The Full List Of Every GOP Senator Who Stands To Be Personally Enriched By The Tax Bill

Submitted by David Sirota of International Business Times

When the U.S. Senate takes up the final tax bill this week, more than a quarter of all GOP senators will be voting on a bill that includes a special provision that could give them a new tax cut through their real estate shell companies, according to federal records reviewed by International Business Times.

The provision was not in the original bill passed by the Senate on Dec. 1. It was embedded in the final bill by Sen. Orrin Hatch of Utah, who is among the lawmakers that stand to personally benefit from the provision. 

In response to Democratic lawmakers who have slammed the provision as a lobbyist-sculpted giveaway to the rich, Republican Majority Whip John Cornyn promoted on Twitter a column by Ryan Ellis, a registered bank lobbyist who has been working to influence the tax legislation and who has defended the provision.

In all, 14 Republican senators (see list below) hold financial interests in 26 income-generating real-estate partnerships — worth as much as $105 million in total. Those holdings together produced between $2.4 million and $14.1 million in rent and interest income in 2016, according to federal records. 

IBT first reported on the tax carve-out, which allows investors in “pass-through” entities, including real-estate partnerships such as LLCs and LPs, with few employees to deduct part of their income that passes through those partnerships. In response to IBT’s reporting, Republican Sen. Bob Corker, who owns up to $35 million in “pass-through” real-estate interests, claimed he did not know of the carve-out when he announced his support for the legislation on Friday, after previously casting the only Republican vote against the bill in the Senate, which did not then include the provision.

In the face of a Twitter-trending hashtag #CorkerKickback, Corker has been vociferously defended by Liam Donovan, a registered lobbyist for the construction and real estate industry who is lobbying Congress on tax reform and specifically on “pass-through rates,” according to federal records.

While Republicans have argued the House version of the bill contained the controversial provision, experts have told IBT the provision appeared in the legislation only after the bill was finalized during House-Senate Conference Committee deliberations.

“The mechanism is completely new and can’t be found in any prior version of the bill,” Matt Gardner, a senior fellow at the Institute of Economics and Tax Policy, previously told IBT.

Because the provision was added by the conference committee, it is “unlikely to have been fully priced into the revenue estimate, because the new provision was never subject to the benefits of crowdsourced analysis of all its implications,” University of Southern California law professor Edward Kleinbard told IBT.

GOP senators will vote on a tax bill with a real estate tax break that would benefit
14 of them. Sens. Lamar Alexander, John Cornyn and John Barrasso

Corker, the Senate’s fourth richest member in 2015, with an estimated net worth of over $69 million, reported the highest 2016 income from real-estate partnerships — up to $7 million — among GOP senators. His income came from three properties held by LLCs that together were worth as much as $35 million. Montana Sen. Steve Daines, whose estimated net worth was $14.4 million in 2015, reported earning between $425,000 and $4.2 million last year in rental income from eight properties managed by Genesis LLC. Daines, with Wisconsin Sen. Ron Johnson, pushed for a more generous tax deduction for pass-through entities during the Senate tax bill process.

Other top earners were Johnson and Tennessee Sen. Lamar Alexander, who both earned as much as $1 million in 2016 from real estate pass-through vehicles.

Elaine Hatch, the wife of the chairman of the Senate Finance Committee who said Monday that he wrote the real-estate tax break and disputed IBT’s report that the provision had not been in previous versions of the bill, owns a stake in a real-estate LLC worth up to $500,000 that generated between $5,000 and $15,000 of income from rent/royalties, interest and capital gains in 2016.

Several of these senators were also top recipients of campaign cash from the real estate industry during the 2016 election cycle. Ohio Sen. Rob Portman’s campaign took in over $900,000 from real estate industry PACs and individuals; Johnson received roughly $780,000; and Georgia Sen. Johnny Isakson got $520,000 from the industry.

Beyond Republican senators, other major beneficiaries of the provision could be President Donald Trump, who owns or directs over 560 companies, most of which are LLCs or LPs. Democrats in recent days have seized on the provision — and its potential benefits to Republican lawmakers — in demanding the bill be halted.

“President Trump made several promises to the American people on tax reform, including the assurance that his tax proposal wouldn’t enrich people like him,” Democratic U.S. Sen. Tom Carper of Delaware told IBT in an emailed statement. “Unfortunately, Republicans are rushing through a tax plan that does indeed enrich the wealthiest people in our country, including business-owners like Mr. Trump. It’s regrettable and, frankly, shameful that my Republican colleagues are rushing ahead with their partisan tax bill despite the mounting questions and concerns about its provisions.”

