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Taxing Times

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If you believe that tax cuts create jobs and growth, you’re not alone. Almost, but not quite. Even those who would benefit the most from the proposed tax bill aren’t willing to go that far.

This puts the Republicans in the Senate in a terrible bind. They can pass the tax bill which came over from the House, potentially angering their constituents, or they can stop it, angering their donors. They also have the choice between raising the deficit or having a record of getting just about nothing accomplished.

How bad is it for Republicans, already worried about 2018? It’s so bad it’s worse than the Tax Bill itself.

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Double Irish

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Another bizzy day demands a repeat, this from just last year.  Little has changed since then, and if anything corporate taxes are only closer to the front burner.  Maybe.

In a victory for corporate taxes everywhere, Apple has been ordered to pay as much as €13 billion ($14.7 billion) in back taxes to Ireland. Or, perhaps, in a loss for workers everywhere, a reluctant Ireland is forced to go back on its agreement with Apple to base its European operations there in exchange for much needed tax breaks. Or, perhaps, corporate tax harmonization has been dealt a terrible setback as the European Union (EU) has claimed their turf in what should be hammered out through an international agreement.

What we do know for sure is the massive penalty, the largest ever imposed, is a big blow to Apple, amounting to …. around 7% of their massive $200 billion cash reserves. Unless, of course,  the Republic of Ireland can justify a smaller bill, which they are very much keen to do. So nevermind.

Like corporate taxes themselves, today’s big story is completely negotiable and dependent on your perspective. There will be more to this, but nothing even remotely obvious will happen in the immediate future.

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Underground Economy

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This is a repeat from 2013.  What’s amazing is that the Underground Economy, that part which is off the books, has not been studied properly for a solid five years.  It may still be 12% of GDP, but we don’t really know. 

It’s good to have a lot of money, assuming that not everyone has a lot.  Inequality is apparently bad when it gets too big, but it also makes the whole economy possible in small doses.  But how much money is really out there, and where is it going?  It turns out that this is more complicated – and hidden – than most thought.

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Reforming Reform

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Tax reform is on the minds of many Republican candidates, and that’s a good thing. Donald Trump revealed a plan, suggesting he may be a serious candidate after all. This announcement came as his poll numbers were slipping, so we may have a hint what voters think about actual policies. Jeb Bush released his plan earlier this month with the distinction of being called “weird”.

The point is that we are talking about taxes and serious tax reform, which is good. No one should expect one plan to suddenly spring forward and cut through the elaborate mess we have. Then again, once the knife is out, you could carve a better tax code out of a banana. But what really is needed? What is “simplification” or “reform”? Let’s start at the beginning.

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Read Their Lips

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The long election season should, if anything, bring clarity to what we can expect starting in 2017. The next year will give us a lot of information as the campaigns coalesce. The candidates should at least give us the boundaries of what we can expect in terms of policy regardless of who is elected.

There are many things that are well known already, such as the retirement of Baby Boomers and a lot of reasons to believe that this will be a relatively good time economically. Add to that list a lot of reason to believe that taxes will rise. Why? Because the pressure is completely off the Republican Party to hold the line.

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