For those who were not invited to the PHONE TOWN HALL meeting with Mark Ridley -Thomas and Diane Harkey at 9 am on Tuesday, February 14th, 2017 about the impact of changes to the Federal Tax Laws and the impact on the State of California……there were some very valuable moments. From what we gathered: Right now the Congress has a virtual “NO CLUE” as to what will happen with a Trumpster Administration. The call for Comprehensive Tax Reform in the United States has been going on as long as anyone might have memory. The luminaries included both Republicans and Democrats. The concept of this discussion was to target the impact of New Federal Tax Laws on the citizens of the State of California. A noble and audacious endeavor for anyone. The discussion began with and included the 2009 Republican concept of HR 1…..and what that might cure or remove from the tax code.
However, after the nearly two hour phone chat…..a couple of very valuable things came out. First of all without Global Rules which impact currency trading and Global Tax policies and the finalization of NEW or ReNewed Trade Policies – it appears that any tax changes are basically going to simply re-arrange the deck chairs on the Titanic. Raise Middle-Class base rate, up to $162,ooo a year from 20% to 25%…..which of course adds another $6 to $8 Thousand dollars to our annual tax bill. The chat is also that the Mortgage Deduction may be unceremoniously dumped, on the premise that it only helps the upper ONE to TEN Percent of earners. The current cap is $1,000,000 dollars and they want that drawn down to $500,000. They also believe that Charity Deduction will be the last to go as a write off. So, if the average middle class family gave $2,000 dollars to charity last year……it will probably not help much – but then who is counting?
There was no suggestion about comparing the tax codes of the six largest economies in the world, or the desire to bring the current tax code into Global Compliance or Global Evaluation. The concept seems to be that the United States is a Bubble of its own. When the discussion ranged to the subject Tariffs – the euphemism was now called a “Credit Transfer”. In bookkeeping we learned that when someone owed you something and didn’t pay…..it appeared on the balance sheet as a “Credit”….when the actual payment occurred it was written in as a Debit to you account. Now days those terms get a little twisted and when you want a refund on something you have purchased they issue either a “Credit to your Credit Card” or give you an in-store Credit Certificate or the ability to use that Credit to buy other goods. The point is simple: A Tariff is a Debit – You buy the goods, you pay the 22% on top of that. A “Credit Transfer” means, or may mean that we have written down what you owe for the Tariff Charge and will keep that in a Cigar Box – that we can balance every year or two.
From what we can glean from this is: Big Companies will raise the price to consumers of everything built in a foreign country and pay later with a paper credit to their account. For example: A new VW says that 8% of it is built in the USA. Everything else is built in either Mexico or Germany. What that would mean on the sale of a $22,000 dolllar vehicle is that about $1800 would be deducted from the price because it was US Made. Then 20% would be added to the remaining say: $20,000. The new price would now be $26,200, plus tax and license. For those buying Ford 150 Pickups, GMC, Chevy or Toyota Pickups….we are talking VERY BIG PRICE HIKES!
Writing off Depreciation is another thing that they touched upon. When Big Global Integrated Companies make major investments in manufacturing facilities in the United States, Mexico, China, The Euro Zone or the Far East…….they write off the cost of creating these facilities over anywhere from 1 to 20 years. Most small businesses in the United States write off the Depreciation of their Capital Expenses in 1 to 5 years. This is not a level playground. We seem to be encouraging American Companies to build everywhere and then take the tax write off…..no matter where it is. If GMC Builds a plant in Korea, to supposedly create EXPORTS….they get the tax write-off. If Boeing builds an Aircraft Manufacturing Facility in China, they also get the tax write-off because they sell Globally. The point in this regard is very simply that without knowing what the tax impact to these companies is in foreign markets….we will never be able to change our tax code to either benefit small business or just plain workers in this country. What does a Chinese Citizen pay in individual taxes? Do these experts know that answer? What about a British Citizen?
So, after all the smoke and mirrors of the conversation mixing in Possible Changes The Affordable Care Act – the conversation soon became rather diluted….into a flim flam discussion of minutia. Since the Days of Steve Forbes and his wonderful idea for the Flat Tax, where we throw out 14,000 pages of the Federal Tax Code and replace it with one line….back in the 1990’s – we can see that any changes to the current tax code is going to unfairly damage the Middle Class and Small Business – AGAIN! How in the world can Economists, Federal Economic Advisors and Tax Experts around the world come to any conclusions without seeing and addressing all the facts? The Flat Tax is great until you realize by the simple passage on Legislative Bill – Tax rates would rise from 15% to first year to 16% the 2nd year and 35% by year five. No FAT TAX…please! Then you have the VAT’s – Value Added Taxes in foreign countries. You buy a bunch of great British Bone China and pay $2000 dollars. When you leave the country – after filling out endless forms and spending a good three hours just figuring out where the VAT office is at the airport……they give you upwards of 15% refund. This is designed of course to encourage tourists from other countries to buy your native products. Of course what they don’t tell you is the cost of the Administration and the Byzantine methods employed in our marvelous computer age.
The idea that the United States changes its tax code before on finalizing our Global Trade Agreements around the world is just plain stupid and ridiculous. The idea, that we are not embarking on understanding how people in China, Japan, The EuroZone and Russia….pay their taxes, does all go back to the 14,000 Lobbyists in Washington that represent every major company and industry and all want to keep their jobs by saving those companies money and taking out of the pockets of the working American Citizen. Trickle down again….more like Trickle on! The Fed and Chairman Janet Yellen just disclosed that interest rates were going to be going up and very quickly. Stand by to stand by…..on that one. Greece, Portugal, Spain and Italy all still stimulus dollars from the US.
It was an honor to be included in the Ridley-Thomas/Harkey Phone Town Hall. Thanks Diane Harkey: We left our questions after the event and were supposed to have someone (a person) get back to us…….we are waiting. We advise all – to keep a keen eye on their wallets when any Politician starts to talk about changes or simplification to the United States Federal Tax Code!
Then of course don’t forget that Currency Manipulation is not restricted to China….the US has been doing that for years!
The Ridley-Thomas / Harkey Town Hall Tuesday! What a kick in the pants….that was!