Republicans Reverse, May Allow State Income Tax Deduction

One day after the top Senate Republicans realized they probably should have read the tax bill they voted for in the deep of the night on Saturday morning, and announced they are seeking to repeal the Alternative Minimum Tax they passed just days earlier, realizing it could punish growing companies, they now also appear to be reversing on the controversial repeal of State and Local Tax Deductions, and as Bloomberg reports, Republican lawmakers "are discussing a compromise on state and local tax deductions that would allow taxpayers to deduct state income tax, House Ways and Means Chairman Kevin Brady said."

According to one proposal being discussed, taxpayers could deduct both their state income tax and state and local property taxes up to a combined limit of $10,000. This differs from the currently circulating bills which preserve the individual deduction for state and local property taxes - capped at $10,000 - but not for income taxes. The push to include income taxes could help those in high-tax states who don’t own property.

Mitch McConnell confirmed he’s open to tweaking final tax legislation to appease lawmakers who want to let constituents deduct state income taxes: "There’s some in the House who would like to see that applied not just to property, but to income tax, you know, where you can sort of pick which state and local tax you want to deduct,” the Kentucky Republican said on conservative radio host Hugh Hewitt’s show. “That sounds like a kind of reasonable idea.”

Summarizing the conference process, McConnell said "There are a lot of these things that are floating back and forth,” adding that he cannot predict “exactly how the final product turns out” once the House and Senate complete their conference negotiations.

Indicating that SALT repeal was conceived as an entirely political move meant to punish "rich", predominantly blue states, House Republican leaders - hearing significant pushback from their own constituents - signaled openness to "relieving the burden for residents of high-tax states."

Plans for the so-called SALT deduction have prompted more tension in the House than in the Senate, because there aren’t any Republican senators from states with the highest taxes. Twelve out of the 13 GOP House lawmakers who voted against the bill last month were from high-tax states. Still, including the property tax deduction in the Senate bill was a last-minute change to help get the support of Republican Senator Susan Collins of Maine.

 

Two House members from New Jersey -- Leonard Lance, a Republican, and Josh Gottheimer, a Democrat -- plan to submit a joint proposal to the conference committee that would maintain SALT in its entirety.

 

The lawmakers said repealing the break will lead to "double taxation" and "pay for reform on the backs of just a few states that already pay significantly more than other states in federal taxes." One of those net donor states, they note, is New Jersey.

Brady, who’s overseeing the House-Senate conference committee for tax negotiations, said Wednesday that allowing income tax deductions is one of five options on the table. Others include potential adjustments to rates, brackets, the individual alternative minimum tax and the family tax credit.

There is just one problem with the bill which is already cutting it dangerously close to the $1.5Tn extra deficit limit: where does the money come from?

As Bloomberg writes, it"s unclear how lawmakers would pay for any such modifications to the state and local tax break. Preserving the property tax deduction up to $10,000 would cost about $148 billion over a decade, according to the Joint Committee on Taxation. McConnell has been said to want any proposed changes presented with ways to pay for them.

Among the proposed revenue offset include changing estate tax rules about stepped-up basis and closing what they call a loophole for charitable donations to private foundations as ways to offset some of the lost revenue that would result from keeping SALT.

Three Americans Now Own More Wealth Than Bottom Half of US Combined: Report

Authored by Jake Johnson via TheAntiMedia.org,

“The elite ranks of our billionaire class continue to pull apart from the rest of us,” a new Institute for Policy study analysis finds.

In the United States, the 400 richest individuals now own more wealth than the bottom 64 percent of the population and the three richest own more wealth than the bottom 50 percent, while pervasive poverty means one in five households have zero or negative net worth.

Those are just several of the striking findings of Billionaire Bonanza 2017, a new report (pdf) published Wednesday by the Institute for Policy Studies (IPS) that explores in detail the speed with which the U.S. is becoming “a hereditary aristocracy of wealth and power.”

“Over recent decades, an incredibly disproportionate share of America’s income and wealth gains has flowed to the top of our economic spectrum. At the tip of that top sit the nation’s richest 400 individuals, a group that Forbes magazine has been tracking annually since 1982,” write IPS’s Chuck Collins and Josh Hoxie, the report’s authors.

 

“Americans at the other end of our economic spectrum, meanwhile, watch their wages stagnate and savings dwindle.”

Collins and Hoxie are quick to note that the vast gulf that currently exists between the rich and everyone else is not the product of some inexplicable “natural phenomenon.” It is, rather, the result of “unfair economic policies that benefit those at the top at the expense of those at  the bottom.”

Based on data recently made public by the Forbes 400 list and the Federal Reserve’s annual “Survey of Consumer Finances,” Billionaire Bonanza examines in detail the principal beneficiaries of America’s “deeply unbalanced economy”: the mega-rich.

“The wealthiest 25 individuals in the United States today own $1 trillion in combined assets,” the report notes.

 

“These 25, a group equivalent to the active roster of a major league baseball team, hold more wealth than the bottom 56 percent of the U.S. population combined, 178 million people.”

