Wednesday, November 29, 2017

Taxes: Seen, Unseen, and Tax Plan

Mark Twain had it right when he said, "There are two things in life for certain, taxes and death."
Seen Taxes 
In the USA there is a sales tax which is left to each state for revenue. The federal government has an income tax for everyone and then, each has enacted other taxes. There is for example under state's, real estate taxes. Uncle Sam collects gasoline taxes as well as many other examples.
In the world and most notably in Europe, there is the value tax. This is a state government tax on any purchase. It is added to the purchase price. The tax is high, but the money is used for many things like government health care. Some critics claim this gives foreign nations an advantage over US producers. Then, of course there is the question of taxes on imports, exports or both. At the moment, one big aspect of Trump's tax plan concerns profits being bought back to the homeland. Corporate taxes are very high and I agree with Trump that in order to get more manufacturing and quality jobs in the US, we need to lower this tax rate. This is the best and only good aspect of the plan. The rest goes to the haves and haves more.
Unseen Tax 
Inflation is the biggest unseen tax. It is the root disease which kills the middle class and causes the poor to fall to poverty. The Federal Reserve has destroyed the value of the dollar. The decay acts slowly like a cavity in a tooth, but the results are inevitable. Government controls what is classified as inflation, and that is why food, energy and shelter, all the things that we need and use every day, is not included. The system is rigged!
The two sections on taxes, seen and unseen, will also play an important role in any final tax plan overhaul bill, if there is one, and there will be one. The following looks like a lock to be included in the final tax plan bill.
Hidden Tax 
It gets that moniker because it was taken for granted when applied to the selling of stock shares. It you purchased shares of a company over time, you could decide which ones you would like to sell and in any order that you chose. Now, you must sell your first purchase, first. It is called, "First in, first out." This applies to all except mutual funds whose lobbyist got them exempted.
Tuition Waivers
Some schools waive tuition fees and other bills like boarding. These benefits mainly go to students who offer to teach or help in research. Now, they will be taxed as if they were income even though the students didn't receive any income.
Some people collect art, old cars or similar. Sometimes, they make a trade. This use to be tax free if the items were of equal value. I sell a piece of art and I buy another in a similar price range. This was considered a wash out. It is called, "1031 Swap." This happens with airplanes, tractors and so on. No longer! However, due to state pressure, Congress will continue to allow this practice in real estate. Homeowners can still sell their home and buy another of equal value or higher without a tax penalty. There is still a battle over the mortgage deduction on interest. There are many older states with high state taxes and this too, is a point of contention. There will probably be a limit on the deduction. Time will tell, but this could cause a big exit from the Northeast and Midwest to the lower state taxes of the South. This has helped Florida grow to the fourth largest state by population. It also has no state income tax.
One other aspect of taxes that has serious repercussions is the high cost of home ownership and high rents across the nation. It is not addressed because it effects the poor and this is the biggest problem of our government and its so-called leaders. They forget the ordinary citizen. Due to excessive rental costs and high real estate prices, the poor have turned to live in RVs. At one time, the poor moved into trailer parks, but state taxes, environmental rules and zoning have pushed them out of cities. At one point, people lived in their cars. Now, they buy RVs.
In Cupertino, Ca, home of Apple, it is 74%. In Mountain View, Ca, it is 51%. Many of these people live on the street in RVs, to which the rich don't want them in their neighborhood. They line up to park on street after street every night. This is a sad truth of modern America. Poverty in America is well over 20%. Instead of giving more to the have mores, it is time to takeaway any of their tax benefits and give more to state governments so that they can build more affordable housing. Is it too much to ask for decent four walls and a bath? Thank you, George Bailey.