• Tag Archives Tax
  • The Economic Lessons of Bethlehem

    At the heart of the Christmas story rests some important lessons concerning free enterprise, government, and the role of wealth in society.
    Let’s begin with one of the most famous phrases: ‘There’s no room at the inn.’ This phrase is often invoked as if it were a cruel and heartless dismissal of the tired travelers Joseph and Mary. Many renditions of the story conjure up images of the couple going from inn to inn only to have the owner barking at them to go away and slamming the door.
    In fact, the inns were full to overflowing in the entire Holy Land because of the Roman emperor’s decree that everyone be counted and taxed. Inns are private businesses, and customers are their lifeblood. There would have been no reason to turn away this man of royal lineage and his beautiful, expecting bride. In any case, the second chapter of St. Luke doesn’t say that they were continually rejected at place after place. It tells of the charity of a single inn owner, perhaps the first person they encountered, who, after all, was a businessman. His inn was full, but he offered them what he had: the stable. There is no mention that the innkeeper charged the couple even one copper coin, though given his rights as a property owner, he certainly could have.

    This post was published at Mises Canada on DECEMBER 25, 2017.


  • Mises Explains The Santa Claus Principle

    From “The Exhaustion of the Reserve Fund” in Human Action, Chapter XXXVI by Ludwig von Mises:
    The idea underlying all interventionist policies is that the higher income and wealth of the more affluent part of the population is a fund which can be freely used for the improvement of the conditions of the less prosperous. The essence of the interventionist policy is to take from one group to give to another. It is confiscation and distribution. Every measure is ultimately justified by declaring that it is fair to curb the rich for the benefit of the poor.
    In the field of public finance progressive taxation of incomes and estates is the most characteristic manifestation of this doctrine. Tax the rich and spend the revenue for the improvement of the condition of the poor, is the principle of contemporary budgets. In the field of industrial relations shortening the hours of work, raising wages, and a thousand other measures are recommended under the assumption that they favor the employee and burden the employer. Every issue of government and community affairs is dealt with exclusively from the point of view of this principle.
    An illustrative example is provided by the methods applied in the operation of nationalized and municipalized enterprises. These enterprises very often result in financial failure; their accounts regularly show losses burdening the state or the city treasury. It is of no use to investigate whether the deficits are due to the notorious inefficiency of the public conduct of business enterprises or, at least partly, to the inadequacy of the prices at which the commodities or services are sold to the customers. What matters more is the fact that the taxpayers must cover these deficits. The interventionists fully approve of this arrangement. They passionately reject the two other possible solutions: selling the enterprises to private entrepreneurs or raising the prices charged to the customers to such a height that no further deficit remains. The first of these proposals is in their eyes manifestly reactionary because the inevitable trend of history is toward more and more socialization. The second is deemed “antisocial” because it places a heavier load upon the consuming masses. It is fairer to make the taxpayers, i.e., the wealthy citizens, bear the burden. Their ability to pay is greater than that of the average people riding the nationalized railroads and the municipalized subways, trolleys, and busses. To ask that such public utilities should be self-supporting, is, say the interventionists, a relic of the old-fashioned ideas of orthodox finance. One might as well aim at making the roads and the public schools self-supporting.

    This post was published at Ludwig von Mises Institute on December 25, 2017.


  • WHEN LEFTIST VIRTUE SIGNALLING GOES HORRIBLY WRONG

    On Wednesday, HuffPost writer Andy Ostroy attempted to virtue signal as a progressive liberal by attacking Republican Senator Tim Scott of South Carolina as a token black man and a ‘manipulated prop’ being used to sell the Republican’s newly passed tax bill.
    ‘What a shocker… there’s ONE black person there and sure enough they have him standing right next to the mic like a manipulated prop,’ Ostroy tweeted. ‘Way to go @SenatorTimScott.’


    This post was published at The Daily Sheeple on DECEMBER 23, 2017.


  • Turmoil Grows Over Disparity In Rules For Prepayment Of Property Taxes

    What a mess!
    A matter of immediate importance to many property owners – prepayment of property taxes – is rapidly descending into chaos and unfairness.
    Can you prepay property taxes before the end of this year or not? You can for purposes of getting a deduction in 2017 under the new federal tax law, but the problem is whether your county will accept prepayment. It varies by county, which is obviously unfair, and reports are very confusing on what the rules are.
    If you own in Cook County, try to prepay your 2017 taxes (due in two halves in 2018) and you’ll find that the county is only set up to allow you to pay 55% of the prior year’s tax. The place to do so is linked here.

    This post was published at Zero Hedge on Dec 24, 2017.


