Here's some potentially VERY good economic news that was lost amid the weekend news flurry.  Those…
CFIF on Twitter CFIF on YouTube
Some Potentially VERY Good Economic News

Here's some potentially VERY good economic news that was lost amid the weekend news flurry.  Those with "skin in the game," and who likely possess the best perspective, are betting heavily on an upturn, as highlighted by Friday's Wall Street Journal:

Corporate insiders are buying stock in their own companies at a pact not seen in years, a sign they are betting on a rebound after a coronavirus-induced rout.  More than 2,800 executives and directors have purchased nearly $1.19 billion in company stock since the beginning of March.  That's the third-highest level on both an individual and dollar basis since 1988, according to the Washington Service, which provides data analytics about trading activity by insiders."

Here's why that's important:

Because insiders typically know the…[more]

March 30, 2020 • 11:02 am

Liberty Update

CFIFs latest news, commentary and alerts delivered to your inbox.
Jester's CourtroomLegal tales stranger than stranger than fiction: Ridiculous and sometimes funny lawsuits plaguing our courts.
Trump's Tax Plan: What's There. What's Not. Print
By Ben Boychuk
Thursday, October 01 2015
Using some good faith assumptions, the Tax Foundation found the plan would reduce federal revenues by $11.98 trillion over the next decade using a dynamic model.

Donald Trump released his tax reform plan this week. Which is to say, this is Trump’s 2015 tax reform plan. His previous statements deriding Reagan- and Bush-era tax cuts, advocating a wealth surtax, and touting the virtues of a European-style Value Added Tax on goods and services should henceforth be considered null and void.

Trump took to the pages of the Wall Street Journal on Monday, where he explained his proposal in a Trump-like fashion.

“My approach to tax policy will do just what needs to be done.”

“As president, I will pursue policies that will ensure huge economic growth and put this country on the road to extraordinary prosperity.”

“This plan is bold, but it is also cast in reality and common sense.”

Is it?

Trump’s plan would cut the top income tax rate from 39.6 to 25 percent, and create three other rates: 20 percent, 15 percent and zero. The plan ends the Alternative Minimum Tax, eliminates the death tax, and repeals the marriage penalty.

For singles who earn less than $25,000 or couples who earn less than $50,000, “they get a new one-page form to send the IRS saying, ‘I win.’”

Crucially, the plan proposes to slash the corporate tax rate from 35 percent — the highest in the developed world — to 15 percent.

In exchange, Trump wants to impose a “one-time” 10 percent tax on repatriation of U.S. corporate earnings held overseas, followed by an end to the deferral of taxes on corporate income earned abroad.

Trump would also go after “the hedge fund guys” by ending the carried interest exemption. But the hedge fund guys will likely be just fine, as their income tax rate will drop from 40 percent to 25 percent, and the tax rate on their administrative fees would see a modest increase from 23.8 percent to 25 percent.

“The proposed policies will allow the middle class to keep most of their deductions while eliminating many of the deductions for the very rich.” Which ones? He mentions the charitable deduction and the mortgage interest deduction will remain unchanged.

Beyond that, however, the plan is vague. “Those within the 10 percent bracket will keep all or most of their current deductions. Those within the 20 percent bracket will keep more than half of their current deductions. Those within the 25 percent bracket will keep fewer deductions.” Details matter.

The zero percent income tax rate is troubling both as a matter of policy and as a matter of citizenship. Why not a 1 percent rate so everyone has some “skin in the game,” as the cliché goes?

Exempting more and more Americans from the income tax creates a fiscal and political problem. Right now, about 43 percent of U.S. households pay no income tax, according to the Tax Policy Center. About 14 percent pay no income or payroll taxes.

The George W. Bush tax cuts of 2001 removed 7.8 million low and middle-income families from the tax rolls — an astounding number at the time. Trump says his plan would remove 75 million households — bringing the total to more than 50 percent — from the rolls.

The United States was founded in part on the idea of “no taxation without representation.” We may be approaching a time when a majority of Americans will have representation without taxation — and without incentive to bother with how government spends its revenues because, after all, it’s other people’s money. 