The top 25 list features billionaires who have attained their vast riches through a variety of means, from inheritance to investing to founding a corporate giant like Amazon or Google. What unites these enormously wealthy individuals—aside from the fact that they are all white—is that they just keep getting richer, decade after decade.

Average Americans, by contrast, have not fared nearly as well: a significant percentage of the U.S. households “have no savings at all or owe more than they own,” making them residents of what Collins and Hoxie term “Underwater Nation.”

“Excluding the value of the family car, 19 percent of U.S. households have zero or negative net worth,” the report notes.

 

“Looking at this trend through the lens of race reveals that 30 percent of black households and 27 percent of Latino households have zero or negative wealth.”

In order to get a broader sense of the size of the chasm between rich and poor in the U.S., Collins and Hoxie place the net worth of the top one percent and the bottom one percent side by side.

“All combined, households in the bottom one percent have a combined negative net worth of $196 billion,” the report finds. “For comparison, the top one percent, a category holding the exact same number of people, have positive $33.4 trillion in combined net worth.”

Even mainstream institutions like the International Monetary Fund have acknowledged that such vast disparities of wealth and income are not sustainable, politically or economically. But as Billionaire Bonanza notes, the Trump administration—with the help of the GOP-controlled Congress—appears bent on making these disparities worse by slashing taxes for the wealthy while gutting programs that primarily benefit low-income and middle class Americans.

So the first priority, Collins and Hoxie note, is to “reject tax and other federal policies that will add oil to the inequality fire.”

In terms of going on the offensive once the “do no harm” principle is observed, the report makes several suggestions, including:

• Enacting higher marginal tax rates on individuals earning above $250,000 and $1 million;


• “Addressing the problem of hidden wealth,” which often leads to an underestimation of the level of wealth inequality;


• Instituting a tax on Wall Street financial transactions, which could bring in an estimated $350 billion in federal revenue over a decade;


• Eliminate the carried interest loophole, which allows hedge fund managers to “reclassify wage income as capital income” and pay less in taxes as a result; and


• Bolstering, rather than eliminating, the estate tax, which only affects a tiny number families.

As “the elite ranks of our billionaire class continue to pull apart from the rest of us,” the report notes, many Americans—including students saddled with loan debt, workers suffering from stagnant wages, and families who have seen “their wealth and savings evaporate”—are revolting against the system that allowed the richest to accumulate such wealth at the expense of so many.

“A century ago, a similar anti-inequality upsurge took on America’s vastly unequal distribution of income and wealth and, over the course of little more than a generation, fashioned a much more equal America,” Collins and Hoxie conclude. “We can do the same.”

Flatliners - Dead Market Walking

Authored by Sven Henrich via NorthmanTrader.com,

In the movie Flatliners aspiring medical doctors tried to unlock the mysteries of death by, well, killing themselves. It was meant to be a controlled death of course, to flat line on the heart rate monitor for a few minutes to find out what wonders where to be found “on the other side” only to then return safe & sound thanks to medical intervention. Well, they soon found out the other side wasn’t everything it was cracked up to be and the main character soon got regular beatings as the sins of his past came back to haunt him.

In my view markets find themselves in a very similar script. The promise of investor nirvana where the pains of real life no longer matter. If you only pay attention to the record highs headlines it all looks rather fantastical these days.

Prices only go up no matter what time frame you look at.

Annually:

Quarterly:

Monthly:

And still central bankers can’t find any evidence of inflation. Funny.

Indeed all risk has been flat-lined in this grand central bank experiment as the following chart of the $VIX shows:

Oh I’m kidding of course, but any trader staring at the tape knows that we find ourselves in the most compressed price environment in history.

This is not normal, there’s no heartbeat:

As I’m writing this I’m fully aware I may be viewed as the bear who cried wolf. After all I’ve been outlining structural risk factors for a while and markets have moved past my technical risk zones of 2450-2500 and most recently 2530. That’s what bubbles do. They blow past anyone’s expectations, they make believers of the unbelievers, make bears look like idiots and the most reckless look like geniuses.

But an extreme market that only becomes more extreme is not any less extreme, it is just more extreme. As no risk is apparent these extremes are then dismissed as the new normal.

Yet momentum driven price appreciation has absolutely zero predictive value of future price appreciation, it only appears as such at the time.

Here’s the $NDX leading up to the 2000 top:

It looked fantastic.

It meant absolutely nothing:

For traders of course the key is how to trade set-ups (I’ll post more on this in the near future, but I’ve talked a bit about it in The Relevance of Technical Charts) and for investors it is a matter of how to take advantage while at the same time know when things change.

At this time I want to document a bit of what I see here in markets and the structural world as I don’t want anyone to be surprised when the flat risk line we currently see brings about those nasty consequences.

Let’s be clear.

