Donald Trump had a tough day yesterday. His candidate in Alabama lost (driving him to delete Presidential tweets), his #1 legislative promise failed again, and to top it off, he had to sit in a room pretending to know Kristi Noem’s name and details of the tax plan his aides are writing up for him:
Yup, there’s Representative Kristi Noem, sitting in the White House listening to Donald Trump yuck it up. Whatever he said about taxes, Noem supports it:
She says there are a lot of positives for South Dakotans in the president’s tax proposal.
85 percent of mothers work outside the home in South Dakota, which is the highest rate in the country. Trump’s proposal has tax cuts for child care included.
The tax reform would also get rid of the death tax, which is something Noem has been pushing for.
Noem believes there are plenty of incentives for Democrats to get on board as well.
“You know, one of the things they always talk about is they don’t want more tax cuts for the rich. We were focused on making sure the average American and average South Dakotans are getting more money in their pockets to re-invest in their small businesses and families,” Noem said [Sammi Bjelland, “Rep. Noem Supports Trump’s Tax Proposal,” KELO-TV, 2017.09.26].
Funny she mentions focusing on average Americans and the “death tax”—come on KELO: estate tax—in the same interview. The average American is millions of dollars away from ever having to pay estate tax. There may be twenty taxable estates in South Dakota. Twenty. Eliminating the federal estate tax is another tax cut for the rich, which lies outside Noem’s professed focus.
The Trump tax plan coming out today cuts the top individual income tax rate from 39.6% to 35%. Only people making over $418,000 a year in taxable income (that’s after exemptions and deductions) pay that rate. Cutting the top marginal tax rate is another tax cut for the rich, which lies outside Noem’s professed focus.
The Trump tax plan makes permanent the loophole that allows big multinational corporations dodge taxes by claiming they made the money overseas and lets them bring those profits home without paying any tax. None of my average friends own multinational corporations. Making this tax dodge permanent is another tax cut for the rich, which lies outside Noem’s professed focus.
Maybe Kristi mispronounced a vowel when she said focus. Either that, or hanging out with billionaires like the Donald in Washington has changed her definition of average American.
Trump just claimed that he doesn’t personally benefit under his new tax cut proposal.
Well, technically his estate could save a couple billion dollars when he dies if the estate tax is repealed, but he wouldn’t be around to personally benefit from that. And he doesn’t pay taxes a lot of years so the marginal rate cut from 39.6% to 35% may not affect him those years. And he could say the corporate tax rate cut from 35% to 20%, doesn’t affect him personally–its just his corporations that are affected. (wink-wink).
But to say that these tax proposals are focused on the average South Dakotan or average American is a big lie. Average South Dakotans are not affected by the estate tax unless they have a net estate (assets -liabilities) of over $5.5 million for an individual or $11 million per couple and have failed to do any financial planning at all. The average American has a net worth of $345,000 and the median net worth of an American is $45,000. Thus, a tax break solely for people with a net worth of more than $5.5 million per person or $11 million per couple is not by any reasonable definition a benefit for average Americans.
The tax breaks for corporations going from a 35% rate to a 20% rate is another massive tax cut for rich people. In 2013, the wealthiest top 10% of American households owned 80% of all stock and the bottom 80% of all American households owned only 8% of all stock. So, Trump’s corporate tax break would flow to the benefit of the wealthy at 10 times the rate (80-8) it would flow to the average and poorest Americans combined. I guess that is better than the 0% of average Americans that would be helped by the estate tax cuts.
http://www.npr.org/2017/03/01/517975766/while-trump-touts-stock-market-many-americans-left-out-of-the-conversation
Cutting the top marginal rate from 39.6% to 35% for those people making more than $418,000 per year is certainly not focused on the average American. In case you were wondering, making more than $418,000 per year, which is the beginning of the top bracket in 2016, puts you in the top .5% of income earners in the US. In other words, you are not just the top 1%, but the top 1/2% to gain from this tax rate change.
https://dqydj.com/income-percentile-calculator/
There are some helpful items for lower and average income earners like an expanded standard deduction and some childcare expense credits. However, all of these seem like Trump is selling us a bungalow in a bad neighborhood compared to the gleaming gold Trump Tower of tax cuts for the rich that Trump is erecting for himself and his rich friends.