The consequences aren’t difficult to imagine, because we’ve seen them before and we’re seeing them again: politicians seeking the votes of the many who don’t pay taxes by promising to take more from the diminishing few who do.

At some point, “taxing the rich” or the “very rich” will reach an upper limit. Who then will be left to pay?

The middle class, naturally.

Based on what little anyone knows of Trump’s proposal thus far, the Tax Foundation and Grover Norquist’s Americans for Tax Reform both released analyses of Trump’s plan on Wednesday. Although ATR criticized Trump’s carried interest proposal, Norquist seemed to find much to commend it otherwise. “This plan is a reform, not a tax hike,” he said. ATR’s analysis concludes the plan is “intended to be revenue neutral under a dynamic score.”

It’s hard to see how. Using some good faith assumptions, the Tax Foundation found the plan would reduce federal revenues by $11.98 trillion over the next decade using a dynamic model.

Notice what else is missing? A serious discussion of spending cuts and entitlement reforms.

“We’re reducing taxes, but at the same time, if I win, if I become president, we will be able to cut so much money and have a better country,” Trump said at his press conference unveiling the plan on Monday. “We won’t be losing anything.”

He was a bit more sober, but no more specific, in his Journal op-ed. “With disciplined budget management and elimination of waste, fraud and abuse,” Trump writes, “this plan will allow the nation to balance the budget, boost the economy to record levels, clear the backlog of workers sitting at home and begin the process of reducing the debt.”

Unfortunately, “waste, fraud and abuse” has through overuse become a meaningless catchphrase. Everyone hates “waste, fraud and abuse.” Have you ever heard anyone campaign for it? Yet in a government with a $3.5 trillion budget and nearly $19 trillion in debt, “waste, fraud and abuse” amounts to a rounding error, albeit one a truly conscientious government should address.

Trump’s tax plan cannot be considered in a vacuum. “Starving the beast” has always sounded fine in principle and foundered in practice. Given the revenue reductions that Trump’s plan would create in its first decade, he should soon serve up specifics regarding spending.

Calls for “budget discipline” and cutting government is hard to reconcile with Trump’s loudly stated goal of rounding up every illegal alien in the United States and building an impenetrable wall along the U.S.-Mexico border. A back-of-the-envelope estimate puts the cost of that plan at upwards of $200 billion. He also wants to boost military spending dramatically and replace ObamaCare with universal health insurance. How many billions or trillions would that cost? Who knows?

In short, Trump says he can cut taxes upwards of $12 trillion over the next decade, while proposing an unknown — and perhaps unknowable — number of budget increases.

Would Trump’s plan yield 6 percent growth, as he suggests? Impossible to say. As the Tax Foundation notes in its analysis, “The Taxes and Growth Model does not take into account the fiscal or economic effects of interest on debt. It also does not require budgets to balance over the long term. It also does not account for the potential macroeconomic effects of any spending cuts that may be required to finance the plan.”

When Ronald Reagan tackled tax reform 35 years ago, the economy was in severe recession, inflation was high and the federal budget deficit was a fraction of what it is today. Trump’s plan simply assumes growth will eliminate the deficit over time. If recent history has taught us anything, that is a bold assumption.

We as citizens must also always remember that tax plans and spending plans virtually never survive the Washington meat grinder intact.

Caveat emptor.

Question of the Week   
In which one of the following years did Congress first meet in Washington, D.C.?
More Questions
Quote of the Day   
 
"The Chinese Communist Party (CCP) is waging a ferocious, global propaganda campaign designed to deflect blame for the origin and spread of the COVID-19 outbreak from Wuhan, China. Moreover, Beijing is trying to take advantage of the pandemic to increase its global standing and influence. ...If Beijing escapes blame for its failure to curb the coronavirus pandemic, its lies, and its attempts to cover…[more]
 
 
—Michael Auslin, Hoover Institution Payson J. Treat Distinguished Research Fellow and Foreign Policy Research Institute Senior Fellow
— Michael Auslin, Hoover Institution Payson J. Treat Distinguished Research Fellow and Foreign Policy Research Institute Senior Fellow
 
Liberty Poll   

Who is most to blame for the delay in passage of the critical coronavirus economic recovery (or stimulus) bill?