Tony K's Blog

There is a lot of talk from the republicans about how the tax cut on business will flow down to workers. Let's be clear about this though. The initial impact will be to increase profits to businesses. The tax shortfall has to be made up from somewhere else, either reduction in spending (mainly from programs for the poor), or from increases on others (aiming at blue state tax deductibility). Wages are set based on the local labor market. Any belief that a tax cut will result in higher labor rate is irrational. There is an argument that lower taxes will result in more investment, but this takes years, and may not actually happen. By the way, taxes on US businesses are among the lowest in the world already. Yes, the statutory rates are higher, but there are many deductions and dodges allowed. And ultimately, if we are to have programs that protect us and the poorest and least fortunate members of society, it has to be paid for. Ultimately, that means taxes. We all pay for it in ...

I wrote this in October of 2016. I had no idea how prescient it would be.   Trumps greedy long game - Trumps' heirs would receive at least $4 billion benefit at the expense of the US taxpayer   Donald's 1995 tax return was recently released. It's interesting that he had a tax loss of almost $1 billion in that year, but that, along with tax deductions, is business. Really nothing to see there. But it got me thinking.   The tax system is complex for businesses. One of the features is that it allows businesses to recognize depreciation of assets. Most governments do this in some form to encourage investment. If you invest $1,000 on an asset that is allowed to depreciate over 10 years, you can subtract $100 per year from your income each year for the next 10, until the tax value goes to zero. This reflects the value from a tax perspective, not the actual value.   If you then sell the asset for $50, you then owe taxes on $50 (sales value mi...