Taxes

Mexico and Hungary tried junk food taxes — and they seem to be working

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Mexico and Hungary tried junk food taxes — and they seem to be working

"Walk into any food-selling establishment in the US, and it becomes clear very quickly why America is one of the most obese nations on the planet. From morning muffins that pack as much sugar as an icing-topped cupcake, to chocolate bars that contain more than 600 calories, it’s extremely easy to overindulge in America. What’s less clear is exactly what to do about that. Some kind of government intervention in the food environment probably has to be part of the solution — taxes have of course been an effective, though still controversial, approach to curbing the consumption of tobacco, alcohol, and soda."

Why Smarter Ways Exist to Foster Innovation and Save Jobs

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Trump’s Destructive Solar Tariffs: Why Smarter Ways Exist to Foster Innovation and Save Jobs

"Solar job growth took off in 2010. By 2016, more than 260,000 Americans worked in the industry, up from fewer than 95,000 seven years earlier."

"An uninterrupted solar boom would create even more jobs. The number of solar panel installers, for example, would more than double from 11,300 to 23,000 within 10 years at the current pace of growth, which would make it the fastest-growing profession, according to the Bureau of Labor Statistics. Another renewable energy mainstay, wind turbine technician, came in a close second."

"Imposing tariffs on imported panels would cloud that outlook, largely because manufacturing accounts for less than 15 percent of U.S. solar jobs while installation amounts to more than half of them, according to the Solar Foundation's annual census. If panels get more expensive, the cost to go solar will rise and demand will fall—along with the impetus to employ so many installers."

The Tax Law’s New Way Of Measuring Inflation Could Take A Toll On Taxpayers

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The Tax Law’s New Way Of Measuring Inflation Could Take A Toll On Taxpayers

"Among the big changes contained in the tax overhaul signed by President Trump last week is a little-remarked-upon provision changing the way inflation is calculated."

"The new method, using the so-called "chained" consumer price index to determine when to adjust tax brackets and eligibility for deductions, is expected to push more Americans into higher tax brackets more quickly. In the past, the tax code used the traditional CPI measure issued by the Labor Department each month."

"By switching to this new method, the government will bring an additional $134 billion into federal coffers over the next decade, according to the Joint Committee on Taxation."

Democratic Tax Plan

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Here is what I think a Democratic tax plan should look like

I think the Democrats should put forward an alternative tax plan that makes the wealthy pay their fair share while encouraging working folk to keep and save more money. Here is what I propose for a Democratic tax plan:

Send all taxpayers a pre-filled out tax form

Too many poor and working folk are defrauded by tax preparation corporations. An easy way to increase tax refunds to the poor is to eliminate the tax preparation industry. The government knows how much you received in income for the most part, because the government receives from your employers and banks detailed statements on income earned and interest paid out. Rather then force a taxpayer to manually fill out a paper form or pay to have their taxes online, all a person would have to do is review the tax statement sent by the government, attest to it’s accuracy and provide a credit card or bank account for payment or refund either online or on paper. By using the online version, it would give people an additional $5 credit, covering the cost of postage and manual processing.

Create a new refundable $500 tax credit for individuals, $1,000 refundable tax credit for families

I think a “flat tax cut” makes a lot of sense, because it means that people who most it most will get more money in their pockets. A “flat tax cut” is fair because both the poor and rich get the same tax credit. George W. Bush implemented a similar tax cut, it proved to by mildly stimulative to the economy. It’s good policy to help people at the bottom who need the money the most get more, and for everyone else it’s fair, because everyone gets the same basic tax break regardless of how wealthy or poor they may be.

Make Taxes on Interest and Dividends More Progressive

Saving is such an important part of wealth building, that working families should pay no taxes on interest or capital gains made on bank accounts and investment. Taxes on investments should be eliminated for most working families, and should be reduced even for the wealthy. Instead of taxing wealth, we should move towards taxing carbon dioxide. Allow wealth to grow freely, especially for the poor and middle class, while addressing the carbon crisis our nation is facing.

Implement a Carbon Tax

Some liberals don’t like the idea of a carbon tax, because it means working families (and everybody else) will pay more for energy and daily necessities. This is valid point, but slowing the damage from climate change is a much larger concern then any one individual’s personal finances. I think a carbon tax should be phased in, and as it comes online, the carbon tax can be used to reduce taxes on industry to mute the effect of job loses as industry has to retool as we move to a carbon constrained future. A carbon tax will be costly on the economy, and will be costly on the rich and poor alike, but it’s too important to ignore.

Make the Estate Tax More Progressive

The current estate tax is $5.4 million tax free, then 40% for any money or property passed from one generation to the next. That threshold seems a little bit too high, I would suggest allowing families to pass on a million dollars of money or property tax free, then start at 10% for the next million, and increase it by 10% for every million over two. For too long, wealthy farmers and small business owners have been allowed to concentrate their wealth rather then spreading it out in economy. A much more progressive estate tax would provide billions in additional funding for the federal treasury, helping to close the deficit and freeing up billions to be used to strengthen the safety net and invest in our public infrastructure.

The GOP Tax Cut

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I hope the GOP tax cuts prove as successful as their proponents claim they will be. I don’t want them to fail, I don’t want our country to slip into recession or suffer from inflation. Three percent growth could produce a lot of good jobs, a lot of tax revenue needed to make the kind of investments in clean energy and education for our youth to move our country forward. I want to see life get better for all Americans, and I want to see enough growth so we can help get people in the inner cities and Appalachia back to work, utilizing their unique talents to move our country forward.