We find ourselves in a very unique point in history and in a world dominated by false narratives. It is a challenge to keep an analytical grip on reality, but I’ll try to tie a few threads together here to put everything in a macro context.

Firstly the underlying base reality: Free money, easy money, whatever you want to call it, permeates everything we see in financial markets. Indeed I would argue price appreciation has been paid for with unprecedented and, in my view, unsustainable volatility compression.

A couple of charts really highlight this.

Most clearly perhaps is the precise trend line tagging we can observe in the correlated picture of price appreciation and volatility compression since the February 2016 lows:

The $VIX’s corollary, the inverse $XIV, embarked on an explosive near one way journey since the US election coinciding with over $2 trillion central bank intervention in just the first 9 months of 2017:

And it has continued to this day and just made another all time high this past week on a massive negative divergence. It is the magnitude of this volatility compression that explains the current trading environment we find ourselves in.

Aside from the obvious artificial liquidity avalanche we’ve had speculated about the driver of all this and the answer may simply be the promise of even more free money, specifically tax cuts.

As some of you may recall from my analysis over the past year  I’ve been very clear that math ultimately will bring out truth in any narrative. In this case that notion that tax cuts pay for themselves is a fantasy. It always has been. Can it result in a short term bump in spending or even growth? Yes it is possible, especially if structured right. But any historical analysis will show you that tax cuts, especially already coming from a relatively low base, will just add to debt via larger deficits.

Recently the White House budget director finally acknowledged this very reality:

“a tax plan that doesn’t add to the deficit won’t spur growth”

My criticism has been that all this marketing talk is simply a lie and will structurally put the country further at risk of trillion dollar deficits and a massive debt explosion that is already baked in even without tax cuts.

Indeed the further one digs through the details the bigger the expense of these tax cuts become:

“We have a lot of businesses… I don’t think any of them are non-competitive in the world because of the corporate tax rate,” Buffett, the chairman and CEO of Berkshire Hathaway Inc told CNBC.

Fink said a corporate rate as high as 27 percent could satisfy U.S. businesses’ need for tax relief, while avoiding an increase in the federal deficit.

“What is being proposed is a pretty large expansion of our deficits,” Fink told Bloomberg TV. The plan contains up to $6 trillion in tax cuts, according to independent analysts.”

I bet you if you ran these tax cuts through a budget that accounts for a recession case somewhere in the future this entire budget would be an utter disaster and they could never sell it. And this is why you won’t see a stress tested scenario, all you will see is happy steady 2.9% growth projections in perpetuity. Nonsensical. Unrealistic. And frankly intellectually insulting to anyone that insists on any base line of intellectual veracity to any budget process.

Running the numbers it’s clear who actually benefits:

So I ask, how will any of this change this trend?

The answer is it won’t despite public narratives to the contrary. People will choose to believe what they want, but math is independent of beliefs and the math is very clear on this.

Put this proposal in context of standing trends:

Real disposable personable income growth remains meager at best:

Debt expansion at low rates continues to sustain the illusion of real prosperity for the 90%:

A meager set of rate hikes is already putting pressure on revolving credit obligations and personal interest payments:

Why does all this matter for us here?

Look no further than to the earlier quoted Warren Buffett who may have explained much of the reason we see no sellers in these markets currently:

“Buffett also said he would wait to see how the tax push played out before doing any significant selling of Berkshire Hathaway stock to avoid paying unnecessary taxes on his gains.

“I would feel kind of silly if I realized $1 billion worth of gains and paid $350 million in tax on it if I just waited a few months and would have paid $250 million,” Buffett said.”

I get it, why sell anything if you can save on taxes and while central banks keep pushing markets higher with record liquidity? Steady as she goes after all.

And we have to acknowledge that the combined effect may be here to stay until clarity has emerged. If current legislative efficiency is any indicator then this may drag on for months with perhaps nothing accomplished.

Health care? Still nothing has happened. And let’s be clear: Not a single health care proposal (and there have been multiple efforts) have had anything to do with health care. They have been proposals that would have knocked millions off health care coverage and financially benefitted the 1% in form of tax reversions. That’s the analytical reality.

I don’t know why anyone still believes this administration will implement anything substantive to help the middle class. Previous administrations (both Democrat & Republican) have failed miserably on the wealth inequality front. And this administration looks no different and perhaps only worse. Every proposal looks to disproportionally benefit the top 1% and this latest tax cut proposal is no exception. Every analysis I have seen shows disproportionate benefit going to the wealthy. And how will that stimulate growth for the middle class? Or the bottom 50%?

And don’t think I’m alone bemoaning wealth inequality & associated inbred dynastic economic structure as an increasing drag on society and its future prospects.

Here’s Buffett himself again:

Ironically it is those 400 that would benefit the most by getting rid of the estate tax that is currently proposed as part of the tax cut package.

Bottom-line, it’s all tied together in a package that promises more and more debt.