Assuming that cutting taxes stimulates the economy, especially tax cuts for corporations and the rich, and then assuming that the Republicans then want to rid us of the total federal income tax system over time given the fact that they continue to try to lower the tax rates ever so much each time. Then at that point, when there no longer is a federal income tax system, by what means do the Republicans plan to be able to stimulate future economies? Especially, when Republicans see our federal tax system at the crux, or one along with interest rates, of how one controls our overall economy to begin with.
If Republicans were truly genuine about using the tax code to stimulate the economy, then they would allow over time, in their proposal, for the federal taxes to increase incrementally analogous to how the Fed manipulates interest rates to play on the strengths and weaknesses of our economy. The fact that this component is missing from the Republican tax plan, and that they cannot also articulate how they plan to move the economy in the future absent a federal income tax system with only the Federal Reserve Board as its last mercy, proves that they merely want to cut the taxes of the rich and not really stimulate the economy for the sake of all….
If cutting corporate taxes stimulated the economy, SD should have the biggest economy of all 50 states because we have no corporate income tax. Let me repeat that again SD has no corporate income tax , and we still have a ducky economy. We also have 300 billion in tax free accounts. Taxes is not the issue. Most people don’t realize that they are going to lose all their deductions in this new bill. Trump will pay no taxes because the Alternative minimum tax will go away. The AMT was the only thing that forced him to pay any tax at all.
https://www.vox.com/the-big-idea/2017/9/27/16376096/republican-tax-plan-deficit-busting-mess
This fella doesn’t share Noem’s unbridled greed.
This bill? is a tax giveaway to the wealthy and a 20% increase in taxes for the lower earners. (increase from 10 to 12%). It also takes away many deductions for the middle class. Typical wingnut fare.
Good info, Darin! I share your amazement that such lies can be told and have apparently no impact on support for the White House.
I invite Trump and Ryan to address Robin’s point about how low-low taxes don’t appear to have made South Dakota an economic beacon to the nation.
JKC, even if we accept that tax cuts can stimulate the economy (and as I recall from the Recession, we get the most impact from tax cuts aimed at the working class, which will spend every penny, rather than the rich who are already spending about as wildly as they care), is there an argument that we shouldn’t resort to such fiscal measures unless we’re in dire need of stimulus, unless there are signs that the economy is tanking and can’t stay afloat without government intervention?
God told them tax cuts are good.
Pubs never worry about the nation’s 20 trillion dollar debt when it comes to giving themselves a big tax break.
That’s right, Robin. Where is this booming economy that SD should have with their no corporate income tax.
Robin, thanks for pointing out how the AMT going away is another boon for Don the Con. There are so many goodies for the 1% in this tax proposal that I forgot about the AMT. It is like Halloween came early and Trump is filling up the bags of the 1% with candy and the middle class gets a bar of soap.
Thanks for the Vox article, MFI, which points out the trillions that this will raise the national debt. How is it conservative to blow up the debt by 2-5 trillion dollars?
The GOP’s timing is always exactly wrong and it would be laughable if the consequences weren’t so dire. When the economy was sputtering and threatening to go into depression in 2008-2009, a lot of wingnuts wanted to hold off on government spending and extraordinary economic measures. This was precisely the time for government stimulus to carry the economy out of recession and avoid the risk of the 2nd Great Depression.
Now when the economy has reawakened and the Fed is even beginning to tighten up monetary policy to avoid too much inflation, the wingnuts think it is time for a tax cut. So, their tax cut balloons the debt at a time when we should be working to close the budget deficit and start whittling down the national debt.
