Thanks as always to Pirate’s Cove and, while we forgot to send in our links to The Other McCain this week, check out their Rule Five links. Also, thanks to our blogger pal Doug Hagin over at The Daley Gator for the linkback.
Here is Reason on the recently-passed Senate tax reform bill. Excerpt:
The Senate bill makes major changes to both individual and corporate taxation. It permanently slashes the corporate tax rate from 35 percent down to 20 percent, alters the way that businesses can expense new equipment, and reduces taxes on income earned by pass-through businesses, a tax structure in which corporate profits are taxed as individual income. Those changes could create an incentive for many businesses to restructure as pass-throughs as a form of tax arbitrage, which is what happened when the state of Kansas attempted a similar change. An analysis by the Tax Foundation found that the Kansas provision encourage tax avoidance but not economic growth.
The bill also cuts individual tax rates, nearly doubles the standard deduction, gets rid of the personal exemption, expands the child tax credit, and eliminates or caps several major tax code deductions, including the state and local tax deduction. It modifies, but unlike the House plan does not repeal, the alternative minimum tax, which disallows some deductions by high earners. Over the next decade, filers at all income levels would see a tax cut.
However, unlike the corporate tax reduction, which is permanent, the individual rate reductions are phased out by 2026, creating a major policy cliff, and nearly guaranteeing high-stakes legislative showdowns. The sunset was designed largely to ensure that the bill conformed with Senate budget rules, which require that legislation passed via the reconciliation process not increase the deficit after a decade. Republican leaders have argued that Congress is not likely to let those tax cuts expire. That, in turn, would result in a significant long-term deficit increase.
Full disclosure: My consulting business, as in all of Mrs. Animal’s and my business ventures, are set up as pass-through businesses. This bill (while Mrs. A, who manages our financial affairs, hasn’t had the chance to read the bill yet) will help us, assuming the pass-through rate cut stays in place in the final product.
Now, I may not be in the 1%, but I sure as hell am in the 10%. Schumer and Company are predictably bemoaning the “wealth transfer from poor to rich,” which is laughably clueless – not that this is anything new for Congressional liberals. But it is the categorization of lower-income people as “the working class” that bugs me.
This characterization of white-collar or higher-income earners as somehow not being “working people” has always been a peeve. Sorry, but I work – part of the reason my consulting business has been a success is because I’ve worked pretty damn hard to make it one, including (especially in the beginning) a hell of a lot of unpaid hours. I’ve produced a lot of value for a lot of businesses, and after a few years of building a reputation in my industry, have ended up earning a pretty good living at it.
So, yes, the idea of lower marginal tax rates is pretty damned appealing. The RHEEEE from the professional Left on this issue is pretty entertaining, given their sudden concern with deficit spending – to which my response can only be “cut spending.”