  • “You All Just Got A Lot Richer” – Trump Confirms The Biggest Problem With The GOP Tax Cut

    As we’ve pointed out time and time again, the biggest problem with the Trump tax cuts is that they overwhelmingly benefit the rich. In fact, shortly after the initial nine-page outline of the program was unveiled by Gary Cohn and Steven Mnuchin, the nonpartisan Tax Policy Center released an analysis that showed the wealthiest 1% of Americans would accumulate more than 80% of the benefit from the tax bill.
    One need only glance at this chart from JP Morgan to see how shabbily middle- and working-class voters are treated by the tax bill.
    This is a big problem – particularly if the administration hopes to come anywhere near the 2.9% rate of GDP growth sustained over the next 10 years, a feat that would amount to the longest period without a recession in US history. That’s because when the wealthy receive tax breaks, they tend to save the money instead of putting it to productive use – at least at first – as we discussed last week.

    This post was published at Zero Hedge on Dec 24, 2017.


  • Consumers Are Smarter than Bureaucrats Think

    Despite the name of this government agency, Canada’s Competition Bureau lacks an appreciation of the nature of competition. Moreover, the Bureau’s actions can be seen as an insult to Canadians, as it fails to acknowledge the ability of discriminating consumers to recognize uncompetitive offerings. As the Bureau pretends to be the consumers’ guardian angel, it wastes taxpayers’ dollars on counterproductive activities.
    The Hudson’s Bay Company (HBC) operates numerous department stores in Canada. They say they have spent more than US$425,000 and invested more than 6,500 person-hours to produce 37,000 documents in response to the Competition Bureau’s complaint made last February. According to The Canadian Press, the Competition Bureau
    is suing Hudson’s Bay Co., alleging that the retailer engaged in deceptive pricing practices for four years …
    The Competition Bureau claims HBC misled customers over the prices of mattresses and box springs sold together since at least March 2013 …
    ‘The regular prices of the sleep sets were so inflated above what the market would bear that sales at the regular price were virtually non-existent,’ reads the filing.
    HBC listed a Mount Royal tight top queen sleep set at $1,998 and then a sale price of $788 in 2014, for example, but never sold one at the regular price, the agency says.
    So, HBC supposedly ‘engaged in deceptive pricing practices’ which the Bureau defines as misleading customers about prices. Nonsense. The Bureau reveals its own bureaucratic idiocy when it contradicts itself by admitting that no sales were made at the inflated price.

    This post was published at Ludwig von Mises Institute on December 23, 2017.


  • Doug Noland: Epic Stimulus Overload

    This is a syndicated repost courtesy of Credit Bubble Bulletin . To view original, click here. Reposted with permission.
    Ten-year Treasury yields jumped 13 bps this week to 2.48%, the high going back to March. German bund yields rose 12 bps to 0.42%. U. S. equities have been reveling in tax reform exuberance. Bonds not so much. With unemployment at an almost 17-year low 4.1%, bond investors have so far retained incredible faith in global central bankers and the disinflation thesis.
    Between tax legislation and cryptocurrencies, there’s been little interest in much else. As for tax cuts, it’s an inopportune juncture in the cycle for aggressive fiscal stimulus. And for major corporate tax reduction more specifically, with boom-time earnings and the loosest Credit conditions imaginable, it’s Epic Stimulus Overload. History will look back at this week – ebullient Republicans sharing the podium and cryptocurrency/blockchain trading madness – and ponder how things got so crazy.
    From my analytical vantage point, the nation’s housing markets have been about the only thing holding the U. S. economy back from full-fledged overheated status. Sales have been solid and price inflation steady. While construction has recovered significantly from the 2009/2010 trough, housing starts remain at about 60% of 2004-2005 period peak levels. It takes some time for residential construction to attain take-off momentum. Well, liftoff may have finally arrived. As long as mortgage rates remain so low, we should expect ongoing housing upside surprises. An already strong inflationary bias is starting to Bubble. Is the Fed paying attention?

    This post was published at Wall Street Examiner on December 23, 2017.


  • Why Monetary Policy Will Cancel Out Fiscal Policy

    Authored by MN Gordon via EconomicPrism.com,
    Good cheer has arrived at precisely the perfect moment. You can really see it. Record stock prices, stout economic growth, and a GOP tax reform bill to boot. Has there ever been a more flawless week leading up to Christmas?
    We can’t think of one off hand. And if we could, we wouldn’t let it detract from the present merriment. Like bellowing out the verses of Joy to the World at a Christmas Eve candlelight service, it sure feels magnificent – don’t it?
    The cocktail of record stock prices, robust GDP growth, and reforms to the tax code has the sweet warmth of a glass of spiked eggnog. Not long ago, if you recall, a Dow Jones Industrial Average above 25,000 was impossible. Yet somehow, in the blink of an eye, it has moved to just a peppermint stick shy of this momentous milestone – and we’re all rich because of it.
    So, too, the United States economy is now growing with the spry energy of Santa’s elves. According to Commerce Department, U. S. GDP increased in the third quarter at a rate of 3.2 percent. What’s more, according to the New York Fed’s Nowcast report, and their Data Flow through December 15, U. S. GDP is expanding in the fourth quarter at an annualized rate of 3.98 percent.
    Indeed, annualized GDP growth above 3 percent is both remarkable and extraordinary. Remember, the last time U. S. GDP grew by 3 percent or more for an entire calendar year was 2005. Several years before the iPhone was invented.