Many people remember government stimulus was espoused by Keynes to kick-start the economy out of recession, but what they forget is he recommended paying down the debt when times were good. In that way, you have some wiggle room on government deficit spending when the next downturn comes along.
Instead, we have let the debt ride and kicked the can down the road. So, the next time we really need the government stimulus, we could be constrained from doing the stimulus in the magnitude necessary to overcome recession.
This situation is worsened when the Republicans cut taxes on the rich at the same time the Fed is tightening monetary policy. Not only are we not paying the debt down during the “good times”, the Republicans want to balloon the debt when the economy is growing steadily, albeit not quickly. If we never take the opportunity to pay down the debt, there will come a time when the piper will need to be paid one way or another. The combination of one or more of budget austerity, dollar devaluation or interest rate hikes will be chosen for us or forced upon us. And the timing for a debtor to come to Jesus by confronting their out of control spending is usually not opportune.
What is wrong with cutting the taxes on fellows making more than a few hundred thousand just like we should cut the taxes, or at least make them pay the same, on the fellows making $20K? This is why grudznick thinks the same, flat percentage, to everybody, is the fairest. Pick a number, then jam it down everybody’s maw just like the way Obamacare was jammed down our maws.
Darin Larson is right. This is the time to be conservative. Tax reform to give the middle class a break might be OK, but it should be paid for with tax increases on the wealthy. Let’s start paying down the debt, and not on the backs of the poor and seniors.
Cory, exactly. There is no justification to give the rich a tax cut at this time. But if you live in the Republican world for a moment and look at their actions versus their words, it becomes very telling to what their true motive is…..
Mr. Claussen, I think everybody should get tax cuts. It is when we start to be prejudiced against segments of our society that the ugliness bubbles to the top. All for one and one for all, I say. 10% haircuts for everybody.
I would be in favor of a modest tax cut for the middle class and poor. We know the benefits of real income gains in the new economy over the last 20 years have primarily gone to the wealthy, so why favor them with tax policy as well? Moreover, our relatively slower overall growth since the 90’s might be, in some part, due to the fact that middle class consumers have experienced flat real income growth. The real income growth of the wealthy in this country has been tremendous in this time frame, but this has failed to drive our consumer-based economy. This is another demonstration of the failure of supply side economics.
Just because the stupider people choose to pay more taxes through the lotteries does not mean we should tax the smarter and harder working people more. If you don’t want to pay stupid taxes then don’t play the lotteries or buy cigarettes. We should not penalize those people smart enough to save money and who work harder than most. Hard work should be rewarded with tax cuts.
Gruz, how are those who are “rich” smarter or harder working? Most of the money made by those in that taxable bracket make their money through capital gains on investments, which, and I’m simply going off memory, are taxed at an extremely low rate. Being rich is often not what you know, but who you know. Granted, a fair portion took a risk, worked hard, and reaped rewards. Another, larger portion, simply continue to reap the benefits of being born into the genetic lottery of monetary comfort those that came before them laid.
Ya, Grudz, just tax poor people out of existence why don’t you. Henceforth, no one is allowed to be poor or they are subject to a 95% tax rate. Problem solved. The more money you make the lower your taxes will be. Everyone will be incentivized to make more money so they can pay less taxes. Before long, everyone will be in the top tax bracket paying little or no taxes, but earning millions.
I always thought that SD should have a smoker,drinker,gambler, “Tax Appreciation Day”. To thank the SD citizens that partake in the activities required to maintain our state’s educational system and infrastructure.
Hey Grud, if hard work is rewarded with tax cuts, what is paying taxes rewarded with? You sure make paying taxes sound like a terrible thing.
Is paying taxes something only stupid people do???
Presently only 20% of South Dakotans itemize. The tax proposal doubles the standard tax deduction and increases the child deduction. This means over 80% of South Dakota folks will pay 1) less tax, 2) have more money to help their families, 3) will increase their spendable income, 4) will ring more money into the local economy 5) more money in the local economy means more jobs, 6) increasing wages, 7) better, safer homes, 8) more money available to help their kids go to college, 9) more money to put aside for retirement, 10) less families in poverty.