Like many people who read the news and are knowledgeable about economics, I am skeptical how much the tax cuts will grow our economy. Certainly the corporate tax cuts are helping business, they’ve been helping the market run on a tear over the past year. But it’s a Christmas gift that businesses and stockholders (like myself) have been expecting for a long time, once the present is unwrapped and enjoyed for an hour or so, much of the joy of tax cuts are certain to wear off. That marvelous toy, beloved by child for a few hours eventually just ends up smelling like burnt plastic in the burn barrel. But maybe with fewer taxes, businesses will invest more in their businesses, and shareholders will continue to gain going forward. But I’m not that hopeful. The excitement of tax cuts quickly wear off and are forgotten.

As an investor and as one who is putting away a good chunk of every paycheck towards my eventual retirement in 20-30 years, I certainly want the economy to grow. The money saved today, is money that will eventually buy me land, an off-grid cabin, more guns, a four wheeler and sled, livestock and anything else needed for a good life out in country. A good economy is good for all Americans, even if some places are left behind. An affluent society can invest in those who have been left behind, help them find meaning in life, put people who otherwise would be left behind back to work.

But I am concerned. I see the dark storm clouds in the distance. Our government leaders can put their heads into the sand and deny climate change, or ignore fundamental economics that say you can’t go beyond full employment without elevating inflation. Climate change is a real threat, and society has done the bare minimum to prepare for the natural forces we are unleashing on the globe, to say nothing of doing the bare minimum to control emissions. Most economists will tell you we are at full employment, and stimulating the economy is not what is needed to help those left behind. Education, job training, and relocation assistance is needed to help those without work, not an economy that can’t grow even faster without inflation.

I don’t buy the fact that only the rich will benefit from the GOP tax cut. I am not rich, but any way I look at the numbers, I will benefit from the tax cut. For one, the 25% and 15% brackets which I currently are taxed at will go down by 3% each, which puts more money in my pocket every pay check. The larger standard deduction, even with the loss of personal deduction, means my adjusted income is less, so more of my income falls in the new 12% rate and less at the new 22% rate. Not to mention, the 22% rate starts at a higher portion of my income, as it’s been inflation adjusted upwards. Less directly, it’s promoting growth across the economy, which is causing my stocks and bonds to grow. It’s pushing up interest rates, which are making my cash savings grow. At least for now. But the question is a tax cut that is going to balloon the deficit, and how will it stimulate an economy already at full employment? Will flooding the debt markets with government debt devalue the dollar even further?

Sure, the changes to the personal income tax rate sunset in eight years, after the 2024 presidential election, but do you think that the next president and congress is going to allow a massive hike on working families? You be the politician who says people should pay more in taxes, even if it reduces the deficit. I suspect if Democrats are elected, they’ll increase the top rates and preserve the lower rates for middle-class families. If Republicans are elected, they’ll preserve the rates as is and seek new ways to fund the government and cut spending for certain government programs. Or most likely just ignore the deficit, because interest rates remain low, and government borrowing is cheap and mostly paid through ordinary inflation in the economy over time.

Liberals and most economists are right to say that the increase of federal debt will cause problems (some point) down the road. But the tax cuts equal $100-$150 billion a year or $1.5 trillion over ten years, which isn’t all that much when you consider how truly massive the federal budget is at $4,049 billion. To make up for the loss revenue, I suggest a fairly stiff carbon tax ($100 a ton or higher), that disincentivizes carbon intensive activities and encourages the efficient use of energy. Sure working families including myself will pay the brunt of this tax, but hopefully people will choose to consume less, especially of carbon intensive activities and invest more under such a tax system. Lower businesses taxes will help the economy grow, and help mitigate the impacts of such a large and expensive carbon tax. We can also cut defense spending, as our country has not had a major war in many years, and cut police forces, as crime rates continue to decline. There is no need wasting money for government programs that don’t make sense in peace-time with crime rates being as low as they are today. Repealing outdated and unnecessary laws, can further help save on need for law enforcement, as there are fewer laws to enforce.

I am not freaking out about the GOP tax cut like some of the Democrats. I don’t buy the president’s rhetoric that the tax cut will be “rocket fuel” for the economy, but I think it will be mildly stimulative, give me a little more money in each paycheck and provide modest gains to my investments. The increased deficit can be offset by a future carbon tax, and future congresses can and will end up renewing most of the personal income tax cuts, especially in the lower brackets.

Congress Takes Aim At Tax Rules That Hit Hardest At Upper Middle Class

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AMT: Congress Takes Aim At Tax Rules That Hit Hardest At Upper Middle Class

"Scrapping the AMT would lower the potential tax hit for affluent families. But the AMT has survived for decades because it generates a lot of money for government coffers."

"Eliminating the AMT would cost the U.S. government some $700 billion in revenue over the next decade, about half the estimated price tag for the tax bill Congress is now considering."

"It would also potentially remove some of the constraints on the use of tax shelters by the wealthy, allowing taxpayers to take advantage of more loopholes and deductions, Gale notes."

Nancy Pelosi’s claims on middle-income taxpayers and state and local tax deductions

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Nancy Pelosi’s claims on middle-income taxpayers and state and local tax deductions

"This is a good example of how tax data can be manipulated. Pelosi is usually eager to point out that wealthy Americans will mostly benefit from broad-based tax cuts. In this case, wealthier Americans would mainly feel the effects of a broad-based elimination of a tax break"

"But in this case, Pelosi chooses to ignore the distributional tables and instead focus on the absolute number of people affected, even if the impact is mostly felt by the rich. She earns two Pinocchios."