Look again at my use of the word “employees” in post 2071. Notice that it is directly followed by the words “who make a lot of money.” I was talking about employees who make a lot of money, which is why I wrote “employees who make a lot of money.”
It doesn’t matter what most employees do. It matters what employees who make a lot of money do.
Kansas eliminated taxes on pass-through entities. It was going to create a job boom. In response, lots of high income Kansas residents made themselves pass-through entities.
Surprise! Now Kansas can’t repair its roads, is cutting down on K-12 school year length, and has overcrowded and underfunded prisons.
Perhaps most of us would agree that tax policies have always incentivized or rewarded some behaviors over others.
The currently proposed tax bill (let’s stop calling it a tax cut) seems to incentivize inheriting wealth instead of earning wealth. When earing wealth, earning through a pass-through entity is preferred. Andy Slavitt expressed this more eloquently than me on his twitter feed:
How can we tell what people will do? Well, we do have a nice experiment:
Remember, this was done to avoid a relatively small Kansas state income tax. I am not aware of any sports coaches in Missouri or Oklahoma doing this, although I certainly could be wrong.
I know we already mentioned the Kansas basketball coach.
Well… it looks like some businesses are as screwed as grad students:
This is behind a paywall. I tried to find a similar story that wasn’t but no luck.
Yup, saw that WSJ article as well, Romani. I still think this bill could collapse completely.
Here’s an interesting analysis from a group of law professors: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3084187
You should be able to download the pdf without signing up, but signing up is free and there are many interesting articles on all sorts of subjects. Be careful, You can lose yourself in them.
One of the money quotes from the law professors’ document:
That is the essence of tax policy, but the goal is to have the incentives and rewards match the end-goals that the government wants to encourage. So a deduction for home-mortgage interest is intended to encourage taxpayers to buy homes. Reduced rates on long-term capital gains are intended to encourage long-term investment.
As long as the incentives match societal goals, then the tax policy is working as intended.
But in this case there appears the tax bill is incentivizing behavior that is contrary to the overall goals of the system, unless the goal is to further break down the US economy and concentrate wealth in the hands of a few.
One can argue about whether the point of the law-- giving corporations and rich people a big tax cut-- is a good idea. But even if we think it’s a good idea in principle, the law is nevertheles badly drafted and it still encourages pointless economic activity only intended to avoid taxes. Maybe we want to cut taxes to Apple by $45 billion, but do we really want a football coach to become a corporation just to avoid paying taxes? No. We don’t.
And we don’t want the marginal tax for some taxpayers to be over 100%, either. That’s just legislative malpractice.
Wow, they are on the California plan…
California schools are not shortening their school year. You’re thinking of back in 2011 when a Republican was governor. That is not happening now.
This thread is making Kansas sound a lot worse than it actually is. On 2015 NAEP scores, whether you look at 4th or 8th grade, or math, science, or reading, Kansas scores about the same as the national average. California is below the national average. So despite the funding issues and shortened school year, Kansas kids still learn more than California kids and California schools still are worse than Kansas schools in academics.
White students perform about the same in Kansas as in California, and black students perform about as well, and Asian students perform about as well, and Hispanic students perform about as well. So it’s not clear to me on what basis you say Kansas schools are doing better than California schools, @roethlisburger… Seems to me Kansas is majority white, and California is majority minority with a lot of English language learners, and that explains the difference, not any superiority of Kansas schools.
Whatever it is or not, one thing for sure: it is a war on higher ed.
https://www.seattletimes.com/seattle-news/politics/the-right-really-was-coming-after-college-next/
Ten years ago, in 2007, Kansas schools were in the top 10 for both 4th & 8th grade. And their bond rating at that time was AA+, a quite strong rating.
That Kansas has dropped in 10 years to be as bad as California in both school quality and bond ratings is not a good sign. And while it is a big mistake for California to spend like drunken sailors with the hope that Silicon Valley will bail them out (again!), at least California has a Silicon Valley that can deliver tax windfalls periodically. Kansas does not have that and needs to manage its finances more carefully.
Kansas had to roll back many of the tax cuts they enacted because it was such a disaster for that state. Those tax cuts were initially enacted because they believed it would spur economic growth & jobs. It did neither. All it did was blow a massive hole in the state’s budget.
The definition of insanity is doing the same thing over and over again and expecting different results.
California’s economy, OTOH, is quite healthy.
https://www.bloomberg.com/view/articles/2017-05-10/california-leads-u-s-economy-away-from-trump
Yes, California is currently healthy because Silicon Valley is currently healthy. If you look at tech ETFs, they are 6x where they were in 2009.
When Silicon Valley does badly, California runs huge deficits. After the great recession, California had the worst bond rating in the US.
So why does California continue to spend like Silicon Valley will always do well, when it is highly susceptible to stock bubbles and economic cycles?
This tax cut package is going to make the deficit explode. Just wait until we hit the next slow down in a couple of years and the tax money dries up. What a horrible way to govern with each party making 180 degree turns in policy every 4 or 8 years. Will we ever be able to get out of our own way?
“California’s Economy: The 9 Industries Driving GDP Growth”
H says the tax advisors are saying if you are in a high state/local tax area and you expect to owe for 2017, you should pay now instead of waiting until April or whenever you would normally file. We can’t do our taxes yet, but I’m going to try to muster enough $$ to send in the same amount we had to send for 2016.