The last thing I thought I would see a bunch of leftist do is fight for more itemized tax deductions. Your stand is against 80% of your fellow South Dakotans.
On Darin’s point on timing: I could get conspiratorial and say Republicans could be timing their tax cuts to an already established economic upswing so they can turn to us in 2020 and say, “See? We cut taxes, and the economy boomed!” hoping that we would all develop amnesia about the policies Obama used to get us out of recession and onto this upward trajectory in the first place.
But it’s probably not that complicated: Republicans in power would offer a tax cut proposal like this no matter when they took power, during boom or bust. They supported the stimulus when the recession started and Bush put it forward; they only backed away when Democrats took power.
OldSarg, read what Darin said. He’s fine with lower, simpler taxes for lower- and middle-income South Dakotans. He’s not arguing for what you say he’s arguing. He’s arguing against using a few scraps for average Americans as cover for another massive transfer of wealth to the already wealthy like Trump.
Craig, I am amused by the suggestion that we should buy our drinking friends a drink for all their support of our civic institutions. It would be the patriotic thing to do! :-D
How are these tax cuts going to be paid for OldSarge?
What is wrong with cutting the taxes on fellows making more than a few hundred thousand j
Why do these wealthy people need more taxcuts and loopholes? Why shouldn’t they pay FICA taxes on all their income other than the first 120 grand?
Oldsarge, you mentioned that the standard deduction is doubled to $24,000, but you failed to mention that the personal exemption which is worth $4,000 per person in the household is eliminated. Thus, a family of four which currently has $28,000 ($12,000+(4,000×4)) exempt from tax may only have $24,000 exempt under Trump’s plan to help the wealthy. Moreover, Trump’s plan raises the bottom tax rate from 10 to 12 percent while he is cutting the top bracket from 39.6 to 35%.. The child tax credit is an unknown because Trump hasn’t said what the amount of the credit increase will be.
The bottom line is that Trump’s plan is exactly what he says it isn’t: a “Yuuuge” tax giveaway to the rich while the middle class gets some crumbs and the poor doesn’t benefit at all. This is Bigly wealth redistribution by Trump.
On the issue of timing and the debt which I mentioned yesterday, here’s what the New York Times had to say:
“But the moment is very different. Mr. Reagan and Mr. Bush cut taxes during recessions. Mr. Trump is proposing to cut taxes during one of the longest economic expansions in American history. It is not clear that the economy can grow much faster; the Federal Reserve has warned that it will seek to offset any stimulus by raising interest rates.
At the time of the earlier cuts, the federal debt was considerably smaller. The public portion of the debt equaled 24 percent of the gross domestic product in 1981, and 31 percent in 2001. In June, the debt equaled 75 percent of economic output.
The Trump administration insists that its tax cut will catalyze such an economic boom that money will flow into the federal coffers and the debt will not rise. The Reagan and Bush administrations made similar claims. The debt soared in both instances.”
https://www.nytimes.com/2017/09/27/us/politics/trump-tax-plan-wealthy-middle-class-poor.html
Capital gains tax- Save yer olde Playboys. Hugh Hefner has left the building at 91.
From Jobs Anger blog- The only clear thing is that this bill is a massive tax giveaway to corporate America.
2. Trump has already told at least two lies about the plan. First, he said the plan would not benefit him. But it would benefit him in several ways — elimination of inheritance taxes (which only apply to the rich), elimination of the alternative minimum tax, the cuts to businesses (which will save his own businesses millions of dollars.
Second, he said that cutting business taxes would result in more jobs. That is just silly. If any business person already has enough employees to adequately service their customers (and only a poor businessman would have more or less than necessary), then why would they hire new workers with the extra tax money they get to keep. They wouldn’t, because that would just unnecessarily cut into their own profits.
