Lion of the Blogosphere

Archive for the ‘Taxes’ Category

Fred Trump’s taxes

Massive article in the NY Times that I have not finished reading that alleges that Fred Trump cheated on his taxes. Few people will read the whole thing. Fifteen-thousand words long!

It’s the GIVER of gifts and not the receiver of them who owes tax, so if money was transferred to Donald and no taxes were paid, it was his father who was cheating and not Donald.

Of course, the NY Times also alleges that Donald helped, so I guess then there would be conspiracy to commit tax fraud, but the statute of limitations has expired on any criminal liability for Donald.

I have no idea what sort of civil tax fines could be levied against Donald or the other heirs of Fred Trump.

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A commenter writes:

I will not go into any details but this kind of stuff was/is incredibly common with transactions like these with privately held real estate owners in places like New York. I could throw out names you would know and could guarantee that they used similar tax strategies over the years.

I believe that.

Congress should pass laws that make it harder for the richest of the rich to get away with not paying their fair share of taxes!

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I hope this doesn’t become Trump’s Whitewater.

Written by Lion of the Blogosphere

October 3, 2018 at EST am

Posted in Politics, Taxes

The Manafort trial

https://www.cnn.com/2018/08/01/politics/manafort-trial-day-two/index.html

It’s rather significant that there’s a trial taking place at all. The whole assumption behind Mueller indicting Manafort was that Manafort would turn against Trump in order to avoid going to prison. But that has NOT happened. And I’m pretty sure that the reason it hasn’t happened isn’t because of Manafort’s loyalty to Trump. Ha ha. Nope, the fact that this trial is happening is proof that Manafort doesn’t know anything.

The biggest surprise is that Manafort’s defense is to blame his business associate Richard Gates. This is further evidence that Manafort has no useful knowledge that Mueller could use against Trump. If Manafort is willing to throw his longtime business associate under the bus, I’m sure he’d have no problem doing the same to Trump in order to avoid prison.

It’s not surprising at all that Mueller’s team’s trial strategy is to prejudice the jury by presenting Manafort as a rich fat cat who does business with shady people. As the judge himself pointed out, it’s not illegal to be rich or to have a lavish lifestyle, and I would add that it’s also not illegal to do business with shady people as long as you are doing honest work for them. The Mueller team’s legal strategy is as shady as those wealthy Ukranians who Manafort worked for.

Written by Lion of the Blogosphere

August 1, 2018 at EST pm

Posted in Law, Taxes

South Dakota v. Wayfair (2018)

This is one of the strangest Supreme Court decisions ever.

First of all, there is the oddness of two Justices, Kennedy and Thomas, overruling themselves. They were both on the other side of the issue in Quill v. North Dakota (1992).

And then you have the conservative wing of the Court (1) ruling in favor of more taxes; and (2) ruling against stare decisis.

Meanwhile, except for the strange cross-over of Ruth Bader Ginsburg, the other liberals on the Court, Breyer, Sotomayor and Kagan, sign on with Chief Justice Robert’s dissenting opinion in which he writes:

E-commerce has grown into a significant and vibrant part of our national economy against the backdrop of established rules, including the physical-presence rule. Any alteration to those rules with the potential to disrupt the development of such a critical segment of the economy should be undertaken by Congress.

Conservatives see their decision as supporting states’ rights.

How would I have decided if I were on the Court? I would have decided with Roberts and the three liberal Justices. I don’t buy into the states’ rights angle at all. I support states’ rights more than most, but the right to tax E-commerce businesses in other states is not something that anyone was thinking about when the Constitution was written.

I think that the situation we had before Wayfair was economically stupid and unfairly discriminated against local bricks and mortar businesses, but the judicially imposed cure is even worse. If every state is allowed to impose its own weird sales tax rules on very small-time merchant, it will create a nightmare of compliance issues. And what happens if merchants just ignore it and don’t remit any sales taxes? How will the states ever know about it?

I think that the conservative thing for the Supreme Court to do is to not try to solve every problem that Congress refuses to deal with.

