Watching the debate over this tax bill is at least entertaining; it a total partisan project as everything has been over the past 10 years in Washington, D.C. Polarizing ideals have separated folks in a dangerous way. But when it comes to economics and taxes I think it could pull folks together. Who wouldn’t like having more money in their pockets?
The Democrats call this new tax bill destructive, but don’t you think that the top tax rate of 39.6 percent is enough? And if you live in California add on another 13 percent for an effective rate of 52 percent.
We haven’t seen tax reform for 30 years, since Ronald Reagan. He cleaned up a lot of tax loopholes that folks used to offset the 70 percent tax rate of the day. But he reduced the top tax rate to 28 percent and federal revenues doubled.
I’m not an economist, but I have a lot of friends who are and I read a lot of articles by economists. One thing that a lot of folks don’t seem to realize—especially Democrats—if money is taxed less it moves faster through the economy, and it is taxed more often therefore raising government revenues and giving folks more discretionary funds. It’s a proven economic reality.
I don’t have a problem reducing corporate taxes to 20 percent. This gives corporations more capital to invest in worthwhile projects to grow their business; it’s a very simple proposition. It’s competitive with the rest of the world and we do have to compete in a global economy whether you like it or not.
The tax break doesn’t mean that corporate top management is going to line their pockets. Executive income is subject to individual income rates just like everyone else. If they earn big money they are taxed at 39.6 percent, plus they get whacked by the alternative minimum tax provision, which this tax bill wants to eliminate. But corporations will have more capital to use.
Over the past few days I’ve been watching the Senate tax debates and the Democrats have been attempting to create an evil image for multinational corporations, kind of like R-CALF and meat packers. This is not fair. We’ve seen many corporations leave the U.S. to avoid high taxes—4,700 since 2004 to be exact. If that isn’t proof enough that we need tax reform I don’t know what is. This bill is about growing the economy which has struggled to get over 2 percent over the past eight years. High taxes do not promote growth; they stagnate the economy.
I just want to see what this bill has in store for pass-through business entities, which most American business are—LLCs, Sub S Corporations, partnerships, etc. They all pay their business revenues on personal tax rates. This is a big deal. I pay my taxes that way and I know most everyone in agriculture does, and it’s still a bit of a mystery. If the president wants to sign the bill by Christmas, they have a bunch of work to do.
I’m also concerned about the business interest deduction. Especially for our cattle feeding and stocker cattle industries, if they lose the deductibility of their interest expense it could have a direct effect on cattle prices. It could also make it much harder for young people to get started in agriculture. Any capital-intensive business will be affected by the cost of capital. I wonder how the banks are looking at this and what effect it will have on interest rates. There will certainly be less demand. I think this one needs a second look because it could have ramifications on the economy. And besides they are going to ease up on mortgage interest deductions.
Then there is the “death” tax. The House wants to eliminate it, the Senate wants to double the exemption to $11 million for a single individual, and $22 million for a couple. They say that only 0.20 percent of estates will be affected; President Donald Trump for sure. For most ag businesses $22 million should be enough and for the big ones there is always the use of trusts or corporate structures to protect the real assets if that’s the goal.
One thing I’m not liking is that there seems to be time limitations on many of these new tax laws. They should be made permanent like the corporate tax is. I don’t hear much about cutting deficit spending on the $4.3 trillion federal budgets. And the Democrat mantra hasn’t changed a bit. Tax and spend, keep them poor so they vote for our social promises, while the Republicans want to lift everyone up and create wealth. I’m ready for change. How about you? — PETE CROW