Central banks do whatever it takes to keep reality at bay:

And hence I’ve called this entire central bank talk of “normalization” a fantasy. They can’t do it, they’re trapped and even the quants at JPM are out in force warning of it:

As central banks begin shrinking their balance sheets, they risk triggering another financial crisis, something that may be sharpened by the shift away from active investing, JPMorgan’s top quant strategist has warned.

“Such outflows (or lack of new inflows) could lead to asset declines and liquidity disruptions, and potentially cause a financial crisis,” said Mr Kolanovic (who, it is worth noting, has issued such warnings before). “The timing will largely be determined by the pace of central bank normalisation, business cycle dynamics and various idiosyncratic events, and hence cannot be known accurately.” Mr Kolanovic pointed out that “this is similar to the 2008 [Great Financial Crisis], when those that accurately predicted the nature of the GFC started doing so around 2006.”

“The shift from active to passive assets, and specifically the decline of active value investors, reduces the ability of the market to prevent and recover from large drawdowns,” Mr Kolanovic said. He added that the move towards passive and momentum strategies, where traders chase market cues as opposed to company fundamentals, has “eliminated a large pool of assets that would be standing ready to buy cheap public securities and backstop a market disruption.”

And this is precisely why we won’t see any real normalization ever again. Or perhaps only after a massive reset in the financial system.

This new administration wants massive tax cuts. This year the military budget was already increased by $80B to $700B. The costs of the recent hurricanes are providing the perfect excuse for running larger deficits and you can already see the narrative creeping in:

“I hate to tell you Puerto Rico, but you’ve thrown our budget a little out of whack,” said Trump as he introduced his budget director Mick Mulvaney.

Not the $80B increase in military spending of course.

Look, I can read between lines with the best of them and the message is clear.

Low rates are here to stay and the administration needs low rates to keep it all going and justify tax cuts.

The writing is on the wall, no, actually it is coming to you courtesy Jeffrey Gundlach:

“Bond King” Jeffrey Gundlach has an unusual pick for who President Donald Trump will choose to be the next Federal Reserve chief.

“I actually have a very non-consensus point of view. I think it’s going to be Neel Kashkari,” the the CEO of DoubleLine Capital told the Vanity Fair New Establishment Summit on Tuesday in Los Angeles. “He happens to be the most easy money guy that’s in the Federal Reserve system today and that’s why he may win.”

Kashkari is the president of the Minneapolis Fed and happened to say Monday that the central bank is making a mistake by continuing to raise rates, comments Gundlach referenced as helping him possibly get the job.

“I think there is no chance that she wants to be chairwoman, nor do I think the president wants her to be,” said the manager of $109 billion.

Gundlach said that Trump needs someone who will keep rates low in order to keep his populist reputation and help his base voters and that’s why he’ll pick Kashkari.

“A stronger dollar is not good for achieving that agenda,” he said.

And there you have it. We need an easy money guy. Now I don’t know if Kashkari will be it, but it’s pretty clear Yellen is toast and some version of an easy money guy is coming and the Fed’s balance sheet reduction plan may be out the window shortly after February.

But that’s the combined message, massively more debt is coming, normalization is at best a marketing ploy, and easy money will continue to be part of the equation with perhaps more coming in form of tax cuts.

So yes, I get and receive comments about how it’s different this time, how price discovery as we know it may be a thing of the past.

An asset price inflation world, without core inflation, where valuations don’t matter and debt flows continue unabated and consequence free…

…and market caps rise in asymptotic fashion every quarter, month and week:

The end result: The $SPX is now 18.8% above its annual 5 EMA:

As far as I can tell this is the largest, or one of the largest disconnects ever.

And I’ve shown the chart of $MSFT as an individual stock example of how historically extreme the current disconnect is:

$MSFT is now 35% above its annual 5 EMA. There’s been only 1 year prior to 2017 when it did not touch its 5 EMA: 1999. Did it have any predictive value of future price appreciation? Nope.

Speaking of 1999: Greed is back with a vengeance.

It is all around us:

Central bankers have flat lined risk and investors have crossed to the other side expecting nirvana & free money forever.

So far so good it seems. Just remember in Flatliners the allure of nirvana turned into a running nightmare:

What would be signs of nirvana turning into a nightmare?

Keep an eye on this thin red line:

It will get tested again. Currently the trend line is barely 2% below current prices and it is rising steeply.

When price breaks below this line it’s time to return to real life.

After all you do want a heart beat:

Don’t you? I know I do.

"It Won't Pass" - Larry Fink, Warren Buffett Blast Trump's Tax Reform Plan

In the week that’s passed since the White House unveiled its tax-reform plan, Republicans and Democrats have expressed their reservations about the proposal, particularly after an analysis from the non-partisan Tax Policy Center suggested that taxes would rise over the coming ten years for most members of the middle class if the proposal were passed into law.