Thanks Darin, for explaining the truth to this mess of a tax bill. How is raising taxes on the bottom from 10% to 12%, going to help the “average American”. They’ll just turn to more govt services.
There is no connection that this tax cut is going to make businesses and corporations decide they should start raising everyone’s wages.
They never have before.
Good grief, Old Sarg.
grudznick, taxing at a flat rate for all is something conservatives make to sound fair, but it is the farthest thing from fair. It is the same – not fair. Taxing at a 15% (to pull a number out of the air) rate means a person making $20,000 a year is left to live on $17,000; a person making $418,000 is left with $355,300. Certainly in total dollars, the higher salary has paid more dollars in taxes, but situationally, somebody nearly getting by has been put underwater and the person with disposable wealth to spare still has disposable wealth to spare.
It is also worth mentioning that tax rates only apply to the income above the rate of taxation. NOBODY pays the highest marginal tax rate on their whole salary, only on the amount over the 418,000 threshold. The rich already do not have to pay social security on their whole wage (if above $127,200). How is that “fair?”
Kansas showed us that cutting taxes leads to the ruin of the state. The US had its greatest growth at the time of its highest marginal tax rate. For once, let’s drive tax policy with fact.
Growing your way out of debt doesn’t work. This proposal has a lot of similarities to the tax cuts enacted by soon to be ex governor Sam Brownback of Kansas.
The growth did not happen with companies and individuals moving out of Kansas due to cuts in school funding and government services and infrastructure. Revenues were consistently millions of dollars short on a monthly basis and the Kansas credit rating was downgraded. The legislature finally raised taxes and closed a giant loophole this year to balance the budget plus fund schools at the constitutionally mandated levels.
Kansas has lots of job openings but is now struggling to find workers to fill them according to this morning’s Wichita news.
Noem is an idiot and the estate tax is not as big of a problem in South Dakota as she pretends it is, but there are a lot more than 20 taxable estates in the state. I see them almost every day. These farmers can sit around and gripe and moan about the economy, and grain prices, and estate taxes, and everything else, but it would blow most people away to see how many thousands of millionaire farmers are walking around their local South Dakota grocery stores with dirty coveralls on. Millionaires don’t all look like Trump, and I for one don’t think farmers need all the help the rest of the state thinks they do. Obviously, agriculture drives the SD economy, but if the rest of the people knew about the state and federal benefits the farmers get, everyone would be a lot less sympathetic to those poor millionaire farmers.
Here’s my proposal for tax reform. Tax all income at the same rates as earned income.
1) Do away with the estate tax. Instead, tax beneficiaries at ordinary earned income rates for everything they inherit. This is not double taxation because the recipients have never been taxed on this money.
2) Do away with capital gains taxes. Instead, tax capital gains at ordinary earned income rates.
3) Do away with the carried interest rules that allow hedge fund operators to avoid taxes. Instead, tax any hedge fund gains as ordinary earned income.
4) Remove the cap on income taxed for social security and medicare.
5) Continue the existing progressive tax rate structure.
The more tax cuts we have, the more deficeit we have, the more money that gets borrowed out of the economy to fund the deficeit, the less money available for investment. So tax cuts equals less money for investment. But the rich do not want to think it through that far.
https://www.cbpp.org/blog/a-state-by-state-look-at-the-estate-tax
According this chart, South Dakota has 20 estates worth more than the 5.5 million dollar cutoff. This is federal estate tax. South Dakota doesn’t have a state estate or inheritance tax.
https://www.usnews.com/opinion/economic-intelligence/2015/03/27/facts-dont-back-estate-tax-repeal
More fax about tax.
This article addresses the myth that tax cuts create economic growth:
https://www.washingtonpost.com/news/posteverything/wp/2017/09/28/i-helped-create-the-gop-tax-myth-trump-is-wrong-tax-cuts-dont-equal-growth/?utm_term=.ba07ac645f85
I think there is an error in the overall understanding of the definition of a taxable estate. Most “taxable estates” don’t pay federal estate tax because those millionaires seek professional help and work around the estate tax scheme. The article from MFI incorrectly suggests that “taxable estates” and “estates who paid estate tax” are the same thing.
