Bill Bonner – Bill Bonner’s Diary (United States) –
RANCHO SANTANA, NICARAGUA – Yesterday, Senate Republicans announced their proposed tax reform measures.
Instead of eliminating the inheritance tax – like the House version does – the Senate proposal would increase the exemption by $5 million per person. And instead of cutting business taxes right away, the cuts wouldn’t happen until 2019.
We never met a tax cut we didn’t like. But we never met anything quite like the latest proposals from Republicans…
We’ve been writing about the future. We’ve seen that technology doesn’t always make things better.
As we pointed out yesterday, even rising GDP is not necessarily a good thing. (On the other hand, falling GDP is usually not so great either… look at Venezuela!)
And although we never know for sure how it will go, there are ways to almost guarantee that the future will stink: Tell your wife she’s getting fatter. Or go deeper into debt.
No one knows which… if any… of these new tax proposals will pass. But some of them are very attractive – to us.
By increasing the exemption, the Senate version of the tax plan would save each rich person $4 million on estate taxes alone. The House version would save even more.
Eliminating the alternative minimum tax – a baseline tax rate for certain individuals and businesses – lowering the corporate rate, and allowing a 25% rate for “pass-through” businesses – all would be welcome.
The inheritance (or death) tax is especially menacing for a small business owner. You pay a 40% tax on everything you leave your children in excess of a $5 million exemption.
The tax only really affects rich corpses.
But what if the cadaver is worth more than $5 million?
He may not be able to afford to die!
Imagine a family business worth $10 million. It may make you technically “rich.” But it doesn’t mean you have $2 million on hand to pay to the IRS.
Your kids might have to borrow… or sell part of the business… just to pay the taxes.
And people are reluctant to buy a minority share in a small business; they may have to offer one-third or half of it (possibly losing control of the business) just to get the money to pay the tax.
As a small business owner… and card-carrying member of the “One Percent”… we are 100% behind the Republican plan. We will come out way a.
We also take a mischievous delight in the appalling unfairness of the tax plan… and the galling, in-your-face chutzpah of the Trump-Deep State Team.
After ripping off the middle class for a generation… transferring trillions of dollars from them to the rich and well-connected, rather than apologize and make amends… they rip them off even more!
Because although it is all well and good to cut our taxes (thanks!), there is no way the feds and their crony friends are going to cut their incomes.
Instead, they’re going to pay themselves more.
Here’s a shortcut to understanding why the middle class will be ripped off again:
The poor don’t have any money.
And the middle class doesn’t have lobbyists.
The new “Brady” amendment to the GOP tax plan calls for $2 trillion in tax cuts to corporations and “pass-through” owners.
That money will have to be made up somewhere.
We don’t know. But we’re confident that the lobbyists in Washington will earn their fees. They’ll make sure their clients – the rich, insiders, Establishment, Deep State swamp critters – won’t pay.
The feds will have no choice: They’ll have to squeeze that blood out of the turnips in the general population.
Back in the 1980s – when we were running the National Taxpayers Union, a taxpayer lobby group – we believed that if we could cut taxes, we could “starve the beast” and bring the Deep State under control.
Didn’t happen. Instead, the feds learned to use credit and fake money to finance their expansion.
Conservatives then turned to the debt ceiling to try to slow down Washington’s deficit spending.
That didn’t work either. The politicians simply raised the ceiling.
Two months ago, for example, President Trump colluded with top Democrats to raise the debt ceiling for the 74th time since 1962.
Since then, the national debt has risen at the rate of about $80 billion a week.
This represents a call on future output… on work that hasn’t been done yet… on products that haven’t been made or sold… on profits that haven’t been earned and taxes that haven’t been collected.
Debt doesn’t erase costs… it doesn’t disappear them. It merely puts them off.
For a while.
Then… who pays?
Not the rich. Not the poor. Again, look at Venezuela (about which… more to come…).