiency tax credit in my pricing of geothermal and solar systems. I put all of my info into a tax preparation application and got an answer back. It took me a day to realize that that answer actually exceeded my payments (and that the changes I was trying to model for additional HSA contributions didn’t seem to change our refund any because our refund was maxed out and what was changing was the carry forward on form 5695. I’m also not turning it down. We have paid tens of thousands of dollars in federal taxes each year for decades – I’ll consider it getting an extra grand back from last year.
I wish there was a decent way to file RFE’s (request for enhancements) with the federal government. I can’t do a thing about the complexity of the tax code or the annoyance of having to spend a weekend filling out forms just to get my money back. But there’s existing tax code for charitable deductions (although you can fall afoul of the AMT if you donate too much of your income … so that may need a little rewrite here). Create a new tax deductible donation categorization for government entities — then each department of the government not get themselves registered as a not-for-profit-goverment-entity that qualifies for tax deductible charitable donations. I would feel a LOT better about paying 10k in taxes this year if I knew the money was going toward departments I support (and not going to departments I do not support). I could literally donate every dollar I owe in taxes to specific departments – then get my payroll deduction contributions completely refunded (bonus, US government, you got the interest on my payroll deductions since you held on to them). Don’t want to bother? Then don’t – your payroll deductions will get allocated out for you through the budgeting process.
With a significant adoption rate, if no one wants to fund the Department of Whatever, then the people writing the budget could well take that as a hint. Obviously that’s not a perfect rule – no one wants to fund the IRS, but you’re still going to need someone to handle tax collection & filing (at least until you manage to sort out the tax code & processes). But someone who advocates eliminating the Department of Education may be surprised how many people voluntarily earmark their taxes for Education. Or the military industrial complex may be shocked that donations don’t approach the 60% or 16% (depending on your point of view of “all spending”) of the federal budget that goes into the military and Homeland Security.