The One Thing About Tax Reform That NO ONE is Talking About

Phoenix Capital Research's picture

The One Thing About Tax Reform That NO ONE is Talking About

The markets have been gunning higher on the notion that the Trump Administration is about to unveil a huge tax reform plan.

However, the devil is in the details. And thus far the plan is focusing on corporate tax reform, with the notion that an employer will somehow “pass on” their savings to employees via raises.

First off, while the phrase “corporate taxes” is a great political prop, the reality is that nearly 50% of large corporations pay ZERO corporate income tax.

That is not a typo.

In 2012, the Government Accountability Office performed a study in which it discovered that 43% of companies with $10+ million in assets pay ZERO corporate income tax.

It’s not as if the other 57% are picking up the slack either.

It is well known that large corporations go above and beyond to avoid paying the full, required tax rate. As Forbes noted earlier this year, Apple pays a 25% tax rate (the official US corporate rate is supposed to be 35%).  Microsoft pays a 16% tax rate. Alphabet (Google) pays 19%. General Electric and Exxon Mobil appear to have paid no corporate income tax in 2016.

My point is this: pursuing corporate tax reform is a pointless exercise.  Few if any corporations pay anywhere near the official corporate tax rate of 35%.

So what tax reform should we be talking about?

Individual tax reform.

And why aren’t we talking about it?

Because any discussion of individual tax reform eventually leads to the elephant in the room: entitlements.

The US currently spends 65% of it budget on entitlement spending. Nearly half of American households receive some kind of Government assistance/outlay. Those households that DO pay taxes cover only some of this (which is why the US is running $500+ BILLION deficits every year).

The bond bubble is financing the rest of this.

As I outlined in my best-selling book, The Everything Bubble: the Endgame for Central Bank Policy, politicians promise, but bond markets deliver.

Put simply, the bond bubble is what has financed the enormous entitlement spending of Governments around the world.

Take away the bubble in bonds, which permits Governments to issue debt at rates WAY below the historic average, and most major countries are bankrupt in a matter of weeks.

Well guess what? The bond markets are already beginning to revolt. As I write this, the bond yields on FOUR of the largest economies in the world are rising, having broken out of their downtrends of the last few years. The bond markets for US, Japan, Germany and the UK are all in revolt.

And guess what is triggering this?

INFLATION.

Inflation forces bond yields higher as the bond markets adjust to compensate for the fact that future interest payments will be worth less in real terms.

Bond yields higher= bond prices lower. Bond prices lower= the bond bubble is in serious trouble.

The above chart is telling us in very simple terms: the bond market is VERY worried about rising inflation. And if Central Banks don’t move to stop hit now by ending their QE programs and hiking rates, we’re in for a VERY dangerous time in the markets.

Put simply, BIG INFLATION is THE BIG MONEY trend today. And smart investors will use it to generate literal fortunes.

Imagine if you'd prepared your portfolio for a collapse in Tech Stocks in 2000... or a collapse in banks in 2008? Imagine just how much money you could have made with the right investments.

THAT is the kind of potential we have today. And if you're not already taking steps to prepare for this, it's time to get a move on.

We just published a Special Investment Report concerning FIVE secret investments you can use to make inflation pay ou as it rips through the financial system in the months ahead

The report is titled Survive the Inflationary Storm. And it explains in very simply terms how to make inflation PAY YOU.

We are making just 100 copies available to the public.

To pick up yours, swing by:

https://www.phoenixcapitalmarketing.com/inflationstorm.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

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Solio's picture

I refer to the calendar to see what appointments there are on any given day, but if I had one of those expensive, ultra groovey i-poop phones I could happily consult that device for the latest augmented reality.

surf@jm's picture

"The One Thing About Tax Reform That NO ONE is Talking About".........

Yeah, the middle class tax increases.........

Singelguy's picture

If reduction in corporate tax rates are accompanied by a simplification of the tax code resulting in the closing of a significant number of loop holes, the effective tax rate might actually be higher than it is now, generating even more tax revenue for Washington. However, given the bought and paid for politicians, they will likely lower the rates and not touch the loop holes. In other words, it will look like they did something but everything remains the same.

redmudhooch's picture

Remove the parasites.

President Wilson’s Deathbed Comments About the Fed Were Right

http://www.theamericandreamfilm.com/the-cast/woodrow-wilson.php

"I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit... all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world, no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men."

