The further to the left or the right you move, the more your lens on life distorts.

Monday, November 20, 2017

Two D Words

Both words begin with the letter "D". One is a entity and represents a major political party. The other is an abstraction and indicates the prevailing strategy employed by that party. The words are Democrat and Disingenuous. As the attempt at major tax reform plods forward, the Democrats do what they always do—claim that any attempt to reform a corporate tax structure that has increasingly made U.S. companies uncompetitive on the world stage is a gift to "the rich." That's where the word Disingenuous comes into play.

The Democrats recognize that the tax code is complex and that the vast majority of politicians and citizens have no real clue about the details. They also recognize that taxes are easy to demagogue, simply by claiming that any attempt at reform benefits the rich to the detriment of the middle class, that all of this is about rewarding hated CEOs, and that evil corporation will be the beneficiaries, not the common man. All of that is nonsense, but the Dems learned a long time ago that facts simply don't matter.

Sure, there are some politicians who are dumb as rocks and honestly believe the Dem rhetoric. But there are others who understand that the demagoguery makes for an excellent political strategy even though it's dishonest and detrimental to our economy. No matter. In the age of Trump, the Dems will lie if it results in a defeat for their hated adversary. Never mind that it would also be a defeat for American workers, the economy, and our international competitiveness. Trump Derangement Syndrome is paramount.

The Wall Street Journal comments:
Liberals are denouncing Republican tax reform as a giveaway to big corporations, as they always do. But the irony is that the Senate and House bills would do far more to stop corporate tax gaming than anything the Obama Administration did in eight years. This includes preventing tax avoidance, levelling the tax field for U.S. multinationals, and stopping corporate inversions.

Start with cutting the corporate rate to 20% from 35%, which in a stroke offers less incentive for companies to move capital, income and intellectual property out of the U.S. to lower tax climes. During the Obama Administration, many U.S. companies “inverted” by merging with smaller foreign competitors to take advantage of lower tax rates abroad. The U.S. has the highest corporate rate in the developed world, whose average is 25%.

Inversions seek to make American companies more globally competitive and let them reinvest in the U.S. tax free. Under the current U.S. worldwide tax system, companies can defer taxes on their overseas profits until they bring them home—and then get smacked with the full 35% rate. Hence, corporations have parked $2.5 trillion or more abroad ...

We report all this because you’d think from the press coverage that corporate tax reform is all about enriching a few CEOs. The truth is that it’s a serious attempt to fix a broken U.S. code that has festered for years and made America increasingly uncompetitive as a destination for mobile global capital. The GOP reforms would help the economy and make it harder for corporations to avoid paying taxes.
Without any Democrat support (after all, forget tax breaks for the Middle Class, the only "class" that the democrats truly care about is class warfare), passage of much needed tax reform is in doubt. That may be an excellent political strategy on the Dems' part, but it's lousy governance. So much for profiles in courage.


Guess who wrote this:
When effective marginal rates are higher, potential projects need to generate more income if the business is to pay the tax and still provide investors with the required return. Businesses will therefore limit their activities to higher-return projects. Thus, all else equal, a higher effective marginal rate for businesses will tend to reduce the level of investment, and a lower effective marginal rate will tend to encourage additional projects and a larger capital stock. Increases in the capital available for each worker’s use, also referred to as capital deepening, boost productivity, wages, and output.
James Freeman provides the answer:
That’s a passage from the 2015 Economic Report of President [Barack Obama], and Team Obama even recognized in a footnote the research on this topic conducted by Kevin Hassett, who now chairs President Trump’s Council of Economic Advisers.

Yet now that Mr. Hassett and his boss are promoting a reform of corporate taxation to achieve the goals sketched out by Team Obama, former Obama advisers like Larry Summers and Jason Furman are railing against it. Are they nervous that the resulting Trump economy will compare too favorably with the Obama economy?

Mr. Summers for his part has lately been warning that countries might get into a race to lower corporate tax rates. In a world threatened by North Korean missiles and Islamic terror, he now asks us to be concerned at the possibility that the whole world might decide to encourage economic growth and job creation. That’s a world we want to live in.
So do I. But with regard to the Dem's reaction to the GOP tax reform package, it's D & D all the way down.