Written by Lion of the Blogosphere

June 25, 2018 at EST pm

Posted in Law, Taxes

End tax breaks for charitable giving

I’ve long been opposed to tax breaks for charitable giving, because I am certain that it’s being massively abused. Furthermore, philanthropy is something that rich people do for a hobby, so they shouldn’t get a tax deduction for it any more than a prole should get a tax deduction for buying dumb prole stuff like off-road vehicles or jet skis.

We should be worried about politically motivated investigations, like New York State investigating Trump, not because he’s doing anything that boatloads of other rich people aren’t doing, but because the liberals running New York State hate him and want to punish him for being president.

Why isn’t anyone investigating Clinton’s charity? Isn’t it fishy how the charity got all sorts of huge donations from the kind of people who would benefit from influencing U.S policy?

Written by Lion of the Blogosphere

June 15, 2018 at EST am

Posted in Politics, Taxes

Larry Kudlow

It is reported that Larry Kudlow will head the White House National Economic Council replacing Gary Cohn.

There has never been more of a kneejerk conservative than Larry Kudlow. After I realized his shtick, he became the most uninteresting commentator on CNBC. For 20 years all he has done is repeat the same tax-cut talking points and he has never said anything remotely original or perceptive about anything.

Written by Lion of the Blogosphere

March 14, 2018 at EST pm

Posted in Politics, Taxes

Under the new tax law, it pays to be a sole proprietorship

That was the first thing I said about the new tax law when I read it two weeks ago. Yesterday, the NY Times had an article on the topic, predicting that the new tax law will accelerate the trend of people working as “independent contractors” instead of “employees,” and also correctly pointing out that in most cases it’s cheating, businesses are theoretically not allowed to classify someone who is treated like an employee as an independent contractor.

Written by Lion of the Blogosphere

January 1, 2018 at EST pm

Posted in Taxes

New York Times catches up to my blog

On Monday, I wrote about how independent contractors, anyone filing a Schedule C, would see a big tax cut.

Today, the New York Times catches up to me and has an article about it.

The NYT article legitimately singles out “IT specialists.” The only department in the big corporation I work for that has a lot of independent contractors is IT.

Everyone is now going to want to be a 1099 and not a W-2. The tax savings are big, and easy, no dealing with the hassle of being incorporated.

S corps are out, W-2 employees are out bigtime, sole proprietorships are in.

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I don’t DESERVE a big tax cut just because I happen to not be an employee, but I sure as hell am going to take the money and not donate it to the government.

Written by Lion of the Blogosphere

December 20, 2017 at EST pm

Posted in Taxes

Who wants to move to Mesquite, Nevada?

That’s where the crazy guy lived who shot up all those people in Las Vegas.

With no income tax and low other taxes, Mesquite, Nevada is the perfect place to escape local taxation that’s no longer deductible on your federal returns. Plus Mesquite offers very affordable housing, a mostly white demographic, lots of retired people. With a better climate than Florida, none of that oppressive humidity. Lots of places to buy guns if you’re a gun nut.

But no jobs (except for crappy low-wage service industry jobs) and probably nothing in the way of culture. I assume that it’s a very prole place.

Written by Lion of the Blogosphere

December 20, 2017 at EST am

Posted in Proles, Taxes

Who wants to move to Florida?

Now that there’s no longer a federal income tax personal deduction for state and local taxes, it pays to move to Florida where there’s no income tax.

Florida is king! Too bad it’s full of NAMs.

Written by Lion of the Blogosphere

December 20, 2017 at EST am

Posted in Taxes

Who benefits when corporate taxes are lowered?

The C corporation income tax is being lowered from 35% to 21%. So who benefits from this?

Well, one obvious answer is that C corporations benefit! But corporations aren’t people, they are abstract legal entities. Who ultimately winds up with the extra money?

When individuals have more money from lower taxes, they tend to spend most of it. (I don’t, at least not in the short run, but I’m not most people.) This is believed to “stimulate” the economy. (But with every asset in a bubble these days, it doesn’t seem to me that the economy needs any more stimulation.)

