Displaying items by tag: taxes

(Washington)

Advisors need to be worried about 2020 because some major changes may be on the way. Some of the most prominent Democrats, including presidential candidates are putting forth incredibly progressive proposals which call for heavy tax hikes. For instance, Elizabeth Warren, who will be running for president in 2020, is calling for a wealth tax of 2-3% on those with over $50m of assets. Economists say such a measure would raise almost $3 tn over a decade. Democratic party darling Rep. Alexandria Ocasio-Ortez (D-N.Y.) has put forward a plan calling for up to 70% tax rates on the wealthiest Americans.

FINSUM: In our view, the specific plans are not as important at the moment as the overall direction of the Democratic party and its candidates. While this is very divisive policy, it is a reflection of how polarizing national politics have become. It is also notable because this kind of major plan is the type of platform that can really drive Democratic policy going forward. This may become a rallying cry for the party.

(Washington)

Few would argue that the tax cut passed in late 2017 was one of the main drivers of the strong economy we saw this year. Corporate earnings have been stellar, the economy is expanding at a good clip, and the labor market is tight. However, the IRS looks about to undermine the benefit of the tax cuts. The agency just announced a new policy for 2019 regarding how it accounts for inflation. The move will undermine much of the value of the tax cuts by raising tax bills for almost all Americans. The new policy will increase tax revenue for the government by $133.5 bn over the next decade.

FINSUM: This is the kind of policy that is going to hurt more over time. That said, the current deficit is huge, so from a fiscal responsibility view it is hard to argue this is unnecessary.

(Washington)

One of the things that has become transparent on the midterm campaign trail this Autumn is that the Republican tax cut of last year has not proved a big selling point with voters. Many voters in high tax states are frustrated with the near elimination of SALT deductions. However, Trump is responding to the frustration with a new pitch he debuted on Saturday in Nevada—that a big new tax cut is coming for the middle class in the next few weeks. Treasury secretary Mnuchin confirmed the new middle class tax plan, which Trump called “a very major tax cut”.

FINSUM: The lack of a SALT deduction is really hurting Republicans in some critical voting areas. This seems like a plan to win some of them back.

(New York)

It has just been announced that New York state is opening a tax probe into the Trump family. The scope of the investigation will be extensive, digging into the president’s inheritance form decades ago. The investigation was prompted by an extensive article published by the New York Times which alleges fraud in Trump’s tax affairs. The NY state department of taxation said it was “vigorously pursuing all appropriate avenues of investigation”. The New York times alleges that Trump undertook “dubious tax schemes during the 1990s, including instances of outright fraud”.

FINSUM: Here comes another potential legal headache for Trump.

(New York)

One of the important elements of last year’s tax changes that has not been covered much by the mainstream financial press is the way in which the new tax code proves a big boon for REITs. That big gain is that the effective tax rate on REITs has been slashed from 37% to just 29.6%, a big move downward. One REIT industry expert summed up the changes this way, saying “Now, REITs have even more of an advantage over fixed-income products … Seventy percent of REIT returns have historically come from income, so any relative pickup in income is a big benefit for investors”.

FINSUM: This seems like a big help to REIT investors, and it couldn’t have arrived at a better time given that rate rises will inevitable hurt REITs a bit.