    This post was published at Zero Hedge on Dec 22, 2017.


  • UMich Confidence Disappoints As Bipartisan Divide Weighs On Hope

    Hope is fading among Americans…

    Consumer confidence continued to slowly sink in December, with most of the decline among lower income households.
    Tax reform was spontaneously mentioned by 29% of all respondents, with a nearly equal split between positive and negative impacts on economic prospects.
    As usual, party affiliation was the dominant correlate of people’s assessments of the tax legislation.
    The long term outlook for the economy was most affected, with three-quarters of Republicans expecting a stronger economy and three-quarters of Democrats expecting a downturn.

    This post was published at Zero Hedge on Dec 22, 2017.


  • Two More White House Advisers Leave As Staffer “Churn” Continues

    One week after Omarosa Manigault Newman left the White House under suspicious circumstances – she was reportedly escorted off the property when she tried to enter the residence after being fired by Chief of Staff John Kelly – two more senior Trump staffers are on their way out.
    Last night, both Deputy Chief of Staff Rick Dearborn and White House National Economic Council Deputy Director Jeremy Katz said they would step down early next year. Dearborn told Fox News that his departure is ‘bittersweet’ because he loves working for Trump. But he said the time was right following the tax bill victory. According to the Washington Post, the departures are the latest indication that the administration is in the middle of a “churn” of senior staffers, although the WaPo is known to have a certain “angle” when reporting on the Trump admin.
    Dearborn oversaw the White House’s political operation, public outreach and legislative affairs. An exact date of departure has not yet been set, and he will stay in the position for the first month or two of the next year.

    This post was published at Zero Hedge on Dec 22, 2017.


  • Are Tax Cuts Really Just Undemocratic Exploitation?

    Will Wilkinson, the vice president for policy at the Niskanen Center, does not like the tax bill just passed by Congress. Writing in The New York Times, he finds the legislation ‘notably generous to corporations, high earners, inheritors of large estates and the owners of private jets.’
    Wilkinson has discovered a surprising source for the legislation he dislikes so much. It is none other than the libertarian idea, promoted by Murray Rothbard and Ayn Rand, that taxation is theft. Under their theory of ‘absolute’ property rights, taxation was ‘morally criminalized.’ Democratic majorities, in this view, cannot override property rights.
    Wilkinson rejects this account. ‘The idea that there is an inherent tension between democracy and the integrity of property rights is wildly misguided.’ Democracy is a means for the poor and middle class to protect themselves from exploitative elites. Democracy is a relatively recent innovation; in pre-democratic states, ruling elites exploited the ‘lower orders.’ Those not in the ruling elite need the redistributive democratic state for protection.
    The fault is no doubt mine, but I find Wilkinson’s line of thought difficult to follow. How does the thought that taxation is morally wrong underlie a tax bill? If you reject taxation, would you not oppose taxes rather than enact new taxes? Perhaps what Wilkinson has in mind is this: in present circumstances, Republicans under nefarious libertarian influence could not proceed all the way to abolition of taxation. The best they could manage is not to tax the well-off as much as Wilkinson thinks appropriate.

    This post was published at Ludwig von Mises Institute on 12/21/2017.


  • Trump Tax Reform Causing Panic in Europe & Asia

    While the American press keeps pushing the class warfare along with the Democrats, outside the USA there is a major panic taking place on a grand scale. I have been called into meeting in Europe and even in Asia all deeply concerned about the loss of competition with the United States due to the Trump Tax Reform. Naturally, the American press would NEVER tell the truth how cutting the corporate tax rate will upset the powers that be around the globe.
    A German study warns that its economy will be among the losers in the face of the Trump Tax Reform, which they warn will fuel the tax competition between America and Europe, but also the study leader, Christoph Spengel from the Economic Research Institute ZEW, came out and told Reuters:
    ‘In addition, competition between EU members for US investment will increase; Germany is the loser.’

    This post was published at Armstrong Economics on Dec 22, 2017.