The article also seems to suggest that the number is a per-year calculation. If you trust these facts and are comfortable with their assumptions, it might mean about 20 estates pay federal estate tax each year in South Dakota. That means each year about 20 people pass away with taxable estates and pay some estate tax. That certainly doesn’t mean that only 20 estates in South Dakota have values in excess of the federal exemption – those are just the ones who have to file estate tax returns because somebody died in a given year.
Corey , Economic upswing ? where are you living dude ? I want to live in that world. Even the Federal Reserve is not sure that the economy is stable which is why they are dumping slowly and still holding off on raising interest rates.
BOA issued a warning and still has not lifted the warning for economic recession.
Economic upswing does not include the 99% – When and only when your interest on your savings account gets to 7% does an economic upswing include the 99%
Quite the contrary is happening with people in the loop- They are pulling money out of savings and putting it in safety deposit boxes because the feds are talking opposite and talking about reverse interest for the 99% . Their hope is to force you to take your money out of savings and spend it because the economy is not growing.
As for Trumps tax timing- Payments are due for the corporations that held billions overseas and borrowed money to make payroll and buyouts. Take economics classes and it’s easy to figure out what is going on.
Robin, will you permit me “upswing” in relative terms? Out of Recession, years of slow but steady and uninterrupted job growth, unemployment under 5%… and growing Fed confidence:
I’m not cheering the ongoing wealth inequality or other systemic problems in the economy. I’m just suggesting that Obama left us on a better trajectory than when he took office, that current conditions do not warrant a stimulus package of anything near what the 2008 and 2009 Congresses were justified in passing to remedy a dire economic crisis, and that if Congress does pass this pile of tax cuts for the rich, we’ll have trouble discerning any curve-bending from these tax cuts from the relatively positive trajectory of several key indicators.
Cory , respectfully you are quoting a press release which I understand is all you have access to. Employment numbers have always been reported by the Feds with skewed numbers. There were two sets The U-3 is the rate most often reported in the media. In the U-3 rate, the Bureau of Labor Statistics only counts those who have looked for a job in the past four weeks as unemployed.The U-6 rate adds those who are marginally attached and discouraged. It also includes part-time workers who would prefer full-time jobs. For that reason, it is almost double the U-3 report.
What is now included in the U-3 rate for the first time is the Military which drives that percentage of unemployment way down.
Another indication of a bad economy that the papers aren’t talking about is the resurgence of diseases that are related to poverty. Diseases that were declared eradicated are now making a comeback and are related to economics. Of course the Feds are going to release a press release that is all roses and perfume. Their job is try and make you feel like life is roses and perfume and you should spend money until you go in debt.
We need to talk sometime because there are many, many signs that the economy is not doing well at all too numerous to list here. Just because the Feds make a press release does not mean there is an economic recovery.
Where are the deficit hawks? Removing income has the same affect as adding spending, so why does the Congress only get in a stir when the bottom line is threatened with spending?
This is about power. The rich want it made clear that they (and their wealth) matter more than the “takers” and “welfare queens,” and their concerns.
http://www.huffingtonpost.com/entry/trump-tax-plan-rich_us_59cd6a14e4b05f005d3328cb?ncid=inblnkushpmg00000009
https://2.bp.blogspot.com/-rF_lstjxEuM/WdZx7AroIAI/AAAAAAABrDE/822l102byrk3tpo7xTfccVhym7XurLnYgCLcBGAs/s1600/tpc-taxes-snapshot-v2c.png.948.png
Economic Policy Institute sez 79% of Drump’s 2,4 billion taxcuts goes to the top 1%
Thanks, Mike! I haven’t seen a detailed scoring yet that shows this tax plan living up to what Noem and Trump are saying about it.