Wall Street, for the most part, has ignored these criticisms and US stocks have continued to climb to ever-higher record highs - even after two industry luminaries joined a growing chorus of skeptics warning that tax reform may not pass by year end.

Both Warren Buffett and Blackrock chief Larry Fink have spoken out against the administration’s proposal, echoing the most trenchant criticism of the bill. Namely, that it’s overly generous toward corporations without doing enough to help the middle class, according to Reuters.

With the White House and top Republicans in Congress already on the defensive over claims the plan would not cut taxes for many middle-class Americans, Buffett and BlackRock Inc Chief Executive Larry Fink suggested in separate interviews that the corporate rate may not have to be cut as deeply as proposed.

“We have a lot of businesses... I don’t think any of them are non-competitive in the world because of the corporate tax rate,” Buffett, the chairman and CEO of Berkshire Hathaway Inc told CNBC.

Meanwhile, Fink, who was rumored to be on Hillary Clinton’s short list of Treasury Secretary candidates, echoed Republican Sen. Bob Corker’s criticisms by admitting that he’s nervous about how the bill would impact the deficit, while adding that if the administration insists on incorporating the elimination of deductions for state and local taxes into the final bill, that the measure would almost certainly fail.  

Fink predicted tax legislation would not pass if it includes a proposal to eliminate a popular deduction for state and local tax payments.

“I don’t believe we’re going to get tax reform if there is the elimination of deductibility of state and local taxes,” he said.

Eliminating the state and local tax deduction would raise about one-quarter of the $4 trillion in revenues that some Republicans say they need to prevent tax cuts from creating a massive increase in the federal budget deficit.

Buffett, who’s a well-known advocate for progressive taxes on the wealthy, said that eliminating the estate tax would be a “terrible mistake” that unnecessarily benefits rich people.

Watch CNBC"s full interview with Warren Buffett from CNBC.

Fortunately for the market, Republican leaders are reportedly backing away from the proposed elimination of the SALT deductions – a measure that would impact some 40 million tax-paying Americans.

But even if Republicans ultimately decide against eliminating the SALT deduction, they will still need to find some other way to pass tax reform without massively blowing out the deficit. To be sure, the administration has maintained that revenue lost from corporate-tax cuts will be partly offset by closing loopholes for special interests.

But no matter what form, or forms, the bill ultimately takes, it’s chances of passing are far from assured. And while stocks have so far (mostly) ignored these nagging doubts, challenges to the market’s sanguine outlook are growing increasingly frequent.

Earlier this week, David Stockman, the Reagan administration"s director of the Office of Management and Budget, told CNBC earlier this week that Wall Street is "delusional" for believing it will even be passed.

And earlier today, Bill Blain posited that deficit hawks like Corker would ultimately kill the reform effort.

In its analysis, the TPC found that by 2027, taxes would rise for roughly one-quarter of taxpayers, including nearly 30 percent of those with incomes between about $50,000 and $150,000 and 60 percent of those making between about $150,000 and $300,000. Meanwhile, 80% of the benefits would accrue to the top 1% of taxpayers.

The market greeted Republicans’ failure to repeal and replace Obamacare as investors quickly retreated back inside their bubble of complacency.

At the time, market strategists reasoned that it’d be easier for the administration and the Republicans’ Congressional leadership to rally support for tax reform. This no longer appears to be true.  

And with the Fed preparing to begin the arduous process of reducing its balance sheet next month, the market is quickly running out of excuses to keep stocks bid. 
 

Trump Tax Plan To Benefit "Top 1%" Most, Cost $2.4 Trillion, Middle Class To Pay More Taxes

Based on what we already know about the proposed Trump tax reform, which can be summarized as follows:

• collapse the seven individual income tax rates to three (12, 25, and 35 percent),


• increase the standard deduction,


• eliminate personal exemptions,


• increase the child tax credit,


• eliminate most itemized deductions,


• repeal the individual and corporate alternative minimum taxes,


• repeal the estate tax,


• reduce the corporate tax rate from 35 to 20 percent, tax pass-through business income at a top rate of 25 percent,


• allow businesses to fully expense investment in equipment and machinery for at least five years,


• adopt a territorial tax system that would exempt the foreign earnings of US corporations from US tax

... moments ago the Tax Policy Center released its analysis of what the practical impacts of the Trump tax plan will be on the broader population. Below we present the key findings.

The tax plan will cost $2.4 trillion over the first decade and $3.2 trillion over the second dacade, on a static basis

• The proposal would reduce federal revenues by $2.4 trillion over the first ten years and $3.2 in the second decade. This means that absent a matched deduction in spending, US deficit and debt will increase by a similar amount. This is a problem as a Senate GOP budget resolution unveiled on Friday only allows for adding $1.5 trillion to the debt, implying a revenue shortfall of just under $1 trillion.
  