Once elected, President Wilson obeyed his dark masters and enacted unprecedented changes to our great Constitution. In that single year of 1913, President Wilson signed the Federal Reserve Act and the Revenue Act of 1913, chaining all future Americans to the dual horrors of the FED and the IRS. In order to make these acts binding and appear legitimate to Americans, President Wilson pushed through congress two Constitutional Amendments: the 16th and 17th Amendments. These two amendments remain in our Constitution like a malignant cancer destroying the once healthy body of our great nation. The year 1913 stands as the year that America changed forever and the seminal year in Federal Reserve history. It is time to repeal these amendments, and right the wrongs that Wilson did to our great nation.

President Wilson knew what he did was wrong. After serving the dark forces, he would later lament in his diary, "I have unwittingly ruined my country."

Wilson also broke his campaign promises and took America into WW1, and later the failed League of Nations. Wilson shows us a revelation that Americans must guard against elected officials who guide us into unrighteous wars and desire to establish entangling international systems of rules, organizations and government.

Let it Go's picture

Washington is currently putting together a tax bill promising both reform and tax cuts which means our deficit spending is again being ignored. It is as if the whole world has capitulated to the idea that we can spend our way out of the debt and that levels of unsustainable spending are not a problem.

Spending does matter! The article below delves into why austerity has been given a bum rap and why we would be far better off if the term austerity was replaced or renamed sustainable spending.

 http://brucewilds.blogspot.com/2017/11/austerity-should-be-renamed-sustainable_1.html

Expat's picture

How about not spending 800 billion on guns and torture for starters?  There would not be jihadists flying planes into building or driving trucks over cyclists if the US had not fucked over every Muslim country from Morocco to Indonesia.  Give the Pentagon a plastic spork and a police whistle.  The world will be a safer place.

libertyanyday's picture

There will NEVER be any tax reform, it is the most lucrative tool congress has. Raise rates, corps higher more tax attorne's, lower rates , they higher fewer ...............  75,000 pages of bargaining chips.

MrNoItAll's picture

This article gets at least one thing right: Corporate tax reform will have minimal if any positive impact on the economy. The one thing this current media-driven "corporate tax reform" propaganda narrative does accomplish is that it drives up the stock markets, temporarily. They've played this "tax reform" card several times since Trump was elected, each time with a major burst of MSM-generated propaganda, and each time the "market" responds with a small ramp. Maybe that's the point of it all, just another ploy, one of hundreds/thousands, all intended to manipulate the exchanges upward, to keep that massive bubble inflated for just a little longer. Keeping the bubble inflated does seem to be THE main goal.

conraddobler's picture

It's so fubar at this point I don't know what else you'd do but wait for the collapse and rebuild.

At any point in time you have like one zillion things that make no sense going on all around. 

Everything is built on a house of sand, there is very little solid foundations in the economy and to cap all that off we're hurtling towards automation of tasks at a blistering pace.

What's left?  Giving each other backrubs until the robots can do that better?

The goofed up shit is everywhere, from education to hollyweird to finance, and what is real is exactly what they are trying to kill off with automation.

All our shit is made cheap with as close to slave labor as we can get and AAAAAAAAAAANNNND 90 percent or more of what is made is just superficial unecessary shit.

It's a God damned funhouse mirror world out there and if we're going to start doing the right thing that's great and all but any one straw is likely to result in one loud crack as the camel goes down like Frazier.

Interesting times indeed.

Rik Haines's picture

Whoops... Seems I stumbled upon a text-based infomercial... My bad.

strickler's picture

"...with the notion that an employer will somehow “pass on” their savings to employees via raises."

 

Fucking moron is misrepresenting the argument.

 

Lower corporate tax rate will encourage more business formation, more transnationals to hire and produce more in the US, and foriegn companies to move here.

All of that will boost hiring and demand for labor WHICH WILL DRIVE UP WAGES VIA THE LAWS OF SUPPLY AND DEMAND.

How does such a moron get published anywhere?

By the way, a nice side effect of increased hiring is the feedback to consumption and fewer depending on welfare.

 

Gerrilea's picture

Hon, may I call you "hon"?  We tried that shit starting with Reagan, then again with Clinton, Bush & Obama  and what the hell did we get for it?  We got the "investments" of the Chinese, Russian, British and Dutch governments in our nation.

We became the largest nation with the most people working for minimum wage and no benefits...  YAHOOoooo...ugh.

Your thesis is truly flawed.  "Lower corporate tax rate will encourage more business formation." 

The "free flow of money and people" will keep us living paycheck to paycheck and collecting "government subsidies" just to put food on our tables and keep the lights on.

Today we allegedly have a "labor shortage", no we don't...people are refusing to work for corporations that treat you like crap, pay you like a slave and give you nothing in return. 

