"More Win-Lose Flimflam"
by Bill Bonner
‘Tax Law’s Effect Fuels Farm Outcry,’ read one Wall Street Journal headline yesterday. ‘A provision inserted into the tax code during Senate and House negotiations in December…’ begins the descriptive paragraph. Who inserts a provision? A selfless citizen serving the interests of the public? An earnest congressman with no thought to his own career? A dutiful bureaucrat stirred to action by vapors of fairness and justice wafting through the House Ways and Means Committee?
Win-lose flimflam: We invite you behind the scenes… How are our laws written? For whom? ‘If the idea was to drain the Swamp by simplifying the tax code,’ began one of our tax experts in a meeting yesterday, ‘the result was a total failure. It’s more complicated than ever.’ Today’s Wall Street Journal confirms it. Far from a nation of simple laws that everyone has to follow, we have become a nation of gnostic codes, hidden rules, and disguised favours. ‘The new tax law is complex, with implications that will be different for everybody,’ says Merrill Lynch in a full-page ad.
Our tax team was trying to explain to your editor how the Alternative Minimum Tax (AMT) had been removed for many people, but not for us…and how we could get a deduction of 20% from our pass-through taxable income if we had enough of a wage base to support it. We were pretty sure that the knee bone of the AMT - which gave us an effective rate of about 28% - was somehow connected to the leg bone of the newly modified, tarted-up, and adjusted pass-through rate of 29.5%. But we never did figure out how.
Candidate Trump promised a tax system so simple that you could file your taxes on a postcard. But President Trump lay low when the insiders wrote the new tax law. There was not even any need to read the final legislation - what would be the point? And so, the GOP tax bill, like every other piece of legislation, regulation, and win-lose flimflam emanating from the 2000 ZIP code around the nation’s capital, became Law of the Land. That is, by connivance and collusion. It may be the law of the dry land, but it is by, for, and of the Swamp.
Welcome to the swamp: The American people - and the economy - would be better off with the aforementioned postcard-sized tax return. You total up your income. You pay 10% to the feds. Case closed. No more manipulating earnings…changing business models…looking for loopholes…paying $700-an-hour tax lawyers…and letting the tail of taxes wag the dog of real output. But where would that leave the fleas? The insiders would be out of luck - unable to use their positions as lobbyists, policy wonks, campaign contributors, and politicos to conspire against the public.
And now that Washington has imposed its new tax rules, people are discovering which of the elite had the best lobbyists. As it turned out, the provision that affects farmers, mentioned above, will ‘give cooperatives a significant edge’ that ‘stands to benefit co-op giants including American Crystal Sugar Co., Land O’Lakes Inc., CHS Inc., and Ocean Spray Cranberries Inc.’
Who ‘inserted’ that last-minute provision? Is it too much of a stretch to suggest that these companies’ lobbyists did the job? Meanwhile, the blade comes down on the necks of their competitors. The Journal quotes an independent operator: ‘[Under] this law, if they don’t change it, the scenario is that we’ll go broke.’
Welcome to the Swamp, where the swamp critters slither and slather…playing by swamp rules…and fighting over other people’s money.
Kick in the pants: Meanwhile, the poor realtors! They should give their lobbyists a kick in the pants. ‘The National Association of Realtors, one of the largest and wealthiest lobby groups in the U.S.,’ is among the biggest losers in the tax-code overhaul, reports the Journal on page B6. ‘[T]he legislation blunts the advantage of the mortgage-interest deduction, which is often a key factor in home-buying decisions,” the paper explains.
Whoa! The realtors’ lobbyists inserted that goodie into the law many years ago, fair and square. How come they’re losing it now? ‘A turning point came in the lead-up to the House bill when the National Association of Home Builders split from the realtors…’ according to the article. How do you like that? The builders stabbed the realtors in the back, inserting their own provision. ‘The brokers’ lobby was hurt when a major home-builders group took a different position than it did,’ the report went on.
Government is always a Swamp-based, win-lose business. And win-lose deals always make everyone - in the aggregate - poorer. Real reform doesn’t mean switching winners and losers. It means reducing the scope of government power…to allow more win-win deals that make us all better off. That was the appeal of the ‘Drain the Swamp’ campaign pitch…and the postcard-sized tax return. Pity they never went anywhere…”