  • The business income tax provisions—including those affecting corporations and pass-through businesses—would reduce revenues by $2.6 trillion over the first ten years. Elimination of estate and gift taxes would lose another $240 billion. The individual income tax provisions (excluding those related to business income) would increase revenues by about $470 billion over the same period.
  
  

While many Americans will benefit, the biggest gains will go to the 1%, whose after-tax income would increase by over 8%.

• In 2018, the average tax bill for all income groups would decline: taxpayers in the bottom 95 percent of the income distribution would see average after-tax incomes increase between 0.5 and 1.2%. However, and where the Democrats will have a field day, taxpayers in the top 1 percent (incomes above $730,000), would receive about 50 percent of the total tax benefit; their after-tax income would increase an average of 8.5 percent.

• Between 2018 and 2027, the average tax cut as a share of after-tax income would fall for all income groups other than the top 1 percent. In 2027, taxpayers between the 80th and 95th percentiles of income (between about $150,000 and $300,000) would experience a slight tax increase on average.

The problem is that at the same time, taxes for substantial portion of taxpayers will go up:

• In 2018, about 12% of taxpayers would face a tax increase of roughly $1,800 on average. Where it gets worse is that many of those who form the backbone of the upper-middle class, or more than a third of taxpayers making between about $150,000 and $300,000, will pay more, mainly because most itemized deductions would be repealed.

Fast forward to 2027, when the overall average tax cut would be smaller than in 2018, increasing after-tax incomes 1.7 percent. Taxpayer groups in the bottom 80 percent of the income distribution—those making less than about $150,000—would receive average tax cuts of 0.5 percent or less of after-tax income. However, taxpayers making between about $150,000 and $300,000 would on average pay about $800 more in taxes than under current law. And the one item which Democrats will love: about 80% of the total benefit would accrue to taxpayers in the top 1 percent, whose after-tax income would increase 8.7 percent.

It gets worse: by 2027, taxes would rise for roughly one-quarter of taxpayers, including nearly 30 percent of those with incomes between about $50,000 and $150,000 and 60 percent of those making between about $150,000 and $300,000.

According to the Tax Policy Center, the number of taxpayers with a tax increase rises over time. This is because the plan would replace personal exemptions, which are indexed for inflation, with additional credits for children and non-child dependents that are not indexed for inflation. In addition, indexing tax brackets and other parameters to the slower-growing chained Consumer Price Index means that over time more income is subject to tax at higher rates.

Finally, there is of course, the repeal of the state and local tax deduction, a move which is expected to be widely hated by homeowners across the US, but as the chart below shows, by democrat states far more than republican states.

As BofA writes, blue states with high state and local taxes will be the most adversely impacted from the loss of this deduction. Thus, opposition in the Senate will mainly come from Democrats, while Republicans will mostly be on the same page. But, the situation should be more contentious in the House. Data from the Tax Policy Center reveals that 26 of the top 50 districts in terms of SALT deduction usage had a Republican representative. Republicans will likely face more internal pushback from these members. Ultimately, a House bill would fail if two dozen Republicans (and every Democrat) were opposed.

More in the full report below (link):

USA 2017 Vs. France 1789 - "The Third Estate Has Been 'Handled'"

Authored by Lee Travis via Defiant Thinking blog,

Most people are familiar with the story of the French Revolution: When the poor revolted against the unfairness and wealth inequality imposed by the aristocrats, they overthrew the monarchy and beheaded more than 40,000 people, mostly clergy and noblemen, as punishment for their crimes and injustices.

The days of using a guillotine may be behind us – but the anger that led to that revolution is similar to the growing anger at economic inequality in the US today, and could lead to the same kind of unrest.

In France, there were three classes: The First Estate, made up of clergy; The Second Estate, made up of the nobility; and the Third Estate, made up of everyone else. Even though the first two Estates were made up of just 3% of the population, they owned 35% of the land, paid almost no taxes, and held virtually all the political power in the country.

Where are we in America today?

Wealth distribution

If they were around today, heads still attached, French aristocrats would be mightily impressed with the wealth accumulation of America’s rich. The top 1% of the country owns 35% of the wealth; the top 10% owns 77% of the wealth. The bottom 40% owns 0% (here).

Perhaps the best summary of where we are on wealth inequality can be found in the video below:

Tax burden

Certainly, the American rich are paying more in taxes than did their pre-revolutionary French Counterparts. But as a share of income, the American poor are carrying a much heavier burden.

When most people talk about taxes, they think of income taxes, and on that front the rich do pay quite a bit more: According to the Tax Foundation, in 2015, “The top 1 percent of taxpayers paid a higher effective income tax rate than any other group, at 27.1 percent, which is over 8 times higher than taxpayers in the bottom 50 percent (3.3 percent).”