You can't keep cutting taxes while increasing spending and believe all will be wonderful.  Someone has to pay for it, eventually.



libertyanyday's picture

wrong. lower rates only causes less tax attorneys and CPA's, higher rates  means they hire more loophole finders.

because tax law is fungible, a good CEO would never take tax savings and expand his business.  Next year rates will change and he wont have any choice but to fire.

Expat's picture

that is bullshit. If you lower the tax rate by 1% from 30% to 29% it represents billions for the 1% and corporations.  That means that the next 1% also represents billions.  You will get corporations and the rich to stop buying loopholes when the tax rate is below the marginal cost of bribing congressmen and senators.  I suspect that rate is zero.

cat2005's picture

No he isn’t misrepresenting it.

It easier and quicker to pocket any savings than to reinvest into the business, especially if your are compensated on short term basis.

In other words, this is business (financial engineering) as usual.

TeethVillage88s's picture

Here is what I got, but small corporations are included in individual taxes for some reason.

Final Monthly Treasury Report, 30 Sep 2016, Table 5, or before that... maybe table 2 or 3 or 4.

Corporate Income Taxes Receipts 1998 = $ 188.7 Billion
Corporate Income Taxes Receipts 2002 = $ 148.0 Billion (Recession)
Corporate Income Taxes Receipts 2006 = $ 353.9 Billion
Corporate Income Taxes Receipts 2007 = $ 370.2 Billion
Corporate Income Taxes Receipts 2008 = $ 304.3 Billion
Corporate Income Taxes Receipts 2009 = $ 138.2 Billion (Recession)
Corporate Income Taxes Receipts 2012 = $ 242.3 Billion
Corporate Income Taxes Receipts 2013 = $ 273.5 Billion
Corporate Income Taxes Receipts 2014 = $ 320.7 Billion
Corporate Income Taxes Receipts 2015 = $ 343.5 Billion
Corporate Income Taxes Receipts 2016 = $ 299.6 Billion

Individual Income Taxes Receipts 1998 = $ 828.6 Billion
Individual Income Taxes Receipts 2002 = $ 858.3 Billion (Recession)
Individual Income Taxes Receipts 2006 = $1.044 Trillion
Individual Income Taxes Receipts 2007 = $1.163 Trillion
Individual Income Taxes Receipts 2008 = $1.146 Trillion
Individual Income Taxes Receipts 2009 = $ .915.3 Trillion (Recession)
Individual Income Taxes Receipts 2012 = $1.132 Trillion
Individual Income Taxes Receipts 2013 = $1.316 Trillion
Individual Income Taxes Receipts 2014 = $1.395 Trillion
Individual Income Taxes Receipts 2015 = $1.541 Trillion
Individual Income Taxes Receipts 2016 = $1.546 Trillion

libertyanyday's picture

forest for the trees, lost in the minutia where they want you to go..................rabbit hole here we come.

NurseRatched's picture

S-corporations pay a crapton of taxes via their owners being taxed at high personal rates.  Lower the damn pass-thru rate and the small companies will have more money to invest in skilled employees.

TeethVillage88s's picture

yes, see above my data. you are right.

Pernicious Gold Phallusy's picture

Shut up and sit in the corner until you step up and make colossal campaign contributions.

cheech_wizard's picture

Mmmm, as a guess, out of control government spending?

 

SurlysonofaBitch's picture

"As I outlined in my best-selling book ..." LMFAO

Graph's picture

That, and some kind of finance - John - Lenonesque 'imagine...' where all world is falling apart around you but you're getting richer by the minute, nearing the end of the article.

cat2005's picture

Yes, I rolled my eyes when I read that.

RubyPetunia's picture

The concept upon which this aricle is based is stupid.

Apple pays a lot less corporate tax because it shelters its profits offshore because our corporate tax rate is higher than everybody else.

If we lower our tax rate below nations like Ireland then companies like Apple will pay even less in corporate taxes except that they will be paying them here.

