Author Topic: odds of rolling back tax cut OR significant tax increases in USA?  (Read 2272 times)

DTEJD1997

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Hey all:

For a bit of time I've heard pundits on radio/tv talking about how certain people want the recent tax cuts cancelled/rolled back OR in the alternative to raise taxes to offset/cancel the decreases.

While I heard it, I discounted it substantially.  A lot of talking heads want people to get agitated and riled up.  Controversy sells.

So I paid it little attention.

The other day, I heard some people (man in the street) seriously discussing that the tax decreases are a scam, that they need to be cancelled and taxes increased significantly.  These weren't hobos/crazy people...nor were they some crazy communist beatniks.  They looked/sounded like "regular" suburbanites.

As a property owner, business owners, investor, and tax payer, I am biased somewhat.  I think that the taxes (especially corporate) were too high in the USA.  I also think the repatriation of foreign cash rule is simply moronic.  I also think that this has been holding back business formation and capital expansion.

I think that I would proven correct by the market reaction, the increase in the DOW, the bonuses paid out to employees, the announcements of capital investment/future expansion plans (ie. Exxon's announcement).

I would further think that this is certainly good news, and would be welcomed by EVERYBODY.

So if the recent tax cuts are cancelled/rolled back/increased, I would think the market would collapse.  I would also think that the announced business expansion/formation would be cancelled.  I think a lot of people would lose their jobs.  Finally, I think we would see a catastrophe something along the lines of 2008.

Maybe that is what some people want?  Could it be that too many people are employed?  That the economy is progressing too fast? 

At first I thought this was just non-sense talk, but now I am not so sure.


Cigarbutt

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Re: odds of rolling back tax cut OR significant tax increases in USA?
« Reply #1 on: March 16, 2018, 09:31:08 PM »
Humble contribution from somebody north of the border who has majority of assets denominated in USD and who tries to understand this also.
Disclosure: Have a strong bias against taxes.

Taking the perspective of "regular" suburbanites, maybe people are feeling, individually, that the "share" of their paycheque has moved down in inverse correlation to what (we) shareholders have been getting and also feel that only a small portion of the corporate tax cuts will end up in their pockets.

I understand that you have a low opinion of some (most?) media so I back the following link by saying that I have followed this topic and have compared to other "sources" and this "survey" seems quite representative.
https://www.cnbc.com/2018/01/30/cnbc-fed-survey-most-of-the-tax-cut-windfall-will-boost-buybacks-and-dividends.html

Trying to stay away from ivory tower concepts but if you agree that the permanent income hypothesis formulated by Mr. Milton Friedman tends to fit with main street, regular people will not react to what is felt to be transitory.
I tend to think that the average Joe is not stupid and most probably think that their tax bill will likely go up in the future (whoever is in charge).
FWIW I happen to think that the regular suburbanite may have a better grasp of the situation in comparison to central bankers.

rb

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Re: odds of rolling back tax cut OR significant tax increases in USA?
« Reply #2 on: March 16, 2018, 10:22:57 PM »
DTEJD, it's not a question of if, it's a question of when. The when may not be imminent. It could be 5-10 years into the future but it's gonna happen. This is not an opinion, it's just math.

If I may also make a suggestion... In my opinion you are with a wrong model when thinking about this stuff that is leading you to flawed conclusions.

DTEJD1997

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Re: odds of rolling back tax cut OR significant tax increases in USA?
« Reply #3 on: March 16, 2018, 11:24:42 PM »
DTEJD, it's not a question of if, it's a question of when. The when may not be imminent. It could be 5-10 years into the future but it's gonna happen. This is not an opinion, it's just math.

If I may also make a suggestion... In my opinion you are with a wrong model when thinking about this stuff that is leading you to flawed conclusions.

Wrong model?  What are you suggesting?

As for higher taxes, I am specifically talking about the tax cuts enacted in the past year.  If these are cancelled OR significantly rolled back in the next year or two, I think the economic reaction will be severe. 

Tax increases may be coming...they may be gradual and targeted...if taxes go up a few points say in 3 years, while a negative, I don't think will be a shock to the system.  A shock to the system will come if in in 2019, or 2020, the current tax regime goes back to the old one (or higher).

Further out the timeline, I would suggest that higher taxes may indeed be likely, but not 100% certain.  Higher taxes may also be a function of where you are located.  I don't think taxes can get significantly higher here in Michigan.  People and assets will simply not pay them and move themselves and their capital.

A possible alternative to higher taxes (to some degree) would be to let inflation run wild.  Government entities can repay their debt in devalued currency. A "bust out" if you will.

Another possibility is that government entities are going to have to:

A). Do more work
B). Do higher quality work
C). Do it for a cheaper price

The private sector has had to do this for a while now...government has been insulated to a large degree.  That may change going forward.

Viking

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Re: odds of rolling back tax cut OR significant tax increases in USA?
« Reply #4 on: March 17, 2018, 12:04:12 AM »
My uninformed read is the tax breaks are done and not likely to be reversed anytime soon. If the Democrats carry the Presidency, Senate and House in 2.7 years then perhaps we will see some reversal (3 or 4 years away) :-)

Now there will be tax increases. I think a gas tax has been proposed by Trump to fund the infrastructure spending. The government is also running a growing deficit so it would not surprise me to see other targeted tax increases.

Spekulatius

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Re: odds of rolling back tax cut OR significant tax increases in USA?
« Reply #5 on: March 17, 2018, 04:49:41 AM »
My uninformed read is the tax breaks are done and not likely to be reversed anytime soon. If the Democrats carry the Presidency, Senate and House in 2.7 years then perhaps we will see some reversal (3 or 4 years away) :-)

Now there will be tax increases. I think a gas tax has been proposed by Trump to fund the infrastructure spending. The government is also running a growing deficit so it would not surprise me to see other targeted tax increases.

Yes, I think the tax cuts will be there until we get a new government which chooses to change them. In any case, I believe the change in corporate taxes will survive for the most part.

FWIW, if you live in a high tax state (NY with high income and high real estate taxes),  the Trump tax cut ist not going to do much for you. I put the numbers for my situation in a calculator and for a 200k + income, the saving are in the order of $1000/ year. If I owned an expensive house, it could easily break just even.
To be a realist, one has to believe in miracles.

jeffmori7

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rkbabang

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Re: odds of rolling back tax cut OR significant tax increases in USA?
« Reply #7 on: April 17, 2018, 07:14:37 AM »
DTEJD, it's not a question of if, it's a question of when. The when may not be imminent. It could be 5-10 years into the future but it's gonna happen. This is not an opinion, it's just math.

If I may also make a suggestion... In my opinion you are with a wrong model when thinking about this stuff that is leading you to flawed conclusions.

I agree with you here.  The tax cuts came along with spending increases. That isn't going to work.  I'm all for massive tax cuts far exceeding the current cuts, but spending needs to be decreased too.  Otherwise the debt will increase massively or a lot of money will need to be printed. The amount of new growth stimulated by the tax cuts are not going to make up for the kind of deficits the government is running.  There Ain't No Such Thing As A Free Lunch.  The problem is we have two parties, one that wants to grow government spending by an enormous amount every single year, and one that wants to grow spending even more.