  • Credit Card Debt Suddenly Surges 18% As U.S. Consumers “Pre-Spend” Tax Relief Savings

    With Republicans in Washington D. C. on the verge of passing their first major piece of legislation in the form of comprehensive tax cuts that will allow Americans across the income spectrum to keep a little more of their hard earned cash in 2018, it appears as though eager U. S. consumers may have already “pre-spent” their savings on their credit cards.
    As the folks at Gluskin Sheff point out, 13-week annualized credit card balances in the U. S. have gone completely vertical in the last few months of 2017 which should make for some great Christmas gifts for little Johnny and Susie…gifts that will undoubtedly find themselves tucked away in a dark closet, never to be seen again, by mid January.

    This post was published at Zero Hedge on Dec 21, 2017.


  • What Will the Tax Law Do to Over-Indebted Corporate America?

    A crackdown on excessive debt. Financial engineering gets more expensive. The new tax law is larded with goodies for Corporate America, but there is one shift – a much needed shift – in this debt-obsessed world that will punish over-indebted companies, discourage companies from taking on too much leverage, and perhaps, just maybe, make these companies less risky: The new law sharply limits the deductibility of corporate interest expense.
    Starting in 2018, a company can only deduct interest expense of up to 30% of its Ebitda (earnings before interest, taxes, depreciation, and amortization). Any amount in interest expense beyond it will no longer be deductible.
    This will tighten further in 2022, when the deductibility of corporate debt will be capped at 30% of earnings before interest and taxes but after depreciation and amortization expenses. This is a much smaller number than Ebitda. And interest expense deduction is capped at 30% of that much smaller amount. This will raise the tax bill further.
    Most impacted will be highly indebted companies, which often have a junk credit rating. And due to this junk credit rating, they also pay higher interest rates. This made the interest expense deduction very valuable. But now it is getting partially gutted.

    This post was published at Wolf Street on Dec 22, 2017.


  • 3 (Mis)Statements About Tax Reform

    With the passage of the Tax Cut And Jobs Act on Wednesday, I wanted to address a few of the questions and misinformation currently circulating about the impact of tax cuts on the U. S. economy.
    Over the last couple of months, I have been repeatedly asked why I am not ‘enthusiastic’ about the ‘greatest tax reform’ since the Reagan era.
    First, let me be clear, I like getting a ‘tax cut.’ Under the new plan, and because I own several small businesses structured as limited liability corporations (LLC’s), I will potentially see a reduction in the amount of taxes I will pay next year.
    What I am opposed to, as a ‘fiscal conservative,’ is the ongoing expansion of our debts and deficits which are an inherent drag on the future prosperity of the country.
    For the last 8-years, Republicans have repeatedly blamed the previous Administration for doubling the national debt and further expanding dependency on the welfare and entitlement system. When the Republican-controlled Senate and House had the opportunity to live up to their promise of reducing spending and being more fiscally responsible, their first piece of major legislative action will add another $10 Trillion in debt over the next 10-years, increase the deficit to more than $1 Trillion, and double the size of an existing welfare program through increasing child tax credits.
    As the Committee for a Responsible Federal Budget just wrote:

    This post was published at Zero Hedge on Dec 21, 2017.


  • Thousands Abandoning Illinois and Its Big Government Debacle

    There is a mass exodus from Illinois.
    According to the US Census Bureau, the Prairie State lost a net 33,700 residents in fiscal year 2017. More people bailed out of Illinois than any other state in the US. And based on calculations the folks over at ZeroHedge worked out, the exodus was even worse than the Census Bureau numbers indicate.
    Of course, the net population loss masks the true gross outflow of Illinois residents as it doesn’t account for natural births/deaths. Assuming that Illinois has the same natural population growth as the US as a whole (0.7%) implies that the state lost a staggering ~125,000 residents in aggregate, or roughly 1 man/woman/child every 4.3 minutes.’
    So, why the big rush to bail out of the great state of Illinois?
    The state is a fiscal mess.
    Over the summer, the Illinois legislature pushed through a budget that included $5 billion in tax hikes. Even so, the state’s bond rating continues to teeter just above junk status. Moody’s wasn’t particularly impressed with the new Illinois budget.

    This post was published at Schiffgold on DECEMBER 21, 2017.


  • Asian Metals Market Update: December-21-2017

    ‘Spend wisely and Invest lavishly should be life mantra for 2018’
    American companies announcing large bonuses for its employees after the passage of Tax bill will result in higher consumption in the first quarter of next year. Higher retail consumption in the USA will result in higher employment and higher profitability. Global stock markets will remain firm and result in rosier projections for economic growth in the USA and China.
    Negative news surrounding crypto currencies like hacking etc this week is state manipulated. States know that block chain technology is like the Linux of the world (which is free) and not windows (which is very expensive).

    This post was published at GoldSeek on 21 December 2017.