 

 

 

TeethVillage88s's picture

plus 1, but will post links to higher tax in India.

https://en.wikipedia.org/wiki/List_of_countries_by_tax_rates
https://tradingeconomics.com/country-list/personal-income-tax-rate
http://www.investopedia.com/taxes/countries-highest-income-taxes/

You can sort by different tax types for countries :

https://en.wikipedia.org/wiki/List_of_countries_by_tax_rates#Countries

-

https://en.wikipedia.org/wiki/Tax_haven

2 Extent

2.1 Capital held offshore
2.2 Lost tax revenue

3 Examples

3.1 Former tax havens

4 Methodology

4.1 Personal residency
4.2 Corporate residency
4.3 Asset holding
4.4 Trading and other business activity
4.5 Financial intermediaries
4.6 Anonymity and bearer shares
4.7 Money and exchange control

5 Incentives and benefits for tax haven countries
6 Regulation measures

6.1 Modern developments
6.1.1 U.S. Legislation
6.1.2 Bank data leak 2013
6.1.3 Liechtenstein banking scandal
6.1.4 German legislation
6.1.5 UK Foot report
6.1.6 G20 tax haven blacklist

7 Criticism

7.1 Effect of developing countries

https://en.wikipedia.org/wiki/Tax_Justice_Network
https://en.wikipedia.org/wiki/Offshore_bank
https://en.wikipedia.org/wiki/Offshore_financial_centre

fbazzrea's picture

i think you're missing the point, Petunia. it doesn't matter what the corp tax rate is because there are so many loopholes, it is irrelevant.

and to whom it may concern: social security is NOT an entitlement. it's our money which has been embezzled by crooked politicians from our supposed trust fund and spent forward like everything else the b*astards could get away with in a privatized debt-based financial and monetary system that enriches the few at the expense of the many.

hang 'em high!

libertyanyday's picture

loopholes and the pursuit thereof............thats what tax rates do. very good insight.

Soc Sec is a TAX , you have no right to any of it, FICA is a  tax that congress can and does spend on whatever it wants.  Many Citizens dont understand it  but CONGRESS could end SS act tomorrow and you wouild have no legal recourse.

fbazzrea's picture

funny thing about the Social Security Act, i am unable to find the word "tax" in any form. can you?

there are numerous mentions of pensions, benefits, trust funds, etc.

where in the Act does it specify my contribution as a tax?

Singelguy's picture

You are not quite right about social security being your money. Only part of it is. When SS was first designed, the retirement age was 65 and average life expectancy was 67. Now the retirement age is still 65, but life expectsncy aversges at 78. You get your money back in the first 2 years of retirement. After that, it is the taxpayers funding your monthly payments. In order for SS to be totally self funding, the retirement age would have to be increased, along with monthly premiums, or the monthly benefit would have to be drasticaly reduced; or some combination of the above. The current ZIRP just exacerbates the problem. Even if the government paid back every dime they stole from the SS trust fund plus interest, it would only delay the inevitable failure.

fbazzrea's picture

first thing, my SSI/Medicare contributions were maxed out for more than two decades and much of that was self-employed, meaning i contributed the entire 14.5%. there's no way i'm going to receive that back in the first two years.

secondly, SS in itself is not the problem. it is the runaway costs and abuse of medicare, medicaid and the disability scams that are the anchors around our fiscal necks (omitting DOD et al budget). 

everything is inter-related and i fear we're going to have to rebuild from the ground up after the smoke and dust settles. regardless, it appears Baby Boomers are going to take the brunt of the pain. and as far as that goes... i can live with it. i just get so damn tired of hearing politicians and politicos speak of entitlements like they're giving me something for nothing. 

i suggest their work-five-years-retire-for-life retirement programs and skies-are-the-limit healthcare plans be eliminated retroactively and force them to live under the same laws as every other American citizen.

atomic balm's picture

average life expectancy was 67. 

 

From birth.  What was life expectancy given that age 65 was reached?  Then and today.

Gerrilea's picture

Bullshit answer.  Weekly tax deductions are based on total income.  SSI & Medicare taxes are based on that as well. MEANING we are paying taxes on our SSI & Medicare "contributions" BEFORE we collect any of those "benefits". THEN, say you get a part-time job to supplement your income after you've started collecting, if you make too much, you pay upto 85% AGAIN in taxes ON THOSE SAME BENEFITS THAT WERE ALREADY TAXED.

Anyway it's sliced, you'll never get out what you paid in.  AND if you die say at 55 or 60, you get nothing. Our life expectancy is declining.  And how odd that is, we pay the most for education and healthcare in the world.

This system is designed to keep us in perpetual poverty and illness, as the useless eaters we allegedly are.

Any talks of "tax reform" are meaningless unless it includes a plan to get us out of debt.  And that "debt" must include all things including "entitlements" and pensions.  Kicking the can down the road will only hasten our own destruction and collapse as a sovereign nation and "free" people.

 

libertyanyday's picture

"  Even if the government paid back every dime they stole from the SS trust fund plus interest,,"   

 

1)  Where would the MONEY come from to REPLACE ' what they stole'.........think. even more taxes !!!