So does that mean that corporations will spend their extra money? I say not very likely. Unlike personal spending, nearly all corporate spending is considered a tax deductible business expense, so taxes have never been much of an impediment to corporate spending, and in fact may even have the opposite effect of encouraging corporations to spend income on “growth” rather than waste the income by giving 35% of it to the government.

There is some corporate spending that is capitalized and therefore not immediately deductible from income, but there’s no evidence right now that corporations with profits are having trouble financing capital projects. Remember that the biggest corporate expense, payroll and employee benefits, is immediately deductible from corporate income.

So when corporations have more profits because of lower taxes, they tend to distribute those profits to shareholders. For privately held corporations, it’s pretty simple to trace the path of money to the shareholders who own the corporation. However, C corporations are uncommonly used for privately owned businesses because until this tax bill, C corporations have generally been taxed more harshly than all other business forms. Only 5 percent of business are C corporations.

Why be a C corporation at all? It’s required in order to be a publicly traded corporation. The vast majority of the biggest businesses are publicly traded. Which is why even though C corporations are only 5% of businesses, they represent 62% of all business revenues. And that is why C corporations have been subject to higher taxes. It’s just a really big pool of money that can be taxed, with no apparent victim to complain about the tax, and no easy way for C corporations to switch to a lower-taxed business entity. Theoretically, high corporate taxes should lower the value of corporate shares, but corporate shares have been historically valued quite highly during the last 30 years. Publicly traded corporate shares are valued way above what they ought to be based on their expected future dividend stream. Based on current stock market valuations, there isn’t any sound reason to lower corporate taxes.

However, lowered they will be, so who benefits? Remember that, because dividend payments are pretty low, and approximately half of publicly traded corporations don’t pay dividends at all, people buy stocks not primarily for the dividends but because they expect to sell the stock in the future for more than they paid for it. And yes, many corporations will try to help their shareholders by using their extra income to buy back their shares.

So ultimately, the biggest beneficiaries of a sudden lowering of the corporate tax rate are people who have owned stocks during the last year. There has been something like a 28% increase in the S&P 500 since Trump was elected, and I suppose that was the smart money anticipating the Republicans paying back the investor class, even though the investor class is no longer Republican. The prole whites are Republican, and rich investors hold their noses while they enjoy their Republican-created windfall.

If you are buying stocks today because of the tax cut bill, you are probably too late to enjoy the benefit of that, the tax cut is already factored into current stock valuations. (However my stock advice has always been very bad, so I could be totally wrong about that and maybe you should buy now in anticipation of selling to greater fools in the future.)

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The corporate tax cut will also benefit venture capitalists who invest in small start-up businesses in the hope that they will be able to make huge profits in the future when those businesses go public. The lower corporate tax rate will cause all publicly traded corporations to have higher valuations, so the venture capitalists will make even more profits than they already make when the corporations they invest in go public.

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I will add one argument for why corporate taxes shouldn’t be raised too high. The Laffer Curve kicks in at a much lower marginal rate for corporations, compared to individuals, because corporations have much better tax avoidance tools for shifting their income to lower-tax countries.

This tax avoidance was traditionally the hardest for U.S. corporations because the U.S. taxes worldwide income, and has the sophisticated powers of the IRS to enforce that, although many big companies (especially Apple and GE) are very adept at finding loopholes to avoid worldwide tax. But this tax bill is ending worldwide taxation, which is actually another huge tax giveway to the biggest corporations.

U.S. taxation on worldwide income was something that kept the whole world honest (although the whole world didn’t necessarily appreciate it). I think that a potential huge blowback that could result from this tax bill is that tax avoidance will be RAMPED UP as a result of ending worldwide taxation of corporate income, rather than reducing it merely because we lowered the corporate tax rate. And the effect will be JOB LOSSES as corporations move more manufacturing and operations to tax-haven countries.

However, the new rules are not yet fully understood.

Written by Lion of the Blogosphere

December 19, 2017 at EST am

Posted in Taxes

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