But income taxes are just one of the dozens of kinds of taxes we’re subjected to. As A World of Possible Futures notes, we’re also paying:

• State & local income taxes


• Sales tax


• Social security & Medicare


• Property tax


• Fuel/gasoline tax


• Other taxes such as estate tax, fees, and licenses.

I have yet to find an authoritative analysis showing total tax burden on people by income level in the US. But I expect that, as a percentage of income, the poor are paying a far higher share of their income into tax coffers than are the rich

This was borne out in England at least, where The Independent found that the wealthy are paying more in direct taxes, but far less in indirect taxes, resulting in a situation where “the poorest fifth of households paid 38.2 per cent of their income to the taxman, with the richest fifth paid just 33.6 per cent.”

Political representation

We’ve all known intuitively for some time that politicians listen to their donors, and not to their constituents. We’ve since had confirmation, both anecdotally through narratives like “The Confessions of Congressman X” and statistically through research performed by professors from Princeton and Northwestern Universities in a 2014 paper titled “Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens.” In this paper, the authors reviewed 1,800 Congressional votes in which the interests of the rich were different from those of the public, and as a rule the rich won out on a consistent basis.

Marie Antoinette, before her head and body went their separate ways

So where’s my revolution?

If the rich are so exponentially better off than the poor in this country – why do the poor take it? Why do they passively grumble and let it continue?

I think today’s leaders have learned some lessons from the past, which explains the following:

• Welfare state – In the France of 1789, there was no welfare state. If you were sick, you would get no doctor; if you were hungry, you starved. Today, more than half of the US population receives some kind of government benefit, including 21.3% who receive direct assistance related to poverty. Why bite the hand that feeds you?


• Drugs – Our country is awash in drugs that keep us numb. In 2014, there were 245 million prescriptions filled for opioid pain relievers. In 2015, 17.9% of adults held a diagnosis for a mental disorder, while a 2010 study found that 46.3% of children ages 13-18 had a mental disorder at some point in their young lives, and the majority of those adults and children are given prescriptions. And don’t forget the legal and illegal drugs, ranging from alcohol to heroin, that we use to self-medicate.


• Distractions – In the 1980s, marketers Al Reis and Jack Trout identified America as the world’s first overcommunicated society; that was in the days of a handful of television channels and no internet. Today we are completely enveloped in media, and continue our fascination with other distractions like sports.

I think there will be a disruption in the future, but I can’t see it coming from a domestic mass movement. Today’s Third Estate has been handled; the rich have clearly learned their lessons from the past.

Here Are The States With The Highest Property Taxes

ATTOM Data Solutions has scoured county-level property tax records from across the country to figure out exactly who is getting punished the most on their real estate taxes.  To our complete "shock", the resulting map looks eerily similar to the 2016 presidential electoral college map with the liberal bastions of the Northeast and Midwest suffering the highest property tax burdens.  Per RealtyTrac:

Average Annual Property Tax was $3,296, an Effective Tax Rate of 1.15 Percent; Highest Effective Tax Rates in New Jersey, Illinois, Texas, New Hampshire, Vermont; Owner-Occupied Properties Register Higher Effective Tax Rates Than Investment Properties

ATTOM Data Solutions, curator of the nation’s largest fused property database, today released a 2016 property tax analysis for more than 84 million U.S. single family homes, which shows that property taxes levied on single family homes in 2016 totaled $277.7 billion, an average of $3,296 per home and an effective tax rate of 1.15 percent.

The report analyzed property tax data collected from county tax assessor offices nationwide at the state, metro and county level along with estimated market values of single family homes calculated using an automated valuation model (AVM). The effective tax rate was the average annual property tax expressed as a percentage of the average estimated market value of homes in each geographic area.

Not surprisingly, residents of New Jersey won the award for highest property taxes of any overall state in the union while Westerchester County, the posh suburb of New York City, won for most expensive local municipality with taxes averaging over $16,000.

Per the chart below, states with the highest effective property tax rates were New Jersey (2.31 percent), Illinois (2.13 percent); Texas (2.06 percent); New Hampshire (2.03 percent); and Vermont (2.02 percent).  Other states in the top 10 for highest effective property tax rates were Connecticut (2.00 percent), Pennsylvania (1.89 percent), New York (1.88 percent), Ohio (1.68 percent), and Rhode Island (1.64 percent).

Meanwhile, among the 586 counties with a population of at least 100,000 and at least 10,000 single family homes, nine posted average annual property taxes of more than $10,000...and again, to our complete shock, each one of them is in a deep-blue state: Westchester, Rockland, and Nassau counties in New York; Essex, Bergen, Union and Morris counties in New Jersey; Marin County, California; and Fairfield County, Connecticut.

Perhaps this is why our young snowflakes don"t own homes anymore...their desires to put their Ivy League anthropology degrees to good use in New York City don"t mesh well with the financial realities of implementing their socialist utopias.