2)  The SS business model ( ponzi scheme) is built on sand, no matter what bandaids, raise fica , raise retirement. the system fails.

3)  Its gonna take a civil war to discard WA DC criminals and to start over. NO SOCIAL PROGRAMS.

Umh's picture

BTW the retirement age is not 65 unless you were born before 1938.

Umh's picture

This is bullshit unless you earned minimum wage your whole life ---> " You get your money back in the first 2 years of retirement".

I will have to draw benefits for at least 12 years to get back what I paid in. You don't even want to talk about interest.

I have done the math and checked a spreadsheet before responding to your post. Yes, people making near minimum wage receive about 90% of their prior salary in benefits, but there is this sliding scale bullshit that kicks in on the rest of us.

EBT excepted's picture

rahfohrm, mah assz, dat muh’ fuggah be nuttin’ mo’ den be a increese...

leasr ways, ahd steele nigrow rich...hunned dollah beel n a gold toof...

Aireannpure's picture

Corporations have NEVER passed on any savings to employee's. Do us all a service and stop repeating this. Why keep repeating this lie? If you say it long enough idiot's on the guv payroll believe it. Entitlements are what keep the incumbents, incumbent. There will be no change, just MSM lip service as usual. Term limits, generous IRA's with limited tax on the back end, etc, etc....

nobodyimportant's picture

"corporate taxes" are always passed to the end user.  It is just a government gimick to fool the end user into thinking corporations share the tax load when actually the end user gets the full tax liability.

Honest Sam's picture

The ignorance of the human beans regarding a simple Profit and loss statement is monumental.

OF course, ALL costs of doing business are passed on to the customers. And that includes ALL taxes.

The politicians and Media conveniently never mention it.

This is the best kept 'secret' in finance.

 

RubyPetunia's picture

You mean little-guy employees. They do pass it on to the officers and top managers though and what's wrong with that if they are going to spend this new money here and pay taxes on the higher income instead of sheltering it overseas?

FWIW, corporations do pass on savings to customers at times along with outside service providers for things like new carpets and catering.

BetweenThe Coasts's picture

Notice another Godzilla in the room nobody is talking about?

$21 trillion missing/unaccounted for from the Federal Government over twenty years. 'Adjustments' three times bigger than the entire DOD budget for twenty years, and not a peep about it from politicians. Who cares about the perennial favorite Tax Reform, what good is that going to do, when those crooks won't even look for looted money greater than the National Debt? Over the same twenty years government programs benefiting just plain citizens have been rebranded as 'Entitlements' which will be the ruin of the nation. Bullshit.

 

DOD and HUD Missing Money: Supporting Documentation for $21 Trillion of Undocumentable Adjustments
gdpetti's picture

Notice what was left out? Yes, the big corporations pay as little as possible, same with most of their officers and rich owners... they take their money offshore to avoid paying taxes... it's legal because they made it that way. What isn't mentioned is the difference in taxes on 'earned' vs 'unearned' income... i.e. those getting a paycheck don't have a choice but pay Uncle Sam, while those that make money on WallStreet or in family investment funds, pay less, sometimes way less due to additional tax breaks, offshoring etc. This is how the rich get rich... they create or establish a niche product, but most that follows is due to their connections in DC et al... tax breaks, law changes to benefit their class, etc.

Income is income... if anything, money from these gambling centers should be taxes more, but that won't happen, as they have fixed the game to collapse... that is the nature of the game here in Purgatory. No pain, no gain... gain being the increase in self conscious awareness/...... knowledge is power.

Common_Law's picture

You can only evade taxes you're required to pay. Or in the case of most US federal citizens, taxes you are under contract to pay. Ever wonder why you need to sign you SS card? The terms and conditions aren't legally required to be presented to you, like agreeing to this site's terms and conditions simply by visiting the page (clickwrap contact).

How do the feds have jurisdiction to do this? It's not the commerce clause like most things. And the 16th only applies in federal jusistiction (internal in IRS). It's you right to freely contract. And you can forfeit you rights just like you sign an NDA and waive your freedom of speech.

 

www.sedm.org
http://sedm.org/Search/SubjectIndex.htm

http://sedm.org/Forms/10-Emancipation/CitizenshipDiagrams.pdf

https://famguardian.org/Subjects/Taxes/taxes.htm

And it goes unnoticed because there are 3 separate definitions of "united states" (50 states/federal DC+territories/both combined) see Black's law dictionary for verification. The supreme court ruled on it around 1948.