President Trump: The NEW one and only politics thread

Whatever you read about this tax plan. ... Know three things (among many others I could point out):

1) This is not "tax reform." It's "tax cut."
2) I am as for tax cuts as anyone. I'd like to see 0 income tax. But this is just candy. We are locked into trillions of dollars of spending every year that we already don't fund, with the entitlements we have saddled ourselves with. We already have a huge debt problem that we won't be able to get out of. It is irresponsible (but not surprising) to REDUCE revenues further without first addressing the spending. This is a bad thing.
3) They are selling it with the usual sophistry -- because people are so dumb. They want to sell it as a middle class tax break. What this is really about is cutting corporate rates -- which makes sense, actually, because we are uncompetitive. That said, a big part of this will the repatriation part of it -- U.S. companies have close to $3 trillion of cash sitting overseas that they can't bring back here without getting taxed up the wazoo. The theory is, if you give them incentive to bring that money back here they will invest it and that will create jobs. ... which is what WOULD happen if our economy wasn't being manipulated to create skewed incentives elsewhere. For the last decade, those companies have been able to borrow for next to nothing. And they have -- nearly all of those companies have loaded up their balance sheets with debt that more than offsets the money they have sitting oversees. It is ridiculously cheap to borrow. For the last decade, those companies could have been using that money to build new factories, train workers, invest new business segments. ... and instead they have returned nearly all of that money to their shareholders via stock buybacks and dividend increases. Which was rational, because our economy has been depressed, so they don't want to invest in something that won't return the capital. The same thing that has enabled those companies to borrow so cheaply has investors / savers clamoring for the dividends. ... those savers are being robbed of the yield those companies would have to pay to borrow in an unmanipulated debt market. So the incentive is to buy back stock and create financially-manipulated increases in stock prices that way (people are being forced to try to substitute capital gains for safe yield) and pay back cash in the form of dividends. Anyhow, the point is that with that money repatriated, those same companies aren't going to build factories and create jobs. The smart ones will pay back some of the debt they have piled onto their balance sheets. Unfortunately, most others will just do more of the same with the money -- trying to engineer higher stock prices via buybacks and dividend increases. Bank on it. They have no incentive not to do it. You don't expand your business to meet demand that doesn't exist.

 

BTW, the Federal death tax trigger this year is something like $5.5 million. I am listening to Trump right now going on about farmers and Americans screwed by it (and I actually agree; it is double taxation and unfair). But 99 percent of the people he is addressing will never sniff that kind of estate. Yet, they are cheering like they hit the lottery. He could be saying anything right now and they'd cheer enthusiastically.

 

You shouldn't have to jump through hoops sheltering your wealth in ways and places YOU don't want it committed to (and paying others, btw, which takes capital that could be being deployed for much better uses) to avoid your government snatching it from you.