Despite some of America's highest taxes, and despite being America's wealthiest state, Connecticut can't seem to pay its bills without breaking into its rainy day fund. Such raids on state savings are rare, and usually happen in states reliant on commodity royalties for revenue. When commodity prices tank, those states have a hard time making up the difference. Connecticut is a well rounded economy, with a heavy dose of the finance business located in its South Western corner, and the insurance capital of America, Hartford, dead center. The state isn't suffering from a wild swing in a … [Read more...]
What Tax Reform Means for You: The Final Bill
The House and Senate conference committee worked out differences in their respective tax bills last week. The final bill was released Friday evening and a preliminary read indicates the compromised bill is an improvement from either individual bill. The tax-reform bill is still far from perfect, but it is a marked improvement over the current system, especially with respect to corporate taxation. Our last two pieces on the tax-reform bill were focused on two provisions that we thought needed to be killed—the FIFO capital gains provision and the alternative minimum tax (AMT). The … [Read more...]
What Tax Reform Means for You: Part II
One of the big disappointments (among many) in the GOP tax-reform is that there was no reduction in dividend and capital gains tax rates. With the Obamacare investment tax add-on, the maximum dividend and capital gains rates are almost 25% today. That’s up from 15% during the Bush and early Obama years. Capital gains taxes are one of the easiest taxes to dodge. Investors simply hold their investment positions instead of selling them and paying taxes on the gain. The simplicity with which capital gains taxes can be avoided means there is almost no correlation between the maximum capital … [Read more...]
This Tax Bill Needs Better Messaging
My friend from the Cato Institute, Chris Edwards, outlines some of the areas where Republicans have failed to provide adequate messaging on what will be one of the largest federal tax overhauls in decades. Edwards writes that vague reporting on the bill from various groups who have analyzed it, the bill's "reforms are impressive and promise to lift all boats in coming years with a rising tide of growth." Edwards continues: The Democratic class warfare will continue even after President Trump signs the bill, and that will create two big problems. The first is that the Democrats will probably … [Read more...]
GOP Tax Reform Will Hit Many Wealthy Republicans in Blue States
Yesterday the New York Times published an article about how the elimination of the ability to deduct state and local taxes (SALT) from federal taxable income calculations will hurt many taxpayers in blue states. As the NYT notes, there are even some counties with high Republican affiliations that will take a major hit from the removal of the SALT deductions. Alicia Parlapiano and K.K. Rebecca Lai write: There are a handful of Republican counties, particularly in New York and New Jersey, that claim high amounts of SALT deductions. Many of the 13 Republican representatives who voted against … [Read more...]
What does Tax Reform Mean for You? Part I
The Senate passed a historic tax-reform bill in the wee hours of the night on Friday. The tax overhaul slashes the corporate tax rate to 20% from 35%, reduces the rate on pass-through businesses, and simplifies and reduces rates for individuals. That’s the good, there is bad and ugly in the bill as well. To meet arcane Senate and budgetary rules, there were many sacrifices made starting with the expiration of a simplified individual income tax code in 2026. Lawmakers are saying publicly that they expect a future Congress to maintain the reformed tax-code, but with a bill that was passed … [Read more...]
Senate Republicans Pass Tax Reform
After months of immobility, the Senate passed its tax reform bill last week in a flurry of final edits and revisions. The bill is by no means perfect, but it does preserve the 20% corporate tax rate that was previously passed by the House of Representatives. Both houses' bills will now head to conference to be reconciled with one another, and the final bill will come back to be voted on once more by each house. Richard Rubin and Siobhan Hughes write of the bill's passage: The bill would overhaul much of the U.S. tax system in ways that tax experts are only beginning to understand. Mr. … [Read more...]
Are Hedge Funders Packing Their Bags in Anticipation of Tax Reform?
As a tax reform bill inches its way through Congress, some of its provisions may have wealthy residents of high tax states considering a move. In states like Connecticut, New York and New Jersey, home to many high earning hedge funders, the state budgets themselves may be under threat if wealthy residents decide to bolt for lower taxes locales. Bloomberg reports: The problem for the Connecticut hedge-fund set -- and, more broadly, for a lot of the Wall Street crowd -- is that Republican proposals in both the House and Senate would drive up taxes for many high-earners in the New York City … [Read more...]
States Scrambling to Refinance before Tax Reforms
With the possible elimination of tax exemptions for state and local debt in the tax reform bill being pushed through Congress, states that rely on debt refinancing are scrambling to borrow before the end of the year. Any investor or stakeholder in industry tied to a government tax break or subsidy should consider this a wake up call. What the government can give with the stroke of a pen, it can also take away with the stroke of a pen. Ethanol mandates, electric vehicle subsidies, renewable energy programs, R&D tax deductions, and on and on. If your business, or a business you invest in … [Read more...]
Is the GOP About to Secretly Raise Taxes?
Yesterday the Republican leadership unveiled their much anticipated tax cut plan to the world. It is very much still a work in progress. The plan has potential, but also contains flaws that could lead to it actually harming America's potential for greater economic activity. The GOP used to recognize that lowering the top marginal rate would result in a bigger economic-pie for all Americans to share. Now it seems the Republicans have been cowed into a fear of reducing taxes for "the rich" by the Elizabeth-Warrens of the world. Politico reports that the Republicans writing the bill (aided … [Read more...]
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