California to Pave Way on Highly Troublesome New Tax; WEALTH TAX

 This is deeply troublesome. California often leads other states with new "progressive" policies and taxes. 

All too often, if you see California do it, then other states follow like Colorado, Washington, Oregon, New York and New Jersey. That does not mean California ideas are good ideas. Often they are not. 

Over time California has established high taxes, excessive regulations, overbearing environmental regulations and restrictions on individual liberties. These California Policies almost always lead to an exodus of people from the California to other states that are more friendly to jobs, residents and businesses. 

Here come a new one: The Wealth Tax. This has been tried and failed all over the world. It appeals to some voters who want to "make the rich pay their fair share." But there are serious conceptual problems. These include:

• It encourages people to leave the state,
• It does not raise the revenue predicted,
• It is entirely unfair as most wealth was already taxed as income,
• It is very difficult to effectively measure without legal disputes,
• A modest wealth tax may be a significant share of annual earnings, and, 
• All new taxes lead to increases of those taxes on everyone over time.  

Click here for link to Zero Hedge Article

Tax Policy Under Biden and Democrats

One of my preferred economists, Brian Wesbury of First Trust Advisors, published an analysis of proposed tax policy and its implications to the economy if enacted. Most of these policies cannot be enacted without Democrats taking control of the House, Senate and White House. The analysis implies that some proposals may not have a significant adverse affect while others will. Without question, these proposals, or other versions, will usher in another round of job killing economic policies of Democrats. Keep in mind that all of this would be on the heals of one of the worst economic calamity ever forced on the economy by Democrats. Here is the analysis.

"What many investors are focused on is a scenario where Biden wins and the Democrats also take the Senate. In that scenario, the Democrats could use the special budget process on Capitol Hill to raise taxes permanently (meaning no natural sunset) with a simple majority, like President Clinton did in 1993.

Biden's team has made plenty of tax proposals, but we're going to focus on what we call the Big Five:

1. Raising the top income tax rate on regular income back to 39.6% from 37% 
2. Raising the corporate tax rate to 28% from 21%
3. Ending the step-up basis at death
4. Treating long-term capital gains and qualified dividends as regular income for those earning over $1 million
5. Applying the Social Security payroll tax on incomes over $400,000+

Will Trump or Any President Cancel Social Security? No!

Political divisiveness is rampant in the media and internet websites. Some stories are promoted by political parties/groups and some may be supported by foreign interests.

Here is what you should be sure of. Trump will never support “getting rid of Social Security.” No one in Congress will vote for that even if any President wanted to.

Recently, Trump DID SAY he wanted to get rid of the “payroll tax” which primarily partially funds Social Security. That reflects his view (shared by many over the years) that the payroll tax (15% of wages) is very unfair and regressive. That applies to the first $137,700 of wages irrespective of income. Therefore, someone making $25,000 pays the same 15% as someone making $250,000. In fact, higher incomes stop paying above the threshold. Many economists feel it has become unfair.

Currently, those taxes are earmarked for Social Security. In the Federal Budget, all the funds are commingled. Future planned benefits cannot be paid out of funds set aside. There are not enough funds and those funds are not segregated. It has been a long standing fraud on Americans to suggest SS benefits were safely set aside. They simply are not.

What Trump wants to do (and has always said so) is to fix an unfair tax, and, find a way to honor the commitment to beneficiaries.

Any reasoned analysis of Social Security shows there are long standing problems with paying these benefits. It has to be fixed. Like many issues, Trump wants to fix it even though it will be hard and want to be avoided by the politicians that created the mess.

For my friends who are in Illinois, the pension crises for state and local employees in Illinois is much much worse due to chronic bad policies regarding excessive pension benefits, state budgets and funding. While Illinois is only one state, the lack of funding to pay pensions to state employees is almost as large as the unfunded benefits in Social Security.

Details:
15% payroll tax for Social Security and Medicare is jointly paid by both employee and employer.

The max income threshold of $137,700 applies to SS tax (called FICA) and there is no cap on Medicare tax.)

"So What" to Naysayers of Tax Policy on Corporations; Tim Spinner

I was invited me to contribute over a year ago and I graciously accepted.  Hope you enjoy!

My main bone of contention with all the contentious rhetoric around the GOP tax bill is that it has turned everyone who opposes it, opposes the GOP or opposes Trump into Miss Cleo. If I had a nickel for every time I've heard someone say that they know, beyond a shadow of a doubt, that [a tax cut on business] will absolutely, positively, unequivocally do nothing to help the economy, I'd put Jeff Bezos to shame with his paltry personal wealth.

Economic Reality and Tax Policy; Revisit Reagan Tax Cuts

Tax policy pundits and left leaning ideologues prefer to malign Reagan Tax Cuts and Supply Side Economics. However, their criticism is often devoid of facts and analysis. Oftentimes they confuse other influences on the economy. In a more recent revisiting of tax policy, many left leaning policy makers prefer to blame low tax rates for the economic crises and recession of 2007 through 2009. (We need an adult conversation on the "Great Recession" which has not been part of the media dialogue.)

With a new administration in Washington, DC and a focus on economic growth, an informed awareness of the effects of tax policies is very important. While data supports the arguments that lower taxes lead to greater economic growth, there is also a role for common sense.

People want more of what they keep. If government confiscates more of your effort and production with higher taxes, than most people will be less motivated to produce income and wealth. Is that not just common sense?

Simple Truth -
Lower taxes are good policy especially when current rates place workers or businesses at a competitive disadvantage. 

The economist most associated with advocacy for lower tax rates is Dr. Art Laffer who is associated with "Supply Side Economics." Here is his analysis of the economic impacts of Reagan Tax Cuts. It is worth reading and understanding.

Link to Laffer Paper on Reagan Tax Cuts